In Foreclosure: Can You Counter-Sue Your Lender Under TILA?

The federal Truth in Lending Act (TILA) requires lenders to provide borrowers with clear and accurate disclosures of terms dealing with, among other details, finance charges, annual percentage rates of interest, and borrower’s rights.  Failure to make these disclosures will likely subject the lender / creditor to monetary penalties, including actual damages, statutory damages, costs and attorneys’ fees.  15 U.S.C. 1640.  The borrower may even be able to rescind (unwind) the loan transaction.  However, the borrower must bring a claim for damages against the lender within one year from the date of the lender’s violation, and must bring any rescission claim within three years.

In U.S. Bank NA v. Manzo, U.S. Bank filed a foreclosure lawsuit against the Manzos for failure to pay their mortgage.  The Manzos filed affirmative defenses and counterclaims alleging that U.S. Bank failed to make the required disclosures under TILA, and seeking damages, among other relief.  However, the Manzos did not file their claim for damages within the required one year time period.

The trial court dismissed the Manzos damages claim, and the Manzos appealed.  The appellate court reversed the trial court’s decision, and found that the Manzos’s damages claim should survive, even though it was filed late.  The court relied on section 13-207 of the Illinois Code of Civil Procedure (735 ILCS 5/13-207), which permits a defendant to bring a counterclaim against a plaintiff even after the limitations period has expired as long as the plaintiff filed its lawsuit within that period.  In other words, because U.S. Bank filed its foreclosure lawsuit within the one year period, the Manzos’ could counter-sue U.S. Bank for damages under TILA after the one year period had expired.

If you are in foreclosure, or have been threatened with foreclosure, you should know your rights under TILA.  Like the Manzos, you may be able to assert a counterclaim for damages against your lender even after the one year limitations period has expired.

For more information, contact the attorneys at DeBlasio Law Group, LLC.

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