Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

تمرين 14

In re Kitts
United States Bankruptcy Court, District of Utah, 447 Bankr. 330 (2011).
FACTS Facing the loss of his family's home in Park City, Utah, to creditors, Brian Kitts sought to refinance the debt. He entered into two mortgage loan agreements for $1.35 million and $39,603.47, respectively, with Winterfox, LLC. As part of the deal, Kitts paid $87,500 in "loan origination fees." Kitts defaulted on the loans and filed a petition in a federal bankruptcy court to declare bankruptcy. He also filed a complaint against Winterfox to recover damages for alleged violations of the federal Truthin- Lending Act (TILA). The bankruptcy court dismissed the action, but on appeal, a federal district court ruled that Winterfox had failed to make certain required disclosures. The district court remanded the case for "further fact finding concerning damages" for violation of the TILA, as well as for Kitts's request for attorneys' fees.
ISSUE Was Kitts entitled to recover damages and attorneys' fees because Winterfox charged him $87,500 in finance charges in violation of HOEPA and TILA provisions?
DECISION Yes. The bankruptcy court concluded that HOEPA covered the Winterfox loans, which were high-cost mortgages on which the debtor had not been provided any disclosures. Kitts was awarded statutory TILA damages of $4,000, compensatory damages of $87,500 under HOEPA for the finance charges paid in connection with the loans, and $150,000 for attorneys' fees.
REASON The parties did not dispute that Winterfox had charged $87,500 in fees. The dispute was whether those fees qualified as "finance charges paid by the consumer" under TILA, even though the funds were paid from the loan proceeds rather than coming out of the debtor's pocket. The court reasoned that because Kitts was obligated to pay the fees, they qualified as finance charges paid by the debtor. Thus, Winterfox violated the TILA by failing to provide disclosures on these high-cost loans, and Kitts was entitled to the statutory damages under the TILA. The court further reasoned that Winterfox's failure to provide notice of the required disclosures (under TILA) constituted a material failure to comply with HOEPA. Under HOEPA, the plaintiff is entitled to compensatory damages, so the court awarded damages in the amount of the fees paid ($87,500), plus reasonable attorneys' fees ($150,000, which is 750 hours at $200 per hour).
FOR CRITICAL ANALYSIS-Legal Consideration The TILA, HOEPA, and other consumer-protection laws exist to protect purchasers from "unscrupulous" lenders or sellers. As consumers become better informed about these issues, will these laws still be needed? Discuss.