Florida court holds that Truth in Lending Claim Not Time Barred

There is a time limit for bringing a Truth in Lending Claim under Florida law.  However, when the claim is raised as an affirmative defense to a mortgage foreclosure action (as opposed to the borrower filing a lawsuit against the lender), it is possible to avoid this time limit which is what the Fourth District Court of Appeals held in Vidal v. Liquidation Props., Inc., 38 Fla. L. Weekly D116 (Fla. 4th DCA 2013).

The Vidals executed 2 notes and mortgages in favor of Option One Mortgage Corporation for the purchase of their home. On February 5, 2009, Liquidation filed a complaint for foreclosure on one of the mortgages, to enforce a lost note, and to reestablish a lost mortgage. The Vidals answered and raised fifteen affirmative defenses. Subsequently, the affirmative defenses were amended down to seven. In the amended affirmative defenses, the Vidals alleged Liquidation lacked standing to foreclose. They asserted equitable estoppel and fraud barred the complaint due to the lender’s placing false income and other financial information on the mortgage application. They also alleged, for the first time, violations of the federal Truth in Lending Act and related regulations, seeking rescission of the mortgage and recoupment of damages based on the lender’s failure to comply with federal disclosure requirements, for misrepresenting that the loan terms were fixed, and for failing to disclose the actual payment terms.

The trial court held the affirmative defense of violations of the Truth in Lending Act was legally insufficient because the statute of limitations under that Act had run. Federal law imposes a three-year statute of limitations from the consummation of the transaction on any action for rescission under the Truth in Lending Act. 15 U.S.C. § 1635(f) (2006); Dove v. McCormick, 698 So.2d 585, 587 (Fla. 5th DCA 1997). A one-year statute of limitation from the date of violation of the Act applies to actions for recoupment. 15 U.S.C. § 1640(e).
On appeal the Fourth District held  that “when recoupment and setoff are raised as a defense, the one-years tatute of limitations does not apply. Title 15 U.S.C. 1640(e) states:
This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law.

The Vidals’ affirmative defense seeking recoupment damages and set-off for Truth in Lending violations was not barred by thestatute of limitations set forth in the Truth in Lending Act.”


Fourth District Holds that Truth in Lending Act Defense Not Barred by the 1 yr S/L

The Fourth District recently held that the one-year statute of limitations for violations of the Truth in Lending Act did not apply to mortgage foreclosure action in which recoupment and setoff were raised as a defense. Truth in Lending Act, § 130(e), 15 U.S.C.A. § 1640(e).

The court observed that when recoupment and setoff are raised as a defense, the one-year statute of limitations for violations of the Truth in Lending Act does not apply. Truth in Lending Act, § 130(e), 15 U.S.C.A. § 1640(e).

The claim would have been barred if it had been asserted affirmatively in a complaint as opposed to having been raised defensively.

See Vidal v. Liquidation Props., Inc., 4D10-3358, 2012 WL 5347964 (Fla. 4th DCA Oct. 31, 2012)

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