The opinion of the court was delivered by: GREENE
This is an action under the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., in which plaintiff alleges that defendant National Permanent Federal Savings and Loan Association (Bank) failed to make all of the required material disclosures in connection with a promissory note executed to plaintiff and secured by a deed of trust upon her home. Plaintiff seeks to rescind the note pursuant to section 1635(a), and to recover statutory damages of $ 1,000, costs, and reasonable attorney's fees pursuant to section 1640(a). The action comes before the Court on the parties' cross-motions for summary judgment. After hearing and consideration of the entire record, the Court has determined that no material facts are at issue, and that plaintiff is entitled to judgment as a matter of law for the reasons stated below.
In May of 1972, plaintiff Elizabeth Brown bought a home in Northwest Washington, D.C. for.$ 19,000. This purchase was financed in part through a loan of $ 16,200 by the Bank, secured by a deed of trust on the property.
In January of 1978, Mrs. Brown applied to the Bank for a full rehabilitation loan for her home. She signed a contract with the Hamilton Contractors to do the home improvement work on May 9, 1979, at a price of $ 30,000.
A note in the amount of $ 44,800 was executed to her by the Bank on July 19, 1979. The balance due on the original 1972 mortgage-$ 13,211.20-was to be paid from these proceeds, with the remaining $ 30,000 to be escrowed for eventual direct payment to Hamilton Contractors. Two days prior to the execution of the note, Mrs. Brown signed a disclosure form provided to her by the Bank, and on July 24, 1979, she signed a "request to creditor" form provided by the Bank acknowledging her receipt of all material disclosures under the Truth-in-Lending Act and directing the disbursement of funds to the escrow company.
During August through October of 1979, Mrs. Brown made her payments of interest on the loan to the Bank as required by the promissory note. After that, no further sums were paid,
and in January of 1980, the Bank moved to foreclose and demanded payment of the full amount due at that time (the bulk of which sum had previously been disbursed to the contractor directly from the escrow account). On July 18, 1980, plaintiff sent a letter to Mr. M. Bradley Griggs, Vice President and Treasurer of the Bank, which attempted to rescind the promissory note secured by the deed of trust "in accordance with (her) rights under Section 125(a) of the Truth-in-Lending Act, 15 U.S.C. § 1635(a) because these instruments violate that Act." On the same day, plaintiff filed the original complaint in this action asking for damages, costs and attorney's fees. By letter of July 25, 1980, counsel for defendant informed her of the Bank's position that her "purported exercise of a right of rescission is untimely and wholly ineffective." Plaintiff amended her complaint on August 4, 1980 to include a prayer that defendant "be ordered to take all necessary action to terminate the promissory note and deed of trust and to return to plaintiff all monies she had paid thereon."
One purpose of the Truth-in-Lending Act is to assure disclosure by the creditor to the consumer of the terms of credit before the consumer enters into a credit transaction. See 15 U.S.C. § 1601. To that end, the Act details which terms of credit must be disclosed in advance, and what sanction will ensue should they not be disclosed. It provides that (15 U.S.C. § 1635(a)):
in the case of any consumer credit transaction in which a security interest is retained or acquired in any real property which is used or is expected to be used as the residence of the person to whom the credit is extended, the obligor shall have the right to rescind the transaction until ... the delivery of the disclosures required under this section and all other material disclosures required under this part ... by notifying the creditor ... of his intention to do so (emphasis added).
A further provision of the Act states (15 U.S.C. § 1640(a)) that
any creditor who fails in connection with any consumer credit transaction to disclose to any person any information required under this part to be disclosed to that person is liable to that person in an amount equal to the sum of
(1) twice the amount of the finance charge in connection with the transaction, except that the liability under this paragraph shall not be less than $ 100 nor greater than $ 1,000; and
(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney's fee as determined by the court.
One result of these provisions is that a creditor who fails to make all of the material disclosures required by sections 1636 through 1639 of the Act and the regulations issued pursuant thereto risks the rescission of the credit transaction by the borrower at any time (as well as liability to the borrower for up to $ 1,000 and costs).
Plaintiff claims that the disclosure form she received on July 17, 1979 omitted two items the Bank was obligated to disclose to her under the Act and the regulations: (a) the total finance charge, and (b) the cost of insurance as part of the finance charge. These omissions were material, according to plaintiff, because they made a comparison between the terms of defendant's loan and the terms available from other banks more difficult.
She further contends that, since the Bank failed to make certain disclosures, and these disclosures were material, she is entitled to ...