Court of Appeal Affirms
Judgment Against Borrower Claiming Predatory Lending
Practices and Wrongful Foreclosure
In a series of state and bankruptcy actions, a borrower
brought claims against the lender and loan servicer
alleging violations under TILA, FDCPA, Unfair Business
Practices, Rescission and a variety of torts. The
borrower claimed improper loan disclosures and a bait
and switch concerning the interest rate and loan amount.
The borrower also alleged he sent a notice of rescission
of the loan under TILA and that he was not in default on
the loan in any event. The borrower had filed seven
successive bankruptcy petitions, some in which he
scheduled the loan without dispute even after his
alleged rescission of the loan.
The California Court of Appeal affirmed the judgment
dismissing the borrower’s case based on the doctrine
of judicial estoppel and other grounds such as the
statute of limitations. The Court agreed that a party
cannot utilize the courts to take inconsistent positions
after issues have been deemed established, adjudicated,
or relied upon. Specifically, a borrower cannot obtain
affirmative bankruptcy relief using an undisputedly
delinquent loan as a liability, and then later dispute
the loan and any ultimate foreclosure.
The Court also upheld the dismissal of the TILA and
other claims based upon the applicable statutes of
limitation. The Court ruled that the three year right to
rescind under TILA expires completely three years after
the loan is consummated. In other words, not only must a
notice of rescission be sent, but if the borrower wishes
to bring any action to enforce the rescission he must do
so within that three year period. Otherwise the action
is barred. In this case, the borrower alleged he timely
rescinded the loan, but he did not bring his rescission
action until after the three year period had expired.
The Court held that the borrower’s right to rescind
had expired as a matter of law.
As a result, all of the borrowers claims were barred
in that they all stemmed from the same subject matter
and should have been asserted earlier. The loan servicer
was able to proceed and complete foreclosure.
Click to read Court's Decision
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