The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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JEAN ROBERT SAINT-JEAN, et al.,
Plaintiffs, 11-CV-2122 (SJ)
Vv. MEMORANDUM
AND ORDER
EMIGRANT MORTGAGE COMPANY, et al.,
Defendants.
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APPEARANCES:
BROOKLYN LEGAL SERVICES
105 Court Street, Fourth Floor
Brooklyn, NY 11201
By: Rachel Geballe
Attorney for Plaintiffs
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, NY 10004
By: Richard H. Klapper
Matthew A. Schwartz
PROSKAUER ROSE LLP
Eleven Times Square
New York, NY 10036
By: Evandro C. Gigante
Attorneys for Defendants
JOHNSON, Senior District Judge:
In 2011, plaintiff Jean Robert Saint-Jean and his wife, plaintiff Edith
Saint-Jean (collectively, “the Saint-Jeans”), who own a home in Canarsie,
Brooklyn, commenced this action against their mortgagee, defendant
Emigrant Mortgage Company (“Emigrant”), alleging violations of the Fair
Housing Act (“FHA”), 42 U.S.C. §§ 3604, 3605; the Equal Credit
Opportunity Act (“ECOA”), 15 U.S.C, § 1691 et seq.; the New York State □
Human Rights Law (“NYSHRL”), N.Y. Exec. Law § 296-a; the New York
City Human Rights Law (“NYCHRL”), N.Y.C, Administrative Code § 8-
502; and the Truth in Lending Act, 15 U.S.C. §1601 et seq. In 2016, after the
complaint was amended to add other Emigrant borrowers as plaintiffs and
to add several corporations affiliated with Emigrant as defendants, the case
went to trial before a jury. At the charge conference, the parties stipulated
to have the Court, rather than the jury, find facts pertaining to the TILA
claim.
Edith Saint-Jean (“Plaintiff”) now moves pursuant to Federal Rule of
. Civil Procedure 58 for entry of judgment on her TILA claim. For the
reasons stated below, the Court concludes that Plaintiff has not established
a violation of TILA. Accordingly, Plaintiff's motion is denied.
BACKGROUND
Although the facts of this case are not complicated, they involve
technical provisions of the Truth in Lending Act (“TILA”) which may be
unfamiliar to the reader. Accordingly, the Court will briefly discuss those
provisions before setting forth its Findings of Fact.
TILA was enacted in 1968 to, among other things, “assure a
meaningful disclosure of credit terms so that the consumer will be able to
compare more readily the various credit terms available ... and avoid the
uninformed use of credit ....” 15 U.S.C. § 1601(a). To that end, the statute,
“[tlogether with its implementing Regulation Z, ... requires [certain]
disclosure[s] by the ‘creditor’ ....” Crawford v. Franklin Credit Mgmt. Corp.,
758 F.3d 473, 491 (2d Cir. 2014). The statute defines the term “creditor” to
mean “a person who both (1) regularly extends ... consumer credit which is
payable by agreement in more than four installments or for which the
payment of a finance charge is or may be required, and (2) is the person to
whom the debt arising from the consumer credit transaction is initially
payable on the face of the evidence of indebtedness ....” 15 U.S.C. §
1602(g). It is undisputed that Emigrant meets this definition and is a
creditor as defined by TILA.
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TILA “has separate disclosure requirements for ‘open-end’ and
‘closed-end’ credit transactions.” Benion v. Bank One, Dayton, N.A., 144 F.3d
1056, 1057 (7th Cir. 1998). “Open-end credit means consumer credit
extended by a creditor under a plan in which: (i) [t]he creditor reasonably
contemplates repeated transactions; (ii) [t]he creditor may impose a finance
charge from time to time on an outstanding unpaid balance; and (iii) [t]he
amount of credit that may be extended to the consumer during the term of
the plan (up to any limit set by the creditor) is generally made available to
the extent that any outstanding balance is repaid.” 12 C.F.R. § 226.2(20).
Closed-end credit means consumer credit other than “open-end credit,” see
id. § 226.2(10), so a closed-end credit transaction is sometimes called a
“consumer credit transaction other than under an open end credit plan.”
See, e.g., 15 U.S.C. § 1638(a). A credit card account is the “prototypical
example” of open-end credit, Benion v. Bank One, Dayton, N.A., 967 F. Supp.
1031, 1035 (N.D. Ill. 1997), while a “traditional home equity loan is an
example of a closed end loan,” Bartlett v. Bank of Am., N.A., No. Civ, MJG-
13-975, 2014 WL 3773711, at *2, n. 5 (D. Md. July 29, 2014). A residential
loan secured by a mortgage is a closed-end credit transaction, See Gen. Elec.
Cap. Corp. v. DirecTV, Inc., No. 97-CV-1901 (PCD), 1999 WL 33954791, at *1,
n. 1 (D. Conn. Jan. 28, 1999).
“f
The disclosure requirements for closed-end credit transactions are
“more onerous” than those for open-end transactions. Benion, 144 F.3d at
1057 (comparing 15 U.S.C. § 1637 with id. § 1638). The section relating to
closed-end credit transactions such as the transaction at issue here, 15
U.S.C. § 1638, “requires disclosure by the creditor of, inter alia, the ‘amount
financed,’ id. § 1638(a)(2)(A), the ‘finance charge,’ id. § 1638(a)(3), and the
‘number, amount, and due dates or period of payments scheduled to repay
the total of payments,’ id. § 1638(a)(6). Crawford, 758 F.3d at 491, A creditor
must also disclose the “finance charge expressed as an ‘annual percentage
rate,” (“APR”), 15 U.S.C. § 1638(a)(4), and the “total of payments,” which is
defined as the “sum of the amount financed and the finance charge, id. §
1638(a)(5). Regulation Z provides details regarding what a creditor must
disclose and how that disclosure must be made. See 12 C.F.R. § 226,18.
TILA defines some of the disclosures that must be made as “material
disclosures.” Specifically, it provides:
The term “material disclosures” means the disclosure, as
required by this subchapter, of the annual percentage rate, the
method of determining the finance charge and the balance
upon which a finance charge will be imposed, the amount of
the finance charge, the amount to be financed, the total of
payments, the number and amount of payments, the due
dates or periods of payments scheduled to repay the
indebtedness, and the disclosures required by section 1639(a)
of this title.
15 U.S.C. § 1602(v).
“TILA affords a borrower three business days during which to
rescind a covered loan transaction, calculated from ‘consummation of the
transaction,’ the delivery of the required rescission forms, or the delivery of
the material disclosures required by the statute, whichever is latest.” Smith
v. Wells Fargo Bank, N.A., 666 F. App’x 84, 85 (2d Cir. 2016) (summary order)
(quoting 15 U.S.C. § 1635(a)). However, “[i]f proper forms are never
provided, the borrower's right of rescission survives until three years after
the transaction consummation date or until sale of the property, whichever
occurs first.” Id. (citing 15 U.S.C. § 1635(f)); see 12 C.F.R. § 226.23(a)(3).
FINDING OF FACTS
In the mid-1990s, the Saint-Jeans purchased a home in Canarsie,
which they financed through Arbor National Mortgage. In 2001, after
falling into credit-card debt, the Saint-Jeans refinanced the home through
Washington Mutual. The Washington Mutual note and mortgage were
subsequently assigned to Wells Fargo Bank.
By 2007, the Saint-Jeans were not only in arrears on their payments
to Wells Fargo but had past-due water and gas bills. As a result, they
sought to refinance their home again with a new lender. Although the
Saint-Jeans had low credit scores and modest income, they were able to
refinance with Emigrant, which was willing to lend money without
verifying assets or income under its “STAR NINA” program.
Emigrant agreed to loan the Saint-Jeans $370,000 —enough money to
pay off the Wells Fargo loan and the outstanding water and gas bills and to
give them cash they could use for other purposes. The interest on the 30-
year loan was fixed at 11.75% for the first five years but fluctuated based on
an index rate published by the Federal Reserve Board for the remaining 25
years. The initial payments on this loan exceeded the payments on the
Saint-Jeans’ Wells Fargo loan— payments which the Saint Jeans had been
unable to make.
The Saint-Jeans closed on their Emigrant loan on January 10, 2008.
At the closing on January 10, 2008, Emigrant had the Saint-Jeans sign
various documents including a “Resource Letter” and a “High Equity Loan
Certificate.” The Resource Letter, which Emigrant required all recipients of
“No Income No Asset” (“NINA”) loans to sign, informed the Saint-Jeans of
the monthly payments they were obligated to make and advised them that
they would need over $102,000 in annual income to make the payments.
The Saint-Jeans, who did not make that much money, told those present at
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the closing that they were unable to make the monthly payments. But,
falsely assured that the interest rate would go down if they fans payments
for six months, they ultimately signed both the Resource Letter and the
High Equity Loan Certificate, in which they represented that they had
sufficient income, assets, and resources to make the payments.
At or prior to the closing, Emigrant also provided the Saint-Jeans
with a document entitled “Truth-in-Lending Disclosure (Real Estate).”
Since this document— hereafter, the “TIL Disclosure” —is central to the
instant motion, the Court will describe it in some detail.
The TIL Disclosure
The TIL Disclosure is a single page, single-sided document, that
appears to be divided into three sections. The top section contains the
names and addresses of the Lender, Emigrant, and the Borrowers, the
Saint-Jeans. Plaintiff does not contend that this information is inaccurate.
In the second section, surrounded by a rectangle, are the “material
disclosures” required by TILA and Regulation Z. The top portion of the
rectangle is divided into four smaller rectangles, which are spread evenly
across the page. At the top of each rectangle is a heading, with a brief
description just below that. A number appears below the description and
occupies the remainder of the rectangle.
The first of these rectangles is headed “ANNUAL PERCENTAGE
RATE,” which is described as “The cost of your credit as a yearly rate,” and
is stated to be 10.119%. The second rectangle is headed “FINANCE
CHARGE,” which is described as “The dollar amount the credit will cost
you,” and is stated to be $695,585.19. The third rectangle is headed
“ Amount Financed,” which is described as “The amount of credit provided
to you or on your behalf,” and is stated to be $335,256.01. The fourth
rectangle is headed “Total of Payment,” which is described as “The amount
you will have paid after you have made all payments as scheduled,” and is
stated to be $1,050,841.20.
The remainder of the second section describes the payment schedule.
The heading appears in a longitudinal rectangle to the left of the entry and
reads: “YOUR PAYMENT SCHEUDLE WILL BE.” To the right of that is a
chart which reads:
NO. OF PAYMENTS AMOUNT OF PAYMENTS WHEN PAYMENTS ARE DUE
60 3,734.82 monthly, beginning 03/01/2008
300 2,755.84 monthly, beginning 03/01/2013
The third section of the form contains additional disclosures, each
introduced by a heading which appears in all capital letters. There are nine
headings altogether, most of which are followed by preprinted text and a
box which can be checked if the text is applicable. No box is checked with
respect to three of the headings -PAYABLE ON DEMAND,
FILING/ RECORDING FEE, and REQUIRED DEPOSIT — indicating that
these disclosures are inapplicable to the instant loan.
Boxes are checked, or text is added, following five other headings.
First, after a heading entitled “VARIABLE RATE,” Emigrant checked a box
preceding text that states: “This transaction is subject to a variable rate
feature. Variable rate disclosures have been provided at an earlier time.”
Second, after a heading entitled “SECURITY,” and preprinted text which
reads, “You are giving a security interest in property located at,” Emigrant
added the address of the Saint-Jeans’ Canarsie home. Third, after the
heading “LATE CHARGE,” Emigrant added text to preprinted language to
indicate that if a payment were more than 15 days late, a late charge of 2%
would be assessed on the overdue payment. Emigrant also added text
which reads: “If loan is in default, a default interest rate of 18% may be
imposed.” Fourth, after the heading “PREPAYMENT,” Emigrant checked
boxes to indicate that.a penalty may be imposed if the loan is paid off early
and that the borrowers “will not be entitled to a refund of part of the
finance charge.” Fifth, after the heading “ASSUMPTION,” Emigrant
checked a box to indicate that someone buying the Saint-Jeans’ home could
not assume the remainder of the mortgage on the original terms.
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There are three other disclosures in the form. First, under the
heading “INSURANCE,” the preprinted text advises the borrowers that
they “may obtain property insurance from anyone acceptable to the
Lender.” Second, in a rectangle near the bottom of the third section is a
sentence which advises the Borrowers to consult their “contract documents
for any additional information about nonpayment, default, any required
repayment in full before the scheduled date, prepayment refunds and
penalties and creditor’s policy regarding assumption of the obligation.”
Finally, just above the signature lines, Emigrant checked a box to refer
Borrowers to a “’Good Faith Estimate’ or Settlement Statement for an
Itemization of Amount Financed.”
The Saint-Jeans signed the TIL Disclosure form on January 10, 2008.
At that time, Emigrant knew that a high percentage of its STAR NINA
loans were delinquent and in default and could have anticipated that the
Saint-Jeans were likely to be unable to stay current with the loan payments.
However, even if Emigrant knew that the Saint-Jeans were statistically
likely to default, there is no evidence to suggest that they knew for certain
that they would default or knew precisely when they would do so.
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The Default and this Action
The Saint-Jeans, who had taken cash out in the loan transaction, did
not default immediately. Rather, they defaulted in September 2008,
approximately eight neath after their closing. (2016 Tr. 1449:18-1450:9;
2019 Tr. 939:25-940:12.) Thereafter, their interest rate increased to the
default rate of 18%, where it remained for the next five months. In
February 2009, Emigrant reduced the default interest rate to 16%, and in
October 2010 Emigrant further reduced the default rate to 3% above the
regular interest rate.
In July 2010, the Saint-Jeans attempted to rescind their Emigrant
loan. That attempt was rebuffed. In late April 2011, the Saint-Jeans
commenced this action.
The Saint-Jeans were the only plaintiffs named in the original
complaint and Emigrant was the only defendant. As noted above, that
pleading alleged causes of action under the FHA, ECOA, NYSHRL,
NYCHRL, and TILA. The complaint was subsequently amended to add
other Emigrant borrowers as plaintiffs and to add several corporations
affiliated with Emigrant as defendants. While the causes of action in the
amended pleadings remained the same as in the original complaint, the
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allegations in some causes of action were expanded to suggest other
theories of liability.
Although the Second Amended Complaint (“SAC”) (Doc. No. 264)
expanded the TILA claim to encompass some new theories of liability, the
instant motion focuses on the same theory that was set forth in the original
pleading. That theory is predicated on a finding that Emigrant failed to
“disclose properly and accurately” the “finance charge,” the “amount
financed,” the “annual percentage rate,” the payment schedule, and the
“total of payments,” in violation of 15 U.S.C. § 1638(a) and 12 C-F.R. §
226.18. SAC at § 269. The SAC asserts that because Emigrant failed to
make these material disclosures, the rescission period was extended from
three days to three years. Noting that the Saint-Jeans requested rescission
of the loan in July 2010 —less than three years after the closing — the SAC
seeks rescission, as well as compensatory and statutory damages.
Plaintiff's Motion
In the instant motion, Plaintiff elaborates on this theory. Plaintiff
argues that the material disclosures contained in the TIL Disclosure
significantly understated the cost of Emigrant’s STAR NINA loan to the
Saint-Jeans. (Plaintiff's Memo at 12.) Specifically, Plaintiff asserts that the
material disclosures were incorrectly calculated based on the assumption
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that the “Saint-Jean’s loan would remain current, and their interest rate
would remain as presented on the face of the note for the duration of the
loan.” (Plaintiff's Memo at 6). Plaintiff claims that “[w]ith the benefit of
extensive information about the delinquencies in its own STAR NINA
program, as well as detailed information about the Saint-Jeans’ credit
history, Emigrant knew that the Saint-Jean loan would quickly go
delinquent and the interest rate of the loan would increase to 18%.” (Id.).
Plaintiff explains in some detail how Emigrant’s faulty assumptions
about the Saint-Jeans’ remaining current on their loan payments affected
the calculations of the schedule of payments, total of payments, the finance
charge, and the APR. First, noting that the Saint-Jean loan began incurring
the 18% default interest rate eight months after the closing, Plaintiff argues
that the “schedule of payments” should have been as follows:
¢ 8 payments of 3,734.82 monthly, beginning 03/01/2008
¢ 352 payments of 5,565.58 monthly, beginning 11/01/2009
(Id. at 8.) Under this payment schedule, “total payments would be
$1,979,687” — about $929,000 greater than the total payments disclosed in
the TIL Disclosure. (Id.) The finance charge and APR would also be greatly
increased. Emigrant disclosed a finance charge of $695,585: $14,744 of
finance charges at closing and $680,841 of interest payments over the life of
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the loan. If the finance charge were recalculated to reflect that the interest
rate increased to 18% after eight months, the finance charge would be
$1,633,681: $14,744 of finance charges at closing and $1,618,937 of interest
payments over the life of the loan. Similarly, the APR would jump from
10.119% to 18.02%.
Plaintiff contends that, because these material disclosures were
grossly inaccurate, the Saint-Jeans right to rescind their loan “was extended
for three years and they timely triggered rescission with their letter on July
12,2010.” (Id. at 13.) Plaintiff argues that, in order to effect rescission and
unwind the transaction, the Court should order Emigrant to return the
Saint-Jeans’ payments, including all interest paid throughout the life of the
loan and any other finance charges; cancel Emigrant’s security interest in
the Saint-Jeans’ home; and order the Saint-Jeans to return the principal
amount that they received from the loan. (Plaintiff's Memo at 13.)
However, Plaintiff urges the Court to order that the Saint-Jeans return the
principal amount in 360 equal monthly installments.
CONCLUSIONS OF LAW
In order to analyze the instant motion, the Court must first examine
the detailed regulations relating to the material disclosures mandated by
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TILA.! These regulations dictate all aspects of the disclosure, including the
timing of the disclosure and the contents of the disclosure form. The Court
trusts that even a cursory description of the requirements will expose the
problems with Plaintiff's TILA claim.
First, the regulations prescribe that the disclosures be made “before
consummation of the transaction.” 12 C.F.R. § 226.17(b).2 As used in this
regulation, “[c]onsummation means the time that a consumer becomes
contractually obligated on a credit transaction.” Id. § 226.2(a)(13). In this
context, ““consummation’ occurs ‘when a borrower signs the loan
documents and becomes obligated to pay’” —i.e., at the closing. Nadler o.
Bank of Am., N.A., No. 10 Civ. 4237 (TPG), 2010 WL 4922307, at *2 (S.D.N.Y.
Nov. 30, 2010) (quoting Newa v. Castle Point Mortg., Inc., No. 08 Civ. 859,
2008 WL 3891263 at *9 (S.D.N.Y. Aug. 20, 2008).
1 Both TILA and Regulation Z have been amended since January 2008, when the TIL
Disclosure was provided to the Saint-Jeans. The following discussion refers to the statute
and regulations as they existed in January 2008.
2 For present purposes, the Court need not determine how long prior to the consummation
the disclosures had to be made. However, the Court notes that the disclosures may have
to be made well in advance of consummation. In the case of a “mortgage transaction
subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) that is secured
by the consumer’s dwelling, other than a home equity line of credit or mortgage
transaction [relating to a timeshare],” the creditor must “make good faith estimates of the
disclosures ... and ... deliver or place them in the mail not later than the third business day
after the creditor receives the consumer’ written application.” 12 C.F.R, § 226,19(a).
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At the closing, it is not yet known whether or how well the borrower
will perform the obligations set forth in the loan agreement. Accordingly,
the regulations dictate that the disclosures “reflect the terms of the legal
obligation between the parties.” 12 C.F.R. § 226.17(c)(1). The regulations
further provide that “[i]f a disclosure becomes inaccurate because of an
event that occurs after the creditor delivers the required disclosures, the
inaccuracy is not a violation of this regulation ....” Id. § 226.17(e).
The list of the required disclosures for closed-end credit transactions
is set forth in 12 C.F.R. § 226.18. The version of this section which was
applicable in January 2008 listed over a dozen disclosures that had to be
made by the creditor making a mortgage loan. These included the name of
the creditor, the amount financed, an itemization of the amount financed,
the finance charge, the APR, whether the transaction involved a variable
rate, a payment schedule, and the total of payments to be made pursuant to
that schedule. The regulation also required the creditor to disclose if the
loan 1) included a demand feature or penalties for prepayments or late
payments, 2) was secured by a security interest in real property, or 3) could
be assumed by subsequent purchasers of that property.
Although there is no need to describe all of these disclosure
requirements in detail, a few merit further discussion. First, in disclosing
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the “payment schedule,” a creditor is required to list the “number,
amounts, and timing of payments scheduled to repay the obligation.” 12
C.F.R. § 226.18(g). In summing those payments, the creditor is required to
use the term, “total of payments,” with “a descriptive explanation such as
‘the amount you will have paid when you have made all scheduled
payments.’”” Id. § 226,18(h).
Second, as used in TILA and Regulation Z, the “finance charge”
means “the cost of consumer credit as a dollar amount” and “includes any
charge payable directly or indirectly by the consumer and imposed directly
or indirectly by the creditor as an incident to or a condition of the extension
of credit.” 15 U.S.C. §1605(a); 12 C.F.R. § 226.4(a). It does not include
“Ic]harges for actual unanticipated late payment ... or for delinquency,
default, or a similar occurrence.” 12 C.F.R. § 226.4(c)(2).
Third, the APR “is a measure of the cost of credit, expressed as a
yearly rate, that relates the amount and timing of value received by the
consumer to the amount and timing of payments made.” Id. § 226.22(a)(1).
Regulation Z requires that the APR “be determined in accordance with
either the actuarial method or the United States Rule method,” which are
discussed in Appendix J to the regulation, Id.
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The difference between these two methods is explained in that
appendix, which also provides a detailed “explanation of the actuarial
method as well as equations, instructions and examples of how this method
applies to single advance and multiple advance transactions.” 12 C.F.R. §
Pt. 226, App. J, (a)(1). “Under the actuarial method, at the end of each
unit-period (or fractional unit-period) the unpaid balance of the amount
financed is increased by the finance charge earned during that period and is
decreased by the total payment (if any) made at the end of that period.” Id.,
{ (a)(2). “In contrast, under the United States Rule method, at the end of
each payment period, the unpaid balance of the amount financed is
increased by the finance charge earned during that payment period and is
decreased by the payment made at the end of that payment period.” Id., J
(a)(3). Under either method, calculation of the APR requires knowledge of
the unpaid balance and interest rate for each payment period.
Fourth, Regulation Z contains specific accuracy requirements with
respect to the finance charge and the APR. The finance charge, which has
to be expressed in dollars and accompanied by a “brief description such as
‘the dollar amount the credit will cost you,” is considered accurate only if it
is “understated by no more than $100 ... or ... greater than the amount
required to be disclosed.” Id. § 226.18(d). The APR—which has to be
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accompanied by a “brief description such as ‘the cost of your credit as a
yearly rate,” id. § 226.18(e) —is considered accurate if it is not more than %
of 1 percentage point above or below the APR determined in accordance
with those methods, id. § 226.22(2).
The TIL Disclosure in this case appears to have met the regulatory
requirements that existed in January 2008 and to have accurately provide
the material disclosures. The payment schedule set forth in that document
reflected the payments required by the loan agreement, as prescribed by 12
C.F.R. § 226.17(c)(1). The total payments accurately summed those
scheduled payments. The dollar amount financed was also accurately
calculated; it was total payments minus the amount financed. And while
the Court is incapable of calculating the APR, no one has suggested that the
APR was incorrectly calculated based on the other figures stated in the TIL
Disclosure.
Rather, Plaintiff takes the position that the APR and other material
disclosures were inaccurate because they did not reflect the Saint-Jeans’
actual performance of the loan obligations. Plaintiff asserts that the
payment schedule should have reflected that the initial 11.75% interest rate
applied only to the first eight payments, and that the 18% default interest
rate applied to all subsequent payments. However, Plaintiff's assertion
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ignores the fact that the TIL Disclosure had to be provided before the
closing, see 12 C.F.R. §§ 226.17(b), 226.2(a)(13), at a time when the Saint-
Jeans’ actual performance under the loan agreement was unknowable.
To be sure, the payment schedule changed after the Saint-Jeans’
missed a payment, resulting in increases in the total payments, the finance
charge, and the APR over the life of the loan. However, the Saint-Jeans
defaulted eight months after the TIL Disclosure was provided.
Accordingly, even though the Saint-Jeans’ default resulted in a drastic
increase in the interest rate and rendered the disclosures in the TIL
Disclosure inaccurate, the inaccuracies did not violate TILA’s material
disclosure requirements. See 12 C.F.R. § 226.17(e).
The Court acknowledges that the Saint-Jeans’ default could have
been anticipated at the time of closing. After all, the couple had been
unable to remain current on their Wells Fargo loan, which charged a lower
interest rate and had significantly lower monthly payment. However, their
default was by no means certain; not every recipient of a STAR NINA loan
defaulted, and the Saint-Jeans had represented in writing that they had the
resources to make the payment.
Even assuming that Emigrant knew the Saint-Jeans would
eventually default, they could not know exactly when that default would
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occur. Absent this knowledge, Emigrant could not know what the payment
schedule would be, could not calculate the total payments, and could not
calculate the finance charge or the APR with the precision required by the
regulations. —
Plaintiff tacitly acknowledges this, implying that Emigrant could
have simply estimated when the Saint-Jeans would default and calculated
the material disclosures based on that assumption. Although this might
have resulted in an overstatement of the finance charge, Plaintiff notes that
TILA does not regard such overstatements as inaccuracies. See 12 C.F.R. §
226.18(d). However, Plaintiff ignores the fact that, under this strategy,
other material disclosures, such as the payment schedule, the total of
payments, and the APR, would almost certainly be inaccurate. Moreover,
employment of this strategy would completely frustrate the purpose of the
disclosure requirements, depriving customers of an accurate disclosure of
the costs of credit under the terms of the loan agreement.
For the reasons stated above, the Court concludes that Plaintiff has
not established the material disclosures in the TIL Disclosure were
inaccurate. Accordingly, she has not established liability under TILA. Her
right to rescind the loan agreement ended on January 13, 2008, and
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Emigrant properly rejected Plaintiffs July 2010 request for rescission. Her
motion for entry of judgment is, therefore, denied.
SO ORDERED.
Dated: May 6, 2022 /s/
Brooklyn, New York Sterling Johnson, Jr., U.S.D.J.
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