Belmont v. Associates National Bank (Delaware)

Brief Fact Summary. Peter Belmont, (Plaintiff), filed this complaint against Associates National Bank, (Defendant), seeking relief under 15 U.S.C. Section:Section:1640(a)(2)(A), 1640 (a)(3) and 1666(e).

Synopsis of Rule of Law. Those whom the creditor claims are obligors as well as individuals who are in fact obligors are eligible for the protections under 15 U.S.C. Section:1666-1666(a).

Facts. In September of 1987, Plaintiff cosigned for a credit card account with his son but does not recall doing so with Boatmen’s Bank of St. Louis or Defendant. On April 6, 1992 Plaintiff sent a letter entitled “Notice of Revocation of Co_Signor_Ship” stating that he wished to be removed as cosignor on his son’s account. Plaintiff enclosed a check for the balance of the account with an account number written on it. On the canceled check the account number was crossed out and replaced by Defendant’s account number held by Plaintiff’s son. Defendant denies receiving the letter, using the address on the letter, and does not explain how its account number came to be placed on the canceled check.
After Plaintiff’s son filed for bankruptcy, Defendant sent Plaintiff a statement showing that the account had been assessed finance charges in addition to its outstanding balance and requesting a minimum payment of $413.49. Plaintiff sent Defendant a six page letter within 10 days stating that the bill was in error because he had no contractual obligation to pay any amount on the account and demanded proof of such an obligation. When Defendant finally responded 62 days later, it denied any obligation to provide Plaintiff with a copy of his original application and threatened his credit. Plaintiff’s credit report did reflect the delinquency. Plaintiff then filed this action.

Issue.
Whether the “Wrong-Person Error” alleged by Plaintiff constitutes a billing error under TILA.

Whether Plaintiff’s Notice of Billing Error conformed to the requirements of Section:1666(a)

Whether Defendant is in violation of Section:1666(a)(3).

Held.
Yes. The “Wrong-Person Error” alleged by Plaintiff constitutes a billing error under both paragraph s (1) and (2) of Section:1666(b).

Yes. It is doubtful whether Defendant has ever received a notice of billing error that adheres more closely to the requirements of Section:1666(a).

Yes. Defendant is in violation of Section:1666(a)(3)

Discussion.
The TILA is to be liberally construed in favor of consumers. Paragraph (1) states that a billing error includes a statement of credit that was not made to the obligor. Nothing in paragraph (1) indicates that its scope is limited to particular charges to the account as opposed to the entire account itself. Plaintiff’s assertion that he is not an obligor on the account implies that Defendant ever extended credit to him in the amount state on the billing statement viz. the entire amount of the statement. Therefore the “Wrong-Person Error constitutes a billing error under paragraph (1). It qualifies under paragraph (2) as well because Plaintiff clearly requested clarification including documentary evidence regarding whether Defendant had in fact extended him the credit reflected in the statements.

Plaintiff’s notice of billing error was timely sent because it was sent within 60 days of Defendant’s statement. It repeatedly state his name and account number. It indicated the reason he believed a billing error occurred as well as the amount of such error. It was clearly recognizable as a valid notice because of its all-capitals heading indicating so. Further there is nothing in the parties’ correspondence that indicates that Defendants failed to recognize it as a Notice of Billing Error.

Defendant’s response is in violation of Section:1666(a)(3)(A) on its face. Defendant failed to acknowledge the receipt of Plaintiff’s first notice of billing error within 30 days. Defendant did not correct the error nor did it send a written explanation or clarification including copies of the documentary evidence requested. Further, Defendant did not establish a good faith defense under Section:1640(f) because Defendant did not assert that it mistakenly relied on any rule in fashioning its response to Plaintiff’s notice.

Not only did Defendant’s letters constitute implicit threats to Plaintiff’s credit rating, but it actually did make an adverse credit report after receipt of a valid notice of billing error but before complying with its obligation under Section:1666(a)(3).

Obligors must necessarily be construed to include those whom the creditor claims are obligors as well as individuals who are in fact obligors in the contract law sense. If they were not, then a consumer, who believes that he is not obligated under a credit account and promptly notifies the creditor of the mistake through a proper notice of billing error, would not be protected under the statute. The TILA was intended to protect consumers and the courts mandate the TILA be liberally construed to do so.

The remedies available under this statute apply to Plaintiff even if Defendant has “forgiven” the debt. Defendant shall be enjoined from collecting the first $50 on the account from Plaintiff. Defendant shall be required to pay a penalty of twice the finance charge in the transaction. Plaintiff representing himself pro se shall be awarded costs.