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Case Developments in Consumer Law

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Case Developments in Consumer Law
Issue 29, Fall 2005

Case Developments in Consumer Law

by Larissa Werhnyak, MPLP Law Clerk

TILA and HOEPA Rights to Rescind Eliminated After Sheriff's Sale

A plaintiff cannot obtain relief through rescission under TILA or HOEPA when his action was filed after the property was sold at sheriff's sale, but prior to the expiration of the statutory redemption party. The Court in Marschner v RJR Financial Services, Inc, 382 F Supp 2d 918 (ED Mich 2005) held that only a bare legal title remains in the hands of the debtor during this time. Since the debtor's right of redemption was not an interest in land, but a legal right created by statute, that right was extinguished by the sheriff's sale. Additionally, even if the plaintiff-debtor's right to rescind was not cut off by the sale, the plaintiff in this case failed to notify the defendant of his intention to rescind in time. The plaintiff did not satisfy the notice requirement of 12 CFR. §226.23 because the complaint in this case was not filed prior to the expiration of the right. The mere filing of a complaint without service, the Court held, could not be considered delivery sufficient to satisfy the requirement.

Misrepresentation of Debt's Legal Status by Collector Constitutes FDCPA Violation

In Velderman v Midland Credit Management, Inc, 2005 WL 2405959, the Court held that a debt collector violates §1692e(2)(A) and (10) of the Fair Debt Collection Practices Act by telling a debtor that his failure to dispute the debt within thirty days of receiving the validation letter made him legally responsible for the debt. A collector also violates the FDCPA by telling a debtor that at late stages of the collection process, he can only prove that his dispute regarding the debt is valid by demonstrating proof of fraudulent activity on the part of the creditor. The debt collector improperly informed the plaintiff that his failure to contest the debt at an earlier stage of the process shifted the legal burden to the plaintiff to disprove the debt. While the collector may assume after 30 days that the debt is valid, nonresponsiveness on the part of the debtor does not change the legal status of the debt.


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