[Congressional Record Volume 141, Number 62 (Tuesday, April 4, 1995)]
[House]
[Pages H4120-H4122]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            TRUTH IN LENDING CLASS ACTION RELIEF ACT OF 1995

  Mrs. ROUKEMA. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 1380) to provide a moratorium on certain class action 
lawsuits relating to the Truth in Lending Act.
  The Clerk read as follows:

                               H.R. 1380

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Truth in Lending Class 
     Action Relief Act of 1995''.

     SEC. 2. MORATORIUM.

       Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is 
     amended by adding at the end the following new subsection:
       ``(i) Class Action Moratorium.--
       ``(1) In general.--During the period beginning on the date 
     of the enactment of the Truth in Lending Class Action Relief 
     Act of 1995 and ending on October 1, 1995, no court may enter 
     any order certifying any class in any action under this 
     title--
       ``(A) which is brought in connection with any credit 
     transaction not under an open end credit plan which is 
     secured by a first lien on real property or a dwelling and 
     constitutes a refinancing or consolidation of an existing 
     extension of credit; and
       ``(B) which is based on the alleged failure of a creditor--
       ``(i) to include a charge actually incurred (in connection 
     with the transaction) in the finance charge disclosed 
     pursuant to section 128;
       ``(ii) to properly make any other disclosure required under 
     section 128 as a result of the failure described in clause 
     (i); or
       ``(iii) to provide proper notice of rescission rights under 
     section 125(a) due to the selection by the creditor of the 
     incorrect form from among the model forms prescribed by the 
     Board or from among forms based on such model forms.
       ``(2) Exceptions for certain alleged violations.--Paragraph 
     (1) shall not apply with respect to any action--
       ``(A) described in clause (i) or (ii) of paragraph (1)(B), 
     if the amount disclosed as the finance charge results in an 
     annual percentage rate that exceeds the tolerance provided in 
     section 107(c); or
       ``(B) described in paragraph (1)(B)(iii), if--
       ``(i) no notice relating to rescission rights under section 
     125(a) was provided in any form; or
       ``(ii) proper notice was not provided for any reason other 
     than the reason described in such paragraph.

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
New Jersey [Mrs. Roukema] will be recognized for 20 minutes, and the 
gentleman from Minnesota [Mr. Vento] will be recognized for 20 minutes.
  The Chair recognizes the gentlewoman from New Jersey [Mrs. Roukema].
  Mrs. ROUKEMA. Mr. Speaker, I yield myself such time as I may consume.
  (Mrs. ROUKEMA asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Mr. Speaker, the Truth in Lending Act generally 
requires lenders to disclose credit terms to borrowers in a manner that 
allows borrowers to compare between lenders.
  One of the remedies available under the Truth in Lending Act for 
refinance and second mortgage loans is the ability to rescind the loan 
up to 3 years. The Truth in Lending Act has been interpreted by the 
courts to allow borrowers to seek rescission for minor discrepancies, 
as little as $10, in the required disclosures.
  If a mortgage is rescinded, the lender must reimburse all fees and 
costs to the borrower, including all interest paid for up to 3 years 
and must release the mortgage lien, leaving the lender with an 
unsecured loan.
  In March 1994, the Circuit Court of Appeals for the 11th Circuit in 
Rodash versus AIB Mortgage Co. allowed a borrower to rescind a mortgage 
based on a technical violation of the disclosure and notice 
requirements provided for in the Truth in Lending Act.
  As a result of the Rodash decision, nearly 50 class action lawsuits 
have been filed and in virtually all of the cases, the remedy sought is 
rescission. We have seen newspaper advertisements seeking plaintiffs 
for further class action. These ads are placed by class action 
attorneys and simply state if you have refinanced your mortgage in the 
last 3 years, you may be eligible to have your mortgage rescinded.
  Mr. Speaker, I will include at the end of my statement reprints of 
representative newspaper advertisements.
  [[Page H4121]] If the courts were to permit borrowers to rescind 
loans as part of a class action lawsuit, based on technical disclosure 
and notice violations, the potential disruption to the secondary 
mortgage market and the liability that lenders face as well as the 
impact on safety and soundness of lending institutions may be enormous. 
For example, since 1991, 11.8 million loans totaling $1.3 trillion have 
been refinanced. The estimated potential cost of rescinding these loans 
is approximately $217 billion.
  This amendment establishes a temporary moratorium that begins on the 
date of enactment of the Truth in Lending Class Action Relief Act of 
1995 and ends on October 1, 1995 on class action lawsuits filed under 
the Truth in Lending Act for certain loans secured by real estate. 
Other types of consumer lending will be unaffected.
  Last Congress, the House passed by voice vote a bill, H.R. 5178, that 
included legislative language to address the problem created by the 
Rodash decision. That language included a cut off date for new class 
actions. H.R. 5178, however, was never considered by the Senate and 
died at the end of the last Congress.
  This temporary moratorium will allow Congress sufficient time to deal 
with the underlying issues in the Rodash case while putting a temporary 
halt to the certification of class action lawsuits.
  This amendment is narrowly focused on the potential abuse of the 
right of rescission in the Truth in Lending Act. It does not prevent 
individual consumers from bringing suit under the Truth in Lending Act. 
It only prevents class action certifications for suits under the Truth 
in Lending Act for certain loans secured by real estate.
  We are currently working closely with the other body to resolve this 
problem. We believe that they plan to take up the class action 
moratorium as soon as practicable.
  I am pleased to inform my colleagues of the broad bipartisan support 
this moratorium enjoys.
  This moratorium also enjoys broad support from the industry groups, 
that is, Mortgage Bankers Association, National Consumer Loan Center 
and others.
                  Collect Money Back From Your Lender

       If you have borrowed on your home in the last few years, 
     you may be able to rescind the loan and get your interest 
     payments back. Create equity in your home whether you are 
     current or facing foreclosure.
       Call Atty. Cook now for free information: 407-744-1663, 
     Jupiter; 1-800-741-6663, Boca/Delray.
                                                                    ____


     Home Owners Recover Money From Their Lenders With Federal Laws

       Two examples in Palm Beach County:
       Court reduces $276,000 residential mortgage to only 
     $64,702.45.
       Judge voids mortgage and orders lender to return over 
     $28,000 to borrower.
       To learn if you can recover money from your lender, call: 
     Atty. Stephen Cook.
                                                                    ____


                      Do You Want Your Money Back?

       Have you refinanced your residential mortgage or borrowed 
     on your home? Under Federal Laws you may be entitled to 
     recover money back from your lender.
       This could be thousands of dollars in payment to you or 
     increased equity in your home.
       Free consultation to determine if you may be entitled to 
     recover money under Federal Laws.
       Call Atty. Stephen Cook.
                                                                    ____

                        Edward K. O'Brien, P.C.


                            Attorney at Law

                              Needham, MA

       We are consumer lawyers. We have recovered millions of 
     dollars for mortgage borrowers like you.
       We are writing to homeowners who refinanced in the past 
     year with certain lenders. (We get our mailing list from 
     public deeds records).
       If you were charged fees for overnight mail (E.G., Federal 
     Express, Express Mail, etc.) or if you were charged fees for 
     couriers, or any other delivery fees, you are probably 
     entitled to money damages under the Federal Truth-in-Lending 
     Act.
       Please phone us--with the loan papers in front of you--and 
     we will let you know your rights under the Federal Truth in 
     Lending Act. (617-449-9111--collect--or mail us the sheet 
     showing the closing costs: or fax it to 617-449-4383, 24 
     hours.
       No obligation: You pay us no fees or costs for this phone 
     call. If we find violations and if you want us to represent 
     you--even then you will not pay us fees except out of any 
     recovery we get back for you.
       We are now seeking consumers who make payments to:
       Sears (PNC) Margaretten Plaza Home Huntington GMAC, Mellon 
     Citicorp Chemical Independence One.


                             advertisement

       Since we may agree to represent you, lawyers' ethics rules 
     require us to disclose this letter is an ``advertisement.''

                              {time}  1230

  Mr. Speaker, I reserve the balance of my time.
  Mr. VENTO. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. VENTO asked and was given permission to revise and extend his 
remarks.)
  Mr. VENTO. Mr. Speaker, I rise, of course, in support of this 
legislation that was the product of negotiations of several members of 
the Committee on Banking and Financial Services to address the results 
of the 11th Circuit Court decision on the case simply known as the 
Rodash case, Rodash versus AIB Mortgage Co.
  The chairwoman, the gentlewoman from New Jersey [Mrs. Roukema] has 
well described the purposes and problem this legislation addresses. It 
is a 6-month moratorium which has bipartisan support and the support of 
the consumer and industry groups because the measure accomplishes its 
goal.
  The bill provides, as I said, temporary relief for the mortgage 
industry as a whole from the potential ramifications of certain class 
action suits filed under the Truth In Lending Act. It is a reasonable 
solution for the timeframe in which we are working today, and 
Republican and Democrat members of the Committee on Banking and 
Financial Services worked cooperatively in achieving this temporary 
legislative solution.
  The legislation is responding to an emergency of sorts, because of 
the number of class action suits, nearly 50, that have been filed 
because of technical violations of disclosure requirements provided in 
the Truth In Lending Act. The sheer volume of refinancing of home 
mortgages that has occurred in the last few years gives rise to a great 
potential for many more of this type of suit. Allowing for the 
emergency nature of the problems presented will, of course, with the 
expectation that we will work cooperatively in terms of resolving the 
deficiencies of the Truth In Lending Act.
  For the record, of course, I want to note to our chairman, the 
gentleman from Iowa [Mr. Leach], and the chairwoman of the 
subcommittee, the gentlewoman from New Jersey [Mrs. Roukema], that it 
is my hope that we will proceed with the deliberations of modifying the 
Truth In Lending Act in an orderly manner with regular and full 
hearings, and trying to deal with the intricacies of what is 
fundamentally a fairly complex law.
  We need to have that careful deliberation so that we can retain the 
essence of truth in lending, and deal with the streamlining and the 
avoidance of the types of problems that have been evidenced by this 
legislation and by the events of the last few years. Hopefully this 6 
months will give us the time. I ask my colleagues' support for it.
  Mr. Speaker, I reserve the balance of my time.
  Mrs. ROUKEMA. Mr. Speaker, I yield 2 minutes to our colleague, the 
gentleman from Michigan [Mr. Chrysler], a member of the Committee on 
Banking and Financial Services.
  Mr. CHRYSLER. Obviously, Mr. Speaker, when people borrow money they 
are expected to pay it back. Certainly when lawyers start lining their 
pockets based on technicalities to keep people from having to pay those 
funds back, then it is time for the Congress to come forward.
  I am glad the last Congress came forward, and I am glad we have good 
bipartisan support to make this change in this Rodash law, to make sure 
that the banks and the mortgage companies that have made mortgages over 
the past few years are not penalized unfairly over these kinds of 
technicalities.
  I just rise in support of this legislation, and appreciate the 
gentlewoman from New Jersey bringing it forward and having this 
hearing.
  Mr. GONZALEZ. Mr. Speaker, I rise in support of this bill because it 
is a reasonable response to a situation that exposes lenders and the 
secondary mortgage market to great uncertainty and potentially 
exploding liability. I also endorse this approach because it will not 
impede individuals from seeking relief under 
[[Page H4122]] the Truth in Lending Act. I applaud the efforts here 
today because they provide temporary, stop gap relief to the industry, 
and afford the Congress an opportunity to shape long term reform in a 
more deliberate and reasoned manner.
  The bill originally introduced to address this so-called emergency 
situation would have seriously eroded key consumer protections in the 
Truth in Lending Act. It would have eliminated the consumer's right to 
rescind a mortgage that had been refinanced. It would have limited the 
consumer's recourse against the secondary market when the lender is 
long gone. It would have permitted lenders to provide faulty loan 
disclosures. All this, without a hearing on the subject. All this, in 
response to a number of class actions that have been filed but have yet 
to be decided in a single instant.
  If Congress intends to modernize truth in lending, we need thorough 
hearings on the issues. If we are to reduce burdens on the industry, we 
must not simply shift those burdens onto the consumer. Truth in lending 
must always ensure that lenders give consumers complete, accurate, and 
uniform disclosures about the terms of their loans and their credit 
cards. And the Truth in Lending Act must contain sufficient penalties 
to ensure that these disclosures are made.
  With these considerations in mind, I look forward to working with my 
colleagues on the other side of the aisle to modernize truth in 
lending--to make it a more meaningful act for consumers and a less 
burdensome law for the industry.
  Mrs. ROUKEMA. Mr. Speaker, I yield 2 minutes to the gentleman from 
Wisconsin [Mr. Roth], a member of the Committee on Banking and 
Financial Services.
  Mr. ROTH. Mr. Speaker, I thank the gentlewoman for yielding time to 
me, and I want to thank her for bringing up this legislation, and for 
the excellent job she is doing as chairperson of that committee.
  Mr. Speaker, this is a very important piece of legislation if we are 
concerned about our home buyers. I think all of us are. It is another 
example where we have too much government.
  Here is the Truth in Lending Act that passed in 1968, and the 
gentlewomen from New Jersey I think very well explained the problem 
here. Here we have a court coming in and saying ``Well, you can have 
rescission.''
  In other words, if you come to the court in a class action suit, the 
lender has to give you back your fees and your interest, up to 3 years. 
Then we have lawyers out there advertising. In other words, they are 
looking for complainants, saying, ``Hey, if you want some extra 
dollars, here is a legal rip-off. Come on in and we will help you.''
  I think it shows what happens when there are no ethics left in a 
society, when there is no sense of right and wrong. We should not even 
have a piece of legislation like this.
  However, the rescission under this statute means that the lender must 
reimburse, let me repeat that, all fees and costs of the borrower, 
including all interest paid up to 3 years, and must release the 
mortgage lien. The result leaves the lender with an uninsured loan.
  Therefore, without this moratorium, consumers are going to find 
sources for these kinds of mortgages drying up very quickly. It should 
be emphasized that this moratorium can only be on a class action suit. 
That means that the individual consumer can still file suit under 
remedies prescribed by the Truth In Lending Act.
  The Truth In Lending Act, let us have some courage in this House, it 
is a joke. I have worked in the real estate industry. When you come to 
a closing, no one reads them. Do Members know how it works? The banker 
says ``Here, sign this.'' The client says to his broker ``Is it okay?'' 
``Sure. Go ahead and sign it.'' The banker has not read it, the broker 
has not read it, and certainly the person buying the home has not read 
it.
  It is another example of too much government. That is why the people 
are so upset with government today. There is no common sense left. Let 
us at least pass this legislation and give us time to get back on the 
right track again, and bring some common sense back into this area of 
the law again.
  Mr. VENTO. Mr. Speaker, I yield myself 1 minute.
  Obviously, there have been problems developing with regard to the 
abuse of the provisions of law that have a great problem and pause to 
an important segment of our industry in terms of financing and the 
orderly process and proceeding with that. I think it is also very 
evident that truth in lending is an enormously important legislation to 
inform the consumer and to provide for reputable lenders the 
opportunity to share information so there is a good understanding in 
terms of going forward with mortgages.
  I think, obviously, when a problem exists here, there is an enormous 
need to have solid information in terms of making decisions on the part 
of the consumer and on the part of the finance industry. We want to 
make certain that we are trying to respond to what clearly has been a 
demonstrated problem, but I hope that when we get ready to legislate we 
remember the essence of trying to maintain a proper balance in terms of 
consumer rights and the importance of that with regard to this matter.
  Mr. VENTO. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mrs. ROUKEMA. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from New Jersey [Mrs. Roukema] that the House suspend the 
rules and pass the bill, H.R. 1380.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.
  

                          ____________________