In Harris v. Schonbrun, No. 13-15505 (Dec. 10, 2014), the Eleventh Circuit decided two questions: “(1) whether a lender can satisfy a statutory obligation to give a borrower clear and conspicuous notice of a right to rescind a loan . . . when the lender instructs the borrower to sign simultaneously both the loan and a postdated waiver of the borrower’s right to rescind,” and (2) if the court chooses to rescind the loan, whether the borrower may be awarded statutory damages, attorney’s fees, and costs.
In 2009, Darcel D. Fisher Harris entered into a loan agreement with Harvey Schonbrun, a trustee of a mortgage investment trust, secured by a mortgage for Harris’s residential property. After Harris defaulted on the loan in 2011, Schonbrun sued to foreclose. Shortly thereafter, Harris informed Schonbrun that she wanted to rescind the loan transaction, alleging that Schonbrun had violated TILA by failing to notify Harris “clearly and conspicuously,” as required by the act, that she had a right to rescind the loan within three business days. Due to this failure to notify her, Harris contended that her right to rescission extended to October 2012. Schonbrun denied this request, and Harris filed a complaint in response alleging that the notice Schonbrun had given her “was inadequate because Schonbrun instructed her to sign a postdated waiver of her right to rescind when she signed the loan documents . . . and did not give her two copies of the notice of her right to rescind,” all in violation of TILA. Despite conflicting evidence, the district court found that Schonbrun had violated the Act and granted rescission of the loan. However, the court did not find that the violation was a “material” violation and decided rescission was a sufficient remedy, thereby negating the need for statutory damages, attorney’s fees, and costs. The Eleventh Circuit affirmed the granting of rescission and reversed the district court’s ruling on statutory damages, attorney’s fees, and costs.