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10th Circuit Court of Appeals Overturns heightened pleading standard for TILA Rescission- Sanders v. Mountain America Fed. Cr. Union- July 2012

10th Circuit Court of Appeals Overturns heightened pleading standard for TILA Rescission- Sanders v. Mountain America Fed. Cr. Union- July 2012

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Published by 83jjmack
On appeal the court held that, while TILA recognizes that a court may entertain a creditor’s petition for an order equitably modifying the rescission procedure, in this case the district court impermissibly altered that procedure and created a pleading standard that would require all borrowers seeking TILA rescission to plead their ability to repay. The court reasoned that such a standard would add a condition not supported by TILA or Regulation Z, and that categorical relief is outside of the district court’s equitable powers.

ALWAYS CONSULT A COMPETENT ATTORNEY IN THE APPROPRIATE JURISDICTION.
On appeal the court held that, while TILA recognizes that a court may entertain a creditor’s petition for an order equitably modifying the rescission procedure, in this case the district court impermissibly altered that procedure and created a pleading standard that would require all borrowers seeking TILA rescission to plead their ability to repay. The court reasoned that such a standard would add a condition not supported by TILA or Regulation Z, and that categorical relief is outside of the district court’s equitable powers.

ALWAYS CONSULT A COMPETENT ATTORNEY IN THE APPROPRIATE JURISDICTION.

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Published by: 83jjmack on Aug 08, 2012
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PUBLISHUNITED STATES COURT OF APPEALSTENTH CIRCUIT
SCOTT SANDERS; LISA SANDERS,Plaintiff-Appellant,v.MOUNTAIN AMERICA FEDERALCREDIT UNION,Defendant-Appellee.BRUCE ETHINGTON,Defendant.No. 11-4008
Appeal from the United States District Courtfor the District of Utah(D.C. No. 2:10-CV-00183-DAK)
Matt Wadsworth (Brian E. Arnold with him on the brief), of Arnold & Wadsworth, SouthOgden, Utah, for Plaintiff – Appellant.Joseph A. Skinner of Scalley Reading Bates Hansen & Rasmussen, P.C., Salt Lake City,Utah, for Defendant – Appellee.Before
KELLY
,
McKAY
, and
O'BRIEN
, Circuit Judges.
O’BRIEN
, Circuit Judge.For certain mortgage loans covered by the Truth-in-Lending Act (TILA), a timelywritten notice of rescission triggers the creditor’s duty to release its security interest and
FILEDUnited States Court of AppealsTenth Circuit
July 30, 2012
 Elisabeth A. ShumakerClerk of Court
 
 
 - 2 -refund any finance charges. Once the creditor satisfies this duty, the borrower mustreturn the loan proceeds. Although we have not spoken authoritatively on the issue,several circuits allow district courts to equitably condition the creditor’s duty on theborrower’s ability to repay the loan proceeds.In this case, however, the district court went further by concluding a borrowerseeking to compel rescission must plead ability to repay. The court invoked this rule todismiss the TILA rescission claim of the appellants, Scott and Lisa Sanders. It alsodismissed the Sanderses’ claims under the Equal Credit Opportunity Act and Fair CreditReporting Act. We affirm in part, reverse in part, and remand for further proceedings.
I. BACKGROUND AND PROCEDURAL HISTORY
In 2007, while the Sanderses were attempting to refinance their home, theydiscovered Salt Lake City Credit Union had “reported twelve new maxed-out accounts onthe Sanders[es]’ credit [reports].” (Aplt. App’x 139.) They say this “destroyed [their]credit and made it impossible to refinance.” (
 Id.
) Afterward, the credit union “apologizedfor the misreporting” and “offered to make amends by providing [them] with a ‘free’refinance.” (
 Id 
.) They accepted this conciliatory offer and closed on the refinancing loanin July 2007. Salt Lake City Credit Union later merged with appellee Mountain America.In March 2009, the Sanderses applied to Mountain America to again refinance their loan.They completed the application by phone, but Mountain America denied their applicationat the end of the call.As pertinent to this appeal, the Sanderses’ complaint alleges: (1) they had not been
 
 - 3 -provided with the disclosures required under the Truth-in-Lending Act (TILA) therebyentitling them to invoke statutory rescission; (2) Mountain America violated the EqualCredit Opportunity Act (ECOA) when it failed to provide a notice of adverse action afterdenying their application for refinancing; and (3) Mountain America’s inaccurate creditreporting violated the Fair Credit Report Act (FCRA). The district court dismissed theseclaims on the pleadings.
See
Fed. R. Civ. P. 12(c).
II. STANDARD OF REVIEW
An order dismissing a case on the pleadings is reviewed de novo.
Park Univ. Enters., Inc. v. Am. Cas. Co.
, 442 F.3d 1239, 1244 (10th Cir. 2006). In this review, “weaccept all facts pleaded by the non-moving party as true and grant all reasonableinferences from the pleadings” in that party’s favor.
 Id.
Judgment on the pleadings isappropriate only when “the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.”
 Id.
(quotations omitted).
III. TRUTH-IN-LENDING ACT RESCISSION CLAIM
The Sanderses correctly contend the district court erred when it concluded theywere not entitled to TILA rescission of their mortgage loan because they failed to pleadtheir ability to repay the loan proceeds.
1
 
1
The Sanderses’ complaint also sought damages under TILA. The district courtconcluded their damages claim was time-barred. The Sanderses have not appealed fromthis determination.

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