Supreme Court Sides with Creditors in Truth in Lending Ruling

The U.S. Supreme Court, siding with the financial services industry, tightened the limits on damages consumers can get from companies that violate the federal Truth in Lending Act.

The court today ruled that the 1968 consumer-protection law generally caps damages at $1,000 when the customer hasn’t proven the amount of actual harm. The 8-1 ruling overturned a $24,192 award to a man who won a lawsuit against a Virginia auto dealership over a loan for a used truck.

The ruling may save lenders as much as $1.1 billion a year in increased damage awards on new auto loans and $1.8 billion a year on used-car loans, according to a brief filed by the American Bankers Association and two other industry groups. Total outstanding U.S. consumer credit was $1.95 trillion in August 2003, the brief said.

“This is a good result for the bankers whom I represented, and it’s a good result for not spawning unnecessary litigation over trivial defects in transactions,” said Roy Englert, the lawyer for the trade groups.

Banks, auto dealers and other lenders urged the high court to impose the $1,000 ceiling, which will apply to most loans and credit other than home mortgages. Consumer groups had called on the justices to permit larger awards. For mortgages, the damage limit is $2,000.

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