§ 138.5     Truth-in-Lending and Other Consumer Protection Statutes
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 138.5, at ¶ ____, LundinOnChapter13.com (last visited __________).

Truth-in-lending1 and other federal and state consumer protection statutes are a fertile ground for debtors’ counsel seeking defenses or offsets to claims. A substantial body of case law has developed, much from the Eastern District of Pennsylvania, demonstrating that defects in disclosures and errors in reporting or collecting may entitle a Chapter 13 debtor to rescission, statutory damages, recoupments and offsets that eliminate or reduce the allowable amount of a claim.2 One difficult developing issue in the Chapter 13 cases in which Truth in Lending violations are alleged is whether and how the debtor must tender loan proceeds after a timely demand for rescission.3


Recent developments in this area include lawsuits challenging the claim-filing practices of certain national creditors. It has been alleged that Ford Motor Credit Company and GE Capital Corporation systematically overvalue collateral in the proofs of claim filed in Chapter 13 cases in violation of various consumer protection statutes.4 In a class action filed in the Eastern District of Tennessee, the standing Chapter 13 trustee and individual Chapter 13 debtors allege that Capital One Financial systematically filed claims in Chapter 13 cases in excess of the amounts to which it was entitled.5 Detailed elsewhere,6 class actions have been litigated in the Southern District of Alabama alleging that First Union Mortgage Corporation, Chrysler Financial Corporation, HomeSide Lending, Inc., NationsBanc Mortgage Corporation and Norwest Mortgage, Inc. filed proofs of claim in Chapter 13 cases that failed to disclose attorneys’ fees and claimed unreasonable fees. After trials, the bankruptcy court awarded substantial damages against some defendants, including multi-million dollar awards of punitive damages.7


Mortgage lenders and mortgage servicers are increasingly the target of claims objections and adversary proceedings in Chapter 13 cases challenging the amount of claims and demanding proof of the accruals, fees, charges and other add-ons. Anecdotally, it is reported that mortgage servicing agents often file proofs of claim based on computer records that are difficult or impossible to verify upon objection. In a compelling account of misconduct by a mortgage servicer, in a Chapter 13 case, the Bankruptcy Court for the District of Massachusetts found that Fairbanks Capital Corporation violated various state and federal consumer protection statutes:

Fairbanks, at no time, produced, or showed that it had, a payment history for the Debtor’s loan. Fairbanks, at no time, produced, or showed that it had, copies of the TILA disclosures that are required by law, including the MCCDA, to be given to a mortgagor. Fairbanks, at no time, produce, or showed that it had, the original or a copy of the Debtor’s Note. Thus, Fairbanks does not have, and never had, any way of ascertaining the extent of the Debtor’s obligation . . . . Nevertheless, Fairbanks, in a shocking display of corporate irresponsibility, repeatedly fabricated the amount of the Debtor’s obligation to it out of thin air. There is no other explanation for the wildly divergent figures it concocted in correspondence with the Debtor and her agents and in pleadings and documents filed with the bankruptcy court.8


1  15 U.S.C. §§ 1601 et seq.


2  See Chapman v. Fischer (In re Chapman), No. 01-4209, 2002 WL 31408901, at *1 (7th Cir. Oct. 23, 2002) (unpublished) (“[S]ettlement offers made by a defendant during the course of a consumer-initiated lawsuit do not constitute ‘communications’ as defined by the FDCPA.”); Peterson v. Rothweiler (In re Peterson), 270 B.R. 719 (B.A.P. 8th Cir. 2001) (Objection to claim failed because mortgage holder was not a “creditor” for purposes of Truth-in-Lending Act (TILA).); Bank One, N.A. v. Bumpers (In re Bumpers), No. 03 C 111, 2003 WL 22119929 (N.D. Ill. Sept. 11, 2003) (unpublished) (Debtor is entitled to prove that she did not receive proper Truth-in-Lending disclosures notwithstanding presumption that arises from receipt signed by the debtor.); Sanchez v. Robert E. Weiss, Inc. (In re Sanchez), 173 F. Supp. 2d 1029 (N.D. Cal. 2001) (Complaint under FDCPA states a cause of action that the debt validation notice sent by the creditor falsely informed the debtor that she could dispute the validity of the debt only in writing.); Smith v. Beal Acceptance Corp., 244 B.R. 487 (N.D. Ga. 2000) (Dismissal with prejudice of debtor’s adversary proceeding under Truth-in-Lending Act barred identical adversary proceeding in second Chapter 13 case under principles of res judicata.); Gambale v. Lomas & Nettleton Co., 80 B.R. 308 (E.D. Pa. 1987) (Mortgagee’s secured claim is reduced by Truth-in-Lending Act recoupment, by penalty and by award of statutory attorneys’ fees pursuant to 15 U.S.C. § 1640(a)(3).); Sheppard v. GMAC Mortgage Corp. (In re Sheppard), 299 B.R. 753 (Bankr. E.D. Pa. 2003) (Because loan modification was not a “refinancing,” disclosure and rescission provisions of TILA and Regulation Z were not applicable; transaction did not otherwise violate Pennsylvania’s Unfair Trade Practices and Consumer Protection Act.); Tavares v. Sprunk (In re Tavares), 298 B.R. 195 (Bankr. D. Mass. 2003) (Private mortgage with interest rate in excess of Massachusetts criminal usury statute is per se deceptive for purposes of Massachusetts Consumer Credit Cost Disclosure Act notwithstanding that TILA is not applicable.); Thomas v. GMAC Residential Funding Corp. (In re Thomas), 296 B.R. 374 (Bankr. D. Md. 2003) (Debtor’s action for rescission under TILA is barred by three-year statute of limitations.); Porter v. Nationscredit Consumer Discount Co. (In re Porter), 295 B.R. 529 (Bankr. E.D. Pa. 2003) (Bankruptcy court probably lacks subject matter jurisdiction over Chapter 13 debtor’s postdischarge adversary proceeding under TILA and RICO seeking class certification against Nationscredit with respect to credit insurance purchased in prepetition loan transaction.); Harvey v. EMC Mortgage Corp. (In re Harvey), Nos. 02-32412DWS, 02-1386, 2003 WL 21460063 (Bankr. E.D. Pa. June 9, 2003) (unpublished) (Bankruptcy court struggles with question whether expanded assignee liability imposed by Home Ownership and Equity Protection Act (HOEPA) applies to a Real Estate Settlement Procedures Act (RESPA) claim against a mortgage servicer; an otherwise time-barred RESPA claim can be asserted defensively by way of recoupment against a proof of claim.); Apgar v. HomeSide Lending, Inc. (In re Apgar), 291 B.R. 665 (Bankr. E.D. Pa. 2003) (Notice of right to rescind was ambiguous under TILA with respect to debtor’s spouse; RESPA claim could not be decided on summary judgment because reasonableness of yield spread premium could not be determined in the context of total compensation paid to mortgage broker.); Lewis v. Delta Funding Corp. (In re Lewis), 290 B.R. 541 (Bankr. E.D. Pa. 2003) (Claims for unfair and deceptive practices in connection with refinancing of low-interest mortgage could not be resolved on summary judgment.); Mourer v. Equicredit Corp. of Am. (In re Mourer), 287 B.R. 889 (Bankr. W.D. Mich. 2003) (Although debtors are entitled to rescission under Truth-in-Lending Act and Home Ownership and Equity Protection Act, confirmation of plan that treated mortgage holder as a secured creditor precludes rescission; debtors are awarded damages, a reduction in interest rate and attorney fees.); Hicks v. Homeq Servicing Corp. (In re Hicks), 285 B.R. 317, 323 (Bankr. W.D. Okla. 2002) (Lender’s motion to compel arbitration is denied in debtor’s adversary proceeding alleging violations of Oklahoma Consumer Protection Act and Truth-in-Lending Act. Citing Green Tree Financial Corp. Alabama v. Randolph, 531 U.S. 79, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000), “Debtor’s potential liability for the costs of the arbitration exceeding one day could inhibit her willingness to pursue her claims against Homeq, and calls into question the accessibility of the arbitral forum to resolve Debtor’s claims.”); Crisomia v. Parkway Mortgage, Inc. (In re Crisomia), Nos. 00-35085DWS, 00-0938, 2002 WL 31202722 (Bankr. E.D. Pa. Sept. 13, 2002) (unpublished) (Adversary proceeding against home improvement lender under Home Ownership and Equity Protection Act, Truth-in-Lending Act, Pennsylvania Home Improvement Finance Act and Pennsylvania Unfair Trade Practices and Consumer Protection Act is limited to damages in the amount of the lender’s proof of claim; rescission is not an available remedy, and trial is necessary with respect to remaining claims under Pennsylvania law.); In re Tomasevic, 279 B.R. 358 (Bankr. M.D. Fla. 2002) (Citing Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001), bankruptcy court is without jurisdiction over debtor’s claim that mortgage holder violated Real Estate Settlement Procedures Act.); Williams v. EMC Mortgage Corp. (In re Williams), 276 B.R. 394 (Bankr. E.D. Pa. 2002) (Citing Beach v. Ocwen Federal Bank, 523 U.S. 410, 118 S. Ct. 1408, 140 L. Ed. 2d 566 (1998), debtor cannot rescind under Truth-in-Lending Act after the three years in 15 U.S.C. § 1635(f) by way of a recoupment defense to a creditor’s proof of claim; three-year limitations period is not tolled by the lender’s Chapter 11 case and is not extended by the Bankruptcy Code.); In re Tomasevic, 275 B.R. 103 (Bankr. M.D. Fla. 2001) (Mortgage holder’s failure to respond to letter asserting errors was a RESPA violation, but debtor failed to prove any damages.); In re Tomasevic, 275 B.R. 86 (Bankr. M.D. Fla. 2001) (Claim objection based on Truth-in-Lending Act is rejected because prepetition foreclosure judgment determined some TILA claims against the debtor and transaction was a purchase money mortgage.); Wiggins v. Peachtree Settlement Funding (In re Wiggins), 273 B.R. 839 (Bankr. D. Idaho 2001) (Chapter 13 debtor recovers statutory damages, attorney fees and punitive damages of $184,910 for unconscionable practices by purchaser of insurance settlement proceeds.); Cabbagestalk v. Wendover Fin. Servs., Inc. (In re Cabbagestalk), 270 B.R. 33 (Bankr. W.D. Pa. 2001) (Debtor’s complaint states a cause of action under the Pennsylvania Home Improvement Finance Act.); Quenzer v. Advanta Mortgage Corp. (In re Quenzer), 266 B.R. 760 (Bankr. D. Kan. 2001) (Mortgage lien became immediately void when Chapter 13 debtors gave notice of rescission under TILA.); Martinez v. Law Offices of David J. Stern, P.A. (In re Martinez), 266 B.R. 523 (Bankr. S.D. Fla.) (Debt collection attorney violated Fair Debt Collection Practices Act by sending FDCPA notice with foreclosure complaint when “least sophisticated consumer” would be confused by the conflicting time periods in the documents.), aff’d, 271 B.R. 696 (S.D. Fla. 2001) (Prepetition debt collection notice from attorney violated Chapter 13 debtor’s rights under FDCPA.); Roberson v. Cityscape Corp. (In re Roberson), 262 B.R. 312 (Bankr. E.D. Pa. 2001) (Some of Chapter 13 debtor’s truth-in-lending claims survive the statute of limitations because they may be asserted defensively as a recoupment to the mortgage holder’s proof of claim.); In re McMillan, 251 B.R. 484 (Bankr. E.D. Mich. 2000) (Assertion that second mortgage was invalid under Michigan Home Improvement Finance Act could not be adjudicated through a provision of the plan but rather must be filed as an adversary proceeding.); Barker v. Altegra Credit Co. (In re Barker), 251 B.R. 250 (Bankr. E.D. Pa. 2000) (Mortgage broker committed fraud, breached fiduciary duty and violated Pennsylvania Credit Services Act and Unfair Deceptive Acts and Practices statute, entitling the debtor to damages with respect to home improvement/consolidation loan.); Hart v. GMAC Mortgage Corp. (In re Hart), 246 B.R. 709 (Bankr. D. Mass. 2000) (Prepetition letter notifying the debtor that he was obligated to repay a “negative suspense amount of $1,622.40” violated the Fair Debt Collection Practices Act and violated the Massachusetts Consumer Protection Act. Debtor entitled to $3,000 for emotional distress, statutory damages of $1,000, reimbursement for the Chapter 13 filing fee, attorneys’ fees and trustee’s commission.); Jackson v. US Bank Nat’l Ass’n Trustee (In re Jackson), 245 B.R. 23 (Bankr. E.D. Pa. 2000) (Applying Home Ownership Equity Protection Act amendments to Truth-in-Lending Act, debtor did not receive required preclosing disclosures. Debtor’s liability for mortgage is eliminated, and debtor gets damages of $3,800.); McNinch v. Mortgage Am., Inc. (In re McNinch), 250 B.R. 848 (Bankr. W.D. Pa. 2000) (Complaint under Truth-in-Lending Act is dismissed because amended disclosures given by lender at closing satisfied TILA.); Murray v. First Nat’l Bank of Chicago (In re Murray), 239 B.R. 728 (Bankr. E.D. Pa. 1999) (Chapter 13 debtor gets statutory damages in action under Truth-in-Lending Act.); Knox v. Sunstar Acceptance Corp. (In re Knox), 237 B.R. 687 (Bankr. N.D. Ill. 1999) (Grants motion to dismiss adversary proceeding alleging that secured claim holder knowingly filed proofs of claim that over valued cars in violation of the Illinois Consumer Fraud Act and other laws.); Walker v. Contimortgage (In re Walker), 232 B.R. 725 (Bankr. N.D. Ill. 1999) (Chapter 13 debtor’s complaint under Truth-in-Lending and Real Estate Settlement Procedures Acts survives motion for summary judgment.); Williams v. Gelt Fin. Corp. (In re Williams), 232 B.R. 629 (Bankr. E.D. Pa.) (Chapter 13 debtor gets damages and rescission under Truth-in-Lending Act and Pennsylvania Unfair Trade Practices and Consumer Protection Law.), aff’d in part, 237 B.R. 590 (E.D. Pa. 1999) (Affirms violations of Truth-in-Lending Act and of Pennsylvania Unfair Trade Practices and Consumer Protection Law; affirms most of award of damages and rescission.); Ralls v. Bank of N.Y. (In re Ralls), 230 B.R. 508 (Bankr. E.D. Pa. 1999) (Truth-in-lending violations entitle the debtor to reclassify the creditor’s claim as unsecured, to statutory damages of $2,000, to recoupment of $2,000 and to recovery of reasonable attorney’s fees.); Smith v. VW Credit, Inc. (In re Smith), 227 B.R. 667 (Bankr. N.D. Ill. 1998) (Debtor voluntarily dismisses without prejudice Truth-in-Lending Act and consumer protection counterclaims to proof of claim filed by creditor.); Fidler v. Central Coop. Bank (In re Fidler), 226 B.R. 734 (Bankr. D. Mass. 1998) (On Chapter 13 debtors’ objection to claim and adversary proceeding against claim holder, debtors’ Truth-in-Lending Act actions are time barred, but debtors’ actions under the Massachusetts Consumer Credit Act are not.); Desrosiers v. Transamerica Fin. Corp. (In re Desrosiers), 212 B.R. 716 (Bankr. D. Mass. 1997) (Debtors’ adversary proceeding claiming violations of Truth-in-Lending Act and of Massachusetts Consumer Credit Disclosure Act is barred by res judicata effect of dismissal of district court lawsuit by one debtor that sought rescission and damages pursuant to the same statutes.); Lombardi v. Domestic Loan & Inv. Bank (In re Lombardi), 195 B.R. 569 (Bankr. D.R.I. 1996) (In a Chapter 13 case filed in 1994, debtor can rescind home improvement transaction in 1992 because lender used inadequate Truth-in-Lending Act disclosures at the time of contracting and thus extended for three years the debtors’ three-day right of rescission.); Botelho v. Citicorp Mortgage, Inc. (In re Botelho), 195 B.R. 558 (Bankr. D. Mass. 1996) (Adversary proceeding in 1995 to rescind mortgage transaction in 1989 is not time barred because Truth-in-Lending Act and Massachusetts Consumer Credit Cost Disclosure Act claims are defenses to foreclosure action by Citicorp. Use of refinancing form rather than home equity loan form violated both TILA and CCCDA.); Farris v. Jefferson Bank (In re Farris), 194 B.R. 931 (Bankr. E.D. Pa. 1996) (Bank violated the Equal Credit Opportunity Act by requiring the debtor/wife’s signature on a loan for which the application was filed solely by her nondebtor husband; however, bank did not violate ECOA by requiring the debtor/wife to sign a mortgage to permit the bank to take jointly owned residence as collateral for the nonfiling husband’s loan.); Rebector v. Note Serv. Corp. (In re Rebector), 192 B.R. 411 (Bankr. W.D. Tex. 1995) (Contractor’s lien for home improvements was a retail installment transaction under the Texas Consumer Credit Code, and thus the creditor was prohibited from taking a first lien on the debtor’s real property. Debtor recovered $4,000 as a penalty and reasonable attorney fees of $5,000.); Moore v. Mid-Penn Consumer Discount Co. (In re Moore), 117 B.R. 135, 137 (Bankr. E.D. Pa. 1990) (Creditor’s failure to disclose in mortgage documents that the debtor could obtain fire insurance from an insurer of the debtor’s choice, though a technical violation of Truth-in-Lending Act, “entitled [the debtor] to the full panoply of consequences arising from a creditor’s failure to honor a valid demand for rescission: elimination of finance charges and recoupment which decimates the claim, an award of statutory damages of $1,000 in favor of the debtor and a right of [debtor’s] counsel to collect his reasonable attorney’s fees from the creditor.”); Bender v. Commonwealth Mortgage Co. of Am. (In re Bender), 86 B.R. 809 (Bankr. E.D. Pa. 1988) (Boilerplate in mortgage agreement granting a security interest in both real and personal property must be disclosed to comply with Truth-in-Lending Act, and failure to disclose entitles debtor to $2,000 recoupment. When mortgage is partially secured and partially unsecured, upon objection to mortgage holder’s claim, it is appropriate to bifurcate the recoupment sum and reduce the allowed secured claim in part and the allowed unsecured claim in part.); Ashhurst v. Meritor Sav. Bank (In re Ashhurst), 80 B.R. 49 (Bankr. E.D. Pa. 1987) (Upon objection to claim of mortgage company, husband and wife debtors are each entitled to a separate recovery of applicable statutory damages for Truth-in-Lending Act violation by mortgagee.); Dangler v. Central Mortgage Co., 75 B.R. 931 (Bankr. E.D. Pa. 1987); Mitchell v. Frankford Trust Co. (In re Mitchell), 75 B.R. 593 (Bankr. E.D. Pa. 1987); Jones v. Mid-Penn Consumer Discount Co. (In re Jones), 79 B.R. 233 (Bankr. E.D. Pa. 1987) (Secured claim holder with real estate mortgage is rendered unsecured by Truth-in-Lending Act violation.); Caster v. United States, 77 B.R. 8 (Bankr. E.D. Pa. 1987) (Mortgage holder’s secured claim will not be reduced on the basis of an alleged Truth-in-Lending Act violation because HUD is exempt from liability under Truth-in-Lending Act and debtor failed to meet burden of proving that a Truth-in-Lending Act violation existed.); McCausland v. GMAC Mortgage Corp., 63 B.R. 665 (Bankr. E.D. Pa. 1986) (Damages for violation of Truth-in-Lending Act are allowed as an offset or recoupment against creditor’s secured claim.).


3  See, e.g., Ray v. Citifinancial, Inc., 228 F. Supp. 2d 664, 670 (D. Md. 2002) (In Chapter 13 debtor’s litigation against mortgage holder under Truth-in-Lending Act (TILA) and Home Ownership and Equity Protection Act (HOEPA), “a court does have the authority to condition rescission of a security interest upon the debtor tendering to the creditor its legal due . . . . [T]he Bankruptcy Court . . . has discretionary authority to reduce (and, if it finds the circumstances warrant, eliminate) the creditor’s security interest to the extent that equitable considerations so dictate.”); Webster v. Centex Home Equity Corp. (In re Webster), 300 B.R. 787 (Bankr. W.D. Okla. 2003) (Debtor had grounds under TILA and HOEPA to rescind home mortgage; voiding of mortgage is conditioned that the debtor return the money received; adversary proceeding was filed beyond the one-year statute of limitations for damages.); Williams v. BankOne (In re Williams), 291 B.R. 636 (Bankr. E.D. Pa. 2003) (Tender of loan proceeds is not a precondition to voiding of mortgage lien when debtor rescinds based on TILA/HOEPA violation; mortgage becomes unsecured but principal balance must be paid in full through plan to satisfy tender obligation.); Quenzer v. Advanta Mortgage Corp. (In re Quenzer), 274 B.R. 899, 904–05 (Bankr. D. Kan. 2001) (“[T]he Court believes that Advanta should be allowed to set off its obligation to return money or property to the debtors under Regulation Z § 226.23(d)(2) against their obligation to return the loan proceeds to it under § 226.23(d)(3). . . . Advanta has a duty to return to the debtors $1,956.76 (the closing costs and fees they paid) plus $19,298.82 (all the subsequent principal and interest payments the debtors made on the loan), a total of $21,255.58. In turn, the debtors have a duty to return to Advanta the $69,600 in loan proceeds paid to them or on their behalf. After setoff, the debtors owe Advanta $48,344.42. . . . Advanta is subject to civil penalties under TILA § 1640(a)(2)(A)(iii) of between $200 and $2,000 for each [violation]. . . . [T]he obligor-debtor is excused from the obligation to pay any finance charge (i.e., interest) to the creditor.”), rev’d, 288 B.R. 884, 889 (D. Kan. 2003) (“[T]he bankruptcy court may impose conditions that run with the voiding of a creditor’s security interest upon terms that would be equitable and just to the parties in view of all the surrounding circumstances, and . . . it should require the debtors’ return of property received in connection with the transaction as a condition to rescission in this case.”); Quenzer v. Advanta Mortgage Corp. (In re Quenzer), 266 B.R. 760 (Bankr. D. Kan. 2001) (Mortgage lien became immediately void when Chapter 13 debtors gave notice of recission under TILA.).


4  See, e.g., Simmons v. Ford Motor Credit Co. (In re Simmons), 237 B.R. 672 (Bankr. N.D. Ill. 1999), reconsidering, 224 B.R. 879, 885 (Bankr. N.D. Ill. 1998) (Bankruptcy court has jurisdiction over debtor’s individual claim that Ford Motor Credit Co. improperly filed proof of claim asserting fully secured status, but bankruptcy court could not exercise jurisdiction over class action. Court dismisses debtor’s adversary proceeding challenging Ford Motor Credit’s practice of filing proofs of claim that assert fully secured status notwithstanding that value of car is known to be less than the amount of Ford’s claim. Ford Motor Credit filed a proof of claim for $16,873 asserting that the claim was fully secured. The loan documents attached to the proof of claim showed that the debtor bought the car for an original purchase price of $16,424 more than a year before the Chapter 13 petition. Debtor filed a complaint, seeking to represent a class of all Chapter 13 debtors in cases where Ford Motor Credit had filed proofs of claim and asserting that Ford routinely overstated the value of its collateral in proofs of claim to gain the strategic advantage of automatic allowance under § 502. Court held that § 105 “does not authorize the relief she seeks.” “[T]he Code’s provisions for the allowance of claims and the decision in [Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997),] all seem to contemplate that both debtor and creditor be afforded equal opportunity to advance their interests in the valuation process.” The court deferred to another day the question whether the bankruptcy court had jurisdiction over the debtor’s claims of violation of Illinois consumer fraud and deceptive business practices statutes.); Lenior v. GE Capital Corp. (In re Lenior), 231 B.R. 662 (Bankr. N.D. Ill. 1999) (Dismisses in part adversary proceeding alleging that creditor systematically overvalued collateral in the proofs of claim it filed in violation of various consumer protection statutes.). See also Cooper v. Litton Loan Servicing (In re Cooper), 253 B.R. 286, 291–94 (Bankr. N.D. Fla. 2000) (Debtors’ claims under the Fair Debt Collection Practices Act and under the Florida Consumer Credit Practices Act are dismissed, some with and some without prejudice: “[T]he filing of a proof of claim for a debt whose amount is in dispute is not a per se violation of the Act. On the contrary, the filing of a proof of claim in a bankruptcy proceeding does not trigger the FDCPA, and fails to state a cause of action under that Act. . . . The debtor can only attack a proof of claim in the bankruptcy court, and only by using the remedies provided in the Bankruptcy Code. . . . Defendants’ Motion to Lift Stay was not a debt collection activity, as defined in the FDCPA. Rather, it was an attempt to permit the Defendants’ [sic] to seek a forum in which to attempt a debt collection activity. Defendants’ activity was too far removed from a direct attempt at seeking payment from the Debtors to trigger a remedy under the consumer protection legislation.”); Cooper v. Litton Loan Servicing (In re Cooper), 253 B.R. 295 (Bankr. N.D. Fla. 2000) ($5,000 sanction against debtors’ attorney for “scorched earth approach, suing anyone remotely connected to the case, and threatening to keep piling on allegations if they even attempted to respond.” Violation of Rule 9011 consisted of amending complaint to add as a defendant the law firm that filed proof of claim and appeared to defend the debtor’s FDCPA complaint.).


5  Kerney v. Capital One Fin. Corp. (In re Sims), 278 B.R. 457, 481 (Bankr. E.D. Tenn. 2002) (In class action alleging systematic overstatement of proofs of claim by Capital One Financial, standing trustee and individual debtors can object to overstated claims, a class action is possible (when or if certified) and Capital One may be subject to sanctions if the alleged actions are shown to be knowing and systematic. “In the present case, the plaintiffs allege in their amended complaint that Capital One ‘knowingly and willingly’ and ‘systemic[ally]’ filed claims in excess of the amounts to which it was entitled in chapter 13 proceedings nationwide. The plaintiffs allege that even though in some cases objections to these improper claims have been filed and sustained, Capital One continues these ‘unlawful practices.’ If these allegations are true, sanctions are appropriate.”).


6  See § 51.1  Can Debtor Sue and Be Sued?§ 131.1  Official Bankruptcy Form 410 and Variations§ 131.2  Official Form 410 after BAPCPA, § 138.2  Claims for Creditors’ Attorneys’ Fees and § 138.3  Creditors’ Attorneys’ Fees: New Recovery Rights after BAPCPA.


7  See, e.g., Slick v. Norwest Mortgage, Inc. (In re Slick), Case No. 98-14378-MAM, Adv. No. 99-1136 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov) (After trial in class action, because Norwest Mortgage, Inc., failed to disclose attorneys’ fees for preparation of proofs of claim after September 1997, all such fees are disallowed and discharged and Norwest is sanctioned with $2 million in punitive damages plus attorneys’ fees.); Harris v. First Union Mortgage Corp. (In re Harris), Case Nos. 96-14029-MAM, 00-11321-MAM-13, Adv. No. 99-1144 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov) (After trial in class action alleging that First Union Mortgage Corporation failed to disclose attorneys’ fees for preparation of proofs of claim, court found that First Union “had a consistent policy of not disclosing any attorneys fees charged for filing proofs of claim. . . . First Union gave debtors no notice at all of a fee added to their accounts. . . . [D]ebtors should be awarded $2,000,000 in punitive damages. . . . [P]rejudgment interest should be paid to every plaintiff who has paid some or all of the attorneys fee posted to his or her account.”).


8  Maxwell v. Fairbanks Capital Corp. (In re Maxwell), 281 B.R. 101, 116–17 (Bankr. D. Mass. 2002).