On June 5, 2024, the United States District Court for the Southern District of New York issued a decision adopting in its entirety the May 13, 2024, Report and Recommendation regarding the Truth in Lending Act (TILA). The court held that under TILA, a creditor in an open-end consumer credit plan has no obligation to notify or disclose to consumers information that the creditor has or intends to verify with the Internal Revenue Service (IRS) regarding the consumer’s taxes or income in the course of servicing the consumer’s debt.

Background: Consumer’s TILA Claim Against Creditor in Tunne Case

In Tunne, a consumer brought a TILA claim against a creditor who closed the consumer’s credit card account after being unable to verify the consumer’s information with the IRS due to the consumer’s refusal to cooperate. TILA was enacted to protect consumers against inaccurate or unfair credit billing practices by imposing mandatory requirements on creditors to meaningfully disclose credit terms. In Tunne, the consumer claimed that the creditor violated TILA by refusing to notify the consumer in writing as to the specific verifications and statements that the creditor was seeking from the IRS.

TILA’s Purpose: Protecting Consumers from Unfair Credit Billing Practices

The district court rejected the consumer’s argument, limiting the creditor’s obligations under TILA to disclose only the information specifically delineated under the statute. The court held that the disclosure requirements for open-end consumer credit plans such as the consumer’s credit card account, which are codified at 15 U.S.C. § 1637(a)-(d), pertain to finance charges, interest rates, consumer rights, and creditor responsibilities regarding billing, grace periods, cash advance fees, late fees, and over-credit-limit fees. The court notes that TILA does not specifically require creditors on open-end credit plans to disclose information verified with the IRS.

Court’s Ruling: TILA Disclosure Requirements Limited for Creditors

The Tunne decision makes clear that while TILA was enacted to ensure that consumers can make informed decisions with respect to their credit, it is not intended as a blank check for borrowers to demand disclosure of all information considered or verified by a creditor in the course of servicing the consumer’s account.