In an issue of first impression, the U.S. Court of Appeals for the Third Circuit ruled that a plaintiff must prove detrimental reliance for actual damages under the Truth in Lending Act (TILA).

Plaintiff Louis Vallies and defendant Sky Bank (Bank) entered into a Loan and Security Agreement in which the Bank financed the plaintiff’s automobile purchase, including a premium for debt cancellation insurance. The Loan and Security Agreement did not calculate the premium charge into the “finance charge,” nor did it itemize the premium separately. These failures violated TILA. However, the plaintiff obtained proper TILA disclosures from the car dealer in an agreement to which the Bank was not a party.

TILA provides for both statutory damages, which are assessed whenever there is a violation of TILA, as well as actual damages. Under the statute, a plaintiff may recover “any actual damage sustained by such person as a result of the failure” to comply with TILA.

After the parties settled the statutory damages claim, plaintiff prosecuted his claim for actual damages. The Bank moved for summary judgment on the grounds that plaintiff had not relied on the improper TILA disclosure, and therefore could not show reliance or actual damages. The district court granted the Bank’s summary judgment motion holding that plaintiff had received TILA disclosures from a third party prior to execution of the Loan Agreement with the Bank, and thus plaintiff could not show detrimental reliance.

The Third Circuit affirmed, reasoning that TILA provided only a remedy for “actual damage[s] sustained” by a plaintiff as a result of the failure to disclose. Thus, there must be some detrimental reliance upon the disclosure statement by the plaintiff to sustain a claim for actual damages. Because Plaintiff had in fact received the proper disclosures from the third party car dealer, no detrimental reliance could be shown. (Vallies v. Sky Bank, No. 08-4160, 2009 WL 5154473 (3rd Cir. Dec. 31, 2009))