In Bonte v US Bank, the Seventh Circuit Court of Appeals affirmed dismissal of TILA claims for mortgage rescission because the plaintiffs failed to demonstrate how the allegedly misstated charges constituted “material” disclosures. The complaint alleged that inconsistencies between the plaintiffs’ TILA and HUD-1 statements regarding the annual percentage rate, the amount financed and the finance charge resulted in ten material misstatements, entitling them to rescind their mortgage after the ordinary three-day rescission period. U.S. Bank moved to dismiss for failure to state a claim, arguing that none of the alleged misstatements related to the APR, the amount financed, or the finance charge. In affirming the dismissal, the Seventh Circuit noted that disclosures regarding the APR, the amount financed, and the finance charge are “material” under TILA and will “support rescission for up to three years.”
However, the court found persuasive U.S. Bank’s arguments that: (1) four of the alleged misstated charges related to loan disbursements, which are unrelated to the APR, the amount financed, or the finance charge; (2) the alleged discrepancy in property taxes is excluded from the finance charge; (3) the alleged misstatements regarding title insurance, the ARM endorsement, recording service fees, and courier fees are exempt under TILA and excluded from the finance charge; and (4) the alleged misstatement of settlement fees was exempt under TILA, excluded from the finance charge and that plaintiffs alleged an overstatement, but TILA only prohibits understatements. Consequently, the court held that, even assuming the truth of the allegations and that plaintiffs pled a plausible theory, U.S. Bank had shown that the plaintiffs were not entitled to rescission. The court also noted that by failing to file a reply, the plaintiffs waived their argument that the alleged misstatements were material.