951 S.W.2d 915
Court of Appeals of Texas,
DILLARD DEPARTMENT STORES, INC., Appellant,
Richard L. OWENS, Appellee.
Aug. 21, 1997.
Rehearing Overruled Sept. 18, 1997.
Credit card issuer brought action against debtor and debtor's spouse to recover payment for debtor's purchases under theories of breach of contract, quantum meruit, implied contract, unjust enrichment, and community debt. The Nueces County Court, Robert Blackmon, J., rendered judgment that issuer take nothing from spouse and that spouse recover attorney fees, and appeal was taken. The Court of Appeals, Seerden, C.J., held that evidence was legally and factually sufficient to support conclusion that issuer violated Truth in Lending Act (TILA).
Affirmed in part; reversed and remanded in part.
The Truth-in-Lending Act generally regulates specified aspects of consumer credit and billing practices. Its overall purpose is "to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. § 1601(a); see Fairley v. Turan-Foley Imports, Inc., 65 F.3d 475, 477 (5th Cir.1995). Accordingly, TILA is enforced strictly against creditors and construed liberally in favor of the consumer. Fairley, 65 F.3d at 482; Thomas v. Myers-Dickson Furniture Co., 479 F.2d 740, 748 (5th Cir.1973).
The provision of TILA dealing with civil liability states generally that "any creditor who fails to comply with any requirement imposed under [specified parts of the Act] with respect to any person is liable to such person in an amount equal to the sum of--(1) any actual damage sustained by such person as a result of the failure; (2) [statutory penalties]; (3) in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 of this title, the costs of the action, together with a reasonable attorney's fee as determined by the court;...." 15 U.S.C. § 1640(a).
In the present case, if Dillard, as creditor, failed to comply with a provision of TILA in its attempt to collect the asserted credit card debt against Owens, and if Owens was successful in an action to enforce liability against Dillard for such noncompliance, then Owens also has a right to reasonable attorney's fees. Our first question is whether Dillard breached any duty to Owens under TILA for which Owens could hold it liable.
The responsibilities of creditor and debtor under the TILA with regard to billing disputes are generally set forth in section 1666, which requires the debtor to initiate written notice of any billing error. The creditor must then acknowledge the disputed charge and either correct it or "send a written explanation or clarification to the obligor, after having conducted an investigation, setting forth to the extent applicable the reasons why the creditor believes the account of the obligor was correctly shown in the statement and, upon request of the obligor, provide copies of documentary evidence of the obligor's indebtedness. ...." 15 U.S.C. 1666(a)(B)(ii). The creditor's failure to comply with these requirements causes him to forfeit the right to collect the disputed amounts up to $50.00. 15 U.S.C. 1666(e). Section 1666i generally preserves the claims and defenses of the debtor against the creditor arising out of a credit card transaction, if the debtor has, among other things, "made a good faith attempt to obtain satisfactory resolution of a disagreement or problem relative to the transaction from the person honoring the credit card." 15 U.S.C. 1666i(a).
The jury findings in the present case show that, while Owens complied with section 1666i by making a good faith attempt to obtain a satisfactory resolution of the billing error, Dillard did not comply with the requirement of section 1666(a)(B)(ii) concerning a written explanation or clarification setting *918 forth the reasons the account was correctly shown.
By its sixth point or error, Dillard challenges the legal and factual sufficiency of the evidence to support the jury's finding that it violated this requirement. In considering a "no evidence," "insufficient evidence" or "against the great weight and preponderance of the evidence" point of error, we follow the well-established test set forth in Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986). See also Calvert, No Evidence and Insufficient Evidence Points of Error, 38 TEX. L.REV. 361 (1960).
 It is undisputed that Dillard sent its April 1, 1991, letter to Owens asserting his liability for the debt in the following terms:
We are in receipt of a fraud affidavit in [sic] which you completed. However, after research and investigation, we find that you and Dianna McKay Owens were legally married at the time the purchases in question were made. For this reason, we are unable to process your request as fraud. We feel this should be handled as a civil matter.
We conclude that the letter itself demonstrates Dillard's failure to comply with the requirements of TILA concerning a satisfactory explanation for why it continued to hold Owens liable for Davis' purchases. Although Dillard did mention Owens' marriage to Davis as an impediment to "processing" his fraud claim, this ambiguous and conclusory statement offers no justification as to the basis on which Dillard asserted that Owens remained liable for such purchases. Dillard's theory at trial, that the purchases were for "necessaries" which one spouse is obliged to provide to the other, was never mentioned in the letter or investigated beyond merely a cursory review of the items purchased. Accordingly, the letter and surrounding circumstances offered legally and factually sufficient evidence that Dillard violated this provision of TILA. We overrule Dillard's sixth point of error.
However, in order for Owens to be entitled to attorney's fees, we must further find under section 1640(a)(3) that Owens was successful in an action to enforce liability against Dillard for its noncompliance with TILA.
Although Owens recovered no actual damage award against Dillard, he did successfully defeat Dillard's claim against him for Davis' unauthorized use of the charge card. Moreover, Dillard's violation of TILA played a substantial part in its attempt to recover the improper charges against Owens. Had Dillard attempted to comply with TILA by stating its full theory of liability in a proper written explanation to Owens, it is likely that the futility of its attempt to enforce the debt against him would have become obvious at that time, and both parties could have avoided the time and expense of the present proceedings.
The purpose of the protections afforded a consumer under section 1666 is not, after all, to change the substantive law with regard to his liability for the underlying debt, but to protect him from the intimidating process of bargaining over a disputed debt with a creditor in a superior bargaining position. Without such protections, the creditor may use that bargaining power to encourage payment of even an illegitimate debt by threatening to force the consumer to expend substantial time and money to protect his rights. The fact that the creditor ultimately loses his claim in court does not diminish the expense to the consumer of protecting his rights, unless that consumer either brings an affirmative claim for the statutory penalties and/or collects attorney's fees and costs for his defense.
In another context, the Fifth Circuit has recognized the dilemma that a consumer faces in trying to enforce the provisions of TILA, under which Congress had intended to create "a system of 'private attorney generals' who will be able to aid the effective enforcement of the Act." Sosa v. Fite, 498 F.2d 114, 121 (5th Cir.1974) (quoting Thomas, 479 F.2d at 748). Accordingly, the Sosa court allowed attorney's fees to a debtor who successfully sued to rescind a consumer credit transaction under section 1635 of the Act, even though the debtor's action did not fall within the literal application of section 1640 at that time. So long as the action "vindicates congressional policy," the Sosa court concluded that it was within the trial court's *919 discretion to award attorney's fees to the successful debtor. Sosa, 498 F.2d at 121; see also Purtle v. Eldridge Auto Sales, Inc., 91 F.3d 797, 800 (6th Cir.1996) (plaintiff in a TILA case need not prove that he or she suffered actual monetary damages in order to recover the statutory damages and attorney's fees); but see Rachbach v. Cogswell, 547 F.2d 502, 506 (10th Cir.1976) (criticizing Sosa for failing to follow the "American Rule" that attorney's fees are not ordinarily recoverable in the absence of statutory authorization).
The same policy considerations expressed by the Sosa court justify allowing attorney's fees to the consumer who successfully defends an action by a creditor who has violated TILA by its improper attempts to collect the underlying debt. Had Dillard complied with TILA and properly handled the present dispute, it likely would have been resolved much earlier in Owens' favor and he would not have had to spend a significant amount of money defending his rights before the trial court and now this Court. One obvious purpose of TILA is to simplify the resolution of disputes and to place the consumer on a more equal footing in the resolution of such disputes. When the creditor fails to follow TILA procedures, he encourages misunderstandings, a lack of communication, and ultimately litigation. The costs of such litigation should not fall on the innocent consumer, but on the creditor who has failed to comply with TILA.
We conclude that the trial court had authority to award attorney's fees to Owens under TILA. Accordingly, we overrule Dillard's first seven points of error.
By its eighth and ninth points of error, Dillard complains that the amount of attorney's fees awarded to Owens was excessive and unsupported by legally or factually sufficient evidence.
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