Class action penalties under TILA are capped at?

Class action penalties under TILA are capped at?

• A. $1 million
• B. $500,000 or 1% of the servicer's net worth, whichever is less
• C. $50,000
• D. No cap

Answer: (B)

The main idea here is that TILA allows private actions, including class actions, but imposes a cap on penalties in such cases. The cap is set as the lesser of $500,000 or 1% of the servicer’s net worth. This means the total penalties in a TILA class action can’t exceed either a fixed $500,000 or a percentage of the defendant’s financial size, whichever is lower. For example, if a servicer has net worth of $30 million, 1% is $300,000, so the cap is $300,000. If net worth is $100 million, 1% is $1,000,000, so the cap is $500,000. The other options miss this balancing mechanism: there is a cap, and it’s not a flat $1 million or $50,000.

The main idea here is that TILA allows private actions, including class actions, but imposes a cap on penalties in such cases. The cap is set as the lesser of $500,000 or 1% of the servicer’s net worth. This means the total penalties in a TILA class action can’t exceed either a fixed $500,000 or a percentage of the defendant’s financial size, whichever is lower. For example, if a servicer has net worth of $30 million, 1% is $300,000, so the cap is $300,000. If net worth is $100 million, 1% is $1,000,000, so the cap is $500,000. The other options miss this balancing mechanism: there is a cap, and it’s not a flat $1 million or $50,000.