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How to Start a Credit Repair Business

in

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Cost of starting a credit repair business

Roughly $200

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Cost to obtain the required $10,000 bond:

Roughly $200

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Potential average profit

$20,000 monthly

Credit Repair Laws in Pennsylvania

There are federal and state laws for Pennsylvania. You should be aware of both.

Federal Laws

The Credit Repair Organizations Act (CROA) is a federal law passed in September 1996 that regulates organizations whose purpose is increasing consumer’s credit score through credit repair. One of the most important things the CROA did is make it illegal for credit repair organizations to make false claims. Don’t worry though, staying compliant is pretty easy after you get familiar with the law! This law is moderated and enforced by the Federal Trade Commission (FTC), so the FTC has the authority to close down any credit repair organizations that are operating outside the parameters of these laws (like fraudulent or illegal activities).

The main sections include mandates that:

  • You can’t misrepresent your services (no false claims about what you will do for the client and definitely no promise of working and then not doing the work).
  • You must provide a written contract between you and the client that the client signs.
  • Your clients have three days to cancel the contract.
  • You can’t charge until services are rendered (most companies will do some initial document processing and then charge the client for the work they have just done).
  • Consumers can sue and get refunded all money paid (plus legal fees and damages)  if the credit repair organization is found to have violated the CROA with that consumer.
  • State laws can’t change or render any of the CROA ineffective.

Simply put, these laws were put in place to protect people from credit repair companies using scammy business practices. As long as you’re not trying to be sketchy and scam people, you should be able to stay compliant easily!

To read the Credit Repair Organizations Act in full, visit the United States House of Representatives’ record of the act here.

State Laws

Pennsylvania has laws that govern how to start (and run!) a credit repair business in Pennsylvania. Here are the relevant regulations and Pennsylvania laws governing credit repair businesses that you need to be aware of:

Pennsylvania State Laws

 

Title 9. Civil Code Ancillaries (Refs & Annos)
Code Book III--of the Different Modes of Acquiring the Ownership of Things
Code Title XII--of Loan

Chapter 2. Louisiana Consumer Credit Law (Refs & Annos)

Part XV. Credit Repair Services Organizations Act (Refs & Annos) IN ST 24-5-15-1

Chapter 36. Credit Services Act

§ 2181. Short title

This act shall be known and may be cited as the Credit Services Act.

 

§ 2182. Definitions

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Advance fee." Any funds or consideration assessed or collected prior to closing of a loan by a loan broker.

"Borrower." A person obtaining or desiring to obtain a loan of money, a credit card or line of credit for personal, family or household purposes.

"Buyer." A natural person who is solicited to purchase or who purchases the services of a credit services organization.

"Credit services organization."
(1) A person who, with respect to the extension of credit by others, sells, provides or performs or represents that he or she can or will sell, provide or perform any of the following services in return for the payment of money or other valuable consideration:
(i) Improving a buyer's credit record, history or rating.
(ii) Obtaining an extension of credit for a buyer.
(iii) Providing advice or assistance to a buyer with regard to either subparagraph (i) or (ii).
(2) The term shall not include any of the following:
(i) Any person organized, chartered or holding a license or authorization certificate to make loans or extensions of credit pursuant to the laws of the Commonwealth or the United States who is subject to regulation and supervision by an official or agency of the Commonwealth or the United States.
(ii) Any bank, bank and trust company, trust company, savings bank, Federal savings and loan association or savings bank located in this Commonwealth or savings association or any subsidiary or affiliate of such institution whose deposits are eligible for insurance by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania Savings Association Insurance Corporation.
(iii) Any nonprofit organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1954 (68A Stat. 3, 26 U.S.C. § 1 et seq.).
(iv) Any person licensed as a real estate broker where the person is acting within the course and scope of that license.
(v) Any person admitted to practice law in this Commonwealth where the person renders services within the course of such practice.
(vi) Any broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission where the broker-dealer is acting within the course and scope of such regulation.
(vii) Any consumer reporting agency as defined in the Fair Credit Reporting Act (Public Law 91-508, 15 U.S.C. � 1681 et seq.).

"Extension of credit." The right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family or household purposes.

"Loan broker."
(1) A person who:
(i) For or in expectation of a consideration fee arranges or attempts to arrange or offers to fund a loan of money, a credit card or line of credit for personal, family or household purposes.
(ii) For or in expectation of a consideration fee assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit or related guarantee, enhancement or collateral of any kind or nature.
(iii) Acts for or on behalf of a loan broker for the purpose of soliciting borrowers.
(iv) Holds himself out as a loan broker.
(2) The term shall not include:
(i) Any person organized, chartered, exempt from licensure under statute or holding a license or authorization certificate to make loans or provide credit pursuant to the laws of the Commonwealth or the United States who is subject to regulation and supervision by an official or agency of the Commonwealth or the United States.
(ii) Any bank, bank and trust company, trust company, savings bank, Federal savings and loan association or savings bank located in this Commonwealth, or savings association or any subsidiary or affiliate of such institution, whose deposits are eligible for insurance by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania Savings Association Insurance Corporation.
(iii) Any person licensed as a mortgage broker under the act of December 22, 1989 (P.L. 687, No. 90), known as the Mortgage Bankers and Brokers Act. [FN1]
(iv) Any person who is not required to obtain a license as a mortgage banker by reason of the exceptions contained in section 3(b) [FN2] of the Mortgage Bankers and Brokers Act.
(v) Any person licensed as a real estate broker where the person is acting within the course and scope of that license.
(vi) Any person admitted to practice law in this Commonwealth where the person renders services within the course of such practice.
(vii) Any broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission where the broker-dealer is acting within the course and scope of such regulation.

"Principal." Any officer, director, partner, joint venturer, branch manager or other person with similar managerial or supervisory responsibilities for a loan broker.

[FN1] 63 P.S. § 456.01 et seq.
[FN2] 63 P.S. § 456.03(b).

 

§ 2183. Prohibited activities

A credit services organization and its salespersons, agents and representatives who sell or attempt to sell the services of a credit services organization shall not do any of the following:
(1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services the credit services organization has agreed to perform for or on behalf of the buyer unless the credit services organization has, in conformity with section 7, [FN1] either obtained a surety bond issued by a surety company admitted to do business in this Commonwealth or established a trust account at a bank, bank and trust company, trust company, savings bank, Federal savings and loan association or savings bank located in this Commonwealth or savings association or any subsidiary or affiliate of such institution whose deposits are eligible for insurance by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania Savings Association Insurance Corporation. If a credit services organization has obtained a surety bond or established a trust account, the salesperson, agents and representatives who sell the services of such organization shall not be required to obtain the surety bond or establish the trust account provided for by this act.
(2) Charge or receive any money or other valuable consideration solely for referral of the buyer to a retail seller who will or may extend credit to the buyer if the credit which is or will be extended to the buyer is upon substantially the same terms as those available to the general public.
(3) Make or counsel or advise any buyer to make any statement which is untrue or misleading and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, to a consumer credit reporting agency or to any person who has extended credit to a buyer or to whom a buyer is applying for an extension of credit with respect to a buyer's creditworthiness, credit standing or credit capacity.
(4) Make or use any untrue or misleading representations in the offer or sale of the services of a credit services organization or engage directly or indirectly in any act, practice or course of business which operates or would operate as a fraud or deception upon any person in connection with the offer or sale of the services of a credit services organization.
(5) Make or use an advertisement which guarantees that the buyer will obtain credit.
[FN1] 73 P.S. � 2187.

 

§ 2184. Information sheet

Prior to the execution of a contract or agreement between the buyer and a credit services organization or prior to the receipt by the credit services organization of any money or other valuable consideration, whichever occurs first, the credit services organization shall provide the buyer a statement in writing containing all the information required by section 5. [FN1] The credit services organization shall maintain on file or microfilm for a period of three years an exact copy of the information sheet, personally signed by the buyer, acknowledging receipt of a copy of the information sheet.

[FN1] 73 P.S. � 2185.

 

§ 2185. Contents of information sheet

The information sheet shall include all of the following:
(1) A complete and accurate statement of the buyer's right to review any file on the buyer maintained by any consumer credit reporting agency and the right of the buyer to receive a copy of that file. The information sheet shall include the statement that a copy of the buyer's file will be furnished by the consumer credit reporting agency, and the approximate price the buyer will be charged by the credit reporting agency for a copy of the file. The information sheet shall also include a statement that information in a consumer's credit file will be provided free of charge by the consumer credit reporting agency to the consumer by telephone after written request within 30 days of the consumer's receiving a denial of credit notice.
(2) A complete and accurate statement of the buyer's right to dispute the completeness or accuracy of any item contained in any file on the buyer maintained by any consumer credit reporting agency.
(3) A complete and detailed description of the services to be performed by the credit services organization for or on behalf of the buyer and the total amount the buyer will have to pay or become obligated to pay for the services.
(4) If the credit services organization is required to obtain a surety bond or establish a trust account pursuant to section 3, [FN1] a statement setting forth both of the following:
(i) The buyer's right to proceed against the bond or trust account under the circumstances and in the manner set forth in section 7. [FN2]
(ii) The name and address of the surety company which issued the bond or the name and address of the depository and the trustee and the account number of the trust account.
[FN1] 73 P.S. � 2183.
[FN2] 73 P.S. � 2187.

 

§ 2186. Contract

(a) Contents.--Every contract between the buyer and a credit services organization for the purchase of the services of the credit services organization shall be in writing, shall be dated, shall be signed by the buyer and shall include all of the following:
(1) A conspicuous statement in size equal to 10-point bold type or the size type used for the contract provisions, whichever is larger, in immediate proximity to the space reserved for the signature of the buyer, as follows:

You, the buyer, may cancel this contract at any time prior to 12 midnight of the fifth day after the date of the transaction. See the attached notice of cancellation form for an explanation of this right.
(2) The terms and conditions of payment, including the total of all payments to be made by the buyer, whether to the credit services organization or to some other person.
(3) A full and detailed description of the services to be performed by the credit services organization for the buyer, including all guarantees and all promises of full or partial refunds, and the estimated date by which such services are to be performed or estimated length of time for performing such services.
(4) The credit services organization's principal business address and the name and address of its agent, other than the Secretary of the Commonwealth, authorized to receive service of process.

(b) Copy.--A copy of the fully completed contract and all other documents the credit services organization requires the buyer to sign shall be given to the buyer at the time they are signed.

(c) Notice of cancellation.--The contract shall be accompanied by a completed form in duplicate, captioned "Notice of Cancellation," which shall be attached to the contract and easily detachable and which shall contain, in at least 10- point type, the following statement written in the same language as used in the contract:
Notice of Cancellation
You may cancel this contract without any penalty or obligation within five days from the date the contract is signed.
If you cancel, any payment made by you under this contract will be returned within 15 days following receipt by the seller of your cancellation notice.
To cancel this contract, mail or deliver a signed and dated copy of this cancellation notice or any other written notice to (name of seller) at

________________________________________________________________________
(address of seller) (place of business)

not later than 12 midnight (date).
I hereby cancel this transaction.

____________________ __________________________________________________
(date) (purchaser's signature)

(d) Effect of breach.--The seller's breach of a contract under this act or of any obligation arising therefrom shall constitute a violation of this act.

 

§ 2187. Surety bond

If a credit services organization is required to obtain a surety bond or establish a trust account pursuant to section 3, [FN1] the following procedures shall be applicable:
(1) If a bond is obtained, a copy of it shall be filed with the Department of State. If a trust account is maintained, notification of the depository, the trustee and the account number shall be filed with the Department of State.
(2) The bond or trust account required shall be in favor of the Commonwealth for the benefit of any person who is damaged by any violation of this act. The bond or trust account shall also be in favor of any person damaged by such practices.
(3) Any person claiming against the bond or trust account for a violation of this act may maintain an action at law against the credit services organization and against the surety or trustee. The surety or trustee shall be liable only for actual damages and not the punitive damages permitted under section 11. The aggregate liability of the surety or trustee to all persons damaged by a credit services organization's violation of this act shall in no event exceed the amount of the trust account or bond.
(4) The bond or the trust account shall be in an amount equal to 5% of the total amount of the fees charged buyers by the credit services organization under the contracts entered into between the credit services organization and such buyers during the previous 12 months, but in no case shall the bond be less than $5,000 nor more than $25,000. The amount required shall be adjusted once a year, no later than the tenth day of the first month of the credit services organization's fiscal year.
[FN1] 73 P.S. � 2183.

 

§ 2188. Restrictions on loan brokers

(a) Registration requirement.--Loan brokers shall be registered with the Department of Banking pursuant to regulations promulgated by the department.

(b) Registration fee.--Loan brokers seeking to be registered by the department shall pay to the department an annual registration fee of $300.

(c) Prohibited acts.--No loan broker shall:
(1) Assess or collect an advance fee from a borrower to provide services as a loan broker.
(2) Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage directly or indirectly in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of services of a loan broker, notwithstanding the absence of reliance by the buyer.
(3) Make or use any false or deceptive representation in its business dealings with a State agency or conceal a material fact from a State agency.

(d) Responsibility of principal.--Each principal of a loan broker may be held responsible for the actions of a loan broker, including its agents or employees in the course of business of the loan broker.

 

§ 2189. Waivers and burden of proof

(a) Waiver.--Any waiver by a buyer or borrower of the provisions of this act shall be deemed contrary to public policy and shall be void and unenforceable. Any attempt by a credit services organization or a loan broker to have a buyer or borrower waive rights given by this act shall constitute a violation of this act.

(b) Burden of proof.--In any proceeding involving this act, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

 

§ 2190. Enforcement

(a) Unfair trade practice.--A violation of any provision of this act shall be deemed to be a violation of the act of December 17, 1968 (P.L. 1224, No. 387), known as the Unfair Trade Practices and Consumer Protection Law. [FN1]

(b) Criminal offense.--Any person who violates section 8(c) commits a felony of the third degree.

[FN1] 73 P.S. � 201-1 et seq.

 

§ 2191. Damages

Any buyer or borrower injured by a violation of this act or by the credit services organization's or loan broker's breach of a contract subject to this act may bring an action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer or borrower to the credit services organization or loan broker, plus reasonable attorney fees and costs. An award, if the trial court deems it proper, may be entered for punitive damages.

 

§ 2192. Construction of act

(a) Act not exclusive.--The provisions of this act are not exclusive and do not relieve the parties or the contracts subject thereto from compliance with any other applicable provision of law.

(b) Remedies cumulative.--The remedies provided in this act for violation of any section of this act shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law.

 

Case Law

Relationship between Credit Services Act and Unfair Trade Practices Act:
In re Barker, 251 B.R. 250 (Bkrtcy. E.D. Pa., 2000).� The act regulates loan brokers and credit repair organizations under the same umbrella term: �credit services organization.�� In Barker, the court considered fraudulent conduct by a loan broker who charged his client a fee and then pushed her into a higher rate loan subject to a balloon payment, without providing her with any of the disclosures required by law.� Construing the Credit Services Act, the court noted that the fraudulent conduct at issue was a per se violation of the Act and that any violation of the Credit Services Act was a per se violation of the Unfair and Deceptive Trade Practices Act.� Accordingly, the court ordered recission loan broker�s fee, damages, and attorneys fees and costs.�
Scope of involvement needed to trigger liability:
In re Lewis, 290 B.R. 541 (Bkrtcy. E.D. Pa., 2003).� A mortgage broker who assisted borrower in obtaining extension of credit from a third-party lender in return for compensation qualified as �credit service organization,� within the meaning of the Credit Service Act.� Broker was in violation of the Act because the broker�s contract did not contain terms required by the Act, including notice of borrower's right to cancel.� In addition, a third party lender, which actually prepared the contract between the mortgage broker and the borrower and presented the agreement to the borrower for signing, was liable under the Credit Services Act and its successors in interest were liable under the Unfair Trade Practices Act which makes any violation the Credit Services Act a violation under the Unfair Trade Practices Act and explicitly applies to successors in interest to the transaction.�
In re Balko, 348 B.R. 684 (Bkrtcy. W.D. Pa., 2006).� Because the Credit Services Act provides a cause of action for a range of conduct, including conduct arising to fraud, a cause of action under the statute is subject to the heightened pleading standard of civil rule 9b.� In this case, plaintiff�s general allegations fell short of the requirement under that standard to plead allegations of fraud with particularity.� Mortgage lender and trustee had no liability under the Credit Services Act absent allegations, pled with particularity, that they were involved in marketing or solicitation of the challenged loan.�
Damages available under the Act:
In re Bell, 309 B.R. 139 (Bkrtcy. E.D. Pa., 2004).� A mortgage broker violated the requirements of the Credit Services Act when it failed to provide borrower any of the disclosures required by Pennsylvania's Credit Services Act, including the right of the buyer to rescind within 5 days of signing, before executing a contract or receiving money.� Although the buyer had rescinded the contract and received a full refund of her expenditures, the court would award damages equal to the money she paid to the mortgage broker, including the yield spread premium built into her interest rate, because the statute provided for an award �not less� than that amount.� In a subsequent decision, however, the same court ruled that although damages under the Credit Services Act normally will be trebled (because a violation of that statute is a per se violation of the Consumer Protection Law which provides for treble damages), plaintiff could not recover treble damages because she had received a refund and thus suffered no damages. In re Bell, 314 B.R. 54 (Bkrtcy. E.D. Pa., 2004).
Statutory Exemptions:
Emma King, Vanessa Saunders and Bonnie Bell Henry v. Bernard E. Rubin, James Montgomery, Rubin, 1998 WL 1297102 (Pa. Com. Pl., 1998).� The Credit Services Act exempts from its scope any person licensed as a real estate broker when they act in the scope of that license.� Where organization �Credit Workshop� only provided its services as part of parent organization�s real estate brokerage and where those services were completely connected and ancillary to that business, the real estate broker exception applied and Credit Workshop was not liable for failure to comply with the Credit Services Act.�

Emma King, Vanessa Saunders and Bonnie Bell Henry v. Bernard E. Rubin, James Montgomery, Rubin, 1998 WL 1297102 (Pa. Com. Pl., 1998)
1998 WL 1297102 (Pa.Com.Pl.), 35 Phila.Co.Rptr. 571
Court of Common Pleas of Pennsylvania, Philadelphia County, Civil Division
Emma King, Vanessa Saunders and Bonnie Bell Henry
v.
Bernard E. Rubin, James Montgomery, Rubin Montgomery Realty, Inc. and Credit
Workshop Inc.
No. 9506-0113.
July 1, 1998

Business Law--Credit Services Act--Up-Front Fees--Real Estate Broker Exclusion--Consumer Protection Law.
Defendants' requirement that participants in credit improvement workshops pay an up-front fee did not violate the Credit Services Act, because the workshops were part of defendants' real estate business and were exempt under the Act's real estate broker exemption. However, collection of the fee did violate the Consumer Protection Law. Summary judgment granted in part for defendants and in part for plaintiffs.
Defendants offered credit improvement workshops in exchange for payment of an up-front fee. Plaintiffs sued, asserting that defendants were violating the terms of the Credit Services Act, 73 P.S. �2181 et seq., which prohibits the collection of an up-front fee in exchange for the provision of credit improvement services. Plaintiffs also claimed that defendants violated the Real Estate Licensing Act (RELA), 63 P.S. �455.101 et seq., and the Unfair Trade Practices and Consumer Protection Law, 73 P.S. ��201-1 et seq. The parties filed cross-motions for summary judgment.
Defendants asserted that they were exempt from the Credit Services Act because the services were related to defendants' real estate brokerage and therefore exempt under the Act's real estate broker exemption, 73 P.S. �2182(2)(iv). The court found that the credit improvement services provided by defendants were intended to help clients qualify for the purchase of a home and therefore fell within the Act's real estate broker exemption.
Plaintiffs claimed that defendants violated the prohibition against commingling funds set forth in the RELA. The court concluded that defendants treated plaintiffs' payments as deposits, and therefore that the funds were illegally commingled in violation of the Act. Accordingly, the court granted summary judgment for plaintiffs on their RELA claim.
Plaintiffs were also entitled to summary judgment on their claim under the Consumer Protection Law because 'defendants have engaged in an elaborate scheme to trick unsophisticated clients into forfeiting money paid as a deposit on the purchase of a home.'
Irv Acklesburg, Esquire, for Plaintiffs.
**572 Michael R. Needle, Esquire, for Defendants.
MEMORANDUM OPINION

LEVIN, J.
On May 21, 1998, this court denied cross-motions for summary judgment in the instant matter. [FN1] Our opinion identified the following relevant issues of material fact that precluded a ruling in favor of either party:
FN1. The summary judgment standard under Pennsylvania Rule of Civil Procedure 1035.2 requires that:
'[A] non-moving party must adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof such that a jury could return a verdict in his favor. Failure to adduce this evidence establishes that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.' Ertel v. Patriot News Co., 544 Pa. 93, 101-102, 674 A.2d 1038, 1042 (1996).

'1) Whether Credit Workshop was an integral part of defendants' business, offering credit assistance in connection with real estate purchases, or a separate and distinct entity providing only credit improvement services?
'2) Whether Credit Workshop employees provided defendants' clients with real estate services?
'3) Whether the named representative plaintiffs actually received brokers' services or merely credit services?
'4) Whether defendants' fees were a deposit against the purchase of a home or compensation for services provided?
'5) Whether defendants placed their retainer fees into an escrow account(s), held them for distribution at the payor's settlement, or used them to pay back other clients who had gone to settlement?' May 21, 1998 opinion at pp. 3-4. Having denied the motions, we expected to schedule the matter for a trial on the merits.
After entering our opinion, however, the court engaged in discussions with counsel about how the matter should proceed. It appeared that judicial economy would be better served by selectively supplementing the summary judgment record than **573 by holding a trial de novo. Thus, we scheduled a second hearing to address the open issues of material fact and clear the way for a decision on summary judgment.
The parties reconvened on June 25, 1998. During this session, both parties introduced new testimony and exhibits into the record. This additional evidence answered the questions we posed above, allowing us to rule on the parties' cross-motions for summary judgment as follows.
I. THE CREDIT SERVICES ACT CLAIM
Count I of plaintiffs' complaint asserts a cause of action for violation of the Credit Services Act ('CSA'), 73 P.S. ��2181 et seq.
Plaintiffs allege that defendants Rubin Montgomery Realty, Inc. ('RMR') and Credit Workshop Inc. ('Credit Workshop') are governed by the CSA, because they fit the definition of a 'credit services organization':
'(1) A person who, with respect to the extension of credit by others, sells, provides or performs ... any of the following services in return for the payment of money ...
'(i) Improving a buyer's credit record, history or rating ...' 73 P.S. � 2182(1)(i).
At the heart of this first claim is plaintiffs' assertion that the CSA prohibits defendants' practice of collecting an up-front, non-refundable retainer fee from clients for credit services:
'�2183. Prohibited activities
'A credit services organization and its salespersons, agents and representatives who sell or attempt to sell the services of a credit services organization shall not do any of the following:
'(1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services the credit services organization has agreed to perform for or on behalf of the buyer. ...' 73 P.S. � 2183(1) (emphasis added); plaintiffs' motion for summary judgment at pp. 4- 5, 11-17.
**574 Thus, plaintiffs submit that RMR and Credit Workshop have violated the CSA by requiring an advance fee as a condition of providing credit improvement services.
Defendants respond that Credit Workshop is exempt from liability under the CSA's 'real estate broker exclusion':
'(2) The term [credit services organization] shall not include any of the following: ...
'(iv) Any person licensed as a real estate broker where the person is acting within the course and scope of that license.' 73 P.S. �2182(2)(iv) (emphasis added).
In support of this contention, defendants explain that Credit Workshop only provides its services as part of RMR's real estate business: 'Credit Workshp services are completely connected and ancillary to, thus within 'the course and scope' of, RMR's brokerage activity ....' Defendants' reply brief at p. 12. Thus, defendants conclude they are exempt from the CSA. Id. at pp. 8-16.
After the first summary judgment proceeding, this court could not determine whether Credit Workshop's services are related to RMR's real estate brokerage services (see questions 1-3, supra). In the second hearing, however, defendants offered persuasive evidence that Credit Workshop's services are, indeed, part of RMR's real estate business: Credit Workshop's only clients are RMR customers; Credit Workshop's only business is to help RMR clients secure mortgage pre-qualification and pre-approval toward purchase of a home; RMR managers supervise Credit Workshop's employees and RMR pays all of Credit Workshop's operating expenses. In light of the above, we find that Credit Workshop provides its services only in the context of RMR's real estate brokerage business.
As a result, we hold that the real estate broker exclusion in 73 P.S. � 2182(2)(iv) exempts defendants from liability under the CSA. We will, thus, vacate our earlier order and grant defendants' summary judgment motion with regard to the CSA claim pled in Count I of plaintiffs' complaint.
**575 II. THE REAL ESTATE LICENSING ACT CLAIM
Count II of plaintiffs' complaint asserts a cause of action for violation of the Real Estate Licensing Act ('RELA'), 63 P.S. ��455.101 et seq.
This claim centers around plaintiffs' contention that defendants improperly deposited plaintiffs' funds in RMR's business account, violating RELA's prohibition against commingling. The statute reads, in relevant part, as follows:
'�455.604. Prohibited acts
'(a) ... The commission shall have power to ... revoke a license or registration certificate or levy fines ... where a licensee or registrant ... is found guilty of: ...
'(5) Failure to comply with the following requirements: ...
'(iii) a broker shall not commingle the money or other property of his principal with his own;
'(iv) every broker shall immediately deposit such monies, of whatever kind or nature, belonging to others, in a separate custodial or trust fund account maintained by the broker with some bank or recognized depository until the transaction involved is consummated or terminated ....' 63 P.S. � 455.604(a)(5) (emphasis added); plaintiffs' motion for summary judgment at pp. 3, 17-21.
Plaintiffs initially claimed that the money they paid RMR was a deposit, because defendants had promised to refund the money as a credit at settlement if the client purchased a home through RMR. Plaintiffs argued that defendants' policy of holding deposits in RMR's general business account, instead of in separate trust accounts, violated the RELA prohibition against commingling. Plaintiffs' motion for summary judgment at pp. 4-5, 8.
Defendants responded that plaintiffs' up-front payment was not a deposit, because RMR's brokerage contracts call the money a fee for credit and/or real estate services. Defendants noted that RELA allows brokers to receive a fee for services: 'Nothing in RELA or common law precludes brokers from being paid ... advance fees ....' Defendants' reply brief at p. **576 21. Thus, defendants claimed that placing the fee into RMR's business account was proper, because RELA only requires that funds 'belonging to others' be held in trust. 63 P.S. � 455.604(a)(5)(iv). In defendants' view, since the fee belonged to RMR, there had been no improper commingling. Id. at p. 23.
After our first proceeding, this court was unable to determine how to characterize the funds plaintiffs paid RMR (see questions 4-5, supra). However, in the second hearing, plaintiffs presented substantial additional evidence that, in the course of its business, RMR treats plaintiffs' up-front payments as a deposit: RMR drafts financial statements in which the funds appear as an asset belonging to the client; RMR writes escrow letters in which the funds appear as a deposit; RMR completes settlement sheets listing the funds on the buyer's side, like a deposit placed in escrow, and RMR only returns the funds by issuing a credit on the settlement sheet or producing a check made out to the client at closing. In light of the above, we find that defendants treated plaintiffs' up-front payments as deposits, and that plaintiffs have correctly characterized these funds as monies 'belonging to another.'
As a result, we hold that defendants improperly commingled plaintiffs' deposits with their own business funds in violation of RELA sections 455.604(a)(5)(i)(iii)(iv) and (v). [FN2] We will, thus, vacate our earlier order and grant plaintiffs' summary **577 judgment motion with regard to the RELA claim pled in Count II of plaintiffs' complaint.
FN2. Plaintiffs also brought to the court's attention a December 4, 1996 decision of the Real Estate Commission based on identical facts: In the Matter of John F. Griffin, t/d/b/a American Realty Professionals, Docket No. 0608-56-1996. In this case, a realtor charged his clients a $600 'non-refundable' retainer fee that was to be 'refunded' to the client at settlement. Findings of Fact 272-75. The realtor placed the clients' funds into a business account rather than into separate escrow accounts. Id. The Commission ruled that, despite calling this payment a 'fee,' the monies actually constituted 'a deposit or earnest money' and had to be placed in escrow. The realtor's failure to hold these monies in trust was deemed a violation of 63 P.S. ��455.604(a)(5)(i), (iii), (iv) and (v). Findings of Fact 272-75; Conclusion of Law 28.
III. THE CONSUMER PROTECTION ACT CLAIM
Count II of plaintiffs' complaint also includes a cause of action for violation of the Consumer Protection Law ('CPL'), 73 P.S. ��201-1 et seq.
Plaintiffs assert a private CPL action against defendants arising out of the RELA violation discussed above. The CPL provides:
'�201-9.2. Private actions
'(a) Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by any person of a method, act or practice declared unlawful by section 3 [FN3] of this act, may bring a private action, to recover actual damages ....' 73 P.S. �201-9.2.
FN3. Section 3 refers to the activities prohibited by 73 P.S. �201-3, including 'Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce [defined by the enumerated subclauses of section 201-2].'

Pennsylvania courts have historically used this CPL section to remedy violations of other statutes that lack an explicit right of private action. Moy v. Schreiber Deed Security Co., 392 Pa. Super. 195, 572 A.2d 758 (1990) (Title Insurance Act violation gives rise to CPL claim); Gabriel v. O'Hara, 368 Pa. Super. 383, 534 A.2d 488 (1987) (real estate sale gives rise to CPL claim); Pekular v. Eich, 355 Pa. Super. 276, 513 A.2d 427 (1986) (Unfair Insurance Practices Act violation gives rise to CPL claim); Culbreth v. Lawrence J. Miller, Inc., 328 Pa. Super. 374, 477 A.2d 491 (1984) (Public Adjuster Law violation gives rise to CPL claim); plaintiffs' motion for summary judgment at pp. 21-25. As plaintiffs have no available remedy at law for defendants' **578 violation of RELA, [FN4] this court is compelled to grant them access to a claim under the CPL.
FN4. We believe defendant is correct that primary jurisdiction over plaintiffs' RELA claim lies with the Pennsylvania Real Estate Commission under 63 P.S. �455.604(a). Defendants' reply brief at pp. 18-20.

In support of their CPL claim, plaintiffs have established that defendants: 1) accept money from plaintiffs toward the purchase of a home; 2) promise that the money will be refunded at settlement; 3) call the money a fee; 4) place the money in RMR's business account; 5) treat the money as a deposit in loan and real estate transactions and 6) refuse to return the money to anyone who does not ultimately purchase a home through RMR. In light of the above, we find that defendants have engaged in an elaborate scheme to trick unsophisticated clients into forfeiting money paid as a deposit on the purchase of a home.
As a result, we hold that plaintiffs have made out a private cause of action under CPL section 201-9.2. We will, thus, vacate our earlier order and grant plaintiffs' summary judgment motion with regard to the CPL claim pled in Count II of the complaint.
Pa.Com.Pl. 1998.
Emma King, Vanessa Saunders and Bonnie Bell Henry v. Bernard E. Rubin, James Montgomery, Rubin Montgomery Realty, Inc. and Credit Workshop Inc.
0 #2 2059


In re Lewis, 290 B.R. 541 (Bkrtcy. E.D. Pa., 2003)
290 B.R. 541
United States Bankruptcy Court,
E.D. Pennsylvania.
In re Helen LEWIS, Debtor.
Helen Lewis, Plaintiff,
v.
Delta Funding Corporation and Bankers Trust Company of California, N.A.,
Defendants.
Bankruptcy No. 00-32042 (KJC).
Adversary No. 00-935.
March 25, 2003.

Chapter 13 debtor-borrower brought adversary proceeding for determination of validity, priority and extent of residential mortgage lien, based on lender's alleged violations of the Truth in Lending Act (TILA), Home Ownership and Equity Protection Act (HOEPA), Real Estate Settlement Procedures Act (RESPA), Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP), and Pennsylvania Credit Service Act (CSA). On debtor's motion for summary judgment, the Bankruptcy Court, Kevin J. Carey, J., held that: (1) final rule of the Federal Reserve Board, that revised official staff commentary to regulation implementing provisions of the TILA to require disclosure, in connection with residential mortgage loans subject to HOEPA, of any balloon payments that borrowers will be required to make, did not merely clarify but revised existing law, and could not be applied retroactively; (2) lender's disclosure of the "note rate" which borrower would be required to pay immediately beneath annual percentage rate (APR) did not render its disclosure confusing; (3) genuine issues of material fact precluded entry of summary judgment on RESPA, referral fee claim; (4) single contact, which debtor initiated by telephoning mortgage broker from her home, was insufficient to bring brokerage contract within door-to-door sales provision of Pennsylvania's UDAP; (5) lender was liable under the Pennsylvania CSA; and (6) genuine issues of material fact, as to type and amount of financing sought by debtor and whether loan terms were sufficiently explained, precluded entry of summary judgment for debtor on claim arising out of lender's allegedly unfair and deceptive practices in inducing debtor to enter into refinancing of her low-interest mortgage loan.
Motion granted in part and denied in part.
West Headnotes

[1] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk32 k. Truth in Lending, in General. Most Cited Cases

Final rule of the Federal Reserve Board, that revised official staff commentary to regulation implementing provisions of the Truth in Lending Act (TILA) to require disclosure, in connection with residential mortgage loans subject to the Home Ownership and Equity Protection Act (HOEPA), of any balloon payments that borrowers will be required to make on HOEPA early disclosure statement, did not merely clarify but revised existing law, and could not be applied retroactively to home loan that closed before rule went into effect. Truth in Lending Act, �� 102 et seq., 129 et seq., as amended, 15 U.S.C.A. �� 1601 et seq., 1639 et seq.; 12 C.F.R. � 226.32(c)(3).

[2] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk52 k. Price, Balance, Rate, and Charges in General. Most Cited Cases

Lender's disclosure, in connection with residential mortgage loan subject to requirements of the Home Ownership and Equity Protection Act (HOEPA), of the "note rate" which borrower would be required to pay immediately beneath annual percentage rate (APR), did not render confusing the lender's required disclosure of APR rate, where both rates were clearly labelled, lender provided explanation of what APR rate reflected, and APR rate, which was only rate that lender was required to disclose, appeared more conspicuously on disclosure form. Truth in Lending Act, �� 122(a), 129, as amended, 15 U.S.C.A. �� 1632(a), 1639; 12 C.F.R. � 226.32.

[3] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

Disclosure requirements of the Truth in Lending Act (TILA) and the Home Ownership and Equity Protection Act (HOEPA) do not prohibit lenders from including additional information on disclosure forms, beyond that required by the TILA and HOEPA. Truth in Lending Act, �� 102 et seq., 129 et seq., as amended, 15 U.S.C.A. �� 1601 et seq., 1639 et seq; 12 C.F.R. � 226.32.

[4] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk52 k. Price, Balance, Rate, and Charges in General. Most Cited Cases

Lender's disclosure, in connection with residential mortgage loan subject to requirements of the Home Ownership and Equity Protection Act (HOEPA), of both the "loan amount" in addition to "amount financed" did not render confusing the lender's required disclosure of "amount financed," especially where borrower received itemization of "amount financed," i.e., of principal amount of loan minus prepaid finance charge, on Good Faith Estimate Of Settlement Charges provided at settlement, along with TILA disclosure form. Truth in Lending Act, �� 102 et seq., 129, as amended, 15 U.S.C.A. �� 1601 et seq., 1639; 12 C.F.R. � 226.32.

[5] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Genuine issues of material fact, as to whether debtor-borrower agreed to pay mortgage broker for his services in connection with obtaining loan and whether services actually performed by broker in connection with loan in preparing loan application, ordering appraisal, maintaining contact with debtor-borrower and lender, attending the closing, and possibly negotiating settlement of one of debtor's outstanding debts were "reasonably related" to the $3,097.50 fee that broker collected, precluded entry of summary judgment for debtor in adversary proceeding under the Real Estate Settlement Procedures Act (RESPA) challenging broker's fee as alleged illegal kickback or referral fee. Real Estate Settlement Procedures Act of 1974, � 8(a), 12 U.S.C.A. � 2607(a).

[6] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(A) In General
29Tk139 Persons and Transactions Covered Under General Statutes
29Tk144 k. Subject Matter of Transaction in General. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)

Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP) applies to protect consumers from deceptive acts or practices in residential mortgage industry. 73 P.S. � 201-1 et seq.

[7] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(C) Particular Subjects and Regulations
29Tk223 k. Home Solicitation or Delivery. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)

Single contact, which consumer initiated by telephoning residential mortgage broker from her home, was insufficient to bring brokerage contract within door-to-door sales provision of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UDAP), so as to impose on broker an obligation to provide notice of consumer's three-day right to cancel brokerage agreement. 73 P.S. � 201-7.

[8] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk2 k. Constitutional and Statutory Provisions; Ordinances. Most Cited Cases

Pennsylvania Credit Service Act (CSA) was enacted to regulate conduct of credit service organizations and loan brokers. 73 P.S. � 2181 et seq.

[9] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Mortgage broker who assisted borrower in obtaining extension of credit from third-party lender in return for compensation qualified as "credit service organization," within meaning of provisions of the Pennsylvania Credit Service Act (CSA), whose broker agreement should have contained terms required by the CSA, including notice of borrower's right to cancel. 73 P.S. �� 2182, 2186.

[10] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk17 k. Effect of Violation of Regulations or Lack of License. Most Cited Cases

Where third-party lender with which mortgage broker placed loan had itself prepared broker agreement, it was liable, under the Pennsylvania Credit Service Act (CSA), for any deficiencies therein, including lack of notice of borrower's right to cancel. 73 P.S. � 2186.

[11] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Genuine issues of material fact, as to type and amount of financing sought by debtor-borrower and whether loan terms were sufficiently explained, precluded entry of summary judgment for debtor in adversary proceeding that she had brought to recover from residential mortgage lender for allegedly engaging in unfair and deceptive practices, in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP), by inducing her, in return for cash proceeds of only $7,500.32, to refinance her existing low-interest mortgage loan for 15-year loan that bore interest at significantly higher rate, that required her to make monthly payments of $523.96, and that also required her, at end of this 15 year-term, to make balloon payment that was only $4,364.98 less than principal amount of loan; while loan terms seemed harsh, court could not infer a violation of UDAP solely from harshness of terms, without examination of facts surrounding parties' conduct. 73 P.S. � 2181 et seq.
*543
________________________________________ (Cite as: 290 B.R. 541, *543) ________________________________________
Alan M. White, Philadelphia, PA, for Debtor.
*544
________________________________________ (Cite as: 290 B.R. 541, *544) ________________________________________
Darryl J. Chimko, Rochester, MI, Stephen P. Doughty, Lyons, Doughty & Veldhuis, P.C., Mt. Laurel, NJ, Heidi R. Spivak, Mark J. Udren & Associates, Cherry Hill, NJ, for creditors.
MEMORANDUM OPINION [FN1]
FN1. The court has jurisdiction over this matter pursuant to 28 U.S.C. � 1334, � 157(a). This is a core proceeding pursuant to 28 U.S.C. � 157(b)(1) and (b)(2)(A),(B),(K) and (O).

KEVIN J. CAREY, Bankruptcy Judge.
On December 11, 2002, Helen Lewis, a debtor in a case filed under chapter 13 of the Bankruptcy Code (the "Debtor"), filed an adversary proceeding to determine the validity, priority, and extent of the defendants' mortgage lien against the her residence. Currently before the Court is the Debtor's Motion for Summary Judgment.
BACKGROUND
On July 16, 1997, the Debtor entered into a loan transaction (the "Loan") with Eagle National Bank ("Eagle") by executing a balloon note in the principal amount of $44,250.00, secured by a mortgage against the Debtor's residence located at 8045 West Chester Pike, Upper Darby, PA. See Balloon Note and Mortgage, attached as Exhibits A and B to the Defendants' Mem. of Law. The Loan paid off an existing mortgage, a low-rate assistance loan from the Pennsylvania Housing Finance Agency, several credit card bills, and city water and tax bills. See HUD-1 Settlement Statement, attached as Exhibit B to the Debtor's Mem. of Law. The Debtor received $7,500.32 cash proceeds. Id. Anthony Jones ("Jones"), a mortgage loan broker, received a $3,097.50 broker fee, constituting 7% of the Loan amount. Id. The Loan was to be repaid in 179 installments of $523.96, with a final balloon payment of $39,885.02. See Federal Truth in Lending Disclosure Statement, attached as Exhibit C to Debtor's Mem. of Law.
On the same day as the Loan closing, Eagle assigned the mortgage to defendant Delta Funding Corporation ("Delta"). See Assignment of Mortgage, attached as Exhibit F to Debtor's Mem. of Law. Delta later assigned it to defendant Bankers Trust Company of California, N.A. ("Banker's Trust"). [FN2] Id.
FN2. The second Assignment is not dated, but recites that the mortgage was recorded on September 12, 1997, so it appears that this second assignment occurred sometime after that date. In their answer, the Defendants admitted that Bankers Trust was the current holder of the mortgage, as trustee, and that Delta filed a proof of claim in connection
with the mortgage. See Defendants' Answers to �� 5 and 6 of Debtor's Complaint. According to the Defendants, the mortgage was "owned or being serviced by Delta" at the time the proof of claim was filed (i.e., on or about November 22, 2000), but is currently being serviced by Bankers Trust and Delta, through its attorney-in-fact, Ocwen Federal Bank, FSB. Defendant's Memorandum of Law, pp. 1-2.

Bankers Trust obtained a foreclosure judgment against the Debtor in the Philadelphia County Court of Common Pleas on July 27, 2000. See Proof of Claim, attached as Exhibit D to Debtor's Mem. of Law. After the Debtor filed for bankruptcy protection on September 26, 2000, Delta filed a proof of claim demanding $54,190.81. Id. The Debtor filed an adversary complaint against the defendants, Delta and Bankers Trust (the "Defendants"), on December 11, 2000, asserting claims under the Truth in Lending Act, 15 U.S.C. � 1601, et seq. ("TILA"), the Home Ownership and Equity Protection Act, 15 U.S.C. � 1639, et seq. ("HOEPA"), the Real Estate Settlement and Procedures Act,12 U.S.C. � 2601, et seq. ("RESPA"), Pennsylvania's Loan Interest *545
________________________________________ (Cite as: 290 B.R. 541, *545) ________________________________________
and Protection Law, 41 Pa. Stat. � 502 (the "Usury Count"), and Pennsylvania's Unfair Trade Practices and Consumer Protection Law, 73 P.S. � 201-1 et seq. On February 22, 2002, the Debtor filed this Motion for Summary Judgment (the "Summary Judgment Motion"), together with a memorandum of law in support of the Summary Judgment Motion, on all but the Usury Count. On March 20, 2002, the Defendants filed a response and a memorandum of law in opposition to the Summary Judgment Motion. On April 11, 2002, the parties presented oral argument in support of their positions at a hearing before this Court.
For the reasons which follow, the Summary Judgment Motion will be denied as to Counts I and II, and granted, in part, as to Count IV.
LEGAL STANDARD
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c), made applicable to this adversary proceeding by Fed. R. Bankr.P. 7056. In a motion for summary judgment, the moving party "always bears the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
Once the moving party has made a proper motion for summary judgment, the burden shifts to the non-moving party, pursuant to Rule 56(e), which states, "[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party." Fed R. Civ. P. 56(e); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The party opposing the motion "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348.
Before a court will find that a dispute about a material fact is genuine, there must be sufficient evidence upon which a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must view the facts and draw inferences in a light most favorable to the non-moving party. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14. "[W]here the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true." Pastore v. Bell Tel. Co., 24 F.3d 508, 512 (3d Cir.1994). It is not the role of the judge to weigh the evidence or to evaluate its credibility, but to determine "whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
DISCUSSION
1. Count I-TILA and HOEPA Violations.
A creditor in a consumer credit transaction, other than an open end credit plan, is *546
________________________________________ (Cite as: 290 B.R. 541, *546) ________________________________________
required to make certain disclosures under TILA before credit is extended. 15 U.S.C. � 1638(a), (b). The creditor must also provide additional disclosures for mortgages subject to HOEPA "not less than 3 business days prior to consummation of the transaction." 15 U.S.C. � 1639(b)(1). [FN3] The early disclosures required by HOEPA are set forth 12 C.F.R. � 226.32(c). [FN4]
FN3. The Debtor asserts that the Loan is subject to HOEPA under 15 U.S.C. � 1602(aa)(1)(B) because it is a mortgage loan in which the total points and fees charged, in addition to interest, exceed 8% of the loan amount. See Debtor's Mem. of Law, p. 4 n. 1. The Defendants deny this allegation of the Debtor's complaint; however, in their Memorandum of Law, they conceded "for purposes of this motion for summary judgment" that HOEPA applies to the loan transaction. See Defendant's Mem. of Law, p. 3.
FN4. Regulation Z, 12 C.F.R. Part 226 (1979) was promulgated by the Federal Reserve Board to implement the TILA. See Smith v. Fidelity
Consumer Discount Co., 898 F.2d 896, 898 (3d Cir.1990)("To implement TILA, Congress 'delegated expansive authority to the Federal Reserve Board to elaborate and expand the legal framework governing commerce in credit.... The Board exerted its responsibility by promulgating Regulation Z.' ") (citations omitted). The HOEPA early disclosure form is also known as a "Section 32 Form" because its requirements are located in section 32 of Regulation Z.

In her Motion for Summary Judgment, the Debtor claims that Eagle failed to comply with the HOEPA disclosure requirements. [FN5] More specifically, the Debtor argues that, although she received a HOEPA disclosure statement more than three business days prior to the loan closing, the disclosure statement was insufficient because: (1) it did not disclose that the transaction included a balloon payment, (2) it disclosed a "note rate" in addition to the required annual percentage rate, and (3) it listed a "loan amount" that was greater than the amount that was actually financed. See Ex. A to Debtor's Mem. of Law.
FN5. Although the Debtor's allegations address the conduct of Eagle, she sued Delta and Bankers Trust as assignees of the mortgage. Assignees of HOEPA mortgages are liable for claims that could be asserted against the
original creditor of the mortgage. 15 U.S.C. � 1641(d).

(a) The balloon payment.
[1] First, the Debtor claims that the balloon payment should have been disclosed on the HOEPA disclosure statement pursuant to 12 C.F.R. � 226.32(c)(3), which now provides, in part, as follows:
(c) Disclosures. In addition to other disclosures required by this part, in a mortgage subject to this section, the creditor shall disclose the following in conspicuous type size:
....
(3) Regular payment; balloon payment. The amount of the regular monthly (or other periodic) payment and the amount of any balloon payment. The regular payment disclosed under this paragraph shall be treated as accurate if it is based on an amount borrowed that is deemed accurate and is disclosed under paragraph (c)(5) of this section.
12 C.F.R. � 226.32(c)(3)(2003). The prior version of 12 C.F.R. � 226.32(c)(3) provided:
(c) Disclosures. In addition to other disclosure required by this part, in a mortgage subject to this section the creditor shall disclose the following:
....
(3) Regular payment. The amount of the regular monthly (or other periodic) payment.
*547
________________________________________ (Cite as: 290 B.R. 541, *547) ________________________________________
12 C.F.R. � 226.32(c)(3)(1995). On March 6, 1997, the Federal Reserve Board published a Final Rule revising the official staff commentary to Regulation Z which, inter alia, added a paragraph to the commentary for � 226.32 advising that balloon payments must be disclosed on the HOEPA early disclosure statement. 62 Fed.Reg.10193, 10198 (March 6, 1997)(the "1997 Revisions"). Although the 1997 Revisions were effective on February 28, 1997, compliance was optional until October 1, 1997. Id. at 10193. [FN6] The Debtor's loan transaction occurred on July 16, 1997. The Debtor admits that, at the time of the subject loan transaction, � 226.32 did not specifically require disclosure of balloon payments.
FN6. Official Staff Commentary issued by the Federal Reserve Board is "accorded the same deference" as the regulations. Wright v. Mid-Penn Consumer Discount Company, 133 B.R. 704, 708 (E.D.Pa.1991) citing Ralph J. Rohner, The Law of Truth in Lending, 2.01[2][c] (1989). The requirement for disclosing balloon payments was later moved from the Official Staff Commentary into � 226.32(c)(3) itself, "to aid in compliance." 66 Fed.Reg. 65604, 65610 (December 20, 2001).

The Debtor argues, however, that the 1997 Revisions did not replace any existing language in the statute or regulation regarding balloon payments and, therefore, the new paragraph added to the Official Staff Commentary for � 226.32 was not a change to the prior law, but a clarification of existing law. The Debtor also argues that the only reasonable interpretation of 12 C.F.R. � 226.32(c)(3) requires disclosure of a balloon payment because, otherwise, a consumer would be misled into believing that the regular monthly payments would fully amortize the loan. Debtor's Mem. of Law, p. 6.
To support her argument, the Debtor relies upon Clay v. Johnson, 264 F.3d 744, 749 (7th Cir.2001), in which the Seventh Circuit Court of Appeals determined that the final version of a comment adopted by the Federal Reserve Board for the Official Staff Commentary to Regulation Z noted that it was intended to interpret and clarify a creditor's existing obligations under TILA and Regulation Z. Clay, 264 F.3d at 749. The final version had not been adopted at the time the loan at issue in Clay was made, and the parties disputed whether the comment could be applied retroactively. The Clay Court stated:
If an agency promulgates a new rule that changes the substantive state of existing law, that rule is not retroactive unless Congress expressly authorized retroactive rulemaking and the agency clearly intended the rule to be retroactive....However, a "rule simply clarifying an unsettled or confusing area of the law ... does not change the law, but restates what the law according to the agency is and has always been."... A clarifying rule, therefore, can be applied to the case at hand just as a judicial determination construing a statute can be applied to the case at hand....We give great deference to the promulgating agency's expressed intent as to whether its rule changes the law or merely clarifies it.
Clay, 264 F.3d at 749 (citations omitted). The 1997 Revisions applicable to this Loan do not include any language to suggest that the Board was clarifying existing law. Instead, the 1997 Revisions refer to the new paragraph about disclosure of balloon payments as "revisions and additions" to Paragraph 32(c)(3). 62 Fed.Reg. at 10198. Furthermore, the phased-in, rather than immediate, implementation of the 1997 Revisions suggests a lack of urgency in requiring the balloon payment disclosure. Finally, the Board's decision to add language to the Official Staff Commentary of *548
________________________________________ (Cite as: 290 B.R. 541, *548) ________________________________________
� 226.32(c)(3) tends to negate the Debtor's argument that � 226.32(c)(3) is subject to only one reasonable interpretation. Accordingly, failure to include the balloon payment in the HOEPA disclosure form provided to the Debtor did not violate the requirements of TILA and Regulation Z, as they existed in July 1997.
(b) The note rate.
[2] The Debtor next alleges that Eagle's disclosure of the Loan's "note rate" was impermissible as likely to cause confusion to a borrower. Beneath the required Annual Percentage Rate ("APR") and monthly payment disclosures, the HOEPA form stated: "Note: The note rate of your loan is 13.99%. The annual percentage rate reflects the cost of any prepaid finance charges that may be included in your loan." The APR and monthly payment disclosures, printed above the statement, appeared in regular type in an enumerated list.
[3] The Defendants correctly argue that lenders are not prohibited from including additional information on disclosure forms. Section 1632(a) provides that the annual percentage rate and finance charge shall "be disclosed more conspicuously than other terms, data, or information provided in connection with a transaction...." 15 U.S.C. � 1632(a). Section 1632(b) further states that "[a]ny creditor or lessor may supply additional information or explanation with any disclosures required under parts D and E of this subchapter and, except as provided in sections 1637a(b)(3) [FN7] and 1638(b)(1) [FN8] of this title, under this part." 15 U.S.C. � 1632(b). The HOEPA disclosure requirements set forth in � 1639 are under the same subchapter and part [Part B-Credit Transactions] as section 1632.
FN7. Section 1637a sets forth disclosure requirements for open end consumer credit plans secured by a consumer's principal dwelling.
FN8. Section 1638(b) sets forth the requirements for the typical
TILA disclosures in a residential mortgage transaction.

This is not a situation in which the borrower was given information that directly contradicted other information, as in In re Apaydin, when the borrowers received both a notice advising them of their right to rescind with a form waiving that rescission right. Apaydin v. Citibank Fed. Savings Bank (In re Apaydin), 201 B.R. 716, 723 (Bankr.E.D.Pa.1996). See also Rodash v. AIB Mortgage Co., 16 F.3d 1142, 1147 (11th Cir.1994)(same). Neither did the lender label two items identically. See Varner v. Century Finance Co., 738 F.2d 1143, 1147-48 (11th Cir.1984)(Disclosure statement that labeled two different amounts as the "loan fee" was determined to be in violation of Regulation Z.)
Disclosure of the note rate, removed visually on the form from the APR and monthly payment amount, and accompanied by a simple explanation of what the APR denotes, does not rise to the level of confusion caused by the disclosure infractions described in the cases discussed above. The APR, appearing in the center of the disclosure document, is disclosed more conspicuously than is the note rate. Rather than serving to highlight the information, the display of the note rate and its juxtaposition to the APR explanation, fixes its subordinate role--as if the note rate is a footnote--on the disclosure document. See Mason v. General Fin. Corp., 542 F.2d 1226, 1233 (4th Cir.1976)(Court determined that "equal billing" of the federal TILA disclosures and the state lending disclosures violated TILA and Regulation Z because it told the borrower "more than he needs to know and more than he can possibly understand.") The note rate does not contradict the APR, and both rates are *549
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clearly labeled. The intent of the disclosure requirement, to provide uniformity to assist consumers in comparison shopping, is not undermined, since the APR and the monthly payment are clearly and conspicuously disclosed on the form.
(c) The loan amount.
[4] Finally, the Debtor argues that the "loan amount" of $44,250 on the HOEPA disclosure form contradicted the "amount financed" of $39,896.34 on the TILA form provided at closing, causing confusion. The loan amount set forth on the HOEPA disclosure statement is the principal amount of the balloon note signed by the Debtor. See Exhibit A to the Defendants' Mem. of Law. 12 C.F.R. � 226.32 does not require disclosure of the loan's principal amount, but, as discussed above, Eagle was not prohibited from providing additional information in the HOEPA disclosure form.
In Smith v. Anderson, 801 F.2d 661 (4th Cir.1986), the court concluded that the lender did not provide information in a confusing manner and did not violate TILA by stating different interest rates and principal amounts on the note and in the truth-in-lending statement. The Smith plaintiff argued that the principal amount in the note should have matched the "amount financed" in the TILA disclosure statement. However, the Smith Court noted that "amount financed" is a "term of art, defined by federal regulations" and concluded that the difference between the principal amount and the amount financed did not create a confusing inconsistency. Id. at 663. The Court wrote:
Rather than being a deliberate attempt to deceive, ... [the lender's] disclosures in the truth-in-lending statement served to supplement the information provided in the note in the uniform manner required by federal law, and to convey to the borrowers in understandable terms the true extent of their obligations.
Smith, 801 F.2d at 664. The same reasoning applies here to the difference between the loan amount on the HOEPA disclosure document and the "amount financed" on the TILA disclosure statement. Further, the Debtor received an itemization of the "amount financed" (i.e., the principal amount of the loan minus the prepaid finance charge) on the Good Faith Estimate Of Settlement Charges (See Exhibit 3 to Jones' Deposition), provided at settlement, along with the TILA disclosure form.
Eagle's HOEPA disclosure form included all required disclosures under 15 U.S.C. � 1639 and 12 C.F.R. � 226.32. For the reasons discussed above, Eagle's failure to disclose the balloon payment and inclusion of additional information (i.e., the note rate and loan amount) did not violate TILA and HOEPA as a matter of law. The Debtor's motion for summary judgment as to Count I will be denied.
2. Count II-RESPA violations.
[5] In the Complaint, the Debtor alleges that her sister referred her to Anthony Jones, a mortgage loan broker, for assistance in obtaining a loan. Complaint, � 8. Jones ultimately arranged for the Debtor to obtain the Loan from Eagle. Id. � 9. At closing, Jones received a fee of $3,097.50. The Debtor argues that the broker fee paid to Jones was in fact an illegal kickback or referral fee from Eagle to Jones in violation of 12 U.S.C. � 2607(a) of RESPA. That section states:
No person shall give and no person shall accept any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a real estate settlement service involving a federally *550
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related mortgage loan shall be referred to any person.
12 U.S.C. � 2607(a). [FN9] There is no prohibition, however, against payment for services actually rendered. 12 U.S.C. � 2607(c).
FN9. The mortgage is subject to section 2607 as a "federally related mortgage loan" within the meaning of 12 U.S.C. � 2602.

The Debtor argues that the broker fee "was not based on a valid contract, was not in exchange for any services she contracted to pay for, and bore no reasonable relationship to the value of any 'services' the broker could be said to have provided" to the Debtor or Eagle. Debtor's Mem. of Law, p. 12. The Defendants dispute these allegations and argue that issues of material fact preclude summary judgment on Count II.
When considering similar issues regarding broker fees in the case Newton v. United Co. Fin. Corp., 24 F.Supp.2d 444, 463-(E.D.Pa.1998), the Court looked at whether the fees were paid pursuant to a bona fide agreement between the borrower and the broker. Newton, 24 F.Supp.2d at 463-64. The Debtor, citing to her affidavit, claims that she never agreed to pay Jones a separate fee. Debtor's Mem. of Law, p. 14. The Debtor claims that any agreement regarding Jones' fee was made between Jones and Eagle. Id. To counter the Debtor's allegations, the Defendants presented a copy of a Mortgage Broker Fee Agreement between Jones and the Debtor dated July 16, 1997, which is the date of the Loan closing. Exhibit F to Defendants' Mem. of Law (the "Broker Agreement"). The Debtor, however, argues that the Broker Agreement is not valid because she did not agree to pay Jones for any services prior to closing. Whether the Debtor agreed to pay Jones for his services in connection with obtaining the Loan is an unresolved issue of material fact. [FN10]
FN10. Both parties also cite to the transcript of Jones' deposition
in support of their positions about whether the Debtor agreed to pay for Jones' services prior to closing--the Debtor focusing on Jones' testimony that he may not have advised the Debtor of the specific amount she would be charged, the Defendants focusing on Jones' testimony that he told the Debtor that his fee would be based upon a percentage of the loan, that percentage to be determined by "other factors." See Jones Deposition, attached as Exhibit G to the Debtor's Mem. of Law, p. 30 (the "Jones Deposition"). See also Debtor's Mem. of Law, p. 14; Defendants' Mem. of Law, pp. 9-10. This also underscores the existence of an outstanding factual issue.

Also important are the issues of whether Jones actually performed services for the Debtor and, if so, whether the fee charged for those services was "reasonably related" to the services performed. See Real Estate Settlement Procedures Act (RESPA) Statement of Policy 1999-1 Regarding Lender Payments to Mortgage Brokers, 64 Fed.Reg. 10080, 10084 (March 1, 1999) (the "1999 RESPA Policy"). See also Newton, 24 F.Supp.2d at 463 (E.D.Pa.1998)(The Court concluded that a $700 broker fee was bona fide compensation for services rendered by the broker and the plaintiffs did not present any evidence that the amount of the fee was unreasonable).
For guidance on the issue of whether a broker performed actual services to justify his fee, the 1999 RESPA Policy, issued by the Department of Housing and Urban Development ("HUD"), discusses a 1995 letter from HUD to the Independent Bankers Association of America ("IBAA") which sets forth a two-part inquiry. 64 Fed.Reg. 10085. First, the IBAA letter identifies a non-exhaustive list of fourteen tasks usually performed by a mortgage broker and states that HUD generally would be satisfied that a broker performed *551
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adequate services in connection with the loan if the broker took the borrower's loan application information and performed at least five additional items on the list. 64 Fed.Reg. at 10085. [FN11]
FN11. The fourteen tasks listed in the 1999 RESPA Policy are: (a) taking information from the borrower and filling out the application; (b) analyzing the prospective borrower's income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford; (c) educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product; (d) collecting financial information (tax returns, bank statements) and other related documents that are part of the application process; (e) initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit); (f)
initiating/ordering requests for mortgage and other loan verifications; (g) initiating/ordering appraisals; (h) initiating/ordering inspections or engineering reports; (i) providing disclosures (truth in lending, good faith estimates, others) to the borrower; (j) assisting the borrower in understanding and clearing credit problems; (k) maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed; (l ) ordering legal documents; (m) determining whether the property was located in a flood zone or ordering such service; and (n) participating in the loan closing. 64 Fed.Reg. at 10085.

Second, HUD would analyze a broker's "counseling type" services to ensure a broker was not merely steering a borrower to a particular lender. Id. HUD pointed out that it would be satisfied that meaningful counseling occurred if it found that the broker: (1) gave the borrower the opportunity to consider products from at least three different lenders; (2) would receive the same compensation regardless of which lender's products were ultimately selected; and (3) any payment for "counseling-type" services is reasonably related to the services performed and not based on the amount of loan business referred to a particular lender.
The Broker Agreement signed by the Debtor at closing sets forth five tasks for Jones to complete. [FN12] The Debtor admits that in addition to preparing the loan application, Jones ordered an appraisal, maintained contact with the borrower and lender, and attended the closing. The Defendants repeat the Debtor's list and add that Jones also may have negotiated a settlement of one of the Debtor's outstanding debts. Jones Deposition, p. 36-37. It appears that Jones performed actual services in connection with obtaining the Loan. However, whether Jones performed all of the tasks identified in the Broker Agreement or performed sufficient tasks to meet the guidelines established in the 1999 RESPA Policy is an unresolved issue of material fact.
FN12. The Broker Agreement states: "I will provide the following services on a best effort basis to help you secure financing for the above referenced property: (1) Mortgage programs--provide explanations and prequalifications. (2) Application completion assistance. (3) Obtain, review, explain, and, if necessary help correct, your credit report. (4) Obtain a written conditional approval from a bona-fide, financially sound lender for your loan. (5) Help you to meet the terms of the commitment that we obtain." Exhibit F to Defendants' Mem. of Law.

Finally, the 1999 RESPA Policy states that "[t]he determinative test under RESPA is the relationship of the services, goods or facilities furnished to the total compensation received by the broker." 64 Fed.Reg. at 10085. When a payment to a broker is based on the value of business transacted, it is evidence of an agreement for the referral of business. 64 Fed.Reg. at 10086 n. 8. "[T]he excess over the market *552
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rate may be used as evidence of a compensated referral or an unearned fee in violation of [12 U.S.C. � 2607(a) or (b)] of RESPA." 64 Fed.Reg. at 10086. Here, the Debtor has not identified any portion of the pleadings or exhibits that demonstrate an absence of fact as to the reasonableness of the fee charged by Jones. No evidence has been presented regarding price structures and practices in similar transactions. [FN13] Id. Summary judgment will be denied on Count II.
FN13. "In analyzing whether a particular payment or fee bears a reasonable relationship to the value of the goods or facilities actually furnished or services actually performed, HUD believes that payments must be commensurate with that amount normally charged for similar services, goods or facilities. This analysis requires careful consideration of fees paid in relation to price structures and practices in similar transactions and in similar markets." 64 Fed.Reg. at 10086.

3. Count IV-Violations of state consumer protection laws.
[6] Count IV of the Debtor's complaint alleges that Eagle's and Jones' conduct in connection with the Loan transaction constituted an unfair or deceptive practice in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. � 201-1 et seq. ("UDAP"). [FN14] Section 201-3 of UDAP declares unlawful all "unfair or deceptive acts or practices," which are defined in Section 201-2(4). A person who purchases good or services primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property as a result of the employment of an unfair or deceptive act or practice may bring a private action to recover actual damages. 73 P.S. � 201-9.2(a). A court may, in its discretion, award up to three times the actual damages sustained. Id. The Third Circuit Court of Appeals has concluded that the provisions of UDAP apply to protect consumers from deceptive acts or practices in the residential mortgage industry. Smith v. Commercial Banking Corp. (In re Smith), 866 F.2d 576, 582 (3d Cir.1989).
FN14. This statute is frequently referred to as "UDAP" since it regulates "unfair and deceptive acts and practices." See 73 P.S. � 201- 2(4); In re Murray, 239 B.R. 728, 729 (Bankr.E.D.Pa.1999).

The Debtor alleges that Eagle's and Jones' deceptive conduct fell within the following subsections of Section 201 2(4):
(v) Representing that goods or services have ... benefits or qualities that they do not have ...;
....
(xxi) Engaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.
73 P.S. � 201-2(4)(v), (xxi). The Debtor alleges that two acts, in particular, violated UDAP. First, the Debtor alleges that the payment of Jones' broker fee violated a provision in UDAP that covers certain sales contracts (73 P.S. � 201-7) and the Credit Services Act (73 P.S. � 2181 et seq.) (the "CSA") because Jones failed to give the Debtor a written broker agreement that included notice of her right to cancel the agreement as required by the foregoing sections of UDAP and the CSA. Second, the Debtor alleges that Jones and Eagle violated UDAP by misleading the Debtor into entering into a loan which contained terms that were wholly disadvantageous to her. The Defendants respond that (1) the state consumer protection laws regarding broker agreements cited by the Debtor do not apply to the Loan and, even if the laws were applicable, the lender can not be held liable for the broker's failure to comply with those *553
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laws; and (2) neither the broker nor the lender misled the Debtor about the terms of the Loan or, in the alternative, issues of material fact still exist regarding the type of financing sought by the Debtor, her reasons for requesting a loan, and her understanding of the loan terms.
a. UDAP Section 201-7.
[7] The Debtor alleges that Eagle and Jones violated Section 201 7 of UDAP by failing to provide her with a timely written agreement about the broker fee which included notice of her right to cancel the agreement within three days. 73 P.S. � 201 7. Section 201-7 states:
(v) Where good or services having a sale price of twenty-five dollars ($25) or more are sold or contracted to be sold to a buyer, as a result of, or in connection with, a contact with or call on the buyer or resident at his residence either in person or by telephone, that consumer may avoid the contract or sale by notifying, in writing, the seller within three full business days following the day on which the contract or sale was made and by returning or holding available for return to the seller, in its original condition, any merchandise received under the contract or sale.
73 P.S. � 201-7(a). This provision further requires that, at the time the contract is signed, the buyer must receive written notice of her right to cancel the transaction within three days. 73 P.S. � 201-7(b), (d).
The Defendants argue that the agreement between the Debtor and Jones does not fall within the terms of Section 201-7(a) because the agreement was not "as a result of, or in connection with, a contact with or call on the buyer or resident at his residence either in person or by telephone." [FN16] The Debtor, however, alleges that any agreement with Jones "resulted from a contact with [the Debtor] at her residence by telephone." [FN17] Debtor's Mem. of Law, p. 19. She cites to Jones' deposition in support of this allegation, in which he states that the contact started when he received a telephone call from the Debtor (See Jones' Deposition, p. 9) and argues that the door-to-door sales provision was "written broadly to encompass most consumer transactions that do not take place in a store or retail business." Debtor's Mem. of Law, p. 19. The Debtor does not allege that any further meetings or negotiations with Jones took place at her residence.
FN16. This provision is often referred to as the "door-to-door sales provision" of Section 201-7, even though it the language includes solicitations made by telephone.
FN17. There may be an issue of material fact concerning whether the Debtor made the initial telephone call to Jones from her residence. Although the Debtor alleges that this fact is not contested, the Defendants denied the relevant allegations in the Debtor's complaint (� 33) and there is nothing in Jones' deposition to indicate that the Debtor made the call from her residence.

Even assuming that the Debtor contacted Jones from her residence (see n. 17, supra), this single contact, initiated by the buyer, is not enough to bring the contract within the door-to-door sales provision of Section 201-7. In Saler v. Hurvitz (In re Saler), 84 B.R. 45 (Bankr.E.D.Pa.1988), the court rejected a debtor's argument that "the statute is broadly drawn and should embrace any transaction where either a 'contact with' or 'call' at the obligor's residence played any part in the transaction." In Saler, the Court held that an in-home appraisal, which was the only contact at the debtor's residence in connection with a mortgage loan, did not bring the transaction within Section 201-7, writing:
*554
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However, in interpreting � 201-7, we must recognize that the breadth of its wording is meant to prevent the use of devices to circumvent its underlying intention to provide protection in a broad range of "door-to-door" sales. It is not meant to open up every transaction in which a seller of goods or services has any sort of contact at all with the buyer at his residence to the scope of � 201-7. If we adopted the Debtor's interpretation, practically every home sale transaction and refinancing, most of which would require an in-home appraisal as a condition for consummation, would be within the scope of � 201-7. Also, any home improvement contractor who surveyed the scene of his projected tasks would be within its scope, even if all of the documentation were honestly and carefully put forth and executed in a setting other than in the customer's home. We do not believe that the legislature could have possibly envisioned such frankly bizarre consequences to flow from the enactment of � 201-7.
Saler, 84 B.R. at 49. See Lou Botti Construction v. Harbulak, 760 A.2d 896, 898 (Pa.Super.2000)(stating that the Saler Court's interpretation of Section 201-7 was "instructive.")
The Court in Commonwealth ex rel. Zimmerman v. Nickel, 26 Pa. D. & C.3d 115, 1983 WL 286 (C.C.P. Mercer County, 1983), also declined to construe section 201-7 broadly, stating:
Plaintiff invites the court to broadly interpret the language of section 201-7 to include contracts preceded by a remote contact at the residence of the buyer by mail. This court declines that invitation. To adopt such an interpretation would grant the right of rescission under this act to every contract which ultimately resulted from advertising received in the home, be it by mail, newspaper, flyer or even though radio or television if plaintiff's logic were carried to its natural conclusion. Obviously, this could not have been the intent of the legislature in enacting section 201-7. Had they so intended, it could have easily been expressly set forth.
Nickel, 26 Pa. D. & C.3d at 125-126.
In Burke v. Yingling, 446 Pa.Super. 16, 666 A.2d 288 (1995), the Superior Court of Pennsylvania concluded that a sale of a custom audio/visual system for the buyer's home fell within the door-to-door sales provision of Section 201-7 because the plain language of the statute protects all buyers when the seller "makes a contact or call on the buyer at his residence." It is true that the plain language of the statute does not expressly exclude transactions "where the initial contact was made by the buyer." Burke, 446 Pa.Super. at 23, 666 A.2d at 292. But, in Burke, the seller "expressly admitted ... that Seller engaged in repeated contacts with Buyer at his home and that the sale of the audio visual system either resulted from or was consummated in connection with those contacts." Burke, 446 Pa.Super. at 21-22, 666 A.2d at 291.
Although the fact that the Debtor initiated the contact with Jones may not automatically exclude application of Section 201 7, the Debtor has not alleged that Jones contacted or called upon her at her residence. Here, the Debtor made a single initial telephone inquiry from her residence. All other contacts took place away from her home. Without evidence of other contacts-- made by the seller--at the buyer's residence, a single contact by the buyer from his or her residence will not bring a transaction into the scope of Section 201-7. Accordingly, I conclude that the Debtor's allegations are not sufficient to place the Broker Agreement within the scope of Section 201-7.
*555
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b. The Credit Services Act.
[8] The Debtor next argues that the payment to Jones also violated the Credit Service Act, 73 P.S. � 2181 et seq., (the "CSA"). The CSA is a Pennsylvania statute enacted in 1992 to regulate the conduct of "credit service organizations" and "loan brokers." Barker v. Altegra Credit Co. (In re Barker), 251 B.R. 250, 260 (Bankr.E.D.Pa.2000). The Debtor claims that Jones is a "credit services organization," which is defined in Section 2182 of the CSA as follows:
"Credit services organization."
(1) A person who, with respect to the extension of credit by others, sells, provides or performs or represents that he or she can or will sell, provide or perform any of the following services in return for the payment of money or other valuable consideration:
(i) Improving a buyer's credit, record, history or rating.
(ii) Obtaining an extension of credit for a buyer.
(iii) Providing advice or assistance to a buyer with regard to either subparagraph (i) or (ii).
73 P.S. � 2182. Subsection (2) of the definition of a credit services organization sets forth exceptions to the rule, but neither the Debtor nor the Defendants allege that any of the exceptions apply.
The CSA requires a credit services organization to provide buyers with an information sheet about its services and fees prior to execution of a contract or prior to receipt of any money. 73 P.S. �� 2184, 2185. The Debtor alleges that Jones failed to do so. The CSA also requires a contract between a buyer and a credit services organization to include certain information, including notice of the buyer's right to cancel the contract within five days of signing. 73 P.S. � 2186. The Debtor alleges that the Broker Agreement did not contain the terms set forth in 73 P.S. � 2186; in particular, the Broker Agreement did not contain notice of her right to cancel.
The Defendants do not contest the Debtor's assertion that Jones is a credit service organization subject to the requirements of the CSA. Instead, the Defendants argue that Eagle cannot be held liable for Jones' violation of the CSA and, therefore, they cannot be liable as Eagle's assignees. In response, the Debtor argues that lenders can be held liable under UDAP for knowingly funding a transaction that violates a consumer protection law, relying upon Heastie v. Community Bank of Greater Peoria, 690 F.Supp. 716, 722 (N.D.Ill.1988) and Iron and Glass Bank v. Franz, 9 Pa. D & C 3d 419, 1978 WL 357 (CCP, Allegheny County 1978).
The Defendants argue that, even assuming the Debtor's statement of the law is correct, there is an issue of material fact as to whether Eagle funded the loan transaction, which included payment of Jones' fee, knowing that payment of the broker fee to Jones violated the CSA. However, at his deposition, Jones testified that Eagle prepared the Broker Agreement and had the Debtor sign the agreement at settlement. Jones Deposition, p. 46-47. Therefore, Eagle knew or should have known of the contract's contents and deficiencies.
In responding to the Debtor's Summary Judgment Motion, the Defendants "... may not rest upon the mere allegations or denials of the adverse party's pleading, but must, by affidavits or as otherwise, set forth specific facts showing that there is a genuine issue for trial." Fed R. Civ. P. 56(e). The Defendants "... must do more than simply show that there is some metaphysical doubt as to the material facts." *556
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Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. Their argument that an issue of fact still exists because no one from Eagle has been deposed or offered testimony is not sufficient to satisfy their burden in responding to the Debtor's Summary Judgment Motion.
[9] [10] In this case, Jones falls within the CSA's definition of a credit services organization because he assisted the Debtor in obtaining an extension of credit from a third party lender in return for compensation. Therefore, Jones should have provided the Debtor with an information sheet that complied with 73 P.S. �� 2184 and 2185, and the Broker Agreement should have contained the terms required by 73 P.S. � 2186. The fee agreement, however, did not include notice of a right to cancel the agreement. Because Eagle prepared the deficient Broker Agreement and presented it to the Debtor to sign at settlement, Eagle, itself, violated the CSA. [FN18]
FN18. Therefore, there is no need to determine whether the Iron
and Glass Bank decision is applicable to this case.

The CSA expressly provides that a violation of the CSA shall be deemed to be a violation of UDAP. 73 P.S. � 2190(a). Under HOEPA, the Defendants are subject to any claims that could have been asserted against Eagle, the original lender. 15 U.S.C. � 1641(d). Accordingly, summary judgment will be granted in favor of the Debtor on her claim against the Defendants based upon UDAP and the CSA.
c. UDAP Section 201-2(4).
[11] The Debtor argues that Jones and Eagle violated UDAP by misleading her into entering into a loan which contained terms that were wholly disadvantageous to her. In particular, she alleges that they did not advise her sufficiently about the balloon payment, the refinancing of her low interest mortgages, and the broker fee. She claims she was not aware of many of these terms until the Loan closing, although they should have been disclosed or discussed prior to closing. [FN19] Therefore, she asserts that Jones' and Eagles' conduct constituted "unfair and deceptive acts or practices" as defined in 73 P.S. � 201-2(4) by "representing that good or services have ... benefits or qualities that they do not have" (� 201-2(4)(v)) and "engaging in ... fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding" (� 201-2(4)(xxi)).
FN19. The Debtor claims that Eagle should have provided her with the good faith estimate of settlement costs three days after her initial application. 24 C.F.R. � 3500.7. Also, as discussed previously, she argues that the balloon payment should have been disclosed in the HOEPA disclosure form (12 C.F.R. � 226.32) and the broker fee should have been explained in an information sheet (73 P.S. � 2184).

The Debtor argues that her case is similar to Barker, supra, in which the broker was held to have violated � 201 2(4)(xxi) by failing to disclose the detrimental effect of replacing a loan with a 9% interest rate with a loan with a 17.99% rate; failing to advise the debtor that the loan amount was $19,500 when the debtor requested a loan for only $10,000; and failing to adequately disclose the balloon payment. [FN20] Barker, 251 B.R. at 261- 62. However, the Barker case differs from the one at bar in several respects. After trial, the Barker court found the debtor's testimony credible that she never requested refinancing her other obligations. Barker, 251 B.R. at 255. *557
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Here, what the Debtor requested remains a genuine issue of material fact, since Jones testified that she asked to consolidate and pay off other debts. Compare Debtor's Affidavit, � 3, with Deposition pp. 10, 17, 18, 48. In Barker, the broker did not advise the debtor of a balloon payment, which was not disclosed on any documentation received by the debtor. Barker, 251 B.R. at 258. Here, the Debtor does not allege that she never realized there was a balloon payment, just that she "did not find out about this feature until the loan closing." Debtor's Affidavit � 4. The broker in Barker also held himself out as having expertise in the mortgage industry, thus was found to have committed a material misrepresentation when he failed to advise the debtor of the detrimental nature of the loan transaction. Barker, 251 B.R. at 258. In this case, the Debtor did not allege a basis for Jones owing a fiduciary duty, or allege any misrepresentation of what services he would perform or that the Debtor was an unsophisticated borrower.
FN20. In Barker, the broker failed to "adequately disclose to the uneducated debtor that executing a Balloon Note would result in a final large lump sum payment;" and failed "to disclose or estimate the amount of the lump sum payment in the Balloon Note." Barker, 251 B.R. at 261-62.

The Debtor also suggests that the UDAP violations can be inferred from the "gross or subtle unfairness of a loan's transaction's provisions as they affect the borrower." Debtor's Mem. of Law, p. 24. The Debtor cites to Besta v. Beneficial Loan Co. of Iowa, 855 F.2d 532, 536 (8th Cir.1988) for support of her position that a loan can be deemed unfair "if no reasonable person, being apprised fully of the financing terms would have accepted them." Debtor's Mem. of Law, p. 24. The Besta Court, however, did not infer unfairness from reviewing the loan terms, but examined the facts surrounding the broker's and borrower's conduct in making the loan and held that the broker's failure to advise the borrower of better repayment alternatives "deprived her of fair notice and amounted to unfair surprise," thereby violating the Iowa Consumer Credit Code. Besta, 855 F.2d at 536.
The Defendants respond to the Debtor's UDAP claim by arguing that Jones and Eagle did not mislead the Debtor as to the terms of the Loan. They argue that the Debtor was made aware of the balloon payment at closing by the TILA Disclosure Statement and due to the fact that the note was clearly entitled "Balloon Note." [FN21] They also cite to Jones' deposition, in which he testified that he reviewed the loan preapproval form with her. Jones Deposition, p. 27.
FN21. However, the Balloon Note does not state the amount of the final balloon payment.

The Defendants also argue that the Debtor was not misled into refinancing her low interest loans, because Jones testified that the refinancing was done on her request. Jones Deposition, pp. 67-68. Jones' testimony also indicates that the Debtor was in default on her payments and sought the Loan, at least in part, to "get caught up." Id. Jones also stated that the interest rate was the best he could get at that time for the Debtor under the stated income loan program, and that he made the Debtor aware of the rate and that she had no problem with it. Jones Deposition, pp. 16-17.
Though the terms of the Loan seem harsh, the outstanding issues of material fact regarding the type and amount of financing sought by the Debtor and whether the Loan terms were sufficiently explained to the Debtor prevent entry of summary judgment on this count.
In summary, the Debtor's Summary Judgment Motion with respect to Count IV is resolved as follows:
(i) Claims under 73 P.S. � 201-7: I conclude that 73 P.S. � 201-7 is not applicable to this transaction and, *558
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therefore, summary judgment is denied;
(ii) Claims under 73 P.S. �� 2181 et seq.: I conclude that the Debtor is entitled to summary judgment on her CSA claim.
(iii) Claims under 73 PS � 201-2(4)(v), (xxi): I conclude that issues of material fact prevent summary judgment on these claims.
An appropriate order follows.
ORDER
AND NOW, this 25th day of March, 2003, upon consideration of the Motion for Summary Judgment by Helen Lewis (the "Debtor"), the memoranda of law submitted by both parties, and the April 11, 2002 hearing, and, for the reasons set forth in the accompanying Memorandum Opinion,
AND having concluded that:
a. the Debtor is not entitled to summary judgment on Count I as a matter of law;
b. the Debtor is not entitled to summary judgment on Count II as genuine issues of material fact exist;
c. the Debtor is not entitled to summary judgment on her 73 P.S. � 201-7 claim under Count IV as a matter of law;
d. the Debtor is not entitled to summary judgment on her 73 PS � 201- 2(4)(v), (xxi) claims under Count IV as genuine issues of material fact exist; and
e. the Debtor is entitled to summary judgment on her 73 P.S. �� 2182-2188 claim under Count IV;
it is hereby ORDERED that the Debtor's Motion for Summary Judgment is DENIED as to Counts I and II, but GRANTED, in part, as to Count IV, as described above.
A pretrial conference will be held on April 10, 2003 at 10:00 a.m. in Bankruptcy Courtroom No. 1, Robert N.C. Nix Federal Building & Courthouse, 900 Market Street, 2nd Floor, Philadelphia, Pennsylvania, at which time and place counsel shall be prepared to address any remaining pre-trial needs, which issues, including those of damages, remain for trial, and to set a trial date.


�In re Bell, 309 B.R. 139 (Bkrtcy. E.D. Pa., 2004).
United States Bankruptcy Court,
E.D. Pennsylvania.
In re Maxine B. BELL, Debtor.
Maxine B. Bell, and Edward Sparkman, Trustee, Plaintiffs,
v.
Parkway Mortgage, Inc., and Stephen Flacco, t/a Wharton Investments Network, Defendants.
Bankruptcy No. 01-14420 KJC.
Adversary No. 01-392 KJC.
April 14, 2004.
Background: Chapter 13 debtor-borrower and trustee filed adversary complaint against lender and mortgage broker, asserting various claims under federal and state law in connection with an alleged predatory mortgage loan transaction.

Holdings: The Bankruptcy Court, Kevin J. Carey, J., held that:
(1) because the points and fees payable by debtor at or before closing did not exceed eight percent of the total loan amount, the loan transaction was not subject to the Home Ownership Equity Protection Act (HOEPA);
(2) debtor did not receive proper notice of her right to rescind, as required by the Truth in Lending Act (TILA), and so she was entitled to rescind the loan;
(3) although mortgage document was not notarized in her presence, debtor did not establish fraud under Pennsylvania law and, thus, she could not avoid the mortgage pursuant to the Bankruptcy Code;
(4) debtor failed to establish that broker engaged in fraud;
(5) absent evidence of a confidential relationship between broker and debtor, debtor failed to establish her claims for breach of fiduciary duty;
(6) broker violated the Pennsylvania Credit Services Act;
(7) for broker's violation of the Credit Services Act, debtor was entitled to damages consisting of the total of the broker's fee, the application fee, and the yield spread premium;
(8) although debtor's loan was subject to the Pennsylvania Home Improvement Finance Act (HIFA), no award of actual damages flowing from the improper imposition of finance charges was appropriate because the loan would be rescinded;
(9) the court would not condition rescission on debtor's immediate tender of repayment to lender but, instead, debtor could repay the debt in full over the life of her Chapter 13 plan;
(10) lender was liable to debtor for statutory damages of $2,000.00 for its TILA notice violation; and
(11) lender's failure to honor debtor's valid rescission request gave rise to a separate award of statutory damages, in the amount of $200.00.

Ordered accordingly.
West Headnotes

[1] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk50 k. In General. Most Cited Cases

Congress intended the Truth in Lending Act (TILA) to assure a meaningful disclosure of credit terms so consumers are not misled about the costs of financing. Truth in Lending Act, � 102 et seq., as amended, 15 U.S.C.A. � 1601 et seq.

[2] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk50 k. In General. Most Cited Cases

Home Ownership Equity Protection Act (HOEPA) is an amendment to the Truth in Lending Act (TILA) that requires lenders to make additional disclosures beyond those that are required by TILA for certain high-cost mortgages. Truth in Lending Act, �� 102 et seq., 129 et seq., as amended, 15 U.S.C.A. �� 1601 et seq., 1639 et seq.

[3] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

There are two steps in determining whether a loan falls within the Home Ownership Equity Protection Act (HOEPA): (1) determining the amount of �points and fees,� and (2) determining whether those points and fees exceed eight percent of the total loan amount. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. � 226.32(b)(1).

[4] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

In calculating �points and fees,� for purposes of determining whether a loan falls within the Home Ownership Equity Protection Act (HOEPA), real estate related fees listed in Regulation Z, which are normally excluded from the finance charge, will be included in a points and fees calculation if (1) the charges are not reasonable, (2) the lender receives, directly or indirectly, compensation from the charges, or (3) the charges are paid to the lender's affiliate. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. �� 226.4(c)(7), 226.32(b)(1).

[5] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Overnight delivery fee of $45.00 paid by borrower to title company would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); fee was not required to be disclosed as a �finance charge� and, to the extent it could be deemed to be a real estate related fee incurred for title insurance purposes, fee was reasonable, fee was less than that usually charged, and fee was not paid to lender. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. �� 226.4(c)(7)(i), 226.32(b)(1).

[6] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Copying fee of $30.00 paid by borrower to title company would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); fee was a closing agent charge that was not required by lender, nor did lender retain a portion of the fee. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. � 226.32(b)(1).

[7] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Recording service fee of $30.00 paid by borrower to title company would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); fee was a closing agent charge that was not required by lender, nor did lender retain a portion of the fee. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. � 226.32(b)(1).

[8] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Title insurance endorsement fee of $200.00 paid by borrower to title company would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); fee was a real estate related fee, fee was reasonable, and fee was not paid to lender or to its affiliate. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. �� 226.4(c)(7)(i), 226.32(b)(1)(iii).

[9] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk30 k. Regulations in General. Most Cited Cases

�Yield spread premium� is a bonus paid to a broker when it originates a loan at an interest rate higher than the minimum interest rate approved by the lender for a particular loan; the lender then rewards the broker by paying it a percentage of the yield spread, that is, the difference between the interest rate specified by the lender and the actual interest rate set by the broker at the time of origination, multiplied by the amount of the loan.

[10] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Yield spread premium of $1,280.00 paid by lender to mortgage broker would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); even if yield spread premium was part of the finance charge, it was not paid by borrower at or before closing. Truth in Lending Act, �� 103(aa), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1639 et seq.; 12 C.F.R. Part 226, Supp. I, � 226.32(b)(1)(ii).

[11] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Premium for property insurance policy paid for with borrower's cash proceeds would not be included in calculating �points and fees,� for purposes of determining whether home mortgage loan fell within the Home Ownership Equity Protection Act (HOEPA); even if title insurance company employee wrongfully required borrower to buy the subject insurance, that is, even if borrower already had other valid insurance, TILA disclosure statement contained adequate disclosures regarding borrower's obligation to purchase hazard insurance and advising her that she could obtain such insurance through any person of her choice, and borrower purchased the insurance through the employee, not from lender. Truth in Lending Act, �� 103(aa), 106(c), 129 et seq., as amended, 15 U.S.C.A. �� 1602(aa), 1605(c), 1639 et seq.; 12 C.F.R. �� 226.4(d)(2)(ii), 226.32(b)(1).

[12] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Borrower's mortgage loan transaction was not subject to the Home Ownership Equity Protection Act (HOEPA) where points and fees payable by borrower at or before closing, $4,711.50, did not exceed eight percent of the �total loan amount,� $59,288.50. Truth in Lending Act, � 103(aa)(1)(B), as amended, 15 U.S.C.A. � 1602(aa)(1)(B); 12 C.F.R. �� 226.18(b), 226.32(b)(1).

[13] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

TILA requires a creditor to provide a borrower with clear and conspicuous notice of her right to rescind. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(b)(1).

[14] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

TILA requirement that, as part of its duty to provide borrower with clear and conspicuous notice of her right to rescind, creditor deliver two copies of the notice of the right to rescind to each consumer entitled to rescind, is not a �mere technicality,� as effective exercise of the right to rescind obviously depends upon the delivery of one copy of the rescission form to the creditor and the retention by the consumer of the other copy. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(b)(1).

[15] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

92B Consumer Credit KeyCite Notes
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk60 k. In General; Validity of Transactions. Most Cited Cases

92B Consumer Credit KeyCite Notes
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk64 Actions for Violations
92Bk66 k. Pleading and Evidence. Most Cited Cases

Borrower did not receive proper notice of her right to rescind her mortgage loan transaction, as required by the Truth in Lending Act (TILA), and so she was entitled to rescind the loan; although notice of right to cancel signed by borrower contained an acknowledgment of receipt preprinted above her signature, thus creating a rebuttable presumption of delivery, borrower's testimony that employee of title company had her sign the loan documents quickly and left her house without giving her copies was credible and consistent with remaining facts of case, this testimony was sufficient to rebut the presumption of delivery, and it appeared from the evidence that borrower did not receive copy of notice until employee delivered the checks to her, by which time deadline for exercising her right to rescind had expired. Truth in Lending Act, � 125(a, c), as amended, 15 U.S.C.A. � 1635(a, c); 12 C.F.R. � 226.23(b)(1).

[16] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

Notice of an incorrect date does not provide �clear and conspicuous� notice to the borrower of the date on which the rescission period expires, as required by the Truth in Lending Act. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(a)(3), (b)(1).

[17] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk60 k. In General; Validity of Transactions. Most Cited Cases

Where borrower did not receive proper disclosure of her right to cancel, this violation of the Truth in Lending Act's right to rescind disclosure requirements extended borrower's rescission period for the subject transaction to three years. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(a)(3).

[18] KeyCite Notes

12 Acknowledgment
12I Nature and Necessity
12k4 k. Instruments to Be Acknowledged or Proved. Most Cited Cases

Pennsylvania law requires that all deeds and conveyances made and executed within Pennsylvania be acknowledged, otherwise the deed or conveyance is adjudged fraudulent and void against any subsequent purchaser or mortgagee. 21 P.S. � 444.

[19] KeyCite Notes

266 Mortgages
266I Requisites and Validity
266I(C) Execution and Delivery
266k59 k. Acknowledgment. Most Cited Cases

Under Pennsylvania law, a recorded mortgage containing an acknowledgment that is complete and proper on its face cannot be avoided unless there is proof of fraud or forgery.

[20] KeyCite Notes

266 Mortgages
266I Requisites and Validity
266I(C) Execution and Delivery
266k59 k. Acknowledgment. Most Cited Cases

Under Pennsylvania law, the acknowledgment does not affect the validity of the mortgage and is not part of the document.

[21] KeyCite Notes

266 Mortgages
266I Requisites and Validity
266I(C) Execution and Delivery
266k59 k. Acknowledgment. Most Cited Cases

Under Pennsylvania law, the acknowledgment is required for the recording and perfection of a mortgage lien.

[22] KeyCite Notes

12 Acknowledgment
12I Nature and Necessity
12k1 k. Nature and Functions in General. Most Cited Cases

Under Pennsylvania law, the purpose of the acknowledgment is to verify the executing party's identity and voluntary intention to be bound by the terms of the document.

[23] KeyCite Notes

51 Bankruptcy
51V The Estate
51V(H) Avoidance Rights
51V(H)1 In General
51k2705 k. Bona Fide Purchasers and Rights Thereof. Most Cited Cases

Where Chapter 13 debtor-borrower testified that she signed mortgage, the fact that it was not notarized in debtor's presence as required under Pennsylvania law was not sufficient, on its own, to avoid the mortgage under section of the Bankruptcy Code governing rights and powers of trustee as bona fide purchaser. Bankr.Code, 11 U.S.C.A. � 544(a)(3).

[24] KeyCite Notes

184 Fraud
184I Deception Constituting Fraud, and Liability Therefor
184k2 Elements of Actual Fraud
184k3 k. In General. Most Cited Cases

To prove fraud under Pennsylvania law, plaintiff must show a material misrepresentation made with knowledge of its falsity or reckless disregard for its truth and with the intent of misleading another into relying upon it, justifiable reliance on the misrepresentation, and a resulting injury proximately caused by the misrepresentation.

[25] KeyCite Notes

51 Bankruptcy
51V The Estate
51V(H) Avoidance Rights
51V(H)1 In General
51k2705 k. Bona Fide Purchasers and Rights Thereof. Most Cited Cases

51 Bankruptcy KeyCite Notes
51V The Estate
51V(H) Avoidance Rights
51V(H)2 Proceedings
51k2725 Evidence
51k2727 Weight and Sufficiency
51k2727(1) k. In General. Most Cited Cases

Chapter 13 debtor-borrower failed to establish fraud under Pennsylvania law in connection with her mortgage loan transaction and, thus, she could not avoid the mortgage pursuant to the section of the Bankruptcy Code governing rights and powers of trustee as bona fide purchaser, even though mortgage document was not notarized in her presence; debtor's testimony that some documents other than the mortgage were forged was insufficient to prove that mortgage was forged and that acknowledgment was invalid, debtor's testimony that documents contained blanks and that her signature on some was probably forged was not credible, as debtor's failure to review documents carefully upon signing them precluded her from testifying accurately concerning their contents, debtor did not establish that title company's employee overtly misrepresented loan's terms when she signed documents, and there was no evidence that debtor was incapable of reading and understanding documents' basic terms. Bankr.Code, 11 U.S.C.A. � 544(a)(3).

[26] KeyCite Notes

184 Fraud
184I Deception Constituting Fraud, and Liability Therefor
184k15 Fraudulent Concealment
184k16 k. In General. Most Cited Cases

Under Pennsylvania law, fraud may arise from the intentional concealment of material facts which is calculated to deceive the other party and which the withholding party has a duty to disclose.

[27] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk51 k. Form and Sufficiency of Disclosure in General. Most Cited Cases

Under TILA, the lender has a duty to provide written disclosures regarding the payments due under the loan. Truth in Lending Act, � 128(a)(6), as amended, 15 U.S.C.A. � 1638(a)(6); 12 C.F.R. � 226.18(g).

[28] KeyCite Notes

95 Contracts
95I Requisites and Validity
95I(E) Validity of Assent
95k93 Mistake
95k93(2) k. Signing in Ignorance of Contents in General. Most Cited Cases

Under Pennsylvania law, failure to read documents, without additional proof of misrepresentations, is not sufficient to prove fraud, because it is the responsibility of the executing party to understand the significance of the documents he or she is signing.

[29] KeyCite Notes

95 Contracts
95I Requisites and Validity
95I(E) Validity of Assent
95k93 Mistake
95k93(2) k. Signing in Ignorance of Contents in General. Most Cited Cases

Pennsylvania law affords no leniency for individuals who do not read the contracts that they execute.

[30] KeyCite Notes

95 Contracts
95I Requisites and Validity
95I(E) Validity of Assent
95k93 Mistake
95k93(2) k. Signing in Ignorance of Contents in General. Most Cited Cases

Under Pennsylvania law, in the absence of proof of fraud, failure to read is an unavailing excuse or defense and cannot justify an avoidance, modification, or nullification of the contract or any provision thereof.

[31] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k34 k. Fraud of Broker or His Agent. Most Cited Cases

Borrower failed to establish that mortgage broker committed common law fraud under Pennsylvania law; borrower's evidence did not set forth any material misrepresentations by broker upon which she relied.

[32] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k19 k. Nature of Broker's Obligation. Most Cited Cases

Absent evidence of a confidential relationship between the parties, borrower failed to establish that mortgage broker breached his fiduciary duty to her under Pennsylvania law.

[33] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Mortgage loan that was not subject to the Home Ownership Equity Protection Act (HOEPA) did not fall within Pennsylvania's Mortgage Bankers and Brokers and Consumer Equity Protection Act. Truth in Lending Act, � 129 et seq., as amended, 15 U.S.C.A. � 1639 et seq.; 63 P.S. � 456.301 et seq.

[34] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

By working to obtain an extension of credit for borrower in return for compensation, mortgage broker fell within the definition of a �credit services organization� and, therefore, had to comply with Pennsylvania's Credit Services Act. 73 P.S. � 2182.

[35] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk16 k. Disclosure Requirements; Statements and Receipts. Most Cited Cases

Pennsylvania's Credit Services Act requires a credit services organization to provide buyers with an information sheet about its services and fees prior to execution of a contract or prior to receipt of any money. 73 P.S. �� 2184, 2185.

[36] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk16 k. Disclosure Requirements; Statements and Receipts. Most Cited Cases

Pennsylvania's Credit Services Act requires a contract between a buyer and a credit services organization to include certain information, including notice of the buyer's right to cancel the contract within five days of signing. 73 P.S. � 2186.

[37] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk16 k. Disclosure Requirements; Statements and Receipts. Most Cited Cases

Mortgage broker violated Pennsylvania's Credit Services Act where, although good faith estimate of charges provided to borrower included an estimate of the fees to be paid to broker, none of the documents, including the good faith estimate of charges, the acknowledgment, or the mortgage loan origination agreement, included any of the disclosures required by the Act. 73 P.S. �� 2185, 2186.

[38] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk17 k. Effect of Violation of Regulations or Lack of License. Most Cited Cases

Where mortgage broker failed to provide borrower any of the disclosures required by Pennsylvania's Credit Services Act, borrower was entitled to damages in the amount she paid to broker, that is, $3,840.00 for broker fee, $350.00 for application fee, and $1,280.00 for yield spread premium, which was paid indirectly by borrower in the form of a higher interest rate. 73 P.S. �� 2185, 2186, 2191.

[39] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Pennsylvania Home Improvement Finance Act (HIFA) definition of �home improvement installment contract� does not except financing arrangements that add on payment of other debts. 73 P.S. � 500-102(10).

[40] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Fact that individual was a mortgage broker and did not perform the work did not prevent him from being the �contractor,� for purposes of the Pennsylvania Home Improvement Finance Act (HIFA); broker sold the home repair services to borrower by arranging for the contractor who would perform the work. 73 P.S. � 500-102(9).

[41] KeyCite Notes

95 Contracts
95II Construction and Operation
95II(C) Subject-Matter
95k194 k. Loans and Advances. Most Cited Cases

Financing technique known as �dragging the body� occurs when a seller or contractor does not finance the transaction, but plays an active role in arranging for financing between the retail buyer and the lender.

[42] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Direct loan exception to the Pennsylvania Home Improvement Finance Act (HIFA) was inapplicable where borrower had no direct contact with either mortgage broker or lender but, instead, the only person she dealt with was employee of title company, who made all of the financial arrangements in the case. 73 P.S. � 500-102(10).

[43] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk17 k. Effect of Violation of Regulations or Lack of License. Most Cited Cases

Although borrower's mortgage loan was subject to the Pennsylvania Home Improvement Finance Act (HIFA), no award of actual damages flowing from the improper imposition of finance charges was appropriate where the loan would be rescinded due to violations of another statute. 73 P.S. � 500-101 et seq.

[44] KeyCite Notes

51 Bankruptcy
51XVIII Individual Debt Adjustment
51k3704 Plan
51k3705 k. Claims and Assets; Propriety and Feasibility in General. Most Cited Cases

In Chapter 13, debtor may satisfy creditors over the life of her Chapter 13 plan.

[45] KeyCite Notes

51 Bankruptcy
51XVIII Individual Debt Adjustment
51k3704 Plan
51k3705 k. Claims and Assets; Propriety and Feasibility in General. Most Cited Cases

92B Consumer Credit KeyCite Notes
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk60 k. In General; Validity of Transactions. Most Cited Cases

Where Chapter 13 debtor-borrower's prepetition mortgage loan transaction violated the Truth in Lending Act (TILA), thus entitling debtor to rescind the loan, the bankruptcy court would not condition rescission on debtor's immediate tender of repayment to lender but, instead, debtor could repay the debt in full over the life of her Chapter 13 plan; to condition rescission on immediate repayment would deprive debtor of her right under bankruptcy law to extend the time for payment. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(b)(1).

[46] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk61 Civil Liabilities and Penalties for Violations
92Bk61.1 k. In General. Most Cited Cases

Where total finance charge paid by borrower was more than $2,000.00, lender was liable to borrower for statutory damages in the amount $2,000.00 for its failure to deliver the notice of right to cancel to borrower, in violation of the Truth in Lending Act (TILA). Truth in Lending Act, � 130(a)(2)(A), as amended, 15 U.S.C.A. � 1640(a)(2)(A).

[47] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk61 Civil Liabilities and Penalties for Violations
92Bk61.1 k. In General. Most Cited Cases

Lender's failure to honor borrower's valid rescission request gave rise to an award of statutory damages, in the amount of $200.00, that was separate from the damages awarded for lender's violation of TILA requirement that borrower be given clear and conspicuous notice of her right to rescind; rescission and damage remedies under TILA are not cumulative. Truth in Lending Act, � 130(a)(2)(A), (a)(3), as amended, 15 U.S.C.A. � 1640(a)(2)(A), (a)(3).

[48] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk64 Actions for Violations
92Bk67 k. Judgment and Relief; Attorney Fees. Most Cited Cases

Court may include the costs of the TILA action and reasonable attorney fees as damages in a successful action to enforce TILA liability or the right of rescission. Truth in Lending Act, �� 125, 130(a)(3), as amended, 15 U.S.C.A. �� 1635, 1640(a)(3).

*146
________________________________________ (Cite as: 309 B.R. 139, *146) ________________________________________
David A. Scholl, Law Office of David A. Scholl, Newtown Square, PA, for Debtor/Plaintiff.
Alan C. Gershenson, Paul H. Schieber, Blank, Rome, Comisky & McCauley, Philadelphia, PA, Anthony M. Pugliese, Madden, Madden & Del Duca, Haddonfield, NJ, for Defendants.
MEMORANDUM OPINIONFN1
FN1. This Memorandum Opinion constitutes the findings of fact and conclusions of law required by Fed. R. Bankr.P. 7052. The Court has jurisdiction over this matter pursuant to 28 U.S.C. � 1334. The parties agree this is a core proceeding pursuant to 28 U.S.C. �� 157(b)(1) and 157(b)(2)(K) and (O). See Joint Pre-Trial Statement, p. 1.

KEVIN J. CAREY, Bankruptcy Judge.
BACKGROUND

On May 30, 2001, Maxine B. Bell (the �Debtor�) and the chapter 13 trustee Edward Sparkman (together, the �Plaintiffs�) filed a complaint against Parkway Mortgage, Inc. (�Parkway�) and Stephen Flacco, t/a Wharton Mortgage Investments (�Wharton�) asserting claims in connection with an alleged predatory loan transaction that occurred on June 30, 1999 (the �Closing Date�). The Debtor filed an amended complaint on February 5, 2002 (the �Amended Complaint�), as permitted by an amended pre-trial order dated January 22, 2002. The Amended Complaint asserts four counts against the defendants as follows:

� Count I seeks rescission of the loan transaction, statutory damages and attorney fees against Parkway for violations of the Home Ownership Equity Protection Act, 15 U.S.C. � 1639(a) et seq. (�HOEPA�) and the Truth in Lending Act, 15 U.S.C. � 1601 et seq., (�TILA�);

� Count II seeks an order invalidating the mortgage ( see Ex. D-3, the �Mortgage�) dated June 30, 1999 given by the Debtor to Parkway as security for the Balloon Note ( see Ex. P-1) for failure to obtain a proper notarization;

� Count III seeks statutory and punitive damages and attorney fees against *147
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Parkway and Wharton, jointly and severally, based upon Wharton's fraudulent conduct, breach of fiduciary duty to the Debtor and violation of the Pennsylvania Credit Services Act, 73 P.S. � 2188(c)(2); and

� Count IV seeks treble damages and attorney fees against Parkway and Wharton, jointly and severally, for their violations of the Pennsylvania Home Improvement Finance Act, 73 P.S. � 500-101 et seq. (�HIFA�) and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. � 201-1 et seq., (�CPL�).

On February 7, 2002, Parkway filed an answer to the Amended Complaint, including a cross-claim against Wharton.FN2 On February 11, 2002, Wharton filed an answer to the Amended Complaint, including a cross-claim against Parkway.FN3 The parties filed a Joint Pre-Trial Statement on March 20, 2003 (the �JPS�), which was amended by Wharton on March 27, 2003. Trial was held on April 3, 2003 and, thereafter, the parties each filed proposed findings of fact and conclusions of law.
FN2. Parkway's cross-claim against Wharton seeks indemnification for any sums which Parkway is ordered to pay to the Debtor and for any damages sustained by Parkway due to rescission or other equitable remedy awarded to the Debtor. On February 7, 2002, Parkway also filed a Third Party Complaint against Steven Sacks and Montgomery Land Transfer, Inc., successor to Rittenhouse Abstract Suburban, Inc. On March 8, 2002, the Third Party Complaint was dismissed against Montgomery Land Transfer, Inc. On April 3, 2002, default judgment on the Third Party Complaint was entered against Steven Sacks.
FN3. Wharton's cross-claim against Parkway similarly seeks indemnification from Parkway for any damages sustained by Wharton due to rescission or other equitable remedy awarded to the Debtor. Parkway filed an answer to the cross-claim on February 12, 2002, denying any liability to Wharton.
FINDINGS OF FACT

The Debtor is a high school graduate, who attended more than three years of college courses at Temple University. (Tr. at 47-48).FN4 She has worked for the Social Security Administration for twenty years. (Tr. at 7). The Debtor owns real property located at 1619 Olive Street, Philadelphia, PA (the �Property�). The Debtor responded to a newspaper advertisement offering the possibility of free home improvements. (Tr. at 6). A few months later, she began to get telephone solicitations from an individual named �Vince� regarding home repair work, and she believes he obtained information about her based upon her response to the advertisement, since her phone number is unlisted. FN5 (Tr. at 6-7). She agreed to make an appointment with him at her home. (Tr. at 8). They discussed various work that she needed done on the house and agreed that Vince would try to provide financing and a contractor so that she could have approximately $8,000 to $8,500 worth of improvements made to the walls of her Property. (Tr. at 8-9). The Debtor understood from the beginning that Vince was a broker and not a contractor. (Tr. at 48).
FN4. Transcript citations refer to the trial held on April 3, 2003.
FN5. Although the Debtor did not know Vince's last name, testimony by Linda Groman, the president of the title insurance company involved in this loan transaction, Rittenhouse Abstract Suburban, Inc. (�Rittenhouse�), revealed Vince's full name to be Vince Corelli. (Tr. at 116).
Vince asked the Debtor to make a list of her monthly bills and then suggested that he could consolidate her monthly payments by trying to obtain financing that would include the home repair loan, refinance of two mortgages she had on the Property, *148
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and payment of some of the Debtor's other bills. (Tr. at 14). In their discussions, she told him that the new mortgage payments should be approximately $450 to $470 per month, and the duration of the loan should be no more than 15 years. (Tr. at 15-16). Vince said that interest would be at �market rate.� (Tr. at 16). There were no discussions about a balloon payment. ( Id.). The only person she spoke to in connection with obtaining a loan was Vince. (Tr. at 11).

On June 30, 1999, Vince brought a number of documents to the Debtor's residence for her to sign. (Tr. at 11). Although the Debtor's daughter was home at the time, only the Debtor and Vince were present when she signed the documents. (Tr. at 13). Vince briefly explained the papers that he asked her to sign, so she didn't look at them or question them because she trusted that �he was handling everything for [her].� (Tr. at 59-60).

The Debtor admitted that her signature appears on the Federal Truth-in-Lending Disclosure Statement (Ex. D-1), Notice of Right to Cancel (Ex. D-2), and Mortgage (Ex. D-3), but she maintains that a lot of the papers Vince gave her to sign had blank spaces. (Tr. at 15-22). Steven Sacks, the notary on the Mortgage, was not present at signing. (Tr. at 22-23). The Debtor testified that she did not sign the HUD-1 Settlement Statement dated June 30, 1999. (Ex. D-4; Tr. at 23). She testified that she signed the second page of the Balloon Note, but claimed she signed it without ever seeing the first page, which contains the repayment terms, or the third page addendum, which sets forth a prepayment penalty. (Ex. P-1; Tr. at 56-57). She did not receive copies of any of the signed documents on June 30, 1999, but received copies later, when Vince returned with checks for her. (Tr. at 20, 55).

The Truth-in-Lending Disclosure Statement provides that the Debtor's payment schedule for the loan consisted of 179 payments of $599.84 each starting August 4, 1999 and one final payment of $53,960.54 on July 4, 2014. (Ex. D-1).

After June 30, 1999, Vince sent Steven Sacks to the Debtor's home to perform the home repairs. (Tr. at 30). The Debtor never entered into a written contract with the contractor. (Tr. at 11). The parties relied upon the written description and estimate prepared by Vince. ( Id.). Mr. Sacks' workers performed home repair services for about three or four weeks, but the Debtor called Vince constantly during that time to complain about the poor quality of the work being done. ( Id.). The Debtor offered into evidence photographs of the problems caused by the workers (Exs.D-12(a) to D-12(j), Tr. at 32-36).

A few weeks after June 30, 1999, Vince returned to the Debtor's house to give her four checks (Ex. D-4A; Tr. at 25). The first check, no. 6858, in the amount of $1,800 was used to make her first three loan payments. (Tr. at 38). The Debtor testified that when Vince brought her the checks representing the cash proceeds, she saw the statement from Parkway indicating that the monthly payment was $599 and told Vince it was more than what she had agreed to pay. (Tr. at 54-55). Vince told the Debtor that he had put aside $1,800 for the first three months of payments on the Parkway loan and, after she made those �good faith� payments, he assured her that he would find another loan to replace the Parkway loan that had a lower monthly payment. (Tr. at 17-18, 54-56).

The second check, no. 6859, in the amount of $8,000, was for the home improvement work. (Tr. at 38). The Debtor testified that the signature that appears on the back of check no. 6859, above the *149
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signature of the contractor, is not hers. ( Id.). The third check, no. 6860, in the amount of $251, was used to pay for insurance. (Tr. at 39-40; Ex. P-5). The fourth check, no. 6861, in the amount of $3,726.53, represented the cash proceeds that the Debtor received and deposited into her account, along with the check for $1,800. (Tr. at 40, 76-77).

The Debtor made 15 monthly payments to Parkway. (Tr. at 44). On January 12, 2001, the Debtor's counsel sent a letter to Parkway electing to rescind the loan transaction pursuant to TILA. (JPS, � II.2; Ex. D-5). Parkway's counsel responded by letter dated February 12, 2001, disputing the Debtor's right to rescind. (JPS, � II.3; Ex. D-6). On March 27, 2001, the Debtor filed a voluntary petition under chapter 13 of the United States Bankruptcy Code. The Debtor commenced this adversary proceeding on May 30, 2001. On or about July 12, 2002, Key Home Equity Service, Parkway's assignee, filed a proof of claim in the Debtor's bankruptcy case in the amount of $66,783.04. (Ex. D-7).

DISCUSSION
1. Count I-Violations of HOEPA and TILA.

In Count I of the Amended Complaint, the Debtor claims that the subject loan transaction was a closed-end consumer financing transaction within the scope of HOEPA and TILA, and that she was not provided with the disclosures required by the statutes. (Compl.�� 22-23). As a result, the Debtor claims that she is entitled to rescind the loan. ( Id.).

[1] In 1968, Congress enacted TILA to govern the terms and conditions of consumer credit by requiring lenders to disclose certain details about loan fees and costs. In re Crisomia, 2002 WL 31202722, at *3 (Bankr.E.D.Pa. Sept.13, 2002). Congress intended TILA to assure a meaningful disclosure of credit terms so consumers are not misled about the costs of financing. Id. To that end, TILA, which is implemented by �Regulation Z,� 12 C.F.R. Part 226,FN6 �requires creditors to disclose the cost of credit as a dollar amount� (the �finance charge�) and as an annual percentage rate (the �APR�). Uniformity in creditors' disclosures is intended to assist consumers in comparison shopping. TILA requires additional disclosure for loans secured by a consumer's home and permits consumers to rescind certain transaction that involve their principal dwelling.� Truth in Lending, 61 Fed.Reg. 49237, 49237-38 (September 19, 1996).
FN6. TILA vests the Board of Governors of the Federal Reserve System with the power to promulgate regulations for the interpretation and implementation of the Act. See 15 U.S.C. � 1604(a).
[2] HOEPA is an amendment to TILA, enacted in 1994, that requires lenders to make additional disclosures beyond those that are required by TILA for certain high cost mortgages (�HOEPA Disclosures�). 15 U.S.C. � 1639; Cooper v. First Gov't Mortgage & Investors Corp., 238 F.Supp.2d 50, 54 (D.D.C. Nov.4, 2002). See also Crisomia, 2002 WL 31202722, at *3.

A. This loan transaction is not subject to the provisions of HOEPA.

[3] HOEPA Disclosures apply to mortgages described in 15 U.S.C. � 1602(aa). 15 U.S.C. � 1639. Section 1602(aa) provides, in pertinent part, as follows:

(1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a residential mortgage transaction, a reverse *150
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mortgage transaction, or a transaction under an open end credit plan, if-

....

(B) the total points and fees payable by the consumer at or before closing will exceed the greater of-

(i) 8 percent of the total loan amount; or

(ii) $400.

15 U.S.C. � 1602(aa). The defendants in this case contend that this loan is not a HOEPA loan because the points and fees are less than 8% of the total loan amount. There are two steps in performing the HOEPA calculation: (1) determining the amount of �points and fees;� and (2) determining whether those points and fees exceed 8% of the total loan amount. Cusato v. Option One Mortgage (In re Cusato), Adv. No. 01-247, slip op. at 8 (Bankr.E.D.Pa. April 15, 2003).

(i) The points and fees calculation.

�Points and fees� are defined in � 226.32(b)(1) of Regulation Z to include the following:

(i) All items required to be disclosed under �� 226.4(a) and 226.4(b) [i.e., the �finance charge�], except interest or the time-price differential;

(ii) All compensation paid to mortgage brokers;

(iii) All items listed in � 226.4(c)(7) [i.e., real-estate related fees] (other than amount held for future payment of taxes) unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor; and

(iv) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident, written in connection with the credit transaction.

12 C.F.R. � 226.32(b)(1). See also 15 U.S.C. � 1602(aa)(4). The parties agree that the following charges are included in the points and fees calculation:
Broker fee to Wharton $3,840.00
Application fee to Wharton $ 350.00
Underwriting fee to Parkway $ 500.00
Total $4,690.00

( See Ex. D-8, � 6). The Debtor, however, argues that the following charges which appear on the HUD-1 Settlement Sheet (Ex. D-4) also must be included in the points and fees calculation:
Credit report fee-paid to Parkway $ 7.50
Flood Certification fee-paid to Parkway $ 14.00
Overnight mail fee-paid to Rittenhouse $ 45.00
Copying fee-paid to Rittenhouse $ 30.00
Recording service fee-paid to
Rittenhouse $ 30.00
Title insurance endorsement fees-paid to Rittenhouse $ 200.00
Yield Spread Premium-paid by Parkway to Wharton $1,280.00
Hazard insurance premium-paid from the Debtor's cash proceeds for policy from Fair Plan [FN7] $ 251.00
FN7. The hazard insurance premium does not appear on the HUD-1 Settlement Sheet, but was paid, by separate check, out of the cash proceeds paid to the Debtor. ( See Exs. D-4A and P-5).
[4] The first two charges on the above list are real estate related fees listed in � 226.4(c)(7) of Regulation Z,FN8 which are *151
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normally excluded from the finance charge, but will be included in a points and fees calculation if (1) the charges are not reasonable, (2) the lender receives-directly or indirectly-compensation from the charges, or (3) the charges are paid to the lender's affiliate. See Crisomia, 2002 WL 31202722 at *9. Although the credit report fee and the flood certification fee are reasonable in amount, the settlement sheet shows that they were paid to Parkway and, therefore, they must be included in the points and fees calculation.
FN8. Regulation Z Section 226.4(c) provides, in pertinent part, as follows:

(c) Charges excluded from the finance charge. The following charges are not finance charges:

....

(7) Real-estate related fees. The following fees in a transaction secured by real property or in a residential mortgage transaction, if the fees are bona fide and reasonable in amount:

(i) Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.

(ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.

(iii) Notary and credit report fees.

(iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest infestation or flood hazard determinations.

(v) Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.

12 C.F.R. � 226.4.
[5] Next, the Debtor argues that the points and fees calculation should include four items paid to the title company, Rittenhouse. The first item is an overnight mail fee of $45. At trial, Linda Groman, the president of Rittenhouse, testified that the fee was for overnight delivery of the loan package to the lender and overnight delivery of the payoff checks to the Debtor's two prior mortgagees to �reduce the amount of interest that was collected at the settlement and ... [to] guarantee and track the payment.� (Tr. at 122). She also testified that the actual cost of the three deliveries was probably more than $45, and that the fee was $10 less than her usual overnight delivery charge. (Tr. at 122-23). The overnight delivery fee should be included in the points and fees calculation only if it is required to be disclosed as a finance charge (12 C.F.R. � 226.32(b)(1)(i)) or it is a real estate related fee that is not reasonable or was paid to the lender or affiliate of the lender (12 C.F.R. � 226.32(b)(1)(iii)). This charge does not fall within either category.

Other courts have held that an overnight mail fee that was incurred to expedite payoff checks to other creditors should not be included as a �finance charge� when there was no evidence indicating that the fee was imposed by the lender as incidental to the extension of credit. Veale v. Citibank, F.S.B., 85 F.3d 577, 579 (11th Cir.1996); Great Western Bank v. Shoemaker, 695 So.2d 805, 807 (Fla.Dist.Ct.App.1997). See also Martinez v. Weyerhaeuser Mortgage Co., 959 F.Supp. 1511, 1517 (S.D.Fla.1996) citing Official Staff Commentary, 12 C.F.R. Pt. 226, Supp. I, � 226.4(a)(3) (�[P]ursuant to the Board's staff commentary, fees imposed by third parties for services not required by the lender where the lender does not retain the fee, are excluded from the TILA definition of a finance charge.�).

Moreover, to the extent the overnight mail fee could be deemed to be a real estate related fee incurred for title insurance purposes under 12 C.F.R. � 226.4(c)(7)(i), Groman's testimony showed that the fee was reasonable, was less than the amount she usually charged and not paid to Parkway. Therefore, the overnight delivery fee should not be included in the points and fees calculation. See Brannam v. Huntington Mortgage Co., 287 F.3d 601, 606 (6th Cir.2002) citing In re Grigsby, 119 B.R. 479, 488 (Bankr.E.D.Pa.1990) vacated on other grounds by *152
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127 B.R. 759 (E.D.Pa.1991)(A fee should be considered reasonable if it was for a service actually performed and reasonable in comparison to the prevailing practices of the industry in the relevant market.)

[6] The second fee paid to Rittenhouse was a copying fee in the amount of $30.00. Groman testified that the copying fee was based on the estimated cost for copying the loan documents that were faxed to her office by the lender. (Tr. at 123, 138-39). She testified that she ordinarily charged such a copy fee in her closings at that time. (Tr. at 123). Parkway contends that the fee should not be included in the points and fees calculation because it is a reasonable real estate related fee, not paid to Parkway, incurred for preparing loan-related documents. 12 C.F.R. � 226.4(c)(7)(ii), � 226.32(b)(1)(iii). The Debtor, however, argues that the copying fee is not �bona fide� because it was based on an estimate, not actual number of copies, and is not reasonable because it is a charge that should have been absorbed by the title company as overhead.

I do not agree that the copying fee is a real estate related fee incurred for preparing loan documents. Therefore, it is not subject to the test for including � 226.4(c)(7)(ii) fees in the definition of points and fees. Instead, it is a charge by the closing agent. The Official Staff Commentary discusses whether such fees should be disclosed as part of the finance charge as follows:

(4)(a)(2) Special rule; closing agent charges.

(i) General. This rule applies to charges by a third party serving as the closing agent for the particular loan. An example of a closing agent charge included in the finance charge is a courier fee where the creditor requires the use of a courier.

(ii) Required closing agent. If the creditor requires the use of a closing agent, fees charged by the closing agent are included in the finance charge only if the creditor requires the particular service, requires the imposition of the charge, or retains a portion of the charge. Fees charged by a third-party closing agent may be otherwise excluded from the finance charge under � 226.4. For example, a fee that would be paid in a comparable cash transaction may be excluded under � 226.4(a).

12 C.F.R. Pt. 226, Supp. I, � 226.4(a)(2). There was no evidence that indicated that the copying fee was required by Parkway or that Parkway retained a portion of the fee. Accordingly, the copying fee should not be included in the points and fees calculation.

[7] The third fee paid to Rittenhouse is listed as a recording service fee in the amount of $30. Groman testified that this fee was charged to offset the cost of hiring a courier to deliver the documents to the Recorder of Deeds office to record the new mortgage lien and to release the two existing mortgage liens. (Tr. at 123-125). Rittenhouse charged a recording service fee on all transactions during that time period. (Tr. at 124). Based upon the Official Staff Commentary cited above regarding closing agent costs, and for the same reasons stated above with respect to the copying charge, I conclude that the recording service fee should not be included in the fees and points calculation.

[8] The final fee paid to Rittenhouse that is in dispute is the title insurance endorsement fee in the amount of $200. Groman testified that this fee included was for �the endorsements to the title policy issued to the lender, which are pretty customary and required by the lender. They are additional affirmative coverages in addition*153
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to the insurance that they have a first-lien position.� (Tr. at 121). The cost of the endorsements are set by the Department of Insurance and Groman testified that she had no discretion to change the amount charged. ( Id.). Clearly, these are real estate related fees for title insurance and fall within 12 C.F.R. � 226.4(c)(7)(i). Therefore, they are only included in the points and fees calculation if the charges are not reasonable or were paid to Parkway or its affiliate. 12 C.F.R. � 226.32(b)(1)(iii). I conclude that the title endorsement fees are reasonable and were paid to Rittenhouse. See Cusato, supra., slip op. at 15. Therefore, they will not be included in the points and fees calculation.

[9] [10] The Debtor also argues that the Yield Spread Premium in the amount of $1,280 should be included in the points and fees calculation. The HUD-1 Settlement Sheet shows that Yield Spread Premium was not included in the column of amounts �paid from the borrower's funds at settlement,� but instead was paid by the lender to Wharton Investment. ( See Ex. D-4).FN9 The statute that describes which mortgage transactions are subject to HOEPA states that it applies to certain mortgage transactions when �the total points and fees payable by the consumer at or before closing exceed the greater of-(i) 8 percent of the total loan amount; or (ii) $400.� 15 U.S.C. � 1602(aa)(emphasis added). The Official Staff Commentary to � 226.32 of Regulation Z provides that:
FN9. A Yield Spread Premium is a bonus paid to a broker when it originates a loan at an interest rate higher than the minimum interest rate approved by the lender for a particular loan. The lender then rewards the broker by paying it a percentage of the �yield spread� (i.e., the difference between the interest rate specified by the lender and the actual interest rate set by the broker at the time of origination) multiplied by the amount of the loan. Noel v. Fleet Finance, Inc., 971 F.Supp. 1102, 1106-07 (E.D.Mich.1997).
In determining �points and fees� for purposes of this section, compensation paid by a consumer to a mortgage broker (directly or through the creditor for delivery to the broker) is included in the calculation whether or not the amount is disclosed as a finance charge. Mortgage broker fees that are not paid by the consumer are not included.

Official Staff Commentary, 12 C.F.R. Part 226, Supp.I, � 226.32(b)(1)(ii). In Noel v. Fleet Finance, Inc., the court held that a yield spread premium is a finance charge under TILA, but it is not a prepaid finance charge paid by the borrowers at or before consummation of the transaction that needs to be separately itemized; rather, it is paid indirectly by the borrower over the course of the loan in the form of a higher interest rate. Noel, 971 F.Supp. at 1110-1112. Even if the yield spread premium in this case is part of the finance charge, it clearly was not paid by the Debtor at or before closing. Therefore, the yield spread premium is not included in the points and fees calculation.

[11] The final item which the Debtor argues must be included in the points and fees calculation is the $251 premium for a property insurance policy that did not appear on the settlement sheet, but was paid for with the Debtor's cash proceeds. ( See Ex. D-4A, Ex. P-5). Parkway argues that the insurance premium should not be included in the points and fees calculation because it did not require the Debtor to incur this cost and had no control over the Debtor's use of her cash proceeds. The Debtor, however, argues that she already had insurance on the Property, yet was told by Vince that she needed to obtain this policy. (Tr. at 39).

The Debtor's testimony about whether she already had property insurance in *154
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place at the time of the loan closing and whether she signed the insurance application on July 6, 1999 is confused. (Tr. at 67-73, 75-76). I do not find the Debtor's testimony that her signature was forged on the insurance application to be credible. However, I do find credible that she believed she was required to purchase insurance with her cash proceeds, as directed by Vince, and she was not given a copy of the policy or an explanation about the type of insurance she was buying. (Tr. at 39).

The issue at present is whether the insurance cost must be included in the points and fees calculation as a �finance charge.� 12 C.F.R. � 226.32(b)(1). TILA provides that:

Charges or premiums for insurance, written in connection with any consumer credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, shall be included in the finance charge unless a clear and specific statement in writing is furnished by the creditor to the person to whom the credit is extended, setting forth the cost of the insurance if obtained from or through the creditor, and stating that the person to whom the credit is extended may choose the person through which the insurance is to be obtained.

15 U.S.C. � 1605(c). See also 12 C.F.R. � 226.4(d)(2)(ii). Even assuming that Vince wrongfully required the Debtor to buy the property insurance at issue (i.e., if she already had valid insurance), the Truth-In-Lending Disclosure Statement contained adequate disclosures regarding her obligation to purchase hazard insurance and advising that she could obtain insurance through any person of her choice. (Ex. D-1) Further, the evidence indicates that she purchased the insurance through Vince, not Parkway. Therefore, pursuant to the sections of TILA and Regulation Z quoted above, the insurance premium should not be included in the points and fees calculation.

Based on the foregoing, the total points and fees for this loan transaction are:
$4,690.00 (as agreed by the parties)
$ 7.50 (credit report fee paid to Parkway)
$ 14.00 (flood certification fee paid to Parkway)
$4,711.50 Total
(ii) Determining whether the �points and fees� exceed 8% of the total loan amount.

[12] After calculating the points and fees, the second prong of the HOEPA threshold test set forth in 15 U.S.C. � 1602(aa)(1)(B) requires a determination of whether the �total points and fees payable by the consumer at or before closing will exceed ... 8 percent of the total loan amount.� 15 U.S.C. � 1602(aa)(1)(B). The Official Staff Commentary to Regulation Z provides that �the total loan amount is calculated by taking the amount financed, as determined according to � 226.18(b),FN10 and deducting any cost listed in � 226.32(b)(1)(iii) [i.e., the real estate related fees] and � 226.32(b)(1)(iv)[i.e., premiums for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage] that is both included as points and fees under � 226.32(b)(1) and financed by the creditor.� Official Staff Commentary, 12 C.F.R. Pt. 226, Supp. I, � 226.32(a)(1)(ii). The amount financed in *155
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this loan transaction is $59,310.FN11 After subtracting the additional points and fees under � 226.32(b)(1)(iii) [$21.50] and � 226.32(b)(1)(iv)[$0], the �total loan amount� for this loan transaction is $59,288.50.
FN10. 12 C.F.R. � 226.18(b) provides that the �amount financed� is calculated by (1) determining the principal loan amount or cash price (subtracting any downpayment); (2) adding any other amounts that are financed by the creditor and are not part of the finance charge; and (3) subtracting any prepaid finance charge. The term �prepaid finance charge� is defined in 12 C.F.R. � 226.2(a)(23) as meaning: �any finance charge paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time.�
FN11. The �amount financed� pursuant to � 226.18(b) is $59,310, which is calculated by taking the principal amount of the loan ($64,000) plus any other amounts financed that are not included in the finance charge ($0) less the prepaid finance charges ($4690).
Eight percent of the total loan amount is $4,743.08. Because the points and fees in the amount of $4,711.50 is less than $4,743.08, this loan transaction does not fall within HOEPA.

B. The loan transaction violates TILA because the Debtor did not receive proper notice of her right to rescind.

[13] [14] In paragraph 23 of the Amended Complaint, the Debtor contends that she is entitled to rescind the loan transaction because, among other things, she was not provided with notice of her right to cancel the transaction at closing.FN12 TILA requires a creditor to provide a borrower with clear and conspicuous notice of her right to rescind in accordance with the provisions of 15 U.S.C. � 1635(a). Section 226.23(b) of Regulation Z more specifically states:
FN12. Parkway argues that the Debtor admitted in paragraph 10 of the Amended Complaint that she received loan documents, including her Truth-in-Lending Disclosure Statement, at closing. Parkway further argues that the Debtor raised the issue of whether she received her Right To Cancel Notice for the first time at trial. However, paragraph 23 of the Debtor's complaint includes an allegation that she did not receive a notice of rescission at closing. A statement in the Debtor's complaint alleging that she received a Truth-in-Lending Disclosure Statement at closing is not an admission that she received all necessary documents at closing. More importantly, the first paragraph under �Legal Issues Presented� in the Joint Pre-trial Statement states: �Did the Debtor receive the requisite Notice of Right to Cancel form at settlement?� JPS, � V(1), p. 4. Clearly, Parkway had notice of this issue prior to trial. Moreover, the Pretrial Order dated January 15, 2003, provides that the JPS �shall govern the conduct of the trial and shall supersede all prior pleadings in the case.� Pretrial Order, � 6.
(b)(1) Notice of right to rescind. In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.... The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following:

(i) The retention or acquisition of a security interest in the consumer's principal dwelling.

(ii) The consumer's right to rescind the transaction.

(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business.

(iv) The effects of rescission, as described in paragraph (d) of this section.

12 C.F.R. � 226.23(b)(1). This requirement is not a �mere technicality,� because �[e]ffective exercise of the right to rescind obviously depends upon the delivery of one copy of the rescission form to the creditor and the retention by the obligor of the other copy.� Williams v. BankOne, N.A. (In re Williams), 291 B.R. 636, 645 (Bankr.E.D.Pa.2003) quoting Stone v. Mehlberg, 728 F.Supp. 1341, 1353 (W.D.Mich.1989).

[15] The Notice of Right to Cancel signed by the Debtor contains an acknowledgment*156
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of receipt preprinted above her signature. (Ex. D-2). However, the written acknowledgment �does no more than create a rebuttable presumption of delivery� of the documents. 15 U.S.C. � 1635(c). To determine whether the Debtor timely received the Notice of Right to Cancel, I must examine the testimony regarding the closing.

At trial, the Debtor testified that she signed loan documents that were brought to her house by Vince (Tr. at 13), that some of the documents were not completely filled out (Tr. at 19), that she did not date the documents that she signed (Tr. at 19, 20, 21, 23), and that she was not given copies of the loan documents at the time she signed them (Tr. at 20). As Vince flipped through the papers and briefly explained them, she signed them without stopping him to ask questions because she trusted him. (Tr. at 60-63). She also testified that only she and Vince were present at the signing. (Tr. at 13). It appears that Vince provided her with copies of the loan documents when he returned to her house sometime around July 6 or 7, 1999 with the checks representing the settlement proceeds. ( See Tr. at 55). Upon reviewing the loan documents at trial, the Debtor claimed that her signature was forged on a number of documents. (Tr. at 57, 61-62, 64, 67).

Conversely, Groman testified that the loan documents could not have been blank at the time of signing because the loan documents were generated by the lender and faxed to Rittenhouse. (Tr. at 117-19). Groman reviewed the documents, prepared the settlement statement, and copied the documents to make two additional sets for the loan closing. ( Id.). Although she had known Vince Corelli for only a short time and it was not her usual practice, she agreed to allow Vince to take the loan documents to the borrower's home for signature. (Tr. at 132-33). She was assured that he would have a notary present at the closing. (Tr. at 132). Groman copied a set of documents for the Debtor, but she testified that she really has no way of knowing whether Vince left a copy of the loan documents with the Debtor at closing. (Tr. at 134-35).

Although the Debtor claimed to be positive that many of the documents she signed were blank, I find Gorman's testimony-that she reviewed the documents upon receipt from the lender and found them to be complete-to be more convincing. Based upon the Debtor's testimony that she was signing documents as Vince flipped through them, it is more likely that the Debtor did not review the loan documents carefully. I also find, however, that the Debtor's testimony that Vince had her sign the documents quickly and then left without giving her copies to be credible and consistent with the remaining facts. Vince apparently took the loan documents with him and had them notarized and dated at another time and location. This prevented the Debtor from having the opportunity to examine the loan documents in more detail on her own and, if she so chose, to take advantage of her right to rescind the transaction upon learning of the inconsistencies between the loan she believed she was getting and the loan she was actually given.

Because I find that the Debtor testified credibly that she was not given copies of the loan documents, including the Notice of Right to Cancel, at closing, she has rebutted the presumption of delivery on the Notice of Right to Cancel. Williams v. Gelt Fin. Corp., 237 B.R. 590, 594-95 (E.D.Pa.1999)( �This presumption may be rebutted by the �testimony of a debtor� that the disclosures were not given, �even where a disclosure statement is produced.� �) citing *157
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Pinder v. Lomas & Nettleton Co., 83 B.R. 905, 913 (Bankr.E.D.Pa.1988); Hanlin v. Ohio Builders & Remodelers, Inc., 212 F.Supp.2d 752, 762 (S.D.Ohio 2002)(plaintiffs' testimony that they did not receive disclosures sufficient to rebut presumption).

The burden of proof regarding proper delivery now shifts to Parkway. Williams, 237 B.R. 590, 595 (�Once the debtor has provided an affidavit or testimony that he or she did not receive the documents, it is incumbent upon the ... [creditor] to produce some positive evidence that delivery of the documents occurred.� (citation omitted)). Groman admitted that she did not know whether Vince provided the Debtor with copies of the loan documents as required by TILA. Because no further evidence on delivery of the documents has been submitted, I find that the Debtor did not receive copies of the loan documents, particularly a copy of the Notice of Right to Cancel, at closing in violation of 15 U.S.C. � 1635(a) and 12 C.F.R. � 226.23(b)(1).

[16] [17] Presumably, the Debtor eventually received a copy of the Notice of Right to Cancel when Vince delivered the checks to her on July 6 or 7, 1999.FN13 However, by this time, the dates in the Notice of Right to Cancel were meaningless, since the Notice stated that the deadline for exercising her right to rescind was midnight on July 3, 1999. Regulation Z provides:
FN13. The record does not reveal whether the Debtor eventually received one or two copies of the Notice of Right to Cancel. Section 226.23(b)(1) states that the lender must provide the Debtor with two copies of the notice. The Debtor did not raise the number of copies received as an issue. Because I conclude below that the copy received violated TILA, I need not determine whether the Debtor received the appropriate number of copies.
The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first.

12 C.F.R. � 226.23(a)(3). See also 15 U.S.C. � 1635(f). Other courts have held that a failure to fill in the expiration date on a rescission form is a violation of TILA and, although it is a �purely technical violation of TILA,� it enables the borrower to rescind the loan for up to three years. Armstrong v. Nationwide Mortgage Plan/Trust (In re Armstrong), 288 B.R. 404, 413-14 (Bankr.E.D.Pa.2003) citing Semar v. Platte Valley Fed. S & L, 791 F.2d 699, 704 (9th Cir.1986); Williamson v. Lafferty, 698 F.2d 767, 768-69 (5th Cir.1983); Mayfield v. Vanguard S & L Ass'n, 710 F.Supp. 143, 146 (E.D.Pa.1989); Aquino v. Public Finance Consumer Discount Co., 606 F.Supp. 504, 507 (E.D.Pa.1985). Similarly, notice of an incorrect date does not provide �clear and conspicuous� notice to the borrower of the date on which the rescission period expires, as required by 12 C.F.R. � 226.23(b)(1). See Taylor v. Domestic Remodeling, Inc., 97 F.3d 96, 98-99 (5th Cir.1996)(holding that a misdated notice of right to rescind and disbursement of the loan proceeds prior to compliance with TILA resulted in a material failure to disclose the right to rescind to the borrowers and, therefore, the borrowers were entitled to a three-year rescission period pursuant to 15 U.S.C. � 1635(f)).FN14 *158
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Here, the Debtor did not receive proper disclosure of her right to cancel. This violation of the right to rescind disclosure requirements extends the Debtor's rescission period for this transaction to three years. 12 C.F.R. � 226.23(a)(3). On January 12, 2001, the Debtor sent Parkway a letter notifying it of her intent to rescind the loan transaction, which, indisputably, was within the three-year rescission period.
FN14. As was discussed by the Fifth Circuit Court of Appeals in Taylor, both this case and Taylor can be distinguished from Smith v. Fidelity Consumer Discount Co., 898 F.2d 896 (3d Cir.1990), in which the Third Circuit Court of Appeals found that delivery of the loan proceeds during the rescission period in violation of 12 C.F.R. � 226.23(c) was not a violation of the disclosure requirements of 12 C.F.R. � 226.23(b). The Third Circuit decided that only a violation of the disclosure requirements of � 226.23(b) extended the rescission period. Smith, 898 F.2d at 904. The incorrect date on the Notice of Right to Cancel is a disclosure violation of � 226.23(b), thereby entitling the Debtor to a three-year rescission period.
2. Count II-Failure to obtain a proper notary on the Mortgage.

In the Amended Complaint, and the Joint Pre-Trial Statement, the Debtor argues that she may avoid the Mortgage against her Property under Bankruptcy Code � 544(a)(3) due to the improper notarization of the Mortgage because the notary was not present at closing and because �the entire transaction was rife with forgery, fraud, and overreaching.� Plaintiff's Proposed Findings of Fact and Conclusions of Law, p. 13.

[18] [19] [20] [21] [22] Pennsylvania law require that all deeds and conveyances made and executed within Pennsylvania be acknowledged, otherwise the deed or conveyance is adjudged fraudulent and void against any subsequent purchaser or mortgagee. 21 P.S. � 444. Under Pennsylvania law, a recorded mortgage containing an acknowledgment that is complete and proper on its face cannot be avoided unless there is proof of fraud or forgery. Jones v. The Money Store, Inc. (In re Jones) 284 B.R. 92, 96 (Bankr.E.D.Pa.2002) aff'd 308 B.R. 223 (E.D.Pa.2003). See also Armstrong, 288 B.R. at 430; Schwab v. Home Loan and Investment Bank ( In re Messinger), 281 B.R. 568 (Bankr.M.D.Pa.2002). As I discussed in Jones, the rationale behind the foregoing decisions is as follows:

Under Pennsylvania law, the acknowledgment does not affect the validity of the mortgage and is not part of the document. Messinger, 281 B.R. at 574. The acknowledgment is required for the recording and perfection of a mortgage lien. Messinger, 281 B.R. at 573 citing Abraham v. Mihalich, 330 Pa.Super. 378, 381, 479 A.2d 601, 603 (1984) and 21 P.S. � 42. The purpose of the acknowledgment is to verify the executing party's identity and voluntary intention to be bound by the terms of the document. Messinger, 281 B.R. at 574.

....

[T]he [ Messinger ] Court concluded that, in the absence of any allegation of fraud or forgery, the latent defect did not warrant �interference with the presumptive validity of acknowledged and recorded mortgages, facially complete and regular.�... In support of this conclusion, the Court wrote:

The official certificate of the notary, in regular form, is (in the absence of fraud or forgery) conclusive in favor of those who in good faith rely upon it. �Any other rule would work incalculable mischief. It would open wide the door to fraud and perjury, and make recorded acknowledgments a snare to a person dealing with land on the faith and credit of the public records.� Popovitch v. Kasperlik, 70 F.Supp. 376, 384 (W.D.Pa.1947). Allowing a challenge*159
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where there is an allegation of fraud or forgery would restore the protections that may have been lost by an improper fulfillment of notarial duties. Where the grantors concede that they have signed the deed, and the deed had been delivered, �even a defective acknowledgment would not be a basis for invalidating the recordation.� Abraham v. Mihalich, 330 Pa.Super. at 382, 479 A.2d at 603.

Jones, 284 B.R. at 95-96, quoting Messinger, 281 B.R. at 574-75.

[23] I have determined that the contractor/notary, Steven Sacks, was not present at the closing on June 30, 1999. ( See Tr. at 22-23). However, the Debtor testified that she signed the Mortgage ( see Tr. at 20-21) and, therefore, the fact that it was not notarized in the Debtor's presence is not sufficient, on its own, to avoid the mortgage under 11 U.S.C. � 544. However, her allegations of forgery, fraud and overreaching require me to review the loan transaction more closely to determine whether the Debtor voluntarily agreed to be bound by the terms of the Mortgage.

First, the Debtor may attack the validity of the acknowledgment by alleging that the underlying document was forged. See Steel v. Snyder, 295 Pa. 120, 128, 144 A. 912, 915 (1929)(�If the mortgage was a forgery, its purported acknowledgment was false and fraudulent and gave the instrument no legal validity.�) Here, the Debtor testified that some documents, other than the Mortgage, were forged. See, e.g., Tr. at 23 (Debtor claims she did not sign the HUD-1 Settlement Sheet); Tr. at 56-57 (Debtor claims she did not sign all pages of the Balloon Note); and Tr. at 38 (Debtor claims she did not sign check no. 6859, in the amount of $8,000). This does not provide a basis for finding that the Mortgage was forged and rendering the acknowledgment invalid.

Although she does not specify the fraudulent conduct that she believes entitles her to avoid the mortgage under Count II, the Debtor has argued throughout this proceeding that the documents she signed contained blanks, some of the documents were forged, the monthly payments were more than what she previously agreed to with Vince, and she was not made aware of the fact that the loan included a balloon payment.

[24] [25] To prove fraud, the Debtor must show �a material misrepresentation made with knowledge of its falsity or reckless disregard for its truth and with the intent of misleading another into relying upon it; justifiable reliance on the misrepresentation; and, a resulting injury proximately caused by the misrepresentation.� Giangreco v. United States Life Insurance Co., 168 F.Supp.2d 417, 423 (E.D.Pa.2001). For the reasons set forth below, I conclude that the Debtor has not provided clear and convincing evidence of fraud. See Barker v. Altegra Credit Co. (In re Barker), 251 B.R. 250, 258 (Bankr.E.D.Pa.2000) (To establish a valid fraud claim, the plaintiff must prove the elements of fraud by the exacting standard of clear and convincing evidence). See also Gordon Investments, Inc. v. Gillingham (In re Gillingham), 143 B.R. 55, 61-62 (Bankr.W.D.Pa.1992).

As discussed previously, I do not find the Debtor's testimony regarding the blanks in the documents to be credible. Similarly, her testimony that many documents �appear to be her signature� but are probably forged is not credible. FN15 Instead, I conclude that the Debtor did not *160
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review carefully the loan documents as she was signing them on June 30, 1999. Because she relied upon Vince to tell her what and where to sign, she cannot testify accurately whether the documents were completed or whether she signed particular documents and pages of documents on that evening.
FN15. I do, however, find credible her testimony of forgery regarding check no. 6859, in the amount of $8,000. A review of that exhibit shows that the signature is clearly not similar to the Debtor's signature on other documents.
[26] [27] The Debtor did not provide clear and convincing evidence that Vince overtly misrepresented the loan's terms, specifically, the higher monthly payment and the balloon feature, at the time she signed the documents. She testified only that she was not aware of the higher monthly payments until after closing. However, �fraud may also arise from the intentional concealment of material facts which is calculated to deceive the other party and which the withholding party has a duty to disclose.� Giangreco, 168 F.Supp.2d at 423 n. 5. See also Rodriguez v. Mellon Bank, N.A. (In re Rodriguez), 218 B.R. 764, 784 (Bankr.E.D.Pa.1998)(When a party is under a legal duty to make a disclosure, the mere nondisclosure of information can constitute a misrepresentation). Under TILA, the lender has a duty to provide written disclosures regarding the payments due under the loan. 15 U.S.C. � 1638(a)(6); 12 C.F.R. � 226.18(g). The Debtor has admitted throughout this proceeding that she signed the Federal Truth-in-Lending Disclosure Statement (Ex. D-1). The TILA Disclosure Statement stated both the amount of the monthly payments and the balloon payment.

[28] [29] [30] The Debtor chose to rely upon Vince rather than read the documents which contained the required disclosures. Under Pennsylvania law, failure to read-without additional proof of misrepresentations-is not sufficient to prove fraud, because �[i]t is the responsibility of the executing party to understand the significance of the documents he or she is signing. �Pennsylvania law affords no leniency for individuals who do not read the contracts that they execute.� According to the Pennsylvania Supreme Court, �in the absence of proof of fraud, failure to read is an unavailing excuse or defense and cannot justify an avoidance, modification or nullification of the contract or any provision thereof.� � In re Jones, 284 B.R. at 96, n. 5 quoting Nelson Medical Group v. Phoenix Health Corp., 2002 WL 1066959, *2 (Pa.Com.Pl.2002), citing In re Estate of Olson, 447 Pa. 483, 488, 291 A.2d 95, 97 (1972). There is no evidence that the Debtor was incapable of reading and understanding the basic terms of the loan documents.

Accordingly, I conclude that the Debtor cannot avoid the loan transaction under 11 U.S.C. � 544.

3. Count III-Violations by the Broker.

In Count III of Amended Complaint, the Debtor contends that Wharton engaged in common law fraud, breached its fiduciary duties to the Debtor, and violated the Pennsylvania Credit Services Act, 73 P.S. � 2181 et seq.FN16 The loan documentation *161
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for this transaction included a �Borrowers Acknowledgment of Services Provided By Broker� and a �Mortgage Loan Origination Agreement� dated June 30, 1999 and signed by the Debtor. (Ex. D-6, pp. 7-8).FN17 The Acknowledgment stated that the broker's compensation would be $5,470.00 and included a statement of services to be provided by the Broker.FN18 Despite this documentation, the Debtor testified that she never spoke to or interacted with anyone from Wharton and that Vince was her sole contact in connection with this loan. (Tr. at 11-12). Flacco testified that he mailed a loan application package to the Debtor (Tr. at 156) and �processed� the loan for the lender.FN19 However, he did not provide any evidence of contacts with the Debtor, either through the mail or by telephone (Tr. at pp. 170-71), and admitted that he may not have spoken to the Debtor directly. (Tr. at 171).
FN16. Wharton argues that the Debtor should not be permitted to maintain her causes of action under the Credit Services Act because she claimed a violation of 73 P.S. � 2188(c)(2) in her Amended Complaint. Subsection 2188(c)(2) pertains to restrictions on loan brokers and Wharton, as a licensed mortgage broker (Tr. at 149-50), is excepted from the definition of a loan broker pursuant to 73 P.S. � 2182. However, in the JPS, the Debtor expanded her allegations against Wharton to include claims under the Credit Services Act generally. Therefore, I conclude that Wharton had notice prior to trial of the Debtor's claims under the Credit Services Act generally, is bound by the terms of the JPS, and is not prejudiced by the Debtor's claims thereunder.
FN17. Stephen Flacco (�Flacco�) of Wharton testified that he did not have a contract with the Debtor (Tr. at 172), he did not prepare any documents for the closing and he did not attend the closing (Tr. at 165-66). Therefore, I find that these documents must have been prepared by Parkway. For that reason, any liability based upon the documents will be awarded against Parkway and Wharton, jointly and severally.
FN18. There is also a �Mortgage Loan Origination Agreement� signed by the Debtor, on which the name of the mortgage broker is left blank. (Ex. D-10, p. 13). It is unclear when this document was signed, but it appears to be part of the loan application package. Because it is blank, I do not give weight to the document.
FN19. Flacco testified that in �processing� the loan, his duties would include procuring information about the Debtor's job and documenting it with W-2's, paystubs, and other documents, and then providing the information to the lender so the lender can determine whether to extend a loan. (Tr. at p. 160).
[31] [32] Count III of the Debtor's Amended Complaint mirrors the relief granted to the borrower in the Barker case. See Barker, 251 B.R. 250. However, unlike the borrower in Barker, the Debtor in the case at bar had little or no direct interaction with Wharton regarding this loan transaction. Because the Debtor's evidence does not set forth any material misrepresentations by Wharton upon which she relied, her claim based on common law fraud must be denied. See Giangreco, 168 F.Supp.2d at 423. Moreover, the Debtor has not provided any evidence to establish a confidential relationship between the Debtor and Wharton, so her claims for breach of fiduciary duty also must be denied. See Barker, 251 B.R. at 257-59; Koch v. First Union Corp., 2002 WL 372939, at *7-*8 (Pa.Com.Pl. Jan. 10, 2002).

The Borrower's Acknowledgment states that Wharton has �assisted the Borrower in securing the ... financing� by providing specific services, including those Wharton admits to performing, such as completing the credit application, gathering required income and mortgage history documentation to submit with the application, arranging for an appraisal of the home, and obtaining lender approval. The Debtor argues that Wharton is a �credit services organization� which is defined in � 2182 of the Credit Services Act as follows:

�Credit services organization.�

A person who, with respect to the extension of credit by others, sells, provides or performs or represents that he or she can or will sell, provide or perform any of the following services in return for the payment of money or other valuable consideration:

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(i) Improving a buyer's credit, record, history or rating.

(ii) Obtaining an extension of credit for a buyer.

(iii) Providing advice or assistance to a buyer with regard to either subparagraph (i) or (ii).

73 P.S. � 2182. An �extension of credit� is defined in 73 P.S. � 2182 as �[t]he right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family or household purposes.� Subsection (2) of the definition of a credit services organization sets forth exceptions to the rule, but those exceptions do not apply here.

[33] Wharton argues that it is not a credit services organization because the loan in this matter was a mortgage loan transaction governed by the provisions of the Mortgage Bankers and Brokers and Consumer Equity Protection Act, 63 P.S. � 456.301 et seq. (the �Mortgage Act�). Neither party has cited to, nor has my research uncovered, any cases discussing whether transactions subject to the Mortgage Act can also be subject to the Credit Services Act. However, the Consumer Equity Protection chapter of the Mortgage Act sets forth limitations and restricted acts for �Covered Loans,� which are defined in 63 P.S. � 456.503 to mean loans subject to HOEPA (i.e., mortgages that fall within the requirements of 15 U.S.C. � 1602(aa)) and for which the original principal balance of the loan is less than $100,000. Because I have already determined that this loan is not subject to HOEPA, this loan would not fall within the Mortgage Act and, at this time, I need not decide whether a loan can be subject to both the Mortgage Act and the Credit Services Act.

[34] [35] [36] [37] [38] By working to obtain an extension of credit for the Debtor in return for compensation, Wharton falls within the definition of a �credit services organization� and, therefore, must comply with the Credit Services Act. The Act requires a credit services organization to provide buyers with an information sheet about its services and fees prior to execution of a contract or prior to receipt of any money. 73 P.S. �� 2184, 2185.FN20 The Credit Services Act also requires a contract between a buyer and a credit services organization to include certain information, including notice of the buyer's right to cancel the contract within five days of signing. 73 P.S. � 2186. Attached to Wharton's answers to the Debtor's interrogatories is a copy of a �good faith estimate of charges� that is signed by the Debtor and dated April 28, 1999. (Ex. D-10, p. 16). The good faith estimate of charges includes an estimate of the fees to be paid to Wharton, but none of the documents (including the good faith estimate of charges, the Acknowledgment, or the Mortgage Loan Origination Agreement) include any of the disclosures required by 73 P.S. � 2185 or � 2186. The Credit Services Act provides for damages as follows:
FN20. A �buyer� is defined in the Credit Services Act as �a natural person who is solicited to purchase or who purchases the services of a credit services organization.� 73 P.S. � 2182.
Any buyer or borrower injured by a violation of this act or by the credit services organization's or loan broker's breach of a contract subject to this act may bring an action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer or borrower to the credit services organization or loan broker, plus reasonable attorney fees and costs. An award, if the trial court deems it proper, may be entered for punitive damages.

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73 P.S. � 2191. The testimony in this case revealed that the Debtor did not understand that Wharton was involved in this loan transaction or that the agreement with Wharton was subject to cancellation. Pursuant to the provisions of the Credit Services Act, I conclude that the Debtor is entitled to damages in the amount she paid to Wharton. The HUD-1 Settlement Sheet shows that Wharton was paid a broker fee of $3,840 and an application fee of $350 from the Borrower's loan proceeds, or a total of $4,190.00. Wharton was also paid a yield spread premium of $1,280 by the lender at settlement. The yield spread premium is paid indirectly by the Debtor in the form of a higher interest rate. Noel, 971 F.Supp. at 1110-11. Therefore, I conclude that the damages should also include the yield spread premium payment to Wharton, for total damages in the amount of $5,470.

4. Count IV-HIFA Violations.

In Count IV of the Amended Complaint, the Debtor claims that the defendants acted in concert to avoid the strict requirements of the Pennsylvania Home Improvement Finance Act, 73 PS. � 500-101 et seq. (�HIFA�) in structuring this loan, and performed deceptive acts that were calculated to confuse the borrower in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. � 201-1 et seq. (�CPL�). More specifically, assuming the loan transaction is subject to HIFA, the Debtor alleges that she can raise breach of warranty defenses against Parkway and may recover damages under the CPL for violations of HIFA requirements.FN21 See JPS, �� 2, 3, 12, 13, and 14.
FN21. HIFA does not provide a private litigant with a cause of action for a HIFA violation because the sole means of enforcement is through the State Attorney General or district attorney. Armstrong, 288 B.R. at 427 citing Engle v. Shapert Constr. Co., 443 F.Supp. 1383 (M.D.Pa.1978). However, other courts have determined that a violation of HIFA qualifies as an unfair method of competition or an unfair or deceptive act or practice under the CPL, so that the plaintiff may look to the CPL for a remedy. Armstrong, 288 B.R. at 427 citing In re Russell, 72 B.R. 855 (Bankr.E.D.Pa.1987). Cf. Crisomia, 2002 WL 31202722 at *12, n. 29.

The Debtor, citing Brown v. Courtesy Consumer Discount Co. (In re Brown), 134 B.R. 134 (Bankr.E.D.Pa.1991), also claims loan charges that are imposed in violation of HIFA constitute a TILA violation, enabling the Debtor to rescind the loan transaction. Because I have already concluded that the Debtor may rescind the loan under TILA, I need not decide this issue here.
[39] HIFA applies to �home improvement installment contracts,� which are defined as follows:

�Home improvement installment contract� or �contract� means an agreement covering a home improvement installment sale, whether contained in one or more documents, together with any accompanying promissory note or other evidence of indebtedness, to be performed in this Commonwealth pursuant to which the buyer promises to pay in installments all or any part of the time sale price or prices of goods and services, or services. The meaning of the term does not include such an agreement, if (i) it pertains to real property used for a commercial or business purpose; or (ii) it covers the sale of goods by a person who neither directly nor indirectly performs or arranges to perform any services in connection with the installation of or application of the goods; or (iii) it covers only an appliance designed to be freestanding and not built into and permanently affixed as an integral part of the structure such as a stove, freezer, refrigerator, air conditioner, other than one connected with a central heating system, hot water heater *164
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and the like; or (iv) it covers the sale of goods and the furnishing of services or the furnishing of services thereunder for a cash price stated therein of three hundred dollars ($300) or less; (v) the loan is contracted for or obtained directly by the retail buyer from the lending institution, person or corporation; or (vi) the loan is insured, or a written commitment to insure it has been issued, pursuant to national housing legislation.

73 P.S. � 500-102(10). Parkway argues that the Loan is not subject to HIFA, because it was a mortgage refinancing and, although some of the cash proceeds were being used for home repairs, the purpose of the loan was not to finance home improvements. However, the original purpose of the Loan was to cover the cost of home improvement work.FN22 (Tr. at 51). The loan transaction started when Vince solicited the Debtor and advised that he could provide a contractor and financing so that the Debtor could have home improvement work performed on her residence. (Tr. at 8-9). The Debtor stated that Vince came to her home, discussed what repairs needed to be done, and prepared a description of the work to be performed and an estimate of the cost. (Tr. at 11). She testified that she never had a written contract with Mr. Sacks, who performed the work. ( Id.). Instead, the agreement covering the home improvement installment sale in this case is based upon the description of work and estimate prepared by Vince.
FN22. The Debtor testified that adding the refinance of her existing mortgages and payment of other bills as part of the Loan occurred at the behest of Vince. (Tr. at 14-15, 52-53). The definition of �home improvement installment contract� does not except financing arrangements that add on payment of other debts. 73 P.S. � 500-102(10). See also Crisomia, 2002 WL 31202722 at *14, n. 33; Barber v. Fairbanks Capital Corp. (In re Barber), 266 B.R. 309 (Bankr.E.D.Pa.2001); Gonzalez v. Old Kent Mortgage Co., 2000 WL 1469313 (E.D.Pa. Sept.21, 2000).
[40] The Debtor testified that she understood that Vince was a broker, not the contractor who would perform the work. (Tr. at 48). However, the fact that Vince was a broker and did not perform the work does not prevent him from being the �contractor� for purposes of HIFA. HIFA's definition of �contractor� states:

�Home improvement contractor� or �contractor� means a person who sells goods and services, or agrees to furnish or render services, to a retail buyer pursuant to a home improvement installment contract, but not including the construction of new homes.

73 P.S. � 500-102(9). This definition includes a person who is selling home improvement services, even though the individual is not performing the services. Likewise, the exception in subsection (ii) of the definition of �home improvement installment contract� says that it does not apply to a �sale of goods by a person who neither directly nor indirectly performs or arranges to perform any services in connection with the installation of ... the goods.� Conversely, this implies that the definition does, in fact, apply to an agreement with an individual who does not actually perform the services, but �arranges� for the performance of home improvement work. Here, Vince sold the home repair services to the Debtor by arranging for the contractor who would perform the work. The Debtor testified that she asked Vince about getting her own contractor to do the repairs, but Vince insisted that he had to provide the contractor. (Tr. at 9, 54).

[41] [42] Parkway also argues that the direct loan exception applies to the Loan. The direct loan exception is found in subsection*165
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(v) of the definition of �home improvement installment contract� which provides that HIFA does not apply if �the loan is contracted for or obtained directly by the retail buyer from the lending institution, person or corporation.� 73 P.S. � 500-102(10). The Debtor responds by arguing that the financing technique known as �dragging the body� applies to this case. �Dragging the body� occurs when a seller or contractor does not finance the transaction, but plays an active role in arranging for financing between the retail buyer and the lender. Barber, 266 B.R. at 316-17.FN23 The Debtor had no direct contact in this case with either Wharton or Parkway; the only person she dealt with was Vince (Tr. at 12), who made all of the financing arrangements in this case. Therefore, the direct loan exception does not apply here.
FN23. This financing technique has been recognized in matters involving automobile sales under the Motor Vehicle Sales Finance Act, 69 P.S. � 601 et seq. ( See Anderson v. Automobile Fund, 258 Pa.Super. 1, 20-21, 391 A.2d 642, 652 (1978)) or home repairs and improvement sales under HIFA ( See Barber, 266 B.R. at 316-17; Gonzalez, 2000 WL 1469313 at *1).
[43] Based upon the foregoing, I conclude that the Loan is subject to HIFA. However, because the Loan will be rescinded, no award of actual damages which flow directly or indirectly from the imposition of improper finance charges is appropriate. Steinbrecher v. Mid-Penn Consumer Discount Co., 110 B.R. 155, 160 (Bankr.E.D.Pa.1990). The Debtor also asserts that HIFA permits her to collect damages from Parkway based upon a �breach of warranty,� since the work was not done correctly. See 73 P.S. � 500-208. However, the Debtor has not alleged any legal basis for a warranty claim, whether arising from contract, statute or common law. Neither has she made a sufficient record in support of such a claim. Therefore, the record does not provide a sufficient basis on which to make a damage award under HIFA.

5. The effect of the Debtor's rescission of the loan and successful action to enforce TILA.

For the reasons set forth above, I concluded that this loan transaction violated TILA, and the Debtor is entitled to rescind the loan under 15 U.S.C. � 1635(a), because she did not receive proper notice of her right to rescind the loan transaction. In the Amended Complaint, the Debtor requests that her remedies for the TILA violations include the following: satisfaction of Parkway's security interests against her residence; disallowance of any claim based upon finance charges arising from the loan transaction; return of the Debtor's payments to Parkway; statutory damages of $2000 for TILA violations plus all finance charges and fees paid by the Debtor to Parkway; and reasonable attorney fees. The effect of the Debtor's rescission is explained in 15 U.S.C. � 1635(b) as follows:

When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, down payment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor,*166
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the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

15 U.S.C. � 1635(b). Regulation Z, in � 226.23(d), similarly provides:

(1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.

(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.

(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer's option, tender of property may be made at the location of the property or at the consumer's residence. Tender of money must be made at the creditor's designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer's tender, the consumer may keep it without further obligation.

(4)The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.

12 C.F.R. � 226.23(d).

Some courts have conditioned a debtor's right to rescind upon the debtor's tender of repayment to the creditor. See Quenzer v. Advanta Mortgage Corp. USA, 288 B.R. 884, 888 (D.Kan.2003)(Rescission �remains an equitable doctrine subject to equitable consideration.... Within the meaning of this law [TILA], �rescission� does not mean an annulment that is definitively accomplished by unilateral pronouncement, but rather a remedy that restores the status quo ante.... Thus the court may condition rescission and the return of monies under the equitable remedy of 15 U.S.C.A. � 1635(b) on the debtor's return of property received in connection with the transaction.� (citations omitted)). FN24 See also Armstrong, 288 B.R. at 417-18 (holding that *167
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the court may condition the avoidance of the lender's security interest on the return of its money by the plaintiffs, and citing the �majority of courts� whose decisions hold likewise); Apaydin v. Citibank Federal Savings Bank ( In re Apaydin), 201 B.R. 716, 724 (Bankr.E.D.Pa.1996)(same); Thorp Loan and Thrift Co. v. Buckles (In re Buckles), 189 B.R. 752, 764-66 (Bankr.D.Minn.1995)(holding that a debtor's receipt of the benefits of rescission under the TILA should be conditioned upon the debtor's tender of repayment).
FN24. The Quenzer Court also wrote that this interpretation of conditioning a borrower's rescission remedy is �confirmed by the TILA's legislative history, which clarifies that �the courts, at any time during the rescission process, may impose equitable conditions to insure that the consumer meets his obligations after the creditor has performed his obligations as required by the act.� � Quenzer, 288 B.R. at 888, quoting S.Rep.No. 368, 96th Cong., 2d Sess. 29 (1980), reprinted in 1980 U.S.C.C.A.N. 236, 265. Indeed, in Williams, infra., Judge Sigmund notes that the majority of circuit courts that have addressed this issue (outside of the bankruptcy context) condition rescission upon tender of payment. Williams, 291 B.R. at 655-56.
In her decision in Williams v. BankOne, N.A. (In re Williams), 291 B.R. 636 (Bankr.E.D.Pa.2003), my colleague, now Chief Judge Sigmund, after a thorough analysis of the statute, regulation, legislative history, and decisional law, was not persuaded that courts may condition rescission under � 1635 on payment by the obligor. Id. at 657. Rather, Judge Sigmund concluded that, while courts may modify certain procedures (as described in � 226.32(d)(4)), courts cannot modify the voiding of a security interest. Id. at 657-58. Judge Sigmund reasoned that � 1635(b) is a deviation from the traditional common law rules of rescission, Congress intentionally having chosen to provide for the voiding of a creditor's security interest before the obligor tenders what is owed to the creditor. Id. at 658. I agree.

[44] [45] In chapter 13, the Debtor may satisfy creditors over the life of her chapter 13 plan. To condition rescission on immediate repayment would deprive the Debtor of her right under bankruptcy law to extend the time for payment. Certainly, as Williams acknowledges, this puts the creditor at risk, since the obligor may either refuse to perform or be financially unable to do so. Id. However, the Debtor's chapter 13 plan can be used not only as a vehicle for the Debtor to repay her tender obligation over time, but can also serve as a means of protecting the creditor's interests. I look again to Williams and the remedy fashioned by Judge Sigmund.

Invoking the court's authority under � 226.23(d) to prescribe procedures by which the Debtor satisfies her tender obligation, Judge Sigmund ordered the debtor to file an amended plan separately classifying the creditor's claim and requiring its payment in full over the remaining plan life. In addition, the creditor's unsecured claim was memorialized in a judgment and the automatic stay modified to permit its recordation. Id. at 662. This result harmonizes the interplay between TILA and the Bankruptcy Code and the policies and goals underpinning each: the Debtor achieves vindication of her rescission rights under TILA, and her right to extend the time for payment under the Bankruptcy Code, yet also satisfies the lender's right to tender of payment, along with some security that it will be repaid, or, to be in a position to enforce its rights upon the Debtor's failure to make such payment. Without deciding that this remedy is appropriate in every situation, I conclude that this remedy is appropriate here. If, after setoff of the damages awarded below, the parties cannot agree upon the amount of Parkway's claim, the Court will fix an amount at a further hearing so that the Debtor will be in a position to propose the appropriate chapter 13 plan.

[46] The Debtor argues that she is entitled to statutory damages and reasonable attorney fees and costs based on 15 U.S.C. � 1640, which provides, in pertinent part:

(a) [A]ny creditor who fails to comply with any requirement imposed under this part, ... with respect to any person is liable to such person in an amount equal to the sum of-

....

*168
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(2)(A)(i) in the case of an individual action twice the amount of any finance charge in connection with the transaction,

... or

(iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000....

15 U.S.C. � 1640(a)(2)(A). �Courts have routinely interpreted [� 1640(a)](2)(A)(iii) to mean the appropriate penalty is double the finance charge up to a maximum of $2,000.� Williams, 237 B.R. 590, 600, citing Strange v. Monogram Credit Card Bank, 129 F.3d 943, 946-47 (7th Cir.1997); Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3d Cir.1990). In addition, 15 U.S.C. � 1640(g) limits the recovery for multiple disclosure failures to a single recovery. Since the total finance charge paid by the Debtor is more than $2000, Parkway is liable to the Debtor for statutory damages in the amount $2,000 for its failure to deliver the Notice of Right to Cancel to the Debtor in violation of 15 U.S.C. � 1635(a), 12 C.F.R. �� 226.17(a) and 226.23(b)(1).

[47] Parkway's failure to honor the Debtor's valid rescission request gives rise to a separate award under 15 U.S.C. � 1640(a)(3), because �a lender's failure to honor a valid rescission demand is itself a TILA violation giving rise to statutory damages,� and courts in this district have decided that �rescission and damage remedies under TILA are not cumulative.� Armstrong, 288 B.R. at 419; Williams, 237 B.R. at 599. I will not, however, award the maximum amount of statutory damages for Parkway's failure to honor the Debtor's rescission. Parkway could not determine from the loan documentation that the Debtor did not receive proper notice of her right to rescind. Therefore, I will award the minimum damages amount permitted by � 1640(a)(2)(A)(iii) of $200. Williams, 291 B.R. at 664.

[48] Furthermore, 15 U.S.C. � 1640(a)(3) permits a court to include the costs of the TILA action and reasonable attorneys' fees as damages in a successful action to enforce TILA liability or the right of rescission under � 1635. No information has been submitted regarding the fees and costs incurred by the Debtor's attorney in this matter. A hearing shall also be set to determine the appropriate amount of attorney fees and costs that should be awarded to the Debtor in this proceeding.

SUMMARY

For the reasons set forth above, I conclude that: (i) the loan is not subject to HOEPA; (ii) the Debtor is entitled to rescind the loan because she did not receive proper disclosure of her right to rescind the loan transaction, thereby rendering the Parkway mortgage void; (iii) the Debtor's request to void Parkway's lien against her Property for failure to obtain a valid notary on the mortgage is denied; (iv) the Debtor's claims against Wharton based upon common law fraud and breach of fiduciary duty are denied; (v) the broker agreement between the Debtor and Wharton violated the Credit Services Act and the Debtor is entitled to damages in the amount of $5,470; (vi) although this Loan transaction is subject to HIFA, the Debtor is not entitled to any damages based upon improper finance charges, since the Loan is being rescinded, and the Debtor has failed to provide any basis for a breach of warranty claim; and (vii) the Debtor is entitled to statutory damages under TILA in the amount of $2,200. A further hearing shall be scheduled to determine the amount of Parkway's claim, the amount of reasonable attorney fees and costs the Debtor may recover pursuant to *169
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15 U.S.C. � 1640(a)(3), and whether the defendants are entitled to any relief on their respective cross-claims.

An appropriate Order follows.

ORDER

AND NOW, this 14th day of April, 2004, after a trial on the merits and for the reasons set forth in the foregoing Memorandum Opinion, it is hereby ORDERED and DECREED that:

(1) with respect to Count I of the Amended Complaint, judgment is entered in favor of Maxine B. Bell (the �Plaintiff�), in part, and against the defendant Parkway Mortgage, Inc. (�Parkway�), in part, as follows:

(i) the loan transaction between the Plaintiff and Parkway, as evidenced by a Balloon Note dated June 30, 1999 in the original principal amount of $64,000, and secured by a Mortgage dated June 30, 1999, placing a lien against the Plaintiff's real property located at 1619 Olive Street, Philadelphia, PA (the �Property�), is rescinded, and the Mortgage dated June 30, 1999 granted by the Plaintiff to Parkway (the �Mortgage�) is void. On or before May 7, 2004, Parkway shall take any action necessary to reflect the termination of the Mortgage. On or before May 14, 2004, Parkway shall deliver to the Debtor a copy of all documents reflecting the termination of the Mortgage;

(ii) judgment is entered in favor of the Plaintiff and against defendant Parkway in the amount of two thousand two hundred dollars ($2,200) for violations of the Truth-In-Lending Act pursuant to 15 U.S.C. � 1640(a)(2)(A);

(iii) judgment is entered in favor of the Plaintiff and against the defendant Parkway for the Plaintiff's attorney fees and costs, in a reasonable amount to be determined at a further hearing before this Court as described below;

(2) And, further, with respect to Count I, judgment is entered in favor of the defendants and against the Plaintiff with respect to the Plaintiff's claim that the loan transaction is subject to the Home Ownership Equity Protection Act, 15 U.S.C. � 1639 et seq.,

(3) An unsecured claim of defendant Parkway will be allowed in an amount to be determined at a further hearing before this Court as described below and will be treated in an amended plan to be filed by the Plaintiff, which provides for payments to the chapter 13 Trustee over a period of time no longer than the life of the plan in an amount equal to the full amount of the claim. The Plaintiff's obligation to defendant Parkway may be recorded as a judgment and, upon determination of the amount of the claim, the automatic stay of 11 U.S.C. � 362(a) will be lifted for the limited purpose of recording the judgment;

(4) With respect to Count II of the Amended Complaint, judgment is entered in favor of the defendants and against the Plaintiff;

(5) With respect to Count III of the Amended Complaint, judgment is entered in favor of the Plaintiff and against the defendants, jointly and severally, in the amount of five thousand, four hundred seventy dollars ($5,470) for violations of the Pennsylvania Credit Services Act, 73 P.S. � 2181 et seq.,

(6) And, further, with respect to Count III of the Amended Complaint, judgment is entered in favor of the defendants and against the Plaintiff *170
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with respect to the Plaintiff's claims for fraudulent conduct and breach of fiduciary duty;

(7) With respect to Count IV of the Amended Complaint, judgment is entered in favor the defendants and against the Plaintiff; and

it is further ORDERED that a hearing will be held on May 18, 2004 at 1:00 p.m. in Bankruptcy Courtroom No. 1, Robert N.C. Nix Federal Building & Courthouse, 900 Market Street, Second Floor, Philadelphia, Pennsylvania to determine: (i) the amount of Parkway's claim, (ii) whether either Parkway or Wharton is, in light of this decision, entitled to any relief on their respective cross-claims, and (iii) the amount of reasonable attorney fees and costs to be awarded to the Plaintiff pursuant to 15 U.S.C. � 1640(a)(3). Any pre-hearing submissions should be filed and served no later than May 14, 2004, with courtesy copies to be delivered to chambers.

In re Bell, 314 B.R. 54 (Bkrtcy. E.D. Pa., 2004).
United States Bankruptcy Court,
E.D. Pennsylvania.
In re Maxine B. BELL, Debtor.
Maxine B. Bell, and Edward Sparkman, Trustee, Plaintiffs
v.
Parkway Mortgage, Inc., and Stephen Flacco, t/a WHARTON Investments Network, Defendants.
Bankruptcy No. 01-14420 KJC.
Adversary No. 01-392 KJC.
Sept. 9, 2004.
Background: Chapter 13 debtor-borrower and trustee filed adversary complaint against lender and mortgage broker, asserting various claims under federal and state law in connection with an alleged predatory mortgage loan transaction.

Holdings: On plaintiffs' motion for reconsideration of limited relief previously granted to them, 309 B.R. 139, the Bankruptcy Court, Kevin J. Carey, J., held that:
(1) court would not reconsider its prior holding that Chapter 13 debtor's loan was not subject to the Home Ownership Equity Protection Act (HOEPA);
(2) while debtor sustained no �actual damages� as result of lender's allegedly unfair or deceptive act in failing to structure loan in accordance with requirements of the Pennsylvania Home Improvement Finance Act (HIFA), and was not entitled to award of actual damages in her favor under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL), court would award statutory damages;
(3) statutory damages were also warranted for broker fees and costs assessed in violation of the Pennsylvania Credit Services Act (CSA);
(4) lender's failure to honor valid notice of rescission under the Truth in Lending Act (TILA) did not warrant relieving borrower from her repayment obligation; and
(5) hearing would be scheduled to allow debtor and lender to discuss reasonable repayment terms.

Motion granted in part.
West Headnotes

[1] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Motion to alter or amend judgment under Federal Rule of Civil Procedure must be grounded: (1) on intervening change in controlling law; (2) on availability of new evidence; or (3) on need to correct clear error of law or to prevent manifest injustice. Fed.Rules Bankr.Proc.Rule 9023, 11 U.S.C.A.; Fed.Rules Civ.Proc.Rule 59(e), 28 U.S.C.A.

[2] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Parties should not use motion for reconsideration as opportunity to relitigate issues that court has already decided. Fed.Rules Bankr.Proc.Rule 9023, 11 U.S.C.A.; Fed.Rules Civ.Proc.Rule 59(e), 28 U.S.C.A.

[3] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Motions for reconsideration should be granted sparingly, in interests of finality and of conservation of scarce judicial resources. Fed.Rules Bankr.Proc.Rule 9023, 11 U.S.C.A.; Fed.Rules Civ.Proc.Rule 59(e), 28 U.S.C.A.

[4] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2164 Judgment or Order
51k2164.1 k. In General. Most Cited Cases

Bankruptcy court would not reconsider its prior holding that Chapter 13 debtor's loan was not subject to the Home Ownership Equity Protection Act (HOEPA), where debtor did not present any new evidence or assert that there had been intervening change in law, and where, as result of relief already accorded to debtor on other grounds, no purpose would be served by reconsideration of HOEPA issue, so that reconsideration was not needed to prevent manifest injustice. Truth in Lending Act, � 129 et seq., as amended, 15 U.S.C.A. � 1639 et seq.; Fed.Rules Bankr.Proc.Rule 9023, 11 U.S.C.A.; Fed.Rules Civ.Proc.Rule 59(e), 28 U.S.C.A.

[5] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(2) k. Particular Cases. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

Where borrower had already been relieved of obligation to pay any �illegal� Pennsylvania Home Improvement Finance Act (HIFA) fees based on her rescission of loan, she sustained no �actual damages� as result of lender's allegedly unfair or deceptive act in failing to structure loan in accordance with requirements of the HIFA, as required to support award of actual damages in her favor under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL). 73 P.S. �� 201-1 et seq., 201-9.2, 500-101 et seq.

[6] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(2) k. Particular Cases. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

While borrower had sustained no �actual damages� as result of lender's allegedly unfair or deceptive act in failing to structure loan in accordance with requirements of the Pennsylvania Home Improvement Finance Act (HIFA), and was thus not entitled to award of actual damages in her favor under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL), court would award statutory damages in amount of $100.00 for this unfair or deceptive act. 73 P.S. �� 201-1 et seq., 201-9.2, 500-101 et seq.

[7] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(2) k. Particular Cases. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

Where borrower had already been relieved of any liability for broker fees and costs assessed in violation of the Pennsylvania Credit Services Act (CSA), as result of her rescission of loan, lender's unfair or deceptive act in assessing these fees would not support award of actual damages under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL), but would permit award of statutory damages in amount of $100.00. 73 P.S. �� 201-1 et seq., 201-9.2, 2188(c)(2).

[8] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(C) Effect of Violation of Regulations
92Bk61 Civil Liabilities and Penalties for Violations
92Bk61.1 k. In General. Most Cited Cases

Lender's failure to honor what, based on lack of proper notice to borrower of her right to rescind, was valid notice of rescission under the Truth in Lending Act (TILA) did not warrant relieving borrower from her repayment obligation on loan, where lender could not tell from loan documentation that borrower did not receive proper notice of her right to rescind. Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a); 12 C.F.R. � 226.23(d)(4).

[9] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk36 k. Rescission Rights; Liens on Residences. Most Cited Cases

While Chapter 13 debtor-borrower had to repay sums received as condition for exercising right of rescission under the Truth in Lending Act (TILA), she was entitled to reasonable time for repayment, and where debtor contended that it would be impossible for her to satisfy entire repayment obligation in time remaining on maximum, five-year term of Chapter 13 plan, court would schedule hearing to allow debtor and lender to discuss reasonable repayment terms. Bankr.Code, 11 U.S.C.A. � 1322(d); Truth in Lending Act, � 125(a), as amended, 15 U.S.C.A. � 1635(a).

*55
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Maxine B. Bell, Philadelphia, PA, for Debtor.
*56
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David A. Scholl, Esquire, Newtown Square, PA, for Debtor/Plaintiffs.
William Miller, Philadelphia, PA, for Trustee.
Alan C. Gershenson, Esquire, Philadelphia, PA, Anthony M. Pugliese, Esquire, Madden, Madden, & Del Duca, Haddonfield, NJ, for Defendants.
MEMORANDUM OPINIONFN1
FN1. This Memorandum Opinion constitutes the findings of fact and conclusions of law required by Fed. R. Bankr.P. 7052. The Court has jurisdiction over this matter pursuant to 28 U.S.C. � 1334 and � 157(a). This is a core proceeding pursuant to 28 U.S.C. 157(b)(1) and (b)(2)(B), (K) and (O).

KEVIN J. CAREY, Bankruptcy Judge.
A. Background.

On May 30, 2001, Maxine B. Bell (the �Debtor�) and the chapter 13 trustee Edward Sparkman (together, the �Plaintiffs�) commenced this adversary proceeding by filing a complaint against Parkway Mortgage, Inc. (�Parkway�) and Stephen Flacco, t/a Wharton Mortgage Investments (�Wharton�). In her complaint, the Debtor claimed that her loan with Parkway, which occurred on June 30, 1999 (the �Loan�), violated the federal Truth in Lending Act and various Pennsylvania consumer protection laws. After trial and briefing by the parties, this Court issued a Memorandum Opinion and Order on April 14, 2004 (the �April 14, 2004 Opinion�) which determined the following: (I) the Loan was not subject to the Home Ownership Equity Protection Act, 15 U.S.C. � 1639(a) et seq. (�HOEPA�); (ii) the Debtor was entitled to rescind the Loan because she did not receive proper disclosure of her right to rescind the loan transaction; (iii) the Debtor's request to void Parkway's lien against her Property for failure to obtain a valid notary on the mortgage was denied; (iv) the Debtor's claims against Wharton based upon common law fraud and breach of fiduciary duty were denied; (v) the broker agreement between the Debtor and Wharton violated the Pennsylvania Credit Services Act, 73 P.S. � 2188(c)(2)(the �CSA�), and the Debtor is entitled to damages in the amount of $5,470; (vi) although the Loan transaction was subject to the Pennsylvania Home Improvement Finance Act, 73 P.S. � 500-101 et seq., (�HIFA�), the Debtor is not entitled to any damages based upon improper finance charges, since the Loan was rescinded, and the Debtor failed to assert any legal basis for a breach of warranty claim; (vii) the Debtor is entitled to statutory damages under the Truth in Lending Act, 15 U.S.C. � 1601 et seq., (�TILA�), in the amount of $2,200; and (viii) the Debtor could tender repayment to Parkway through her chapter 13 plan in an amount to be determined at a later hearing.

Presently before the Court are the following two motions that were filed by the Plaintiffs on April 26, 2004:(I) �Plaintiffs' Motion For Reconsideration of Certain Portions Of This Court's Memorandum Opinion and Order of April 14, 2004� (the �Motion For Reconsideration�); and (ii) the �Motion of Plaintiffs and Their Counsel for Attorneys' Fees� (the �Attorney Fee Motion�). Wharton and Parkway oppose the relief requested in the Motion for Reconsideration. Further, Parkway objected to the amount requested in the Attorney Fee Motion.

On May 18, 2004, a hearing was held to consider the motions. Thereafter, the parties filed memoranda of law in support of their respective positions on the Motion For Reconsideration. For the reasons set forth herein, the Motion for Reconsideration will be denied, except for allowance of *57
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additional statutory damages in the amount of $200. Because Debtor's counsel may have incurred additional fees, he may wish to supplement his request for attorney fees. I will give counsel the opportunity to do so and will decide objections to the entire Attorney Fee Motion at the hearing scheduled in accordance with this Memorandum.

B. The Motion for Reconsideration.

[1] [2] [3] A motion to alter or amend a judgment under Rule 59(e), which is applicable to this proceeding pursuant to Fed.R.Bankr.P. 9023, must be grounded on (1) an intervening change in controlling law; (2) the availability of new evidence; or (3) the need to correct clear error of law or prevent manifest injustice. North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3rd Cir.1995), Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3rd Cir.1985). Further, parties should not use a motion for reconsideration as an opportunity to relitigate issues the court has already decided. Smith v. City of Chester, 155 F.R.D. 95, 97 (E.D.Pa.1994). �Motions for reconsideration should be granted sparingly because of the interests in finality and conservation of scarce judicial resources.� Pennsylvania Ins. Guaranty Ass'n v. Trabosh, 812 F.Supp. 522, 524 (E.D.Pa.1992).

The Motion for Reconsideration requests reconsideration of four issues: (I) whether the Loan was subject to HOEPA; (ii) whether the Debtor is entitled to damages for violations of HIFA and other Pennsylvania consumer protection statutes; (iii) whether the damages awarded to the Debtor for violations of the CSA should be trebled under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. � 201-1 et seq. (�CPL�); and (iv) whether the Debtor's repayment obligation to Parkway should be eliminated in its entirety since Parkway failed to honor the Debtor's original notice of rescission. The Debtor does not argue that there has been an intervening change in law or that she has uncovered new evidence to support her claims. Instead, the Debtor appears to argue that the matter should be reconsidered to correct an error of law or to prevent �manifest injustice.�

(1) Whether the Loan is subject to HOEPA.

[4] The Debtor argues that this Court should reconsider its decision that the Loan was not subject to HOEPA for two reasons. First, the Debtor claims that because this Court determined that the Loan was subject to HIFA, the Court must also determine whether charges prohibited by HIFA must be included in the HOEPA points and fees calculation.FN2 Second, the Debtor asks the Court to reconsider her argument that the $251 insurance premium should have been included in the HOEPA Points and Fees Calculation as a �finance charge.�
FN2. HOEPA requires lenders to make additional disclosures for certain high-cost mortgages. 15 U.S.C. � 1639. Mortgages subject to the additional disclosure requirements of HOEPA are described in 15 U.S.C. � 1602(aa), and include certain mortgages for which the total �points and fees� payable by the consumer at or before closing will exceed 8% of the total loan amount. 15 U.S.C. � 1602(aa). To determine whether certain charges should be included in the �points and fees� calculation, one must look to the definition of �points and fees� set forth in 12 C.F.R. � 226.32(b)(1) (the �HOEPA Points and Fees Calculation�).
I first note that the Debtor has not offered any new evidence or new arguments regarding the insurance premium charge. I have already considered the Debtor's arguments and my decision on this matter is set forth in detail in the *58
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April 14, 2004 Opinion. See Bell v. Parkway Mortgage, Inc. (In re Bell), 309 B.R. 139, 152-53 (Bankr.E.D.Pa.2004). Nothing has been offered that merits reconsideration of that decision.

I turn, then, to the Debtor's request that this Court reconsider the HOEPA analysis in light of the determination that the Loan is subject to HIFA. More specifically, the Debtor asks that I re-evaluate the HOEPA Points and Fees Calculation by considering whether certain real estate-related fees are �reasonable� (as required by 12 C.F.R. � 226.4�(7)) if state law prohibits charging such fees on HIFA loans. However, the Debtor has not offered any reason why reconsideration of the HOEPA analysis is necessary to prevent �manifest injustice.� If I determine that the Loan is subject to HOEPA, the Debtor would be able to rescind the Loan for failure to receive the HOEPA disclosures (15 U.S.C. � 1635 and � 1639(j)) and to receive statutory damages for a disclosure violation (15 U.S.C. � 1640). I have already determined that the Debtor validly rescinded the Loan and is entitled to receive statutory damages for failure to receive proper disclosure of her right to rescind the loan transaction. Bell, 309 B.R. at 155-58, 167-68. Because � 1640(g) limits a Debtor to a single recovery for multiple failures to disclose, the Debtor would not be entitled to additional statutory damages under � 1640(a)(2)(A). Moreover, the Debtor's damages under � 1640(a)(4) will be recognized because the Loan has been rescinded and the Debtor will receive a credit against her repayment amount for all payments that she previously made to Parkway. Accordingly, I discern no valid reason to reconsider the HOEPA analysis set forth in the April 14, 2004 Opinion.

(2) Whether the Debtor is entitled to damages for violations of HIFA and other Pennsylvania consumer protection statutes?

Because the Loan is subject to HIFA, the Debtor may assert against the assignee (here, Parkway) any defense that she has to payment for the home improvements. 73 P.S. � 500-208.FN3 The Debtor has alleged breach of warranty claims, but has not alleged a legal basis underlying her warranty claim. Bell, 309 B.R. at 165. The Motion for Reconsideration does not allege anything new. The Debtor has neither asserted a violation of an express warranty based upon a contract nor has she specifically pled a statutory warranty or implied warranty to allow me to analyze whether such warranty may be applicable to her claims. Therefore, I will not grant her claims for damages based upon the contractor's �breach of warranty� because I have an insufficient legal basis upon which to do so.
FN3. That section provides, in part, as follows:

No right of action or defense arising out of the transaction which gave rise to the home improvement installment contract which the buyer has against the contractor, and which would be cut off by assignment, shall be cut off by assignment of the contract to any third person whether or not he acquired the contract in good faith and for value unless the assignee gives notice of the assignment to the buyer as provided in this section and within fifteen days of the mailing of such notice receives no written notice of the facts giving rise to the claim or defense of the buyer.
The Debtor argues that I applied the case Steinbrecher v. Mid-Penn Consumer Discount Co., 110 B.R. 155 (Bankr.E.D.Pa.1990) too broadly in deciding that Steinbrecher eliminated the Debtor's breach of warranty claims. However, the Debtor is reading the April 14, 2004 Opinion too broadly. I cited to the Steinbrecher decision in support of my decision that �no award of actual damages which flow directly or indirectly from the imposition of improper*59
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finance charges is appropriate� since the Loan was rescinded and the Debtor is no longer responsible for payment of finance charges. Bell, 309 B.R. at 165. I did not conclude that Steinbrecher applied to the Debtor's �breach of warranty� claims.

[5] However, I will consider whether the Debtor is entitled to recover damages under CPL based upon the violations of HIFA. I did not address this issue fully in the April 14, 2004 Opinion, except for a footnote recognizing that other courts have determined a violation of HIFA qualifies as an unfair method of competition or an unfair or deceptive act or practice under the CPL. Bell, 309 B.R. at 163, n. 21. Because there is a CPL violation, the Debtor seeks recovery under 73 P.S. � 201-9.2, which provides:

� 201-9.2 Private actions.

(a) Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by any person of a method, act or practice declared unlawful by section 3 of this act, may bring a private action to recover actual damages or one hundred dollars ($100), whichever is greater. The court may, in its discretion, award up to three times the actual damages sustained, but not less than one hundred dollars ($100), and may provide such additional relief as it deems necessary or proper. The court may award to the plaintiff, in addition to other relief provided in this section, costs and reasonable attorney fees.

[6] The deceptive act here was the failure to structure the Loan in accordance with the requirements in HIFA. The Debtor's actual damages flowing from this failure are the increased fees and charges charged in violation of HIFA. Because the Loan has been rescinded, pursuant to 15 U.S.C. � 1635(b), the Debtor �is not liable for any finance or other charge.� See also 12 C.F.R. � 226.23(d)(1) (�When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.�(emphasis added)). The Official Staff Commentary further explains that, upon rescission:

The consumer cannot be required to pay any amount in the form of money or property either to the creditor or to a third party as part of the credit transaction. Any amounts of this nature already paid by the consumer must be refunded. �Any amount� includes finance charges already accrued, as well as other charges, such as broker fees, application and commitment fees, or fees for a title search or appraisal, whether paid to the creditor, paid directly to a third party, or passed on from the creditor to the third party. It is irrelevant that these amounts may not represent profit to the creditor.... Similarly, the term �any amount� does not apply to any money or property given by the creditor to the consumer; those amounts must be tendered by the consumer to the creditor under � 226.23(d)(3).

Official Staff Commentary, 12 C.F.R. Pt. 226, Supp. I, � 226.23(d)(2). The Debtor is already relieved from paying any of the �illegal� HIFA fees by rescinding the Loan and, therefore, the Debtor has no �actual damages� to recover under 73 P.S. � 201-9.2. In Armstrong v. Nationwide Mortgage Plan/Trust (In re Armstrong), 288 B.R. 404 (Bankr.E.D.Pa.2003), the Court similarly determined that there were no actual damages to recover under CPL for a HIFA violation if the loan is being rescinded.*60
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Armstrong, 288 B.R. at 427. Even so, the Armstrong Court concluded that statutory damages in the amount of $100 were warranted under 73 P.S. � 201-9.2 to offset the debtor's repayment requirement. Id. The same statutory damages apply here and the Debtor's repayment requirement should be reduced by $100.

(3) Whether the damages awarded to the Debtor for violation of the CSA should be trebled under CPL?

In the April 14, 2004 Opinion, I concluded that the Debtor was entitled to damages for violation of the CSA in the amount of $5,470.00. Bell, 309 B.R. at 163. The Debtor asks that I reconsider whether these damages should be trebled under 73 P.S. � 201-9.2. Because the interplay between CPL and CSA was not addressed in the April 14, 2004 Opinion, I will reconsider the issue here.

[7] The CSA statute specifically provides that a violation of the CSA is a deceptive trade practice under the CPL. 73 P.S. � 2190(a). As discussed in the previous section, � 201-9.2 of CPL permits a Court to award up to three times that amount of actual damages sustained by a borrower. However, consistent with my decision in the April 14, 2004 Opinion and this decision, I again note that because the Loan has been rescinded, the Debtor has no liability for the broker fees and costs. Therefore, the Debtor has no actual damages to treble. The award of $5,470.00 was made pursuant to the language of the CSA which permitted recovery of actual damages �but in no case less than the amount paid by the buyer or borrower to the credit services organization or loan broker.� 73 P.S. � 2191. However, as decided with respect to HIFA above, the Debtor is entitled to another statutory damage award of $100 to offset the amount of her repayment obligation.

(4) Whether the Debtor's repayment obligation to Parkway should be eliminated in its entirety since Parkway failed to honor the Debtor's original notice of rescission?

[8] Finally, the Debtor also requests that this Court reconsider its decision that the Debtor must tender repayment to Parkway, as required by 12 C.F.R. � 226.23(d)(3), through her chapter 13 plan. The Debtor cites to other decisions in this district that eliminated a debtor's repayment obligation under 12 C.F.R. � 226.23(d)(4) due to the lender's failure to honor a debtor's valid notice of rescission. See Williams v. Gelt Financial Corp., 237 B.R. 590, 598-99 (E.D.Pa.1999)(Deciding that the bankruptcy judge did not abuse his discretion by eliminating the debtor's repayment obligation, writing that �whether or not it is equitable to compel the borrower to repay the debt as a condition of voiding the security interest depends on the facts of each case.�); Gill v. Mid-Penn Consumer Discount Co., 671 F.Supp. 1021, 1026 (E.D.Pa.1987)(Deciding that the creditor's failure to comply with a valid rescission excused the borrower from repayment). See also Williams v. BankOne, N.A. (In re Williams), 291 B.R. 636, 655 (Bankr.E.D.Pa.2003)(Deciding that the remedy of eliminating a borrower's repayment obligation should be confined to situations in which the creditors have tried to deceive or cheat the borrower).

Thus, while some courts have held that a debtor may be relieved of a repayment obligation based upon a lender's failure to honor a valid notice of rescission, I have already found in this case that Parkway could not tell from the loan documentation that the Debtor did not receive proper notice of her right to rescind. Bell, 309 B.R. at 168. Therefore, in accordance with 15 U.S.C. � 1640(a)(2)(A)(ii), I awarded statutory damages in the minimum *61
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amount of $200 for Parkway's failure to honor the Debtor's valid notice of rescission. For the same reason, I do not conclude that Parkway's failure to honor the Debtor's valid notice of rescission within 20 days of receipt should give rise to elimination of the Debtor's entire repayment obligation.FN4
FN4. Further, I take note of footnote 22 in Judge Sigmund's decision in Williams that one might argue that the only remedy available to a borrower when a lender fails to fulfill its duties under 15 U.S.C. � 1635(b) is statutory damages under � 1640(a). See Williams, 291 B.R. at 655, n. 22 (citing cases).
[9] Finally, the Debtor also argues that if this Court decides there is a repayment obligation, it should further consider other decisions that have permitted repayment over longer periods of time outside the context of a chapter 13 plan. See Mayfield v. Vanguard Savings & Loan Assoc., 710 F.Supp. 143, 148 (E.D.Pa.1989)(Deciding that the borrower's repayment amount should be $16,113.62, payable in monthly payments of $171, which was the amount of the borrower's monthly payments prior to the two loan refinancings), Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1308 (D.Del.1990)(Deciding that the borrower's repayment obligation should be the value of the siding to the borrower ($11,361.58), payable in monthly payments of $199 ( i.e., the same amount of the consumer's monthly payments prior to rescission)).

Regulation Z recognizes a court's authority to modify the procedures for the creditor's response to a rescission and the borrower's tender of her repayment obligation. The court's discretion to modify the rescission procedures was discussed in the legislative history of 15 U.S.C. � 1635(b) as follows:

The Committee expects that the courts, at any time during the rescission process, may impose equitable conditions to insure that the consumer meets his obligations after the creditor has performed his obligations as required under the act.

Williams, 291 B.R. at 660 quoting S.Rep. 96-368, 96th Cong., 1st Sess. 29 (1979), 1979 WL 10375 (Leg.Hist.), reprinted in 1980 U.S.C.C.A.N. 236, 264-65. In the April 14, 2004 Opinion, I agreed with Judge Sigmund's analysis in Williams and the remedy she fashioned, pursuant to the authority granted in 12 C.F.R. � 226.23(d), requiring the debtor to satisfy her repayment obligation through her chapter 13 plan and granting the lender a judgment in the amount of the repayment obligation. I am still of the view that this remedy harmonizes the interplay between TILA and the Bankruptcy Code.

However, the Debtor claims that it would be impossible for her to pay the entire repayment obligation in the time remaining for the Debtor's chapter 13 plan.FN5 Recognizing that courts have discretion*62
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to modify the procedures of 12 C.F.R. � 226.23(d)(3), I conclude that, under these circumstances, the Debtor should have a reasonable time for repayment, even if such period exceeds the five-year period imposed by 11 U.S.C. � 1322(d). The Debtor has not suggested specific repayment terms. Therefore, I will schedule another hearing to allow the Debtor and Parkway time to discuss reasonable repayment terms. If the parties cannot agree upon the amount of the Debtor's repayment obligation and a reasonable repayment schedule, it is the Court's intention to fix the amount and repayment schedule at the hearing set by the Order which follows.
FN5. One problem here is that resolution of this vigorously litigated adversary proceeding has taken an extended period of time, leaving the Debtor with little opportunity to fully repay her obligation within the maximum five years permitted by Bankruptcy Code � 1322(d). The Court has tolerated delay of confirmation pending the outcome of this adversary. I have reached the conclusion (in part, due to the circumstances of this case) that, except in extraordinary circumstances, confirmation should not be subject to extended delays, pending resolution of such adversary proceedings. See Wile v. Household Bank, F.S.B. (In re Wile), 304 B.R. 198 (Bankr.E.D.Pa.2004) recon. denied by 310 B.R. 514 (Bankr.E.D.Pa.2004), relying upon In re Fricker, 116 B.R. 431, 439 (Bankr.E.D.Pa.1990):

Fricker articulates the appropriate balance to strike when a disputed claim unnecessarily delays confirmation. Confirmation should proceed and the Debtor should be required to establish that there is a likelihood that its failure to treat the filed secured claims as required by � 1325(a)(5) will be upheld.

Wile, 310 B.R. at 517.
ORDER

AND NOW, this 9th day of September, 2004, upon consideration of the Plaintiffs' Motion For Reconsideration of Certain Portions Of This Court's Memorandum Opinion and Order of April 14, 2004 (the �Motion For Reconsideration�), and the opposition thereto, and for the reasons set forth in the foregoing Memorandum Opinion, it is hereby ORDERED and DECREED that:

1. the Motion for Reconsideration is granted, in part, and denied, in part;

2. the Debtor is entitled to additional statutory damages in the amount of $200 to offset the Debtor's repayment obligation to Parkway; and

it is further ORDERED that a hearing will be held on October 27, 2004 at 2:00 p.m. in Bankruptcy Courtroom No. 1, Robert N.C. Nix Federal Building & Courthouse, 900 Market Street, Second Floor, Philadelphia, Pennsylvania to determine: (i) the amount of the Debtor's repayment obligation to Parkway; (ii) the terms of her repayment obligation to Parkway; and (iii) the amount of reasonable attorney fees and costs to be awarded to the Plaintiff pursuant to 15 U.S.C. � 1640(a)(3). Any supplement to Debtor's counsel's request for attorney fees and costs must be filed and served on or before October 13, 2004, with a courtesy copy delivered to chambers. Any response(s) thereto must be filed and served on or before October 20, 2004, with a courtesy copy delivered to chambers.


In re Balko, 348 B.R. 684 (Bkrtcy. W.D. Pa., 2006).
United States Bankruptcy Court,
W.D. Pennsylvania.
In re Gilbert BALKO and Anne Balko, Debtors.
Gilbert Balko and Anne Balko, Plaintiffs,
v.
Carnegie Financial Group Inc., Paragon Home Lending, Chet Underhill, Allegheny Appraisals, J.P. Morgan Chase Bank, n.a., as Trustee, and Joseph Behrens, Defendants.
Bankruptcy No. 05-30667-JAD.
Adversary No. 06-02001-JAD.
Aug. 24, 2006.
Background: Chapter 13 debtors brought adversary proceeding against mortgage brokerage company, mortgage broker, appraisers, mortgage lender, and trustee holding securitized note and mortgage, objecting to proof of claim filed by trustee and asserting claims for alleged common-law fraud and violations of Truth in Lending Act (TILA) and Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL). Trustee, lender, and mortgage brokerage company moved to dismiss.

Holdings: The Bankruptcy Court, Jeffery A. Deller, J., held that:
(1) yield spread premium to be paid to mortgage brokerage company by lender could not be included in calculation of points and fees paid used to determine whether mortgage loan was subject to Home Ownership and Equity Protection Act (HOEPA) and its special disclosure requirements;
(2) debtors failed to plead their common-law fraud claims against lender and trustee with requisite particularity; and
(3) complaint failed to state claim against lender and trustee under Pennsylvania's Credit Services Act and UTPCPL.

Motion to dismiss granted in part and denied in part.
West Headnotes

[1] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(A) In General
92Bk33 Persons, Businesses, and Transactions Subject to Regulations
92Bk33.1 k. In General. Most Cited Cases

Yield spread premium to be paid to mortgage brokerage company by lender refinancing borrowers' mortgage could not be included in calculation of points and fees paid used to determine whether mortgage loan was subject to Home Ownership and Equity Protection Act (HOEPA) and its special disclosure requirements, even though implementing regulation expressly stated that term �points and fees� included all compensation paid to mortgage brokers, given that HOEPA applied to mortgage transactions in which total points and fees payable by consumer at or before closing exceeded designated amount, whereas yield spread premium was to be paid and derived from stream of interest generated over life of loan, and was not payable at or before closing. Truth in Lending Act, � 103(aa)(1)(B), 15 U.S.C.A. � 1602(aa)(1)(B); 12 C.F.R. � 226.32(b)(1)(ii).

[2] KeyCite Notes

92B Consumer Credit
92BII Federal Regulation
92BII(B) Disclosure Requirements
92Bk52 k. Price, Balance, Rate, and Charges in General. Most Cited Cases

Mortgage lender did not have duty under Truth in Lending Act (TILA) to separately disclose to borrowers yield spread premium to be paid to mortgage brokerage company, which was included in finance charge assessed by lender against borrowers. Truth in Lending Act, � 102 et seq., 15 U.S.C.A. � 1601 et seq.

[3] KeyCite Notes

13 Action
13I Grounds and Conditions Precedent
13k3 k. Statutory Rights of Action. Most Cited Cases

Real Estate Settlement Procedures Act (RESPA) does not provide a private right of action to remedy violations of provision requiring that borrower be timely provided with accurate good faith estimate of settlement charges. Real Estate Settlement Procedures Act of 1974, � 5, 12 U.S.C.A. � 2604.

[4] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Heightened standard for allegations of fraud and mistake established by federal pleading rule is inherently applicable when dealing with federal statutory claims, such as securities fraud and racketeering allegations. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.

[5] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Although factors pertaining to state common-law fraud claim are derived from state law principles and jurisprudence, the requirement under federal rule that allegations of fraud be pleaded with particularity applies equally to common-law fraud claims being heard in federal court. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.

[6] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Rule requiring that averments of fraud be pleaded with particularity requires plaintiff to specify the time, place, and substance of defendant's alleged fraudulent conduct. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.

[7] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Under rule requiring that averments of fraud be pleaded with particularity, fraud claimant must allege more than mere conclusory allegations of fraud or the technical elements of the same, and, in a case involving multiple defendants, complaint should inform each defendant of the nature of his alleged participation in the fraud, and should not vaguely attribute allegedly fraudulent statements simply to all defendants. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.

[8] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Borrowers failed both to plead fraud with requisite particularity and to state claim upon which relief could be granted in asserting common-law fraud claims against mortgage lender and trustee holding borrowers' securitized note and mortgage, where borrowers did not allege any specific fraudulent conduct attributable to lender or trustee, but merely made general accusations of fraud and conspiracy to defraud and listed generic misdeeds allegedly committed by unidentified actors, and complaint was devoid of any allegations of wrongful conduct committed by lender and trustee. Fed.Rules Civ.Proc.Rules 8(a), 9(b), 28 U.S.C.A.

[9] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Claim of conspiracy to defraud is subject to rule requiring that averments of fraud be pleaded with particularity. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.

[10] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Dismissal with prejudice was warranted as to common-law fraud claim asserted by borrowers against trustee that held borrowers' securitized note and mortgage, given that trustee had no involvement in solicitation, underwriting, or closing of loan and could not have participated, caused, encouraged, aided, or solicited alleged fraudulent activities undertaken in connection with loan, and that none of other defendants in borrowers' action were acting in agency capacity vis-a-vis trustee with respect to loan transaction, such that no relief could be granted against trustee under any set of facts that could be proved consistent with complaint's allegations.

[11] KeyCite Notes

56 Bills and Notes
56VIII Rights and Liabilities on Indorsement or Transfer
56VIII(C) Assignment or Sale
56k314 Equities and Defenses Against Assignee
56k315 k. In General. Most Cited Cases

Provision of Pennsylvania's version of Uniform Commercial Code (UCC) allowing certain types of fraud to be used as defense, under some circumstances, against right of payee or transferee to enforce negotiable instrument does not provide for recovery of affirmative damages against assignee of such instrument. 13 Pa.C.S.A. � 3305.

[12] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Heightened pleading standard for averments of fraud established by federal rule applied to claims alleging violations of Pennsylvania's Credit Services Act and Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL), given that such statutes provided for cause of action in some instances of fraudulent and/or deceptive conduct. Fed.Rules Civ.Proc.Rule 9(b), 28 U.S.C.A.; 73 P.S. �� 201-1 et seq., 2181 et seq.

[13] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Borrowers' complaint alleged no facts which actively placed either mortgage lender or trustee holding borrowers' securitized note and mortgage in marketing or solicitation of mortgage loan, and thus failed both to adequately plead purported fraud with particularity, as required by rule, and to state claim against lender and trustee under Pennsylvania's Credit Services Act and Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL). Fed.Rules Civ.Proc.Rules 8(a), 9, 28 U.S.C.A.; 73 P.S. �� 201-1 et seq., 2181 et seq.

[14] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk3 License and Regulation in General
92Bk4 k. Particular Businesses or Transactions. Most Cited Cases

Trustee holding borrowers' securitized note and mortgage, which was either a bank or trust company, was not �credit services organization� or �loan broker� and was not involved with loan until well after loan was closed, and thus could not be held liable to borrowers under Pennsylvania's Credit Services Act, which regulated activities of credit service organizations and loan brokers. 73 P.S. � 2182.

[15] KeyCite Notes

56 Bills and Notes
56XI Actions
56k490 Presumptions and Burden of Proof
56k497 Good Faith and Payment of Value
56k497(1) k. Presumptions as to Bona Fides in General. Most Cited Cases

Under Pennsylvania law, every holder of a negotiable instrument is deemed, prima facie, a holder in due course subject to a rebuttable presumption to the contrary.

[16] KeyCite Notes

56 Bills and Notes
56I Requisites and Validity
56I(F) Validity
56k100 Validity of Assent
56k103 Fraud and Misrepresentation
56k103(1) k. In General. Most Cited Cases

Fraud in the factum, also known as real or essential fraud, is a defense to enforcement of obligation to pay negotiable instrument under Pennsylvania's version of Uniform Commercial Code (UCC), while fraud in the inducement is not. 13 Pa.C.S.A. � 3305.

[17] KeyCite Notes

51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2162 k. Pleading; Dismissal. Most Cited Cases

Borrowers' fraud allegations, which alleged fraud in the consideration for, or in negotiations leading up to, execution of negotiable instrument, failed to plead fraud in execution of note required for defense against enforcement of obligation to pay negotiable instrument under Pennsylvania's version of Uniform Commercial Code (UCC), and thus did not support claim that borrowers had right of recoupment against trustee holding their securitized note and mortgage to the extent that mortgage brokerage firm, broker, mortgage lender, or appraisers involved in underlying loan transaction were found to have engaged in alleged fraud. 13 Pa.C.S.A. � 3305.

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David A. Colecchia, Esq.-Counsel to Debtors/Plaintiffs.
Lyle D. Washowich, Esq., Reed Smith LLP-Counsel to J.P. Morgan Chase Bank, N.A., as Trustee.
Peter Nicholas Pross, Esq., Eckert Seamans Cherin & Mellott LLC-Counsel to Paragon Home Lending.
Charles E. Bobinis, Esq., The Bernstein Law Firm-Counsel to Carnegie Financial Group, Inc.
MEMORANDUM OPINION

JEFFERY A. DELLER, Bankruptcy Judge.
The matter before the Court is a Motion to Dismiss filed by defendant, J.P. Morgan Chase Bank, N.A., as Trustee (�J.P. Morgan�), along with joinders to the same filed by defendants Carnegie Financial Group, Inc. (�Carnegie Financial�) and Paragon Home Lending (�Paragon�). Pursuant to the Motion to Dismiss, these defendants ask that the Court dismiss various lender liability and fraud-like causes of action filed by the debtors against the defendants. For reasons set forth more fully in this Memorandum Opinion, the Court concludes that the Motion to Dismiss is, in part, well founded and, as a result: (1) Count 1 of the Complaint (as it relates to the debtors' objection to claim and purported claim sounding in recoupment) against J.P. Morgan shall be dismissed without prejudice; (2) Count 2 of the Complaint (Truth in Lending Act claims) shall be dismissed as to all defendants for failure to state a claim upon which relief may be granted; (3) Count 3 (common-law fraud claims) shall be dismissed as to J.P. Morgan and Paragon for lack of specificity in pleading and for failure to state a claim upon which relief could be granted; said dismissal shall be with prejudice as to J.P. Morgan and without prejudice as to the claims against Paragon; and (4) Count 4 (Pennsylvania Unfair Trade Practices and Consumer Protection Act claims) shall be dismissed as to J.P. Morgan and Paragon for lack of specificity in pleading and failure to state a claim upon which relief could be granted; said dismissal shall be with prejudice as to J.P. Morgan and without prejudice as to the claims against Paragon. The Court denies the Motion to Dismiss with respect to the causes of action asserted in Counts 3 and 4 against defendants Carnegie Financial, Joseph Behrens, Allegheny Appraisals, and Chet Underhill.

I. BACKGROUND

The plaintiffs, Gilbert and Anne Balko filed for bankruptcy protection under Chapter 13 of the United States Bankruptcy Code on August 18, 2005. On January 3, 2006, the plaintiffs filed the instant adversary proceeding against the defendants.

The complaint filed by the plaintiffs is not a model of clarity. It is 30 pages in length, contains in excess of 230 paragraphs (including sub-parts), and has attached to it at least 30 exhibits. The gravamen of plaintiffs' complaint is lender liability.

In a nutshell, plaintiffs have asserted four causes of action against some or all of the defendants. Count 1 is an objection to the claim filed by J.P. Morgan in the Balko's bankruptcy case, (See Plaintiff's Objection to Claim Combined With Complaint for Fraud and Violation of the Truth in Lending Act (the �Complaint�) at �� 70-*688
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74); Count 2 is a cause of action asserted by the plaintiffs against certain of the defendants (Carnegie Financial, Paragon, J.P. Morgan, and Joseph Behrens) under the Truth-In-Lending Act (�TILA�), 15 U.S.C. � 1601, et seq., as amended by the Home Ownership and Equity Protection Act, Pub.L. 103-325 (�HOEPA�), ( See Id. at �� 75-82); Count 3 is a common-law fraud cause of action asserted by the plaintiffs against all defendants, ( Id. at �� 83-81); FN1 and Count 4 is a cause of action by plaintiffs against all defendants under Pennsylvania's Unfair Trade Practices Act and Consumer Protection Law, 73 P.S. �� 201-1, et seq. (See Id. at �� 82-91).
FN1. The Complaint filed by plaintiffs is misnumbered, contains several duplicately numbered paragraphs, and the error in paragraphing permeates Counts 3 and 4 of the Complaint.
The material allegations against the defendants are as follows:

1. Defendant Carnegie Financial is a mortgage brokerage company, and one of its mortgage brokers was defendant Joseph Behrens. ( Id. at �� 10, 11, 12, 21, 22).

2. In January of 2003, the Balkos responded to a newspaper advertisement and contacted Carnegie Financial regarding the possible re-finance of their home mortgage and various credit card obligations. ( Id. at � 35).

3. During ensuing conversations and/or communications between the Balkos and Mr. Behrens, the plaintiffs advised Carnegie Financial that the plaintiffs sought to refinance their mortgage due to, inter alia, the fact that the Balkos were having difficulty paying various credit card debt occasioned by Mr. Balko's unemployment and/or underemployment. ( Id. at �� 36 and 37).

4. In response to the Balko's inquiry, Mr. Behrens advised the Balkos that the Balkos needed a �band-aid� loan, which was allegedly described by Behrens as �a loan to last for two years and then be refinanced at a lower rate with no closing costs.� Mr. Behrens allegedly further explained �that this loan was needed to improve Plaintiffs' credit score and lower Plaintiffs' debt to income ratio.� Mr. Behrens also allegedly explained that �the interest rate for the band-aid loan would be two percentage points lower than Mr. Balko's current interest rate.� ( Id. at � � 39-41).

5. Mr. Behrens allegedly promised the Balkos that the �band-aid� loan was �feasible and affordable, there would be no problems in refinancing two years [sic] so long as Plaintiffs made timely monthly payments, and the interest rate two years from then would be lower than the eight percent Mr. Behrens offered.� Mr. Behrens also allegedly �assured the Plaintiffs that if [the Plaintiffs] made timely payments their payment would not change.� ( Id. at � � 42 and 43).

6. As a result of Mr. Behrens' alleged representations, the Balkos agreed to pursue the proposed refinancing. Ultimately Carnegie Financial procured a lender who was willing to refinance the Balkos. The lender who ultimately refinanced the Balkos' mortgage was Paragon. ( Id. at �� 44, 52, 69, and Exhibit D).FN2
FN2. At the May 26, 2006, no party disputed the fact that J.P. Morgan had no involvement whatsoever with the solicitation, underwriting, or closing of the March 2003 loan. In fact, J.P. Morgan's involvement in this case merely arises as a result of the fact that Paragon had, subsequent to closing of the loan, pooled and securitized the note and mortgage executed by the Balkos. As of the petition date, J.P. Morgan, as trustee, was the holder of the note and mortgage, and for this reason the Balkos named J.P. Morgan as a defendant to this action.
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7. In connection with the underwriting of the refinancing, defendant Carnegie Financial allegedly procured a false appraisal (from defendants Allegheny Appraisals and Chet Underhill) which overstated the value of the Balkos home FN3 and, as a result, allegedly placed the loan with Paragon with the knowledge that Paragon would not �verify the information in the Balkos' application especially since Carnegie advertises loans at 100% equity with no income verification.� ( Id. at �� 46, 47 and 69).
FN3. The fair market of the home is allegedly $154,000 to $157,000 (depending on the appraisal methodology used), while the appraisal obtained by the lender during the course of underwriting the March 2003 loan valued the home at $300,000. ( See Complaint at � 88, Exhibit A, and Exhibit BB).
8. The closing on the loan occurred on March 24, 2003, and the amount financed by the Balkos was $222,840.33. ( Id. at � 52 and Exhibit J). In the complaint, the Balkos do not dispute that they received the benefit of the $222,840.33 loan; but they do allege that when the March 24, 2003 refinancing was completed, defendant Carnegie Financial allegedly failed to completely pay off numerous credit card balances held by the Balkos, despite �promising� to do so. ( Id. at �� 65-68).

9. Approximately two years after the closing of the refinancing, the Balkos attempted to again refinance the loan through Carnegie Financial. In response to their request, the Balkos were informed that the Balkos �owed too much on their home compared to what it was worth� and, despite making several improvements to their home, the Balkos could not refinance their loan. ( Id. at � 55, 57 and 58).

10. Finally, the Balkos allege that due to the various purported acts of the several defendants, the Balkos were left with no equity remaining in their home and were forced to file for bankruptcy protection under the United States Bankruptcy Code in order to deal with claims of creditors.

II. STANDARD FOR MOTION TO DISMISS

Fed.R.Civ.P. 12 (�Rule 12�) is incorporated into the Federal Rules of Bankruptcy Procedure by operation of Fed.R.Bankr.P. 7012. In evaluating a motion to dismiss pursuant to Rule 12(b)(6) and Fed.R.Bankr.P. 7012(b)(6), the court must assume the facts alleged in the Complaint to be true and draw all factual inferences in favor of the nonmoving party, which in this case is the Balkos. In re Loranger Mfg. Corp., 324 B.R. 575, 577-78 (Bankr.W.D.Pa.2005) citing Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991). In order for a motion to dismiss to be successful, it must be clear that no relief could be granted to the plaintiff under any set of facts that could be proved consistent with the allegations in the complaint. Lum v. Bank of America, 361 F.3d 217, 223 (3d Cir.2004) citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

III. DISCUSSION AND ANALYSIS

The Balkos' Complaint contains four counts. Count 1 is an objection to the *690
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claim filed by J.P. Morgan. Count 2 is an affirmative cause of action under the Truth-in-Lending Act filed by the Balkos against all of the defendants, with the exclusion of Chet Underhill and Allegheny Appraisals. Counts 3 and 4 are affirmative causes of action sounding in fraud and for violation of Pennsylvania's Unfair Trade Practices Act and Consumer Protection Law, respectively, against all defendants. Because the predicate to the Balkos' objection to J.P. Morgan's claim in Count 1 are the substantive causes of action asserted by the Balkos in Counts 2 through 4, the Court will first analyze the merits of Counts 2 through 4 before addressing the Balkos' objection to the claim of J.P. Morgan.

Count 2
Violation of TILA and HOEPA

Count 2 of the plaintiffs' Complaint alleges that defendants Carnegie Financial, Paragon, J.P. Morgan and Joseph Behrens committed violations of TILA (as supplemented by HOEPA) in connection with the March 2003 refinancing. Specifically, the plaintiffs allege that the March 2003 loan received by the Balkos was a �high cost� closed-end FN4 consumer transaction falling within the heightened disclosure provisions of HOEPA, and that certain disclosures required by HOEPA were not made to the plaintiffs. In their prayer for relief, the Balkos ask for, among other things, rescission of the loan instrument, statutory damages, attorney's fees and an injunction against all defendants precluding any activity regarding foreclosure of the property securing the loan. J.P. Morgan, Paragon, and Carnegie Financial counter these allegations by claiming that the loan in question is not governed by HOEPA and therefore no disclosures beyond those required under TILA itself were necessary. As discussed in greater detail below, the Court agrees with the defendants that the loan agreement entered into by the plaintiffs does not fall within the purview of HOEPA and therefore Count 2 of the Complaint fails to state a claim upon which relief may be granted.
FN4. �Closed-end� credit is defined as consumer credit �other than open-end credit as defined in this section.� See 12 C.F.R. � 226.2(a)(10), �Open-end� credit is defined in 12 C.F.R. � 226.2(a)(20) as consumer credit extended by a creditor under a plan in which: (i) the creditor reasonably contemplates repeated transactions; (ii) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) the amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid. An example of an �open-end� consumer credit transaction would be a revolving loan obtained by an individual consumer in the form of the use of a credit card.
TILA was enacted by Congress in 1968. Its declared purpose is �to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him [or her] and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.� 15 U.S.C. � 1601(a); see Beach v. Ocwen Federal Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 1409-1410, 140 L.Ed.2d 566 (1998). To achieve this goal, TILA requires creditors (as defined in 15 U.S.C. � 1602) to provide borrowers with clear and accurate disclosures of certain material terms. See 15 U.S.C. �� 1631, 1632, 1635, 1638.FN5
FN5. TILA vests the Board of Governors of the Federal Reserve System with the power to promulgate regulations for the interpretation and implementation of the statute. See 15 U.S.C. � 1640(a). �Regulation Z,� 12 C.F.R. Part 226, sets forth the various disclosure requirements imposed upon creditors covered by TILA. Such disclosure requirements include the requirement that creditors disclose the cost of credit as a dollar amount (i.e., the finance charge) and as an annual percentage rate. Other disclosures required by Regulation Z include the obligation of a creditor to provide a borrower with clear and conspicuous notice of the borrower's right to rescind the transaction in accordance with the provisions of 15 U.S.C. � 1635(a).
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HOEPA is an amendment to TILA, enacted by Congress in 1994 in response to increasing reports of abusive practices in home mortgage lending. Cooper v. First Gov't Mortgage and Investors Corp., 238 F.Supp.2d 50, 55 (D.D.C.2002). At its core, HOEPA �creates a special class of regulated loans that are made at higher interest rates or with excessive costs and fees.� In re Cmty. Bank of N. Virginia, 418 F.3d 277, 304 (3d Cir.2005). As such, Congress has determined that HOEPA loans are subject to special disclosure FN6 requirements above and beyond the disclosure requirements of TILA, and the statute imposes liability (upon creditors and assignees of creditors making such loans) in instances where material disclosures compliant with HOEPA are not timely made.FN7 See 15 U.S.C. �� 1639, 1641.
FN6. Some of the additional disclosures required by HOEPA include the language �You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application� and �If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan� in conspicuous type size. See 15 U.S.C. � 1639(a)(1).
FN7. As to assignee liability, HOEPA provides that �[a]ny person who purchases or is otherwise assigned a mortgage referred to in � 1602(aa) of this title shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor of the mortgage.� 15 U.S.C. � 1641(d).
There are two alternative statutory tests to determine whether or not a closed-end credit transaction qualifies as a HOEPA loan. See 15 U.S.C. � 1602(aa)(1). Under the first test (the �Annual Percentage Test�), a loan is subject to HOEPA if the annual percentage rate payable on the loan exceeds by more than 10 percentage points the yield on Treasury securities having a comparable period of maturity (as measured on the fifteenth day of the month immediately preceding the month in which the application for the loan was received by the creditor). 15 U.S.C. � 1602(aa)(1)(A). As an alternative, the second test (the �Points and Fees Test�) provides that a transaction will be governed by HOEPA if the total �points and fees� payable by the consumer at or before closing exceed the greater of (a) 8 percent of the total loan amount or (b) $400. 15 U.S.C. � 1602(aa)(1)(B). A determination under the Annual Percentage Test is rather simple; a court need do no more than peruse a copy of the Wall Street Journal in order to find the applicable rate(s) and perform the comparison. The Points and Fees Test, however, consists of a more in-depth analysis.

The plaintiffs in this case do not dispute that the annual percentage rate payable on the March 2003 loan does not exceed by more than the 10 percentage points the yield on applicable Treasury securities having comparable maturity. Therefore, the March 2003 loan fails the Annual Percentage Test and HOEPA cannot be invoked on this basis.

[1] The Balkos do allege that the �points and fees� FN8 charged by the lender at closing of the March 2003 loan were in *692
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excess of 8% of the total amount financed, and therefore the Balkos allege that HOEPA has been implicated by operation of the Points and Fees Test. The defendants dispute the Balkos calculation of �points and fees� and suggest that the plaintiffs, in order to gerrymander the loan into HOEPA, have miscalculated the �points and fees� paid under the loan at issue. Specifically, the defendants allege that the Balkos improperly included a �yield spread premium� FN9 earned by the mortgage broker in the Points and Fees Test. The Court agrees with the defendants.
FN8. �Points and fees� is a term of art used in 15 U.S.C. � 1602(aa)(1)(B). Regulation Z at Section 226.32(b)(1) defines the term �points and fees� and states, in pertinent part:

(b) Definitions. For purposes of this subpart, the following definitions apply:

(1) For purposes of paragraph (a)(1)(ii) of this section, points and fees means:

(i) All items required to be disclosed under � 226.4(a) and � 226.4(b) [ i.e., the �Finance Charge�], except interest or the time-price differential;

(ii) All compensation paid to mortgage brokers;

(iii) All items listed in � 226.4(c)(7)[i.e., real estate related fees such as appraisal fees, fees for title examination, etc.] (other than amounts held for future payment of taxes) unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor; and

(iv) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident, written in connection with the credit transaction.

See 12 C.F.R. � 226.32(b)(1).
FN9. A yield spread premium is a �bonus paid to a broker when it originates a loan at an interest rate higher than the minimum interest rate approved by the lender for a particular loan.� In re Bell, 309 B.R. 139, 153 n. 9 (Bankr.E.D.Pa.2004). A yield spread premium is not paid at closing of the loan. Rather, during the term of the loan the lender rewards the broker each month by paying the broker a percentage of the yield spread earned by the lender. Id.
The exhibits attached to the Balkos' Complaint reflect that the following �points and fees� paid by the debtors at closing of the March 2003 loan consisted of the following:
Loan Origination Fee - $ 9,588.00
Wire Fee - $ 30.00
Mortgage Broker Fee - $ 6,010.00
Flood Certification Fee - $ 20.00
Processing Fee - $ 495.00
Underwriting Fee - $ 391.00
Tax Service Fee - $ 84.00
Settlement Fee - $ 300.00
Courier Fee (Paragon) - $ 25.00
Total - $16,943.00 [FN10]
FN10. Counsel for the plaintiffs' acknowledged that this total was accurate, stating to the Court at the May 26, 2006 hearing: �These [the fees encompassed within �� 226.4(a) and (b) of Regulation Z as listed above] are all detailed, and I compliment Mr. Washowich [counsel for J.P. Morgan] in his brief ... those are all detailed in his brief and they run to about $16,000.�
See (Complaint Exhibit C [HUD-1A Settlement Statement] ). These charges, totaling $16,943.00, equate to 7.6% of the total amount financed ($222,840.33). These amounts fall below the 8% threshold set forth in 15 U.S.C. � 1602(aa)(1)(B) and consequently the March 2003 loan transaction fails to qualify as a transaction covered by HOEPA. It is for this reason that the Balkos contend that the �yield spread premium� to be paid to the broker in this case should be included in the Points and Fees Test calculation.

[2] [3] It is understandable why the plaintiffs contend that the yield spread premium is included in the Points and Fees Test calculation. Section 226.32(b)(1)(ii) of Regulation Z expressly states that the term �points and fees� includes �All compensation paid to mortgage brokers,� 12 C.F.R. � 226.32(b)(1)(ii), which on its face includes any yield spread premium paid to Carnegie Financial. However, the answer to the question of whether or not a yield spread premium is included in the definition of �points and fees� does not end the matter. HOEPA unequivocally states that the statute applies to certain mortgage transactions when �the total points and fees payable by the consumer at or before closing exceed *693
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the greater of-(I) 8 percent of the loan amount; or (ii) $400.� 15 U.S.C. � 1602(aa)(emphasis added). In the matter sub judice, the payment of the yield spread premium to the broker-Carnegie Financial-is paid and derived from the stream of interest generated over the life of the loan, and is not �payable by the consumer at or before the time of closing.� Accordingly, the yield spread premium is not included the Points and Fees Test calculation set forth in 15 U.S.C. � 1602. See Noel v. Fleet Finance, Inc., 971 F.Supp. 1102, 1106-07 (E.D.Mich.1997).FN11 The disclosure requirements of HOEPA were therefore not implicated in the transaction at issue. For this reason, the Balkos' Complaint fails to state a claim under TILA (as modified by HOEPA) and Count 2 of the Complaint must be dismissed.FN12
FN11. The Court rejects the Balkos' contention that the lender had a duty to separately disclose the yield spread premium. The Court rejects such a theory because the premium is included in the finance charge assessed by the lender against the borrower. In re Bell, 309 B.R. at 153(�Even if the yield spread premium in this case is part of the finance charge, it clearly was not paid by the Debtor at or before closing. Therefore, the yield spread premium is not included in the points and fees calculation�); Stump v. WMC Mortgage Corp., No. Civ.A.02-326, 2005 WL 645238 (E.D.Pa. March 16, 2005)(because yield spread premiums are paid out as interest over the course of the life of the mortgage, they are already included in the total finance charge as a higher interest rate and should not be �double-counted� by being listed as a separate itemized finance charge); Strang v. Wells Fargo Bank, N.A., No. Civ.A. 04-CV-2865, 2005 WL 1655886 (E.D.Pa. July 13, 2005)(yield spread premiums are incorporated into higher interest rates and therefore should not be double-counted).
FN12. The debtors acknowledged at the hearing on this matter that they hold no garden variety TILA claims if the heightened disclosure requirements of HOEPA do not apply. For example, counsel for the Balkos acknowledged to the Court at the May 26, 2006 hearing that �I believe that if you rule against me on the HOEPA issue, that is really the crux of our TILA claim,� and �I believe that material disclosures [under TILA] were given.� The debtors do appear to allege in their papers that some sort of violation of the Real Estate Settlement Procedures Act (�RESPA�), 12 U.S.C. � 2601 et seq., occurred in this case. The pleadings filed by the debtors are not entirely clear, but they seem to suggest that a RESPA violation occurred as a result of the alleged failure of Carnegie Financial and/or Paragon to timely provide an accurate �good faith estimate� required by RESPA. 12 U.S.C. � 2604. Case law makes clear that RESPA does not provide a private right of action to remedy violations of 12 U.S.C. � 2604. See Brophy v. Chase Manhattan Mortgage Co., 947 F.Supp. 879, 881-83 (E.D.Pa.1996).
Count 3
Common Law Fraud

Count 3 of the plaintiffs' Complaint alleges �fraud� against all of the named defendants. While the Complaint filed by the Balkos is convoluted, their claim for �fraud� seems to revolve around generic allegations that all defendants acted in concert to defraud the Balkos by inducing the Balkos to procure a loan that they could not afford. The defendants have objected to Count 3 of the Complaint citing the lack of specificity and particularity of such claims. The Court finds that the objections of the defendants in this regard do have merit with respect to J.P. Morgan and Paragon.

As a general matter, Federal Courts of the United States adhere to �notice pleading.� Fed.R.Civ.P. 8(a)(2). This system of pleading merely requires that a complaint contain �a short and plain statement of the claim showing that the pleader is entitled to relief.� Id. There are certain times however, when the Federal Rules require more specific pleading on the part of a complainant. Titled �Pleading Special Matters,� Fed.R.Civ.P. 9 deals with such *694
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instances. These �special matters� include, among other things, averments of fraud or mistake. Fed.R.Civ.P. 9(b). In pleading these claims, �the circumstances constituting fraud or mistake shall be stated with particularity.� Id. There are several sound reasons for such a particularity requirement, the most important being to provide defendants with proper notice of the claims against them and to provide increased protection for their reputations. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir.1997). Also, such a particularity requirement helps to reduce the number of frivolous lawsuits brought solely to extract settlements. Id.

[4] [5] The Federal Rules' heightened pleading standard regarding fraud and mistake is inherently applicable when dealing with federal statutory claims, such as securities fraud and racketeering allegations. Id. Quite often, however, in such circumstances the court is called upon to also analyze ancillary claims for common law fraud under the laws of the various states. While the factors pertaining to such a cause of action may be derived from state law principles and jurisprudence, the particularity requirement contained within Rule 9(b) applies equally to common law fraud claims as well. See Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5 th Cir.1997)(finding no principled reason why state law fraud claims should escape pleading requirements of federal rules), cert. denied, 522 U.S. 966, 118 S.Ct. 412, 139 L.Ed.2d 315 (1997). For this reason, a claim of common law fraud founded upon state law must be addressed with Rule 9(b) in mind.

[6] [7] When pleading a claim for fraud, the particularity language in Rule 9(b) requires a plaintiff to specify the time, place and substance of the defendant's alleged fraudulent conduct. See U.S. ex. rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir.1998) citing Cooper v. Blue Cross & Blue Shield of Florida, 19 F.3d 562, 567 (11 th Cir.1994). The claimant must allege more than mere conclusory allegations of fraud or the technical elements of the same. In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1418. In a case involving multiple defendants, �the complaint should inform each defendant of the nature of his alleged participation in the fraud,� and should not vaguely attribute allegedly fraudulent statements simply to all �defendants.� DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir.1987); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993); see also Balabanos v. North American Inv. Group, Ltd., 708 F.Supp. 1488, 1493 (N.D.Ill.1988)(stating that in cases involving multiple defendants �the complaint should inform each defendant of the specific fraudulent acts that constitute the basis of the action against the particular defendant�). This �fair notice� to defendants is �perhaps the most basic consideration underlying Rule 9(b).� See Brooks v. Blue Cross and Blue Shield of Florida, Inc., 116 F.3d 1364, 1381 (11 th Cir.1997) citing Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 778 (7 th Cir.1994). Consequently, �lumping� multiple defendants in a group ( e.g., �defendants misled the plaintiff by stating ...�) defeats this notice objective and is therefore improper under Rule 9(b).

[8] Count 3 of Plaintiffs' Complaint is styled as �Fraud� against �All Defendants.� The various �fraud claims� alleged by the plaintiffs fail to allege any specific fraudulent conduct attributable to J.P. Morgan and/or Paragon. Indeed, upon several readings of the document, the Court cannot discern any.

[9] At its most basic level, the Complaint alleges that a conspiracy of some sort was perpetrated by the various defendants in order to defraud the Balkos. *695
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Similar to claims of fraud, a claim of conspiracy to defraud is also subject to the particularity requirements of Rule 9(b). See Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir.1985) (applying Rule 9(b) particularity requirements to claim for conspiracy to defraud); Segal v. Gordon, 467 F.2d 602, 607 (2d Cir.1972) (same); Klein v. Council of Chem. Ass'ns, 587 F.Supp. 213, 226-27 (E.D.Pa.1984) (same); but see U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., No. Civ.A. 94-7316, 2000 WL 1207162 (E.D.Pa. August 24, 2000).

To use the term �lumping� to describe the allegations against all defendants in Count 3 of the Complaint would be a generous characterization. By way of example, paragraph 84 of the Complaint begins: �The Defendants conspired together and acted in concert to defraud the Plaintiffs in some or all of the following particulars:� and then proceeds to set forth various generic misdeeds committed by unidentified actors.FN13 In doing so, the plaintiffs have miscarried their burden to state a claim for fraud with particularity required under Rule 9(b) against J.P. Morgan and/or Paragon.
FN13. The catch-all contentions of �fraud� and �conspiracy� appear to be that: (1) �the defendants� used a fraudulent appraisal in order to obtain an unaffordable loan for the plaintiffs, the ultimate goal being to �flip� the defendants house and �reap profits and fees and costs,� [ see Complaint at �� 84(B) and (E)]; (2) �the defendants� misled the plaintiffs �as to the true nature� of the financing, including switching the interest rate �at the last minute,� [ Id. at �� 84(A) and (D)]; (3) �the defendants� each �committed fraud by breaching their fiduciary duty to the Plaintiffs,� misled the plaintiffs as to the �necessity� and �benefits� of refinancing their home, and represented to the plaintiffs that they were receiving credit �under the most favorable conditions� when there was in fact credit available �under more favorable conditions,� [ Id. at �� 84(C), (G), (H), (I), and (J)]; and (4) �the defendants� each �padded� the loan fees �to maximize profits for the broker and lender at the expense of the borrower,� [ Id. at � 84(F)]. Nowhere in the Complaint, however, do the Balkos specifically spell out what role each defendant played in the �scheme� or identify any specific employees (other than Mr. Behrens of Carnegie Financial) of each defendant who participated in the alleged �schemes.� In fact, at its most basic level, the Balkos complain that Mr. Behrens failed to honor his alleged promises. Nothing in the Complaint ties Mr. Behrens alleged promises to the remaining defendants, including J.P. Morgan or Paragon. Nor does the Complaint indicate the legal basis on which the Balkos claim the defendants were fiduciaries of the plaintiffs. Nor does the Complaint identify how the Balkos could have detrimentally relied upon an appraisal provided by Allegheny Appraisals and Chet Underhill, when the Balkos received the benefit of the March 2003 loan and nothing in the Complaint indicates that the appraisal was actually provided to the Balkos before the closing of the loan. In fact, the documents attached to the Complaint reflect that the appraisal was provided to Carnegie Financial for the purpose of underwriting the loan. See Id. at Exhibit A. Therefore, it appears that the lender who ultimately made the loan was the person or entity that relied on the appraisal.
Indeed, it appears to the Court that plaintiffs' cause of action against J.P. Morgan and Paragon in Count 3 even fails to adhere to the more relaxed notice pleading standard of Rule 8(a) of the Federal Rules of Civil Procedure. The Court reaches this conclusion because the Complaint is devoid of any allegations of wrongful conduct committed by Paragon and/or J.P. Morgan.

[10] [11] Because plaintiffs have failed to adequately plead their fraud cause of action, Count 3 against Paragon will be dismissed without prejudice. With respect to the fraud claim against J.P. Morgan, the Court dismisses Count 3 with prejudice. Dismissal of Count 3 with prejudice as to J.P. Morgan is appropriate because counsel to the Balkos acknowledged at the hearing on this matter that J.P. Morgan had no involvement whatsoever with the *696
________________________________________ (Cite as: 348 B.R. 684, *696) ________________________________________
solicitation, underwriting, or closing of the March 2003 loan. In fact, it was acknowledged that J.P. Morgan's involvement in this case merely arises as a result of the fact that Paragon had, subsequent to closing of the loan, pooled and securitized the note and mortgage executed by the Balkos. Consequently, as of the date the Balkos commenced this bankruptcy, J.P. Morgan, as trustee, was the holder of the note and mortgage and for this reason the Balkos named J.P. Morgan as a defendant to this action. Under these circumstances, it is undisputed that J.P. Morgan neither participated, caused, encouraged, aided and/or solicited any of the alleged fraudulent activities complained by the Balkos. It is also undisputed that none of the defendants were acting in an agency capacity vis-a-vis J.P. Morgan.FN14 For these reasons, the Court finds that no relief could be granted under Count 3 in favor of the plaintiffs against J.P. Morgan under any set of facts that could be proved consistent with the allegations in the complaint. As such, Count 3 must be dismissed with prejudice insofar as the claims asserted against J.P. Morgan. FN15
FN14. Counsel to the plaintiffs acknowledged at the May 26, 2006 hearing that J.P. Morgan asserted absolutely no control over the activities of the other defendants.
FN15. The Court is mindful that at the hearing on the Motion to Dismiss plaintiffs contended that Article 3 of the Uniform Commercial Code (the �UCC�) allows the Balkos to pursue affirmative fraud claims against J.P. Morgan. When pressed for authority supporting this proposition, counsel for the Balkos offered none. The Court submits that the Balkos reading of Article 3 of the UCC is somewhat misguided. While UCC � 3-305 provides that certain types of fraud may, under some circumstances, be a defense against the right of a payee or transferee to enforce a negotiable instrument (see footnote 18, infra), UCC � 3-305 does not provide for the recovery of affirmative damages against the assignee of such an instrument. See In re Grayboyes, Civ. A. 05-1780, 2006 WL 437546 at *3 (E.D.Pa.Feb.22, 2006) (stating that there are �several requirements� to the applicability of the equitable doctrine of recoupment under Pennsylvania law, one being that it �must be asserted defensively�). For this reason, the Court also rejects the Balkos' affirmative claim for fraud against J.P. Morgan.
With respect to the remaining defendants, Carnegie Financial, Joseph Behrens, Allegheny Appraisals, and Chet Underhill, the Court will not dismiss the common-law fraud claim located at Count 3 at this time. The Court recognizes that some of these defendants have asserted various theories as to why the fraud claims contained in Count 3 of the lawsuit should be dismissed (such as by reason of passing of statute of limitations, the �gist of the action doctrine,� etc.). The Court, however, declines to accept the arguments of the remaining defendants at this early stage of the case. It is the Court's opinion that the Complaint adequately puts Carnegie Financial, Joseph Behrens, Allegheny Appraisals and Chet Underhill on notice of the sort of claims asserted by the Balkos against them. The remaining defendants can assert such defenses either at summary judgment or at trial.

Count 4
Violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Act

[12] [13] [14] Count 4 of the plaintiffs' Complaint alleges various violations of 73 P.S. � 2181 et seq. (the �Credit Services Act�) and 73 P.S. � 201-1 et seq. (the �Unfair Trade Practices and Consumer Protection Law-UTPCPL�). ( See Complaint at �� 84-91). As these statutes provide for a cause of action in some instances of fraudulent and/or deceptive conduct, this Court determines the heightened pleading standards of Rule 9(b) are applicable. See e.g. In re Suprema Specialties, Inc., 438 F.3d 256, 270-272 (3d Cir.2006)(holding that *697
________________________________________ (Cite as: 348 B.R. 684, *697) ________________________________________
causes of action sounding fraud like are subject to the heightened pleading requirements of Rule 9(b)); Learning Express, Inc. v. Ray-Matt Enterprises, Inc., 74 F.Supp.2d. 79, 87 (D.Mass.1999) (holding that the pleading requirements of Rule 9(b) are required with respect to an action based on the New Jersey Consumer Fraud Act); see also Fass v. State Farm Fire and Casualty Company, C.A. No. 06-02398, 2006 WL 2129098 at *2 (E.D.Pa. July 26, 2006). This conclusion is consistent with the fact that Rule 9(b) serves several purposes, including, to place defendants on fair notice of the claims made against them, to safeguard defendants against spurious accusations and to enable defendants to protect themselves from the resulting reputational harm. See Baicker-McKee et al., Federal Civil Rules Handbook at 258 (Thomson West, 2003).FN16 For the reasons discussed above relating to the fraud claims, it appears that the Balkos have not adequately pled violations of the Unfair Trade Practices Act and Credit Services Act against Paragon and J.P. Morgan. In fact, it appears to the Court that even under the more liberal pleading requirements of Rule 8(a), the Balkos have not adequately plead a cause of action against Paragon and J.P. Morgan. The Court reaches this conclusion because there are no facts alleged in the Complaint which actively place Paragon and J.P. Morgan in the marketing or solicitation of the March 2003 loan. The Court therefore dismisses Count 4 against Paragon without prejudice, and dismisses Count 4 against J.P. Morgan with prejudice.FN17
FN16. Some courts have concluded that since various unfair trade practices statutes regulate deceptive conduct, as well as fraudulent conduct, claims made merely on deceptive practices need not be plead with specificity. See e.g. Christopher v. First Mutual Corp., No. Civ.A. 05-01149, 2006 WL 166566 at *3 (E.D.Pa. Jan.20, 2006). This Court declines to follow such decisions, and holds that there is no material pleading difference between �deceptive� conduct and �fraudulent� conduct. Indeed, the term �deception� is very similar to fraud, and is defined as �intentional misleading by falsehood spoken or acted.� Id. (citing Black's Law Dictionary 406 (6th ed.1990)). Cf. U.S. ex rel. Clausen v. Lab. Corp. of America, Inc., 290 F.3d 1301, 1308-09 (11th Cir.2002)(holding that Rule 9(b) applies to claims made under the False Claims Act).
FN17. The Credit Services Act regulates activities of �credit service organizations� and �loan brokers.� Dismissal of the Credit Services Act claim against J.P. Morgan also appears appropriate because J.P. Morgan is not a �credit services organization� under the statute. Specifically, the statute, at 73 P.S. � 2182, expressly excludes any bank or trust company from being a �credit services organization� under the statute. No party to the litigation disputes the fact that J.P. Morgan is either a bank or trust company. In addition, the plaintiffs Complaint fails to allege that J.P. Morgan is a �loan broker,� and plaintiffs made no averment or argument at the May 26, 2006 hearing to the effect that J.P. Morgan is a �loan broker� for purposes of the Credit Services Act. Moreover, because J.P. Morgan had no involvement in this case until well after the closing of the March 23, 2006 loan, the Court is unable to discern any colorable claim that the Balkos may have against J.P. Morgan under the Credit Services Act.
With respect to the remaining defendants, Carnegie Financial, Joseph Behrens, Allegheny Appraisals, and Chet Underhill, the Court will not dismiss the state law consumer protection causes of action located at Count 4 at this time. Each of these defendants may renew their defenses at appropriate stages later in this litigation (i.e., at summary judgment or at trial).

Count 1
Objection to Claim/Request for Recoupment

[15] [16] [17] Count 1 of the plaintiffs' Complaint is captioned as an objection to the claim of J.P. Morgan and is in the nature *698
________________________________________ (Cite as: 348 B.R. 684, *698) ________________________________________
of a �request for recoupment.� The plaintiffs allege in their Complaint that the proof of claim filed by J.P. Morgan �does not accurately reflect the proper amounts due as it does not account for the Plaintiffs' common law recoupment rights especially due to the original fraud and truth-in-lending violations by the mortgagor [sic].� (Complaint at � 72). Because the legal predicate(s) for the Balkos' recoupment claims appear to be the substantive claims for relief contained in Counts 2, 3 and 4 of their Complaint, and because Counts 2, 3 and 4 of the Complaint are dismissed as to J.P. Morgan, the Court concludes that the Balkos' objection to the J.P. Morgan claim is without merit.FN18 Consequently, the Court overrules the objection.FN19
FN18. The Court recognizes that in their Response Memorandum to Defendant J.P. Morgan's Motion to Dismiss (Document No. 26), the plaintiffs have asserted recoupment rights against J.P. Morgan under Article 3 of the UCC. The Balkos contend in their Response Memorandum that if any of the defendants are found to have defrauded the Balkos, Article 3 of the UCC may provide the Balkos with recoupment rights against J.P. Morgan �because they [the Balkos] have made allegations of fraud in the inducement.� The Balkos further allege that �Pennsylvania law provides that a holder in Due Course [sic] is not protected against an allegation of fraud in the inducement made by the maker of the note. 13 Pa.C.S.A. 3305. [sic]� The Balkos, however, misconstrue Article 3 of the UCC. According to Pennsylvania law, every holder of a negotiable instrument is deemed, prima facie, a holder in due course subject to a rebuttable presumption to the contrary. See Morgan Guaranty Trust Co. of New York v. Staats, 428 Pa.Super. 479, 631 A.2d 631, 636 (1993). Therefore, without specific allegations to the contrary, J.P. Morgan, as holder of the note, is a holder in due course. It is well-established that fraud in the factum is a defense under � 3-305 of the UCC, while fraud in the inducement is not. See Exchange International Leasing Corp. v. Consolidated Business Forms Co., Inc., 462 F.Supp. 626, 628 (W.D.Pa.1978). Fraud in the factum, also known as �real� or �essential� fraud, is commonly depicted in terms of �a maker who is tricked into signing a note in the belief that it is merely a receipt or some other document. The theory of the defense is that the signature on the instrument is ineffective because the signer did not intend to sign such an instrument at all.� See 13 Pa.C.S.A. � 3305, Comment 1. The fraud in this case, as alleged by the plaintiffs, consists of fraud in the consideration for, or in negotiations leading up to, the execution of a negotiable instrument; not in the execution of the note itself in favor of the lender. The Balkos' Complaint therefore fails to adequately plead fraud in the factum, and their reliance on UCC � 3-305 is misplaced.
FN19. Having dismissed Counts 1 through 4 of the Complaint against both J.P. Morgan and Paragon, the Court does not at this time address any of the various other defenses asserted by these parties in this proceeding.
IV. CONCLUSION

This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052. For reasons set forth more fully in this Memorandum Opinion, the Court concludes that the Motion to Dismiss, in part, is well founded and, as a result: (1) Count 1 of the Complaint (as it relates to the debtors' objection to claim and purported claim sounding in recoupment) against J.P. Morgan shall be dismissed without prejudice; (2) Count 2 of the Complaint (Truth in Lending Act claims) shall be dismissed as to all defendants for failure to state a claim upon which relief may be granted; (3) Count 3 (common-law fraud claims) shall be dismissed as to J.P. Morgan and Paragon for lack of specificity in pleading and for failure to state a claim upon which relief could be granted; said dismissal shall be with prejudice as to J.P. Morgan and without prejudice as to Paragon; and (4) Count 4 (Pennsylvania Unfair Trade Practices and Consumer Protection Act claims) shall be dismissed as to J.P. Morgan*699
________________________________________ (Cite as: 348 B.R. 684, *699) ________________________________________
and Paragon for lack of specificity in pleading and failure to state a claim upon which relief could be granted; said dismissal shall be with prejudice as to J.P. Morgan and without prejudice as to Paragon. The Court denies the Motion to Dismiss with respect to the causes of action asserted in Counts 3 and 4 against defendants Carnegie Financial, Joseph Behrens, Allegheny Appraisals, and Chet Underhill. An Order consistent with this Memorandum Opinion shall be issued.

In re Barker, 251 B.R. 250 (Bkrtcy. E.D. Pa., 2000).
United States Bankruptcy Court,
E.D. Pennsylvania.
In re Beatrice BARKER, Debtor.
Beatrice Barker, Plaintiff,
v.
Altegra Credit Company, Gelt Financial Corporation, and McGlawn & McGlawn, Inc., Defendants.
Bankruptcy No. 99-32081DAS.
Adversary No. 99-1030.
June 15, 2000.
Supplemental Opinion July 20, 2000.
Chapter 13 debtor-mortgagor brought adversary proceeding against mortgage broker, seeking damages resulting from a detrimental loan transaction procured by broker on behalf of debtor. Following approval of settlement between debtor, mortgagee, and its assignee, regarding mortgagee's claim, the Bankruptcy Court, David A. Scholl, J., held that: (1) broker committed common-law fraud under Pennsylvania law; (2) broker breached its fiduciary duties to debtor; (3) broker was liable to debtor for certain damages under Pennsylvania's Credit Services Act (CSA); (4) broker appeared liable for at least some additional damages under Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP); and, in a supplemental opinion issued after subsequent hearing on damages question, that; (5) debtor was entitled, at minimum, to return of broker's $1,950 commission; (6) debtor was entitled to statutory damages of $100 for each of broker's five discrete fiduciary breaches; and (7) punitive award in amount of $5,000 was likewise appropriate.
Judgment for debtor.
West Headnotes

[1] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k34 k. Fraud of Broker or His Agent. Most Cited Cases

Under Pennsylvania law, to establish valid fraud claim against mortgage broker, mortgagor was required to demonstrate each of the following: (1) broker made a representation, (2) that representation was material to the loan agreement, (3) broker had actual knowledge that this representation was false, or acted with reckless indifference to its truth, (4) broker's intent was to mislead mortgagor, (5) mortgagor was justified in relying on broker's representations, and (6) mortgagor's damages were the proximate result of broker's conduct.

[2] KeyCite Notes

184 Fraud
184II Actions
184II(D) Evidence
184k50 k. Presumptions and Burden of Proof. Most Cited Cases

184 Fraud KeyCite Notes
184II Actions
184II(D) Evidence
184k58 Weight and Sufficiency
184k58(1) k. In General. Most Cited Cases

Under Pennsylvania law, plaintiff has the burden of proving every one of the elements of fraud by the exacting standard of clear and convincing evidence.

[3] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k34 k. Fraud of Broker or His Agent. Most Cited Cases

Mortgage broker committed fraud under Pennsylvania law where broker represented to mortgagor, who sought to obtain a loan in the amount of $10,000 for the purpose of financing home improvements, that she would get the money for home improvements, even though mortgagee had provided broker with written notice that cash disbursement to debtor could not be more than $1,950, or ten percent of the loan proceeds, broker failed to provide mortgagor with fee information prior to first closing, broker omitted any explanation of balloon note, broker thus acted, at minimum, with reckless indifference by leading unsophisticated consumer into detrimental loan transaction, and debtor justifiably relied on broker's representations, resulting in some proximate financial damages in the form of additional interest.

[4] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k34 k. Fraud of Broker or His Agent. Most Cited Cases

Business that holds itself out to the public as having expertise in the mortgage industry commits a �material omission,� for purposes of Pennsylvania fraud analysis, where it fails to advise its own client of the potential detrimental effects of entering into such a transaction.

[5] KeyCite Notes

65 Brokers
65II Employment
65k6 k. Relation to Principal in General. Most Cited Cases

Under Pennsylvania law, mortgage broker was the �agent� of the mortgagor-principal, charged with the undertaking of obtaining a loan to finance home improvements.

[6] KeyCite Notes

308 Principal and Agent
308II Mutual Rights, Duties, and Liabilities
308II(A) Execution of Agency
308k48 k. Nature of Agent's Obligation. Most Cited Cases

Under Pennsylvania law, duty of an agent to his or her principal is one of loyalty in all matters affecting the subject of the agency.

[7] KeyCite Notes

308 Principal and Agent
308II Mutual Rights, Duties, and Liabilities
308II(A) Execution of Agency
308k48 k. Nature of Agent's Obligation. Most Cited Cases

Under Pennsylvania law, agent must act with the utmost good faith in the furtherance and advancement of the interests of his or her principal.

[8] KeyCite Notes

308 Principal and Agent
308II Mutual Rights, Duties, and Liabilities
308II(A) Execution of Agency
308k48 k. Nature of Agent's Obligation. Most Cited Cases

Under Pennsylvania law, �fiduciary� relations include, among others, principal and agent.

[9] KeyCite Notes

266 Mortgages
266IV Rights and Liabilities of Parties
266k211 k. Dealings and Transactions Between Parties. Most Cited Cases

Where, under Pennsylvania law, relationship between mortgagee and mortgagors was an agency relationship, mortgagee owed mortgagors a fiduciary duty and its conduct had to be measured against the standard of care owed by a fiduciary.

[10] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k19 k. Nature of Broker's Obligation. Most Cited Cases

In its role as an agent, broker has a duty, under Pennsylvania law, to advise his or her principals of relevant facts and circumstances known to the broker.

[11] KeyCite Notes

184 Fraud
184I Deception Constituting Fraud, and Liability Therefor
184k5 Elements of Constructive Fraud
184k7 k. Fiduciary or Confidential Relations. Most Cited Cases

Contractual relationship does not create a fiduciary relationship, under Pennsylvania law.

[12] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k31 k. Individual Interest of Broker. Most Cited Cases

Mortgage broker breached its fiduciary duties to mortgagor under Pennsylvania law where broker failed to obtain the home improvement financing sought by mortgagor and substituted a consolidation loan to satisfy certain of her indebtednesses without informing her and without taking either her wishes or needs into consideration, loan obtained did not serve mortgagor's wants or needs, and so broker's motivation for producing the loan was clearly not to serve mortgagor's interest in obtaining a home improvement loan, but to serve its own interest of obtaining a handsome broker's fee.

[13] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk2 k. Constitutional and Statutory Provisions; Ordinances. Most Cited Cases

Pennsylvania's Credit Services Act (CSA) was enacted to regulate the conduct of �credit services organizations� and �loan brokers.� 73 P.S. � 2181 et seq.

[14] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk16 k. Disclosure Requirements; Statements and Receipts. Most Cited Cases

Findings, that mortgage broker engaged in common law fraud and violated its fiduciary duties to mortgagor, constituted sufficient support, in and of themselves, to result in a violation of the provision of Pennsylvania's Credit Services Act (CSA) prohibiting loan brokers from making false or misleading representations. 73 P.S. � 2188(c)(2).

[15] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(C) Particular Subjects and Regulations
29Tk209 k. Finance and Banking in General; Lending. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)

Any violations of Pennsylvania's Credit Services Act (CSA) are deemed to be violations of the state's �unfair or deceptive acts and practices� statute (UDAP). 73 P.S. �� 201-1 et seq., 2190(a).

[16] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk17 k. Effect of Violation of Regulations or Lack of License. Most Cited Cases

Under Pennsylvania's Credit Services Act (CSA), if any actual damages whatsoever are proven, the offending loan broker is liable for an amount no less than the amount of fees paid to it by the borrower, as well as reasonable attorney fees and costs. 73 P.S. � 2191.

[17] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(A) In General
29Tk126 Constitutional and Statutory Provisions
29Tk128 k. Purpose and Construction in General. Most Cited Cases
(Formerly 92Hk3 Consumer Protection)

Pennsylvania enacted its �unfair or deceptive acts and practices� statute (UDAP) as a statute aimed at generally prohibiting and punishing certain deceptive trade practices. 73 P.S. � 201-1 et seq.

[18] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(1) k. In General. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

29T Antitrust and Trade Regulation KeyCite Notes
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk393 k. Enhanced Damages; Double or Treble Damages. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

Under Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP), plaintiff must have suffered �ascertainable loss of money or property� to recover actual damages, which may be trebled, or $100, whichever is greater. 73 P.S. � 201-1 et seq.

[19] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(A) In General
29Tk126 Constitutional and Statutory Provisions
29Tk128 k. Purpose and Construction in General. Most Cited Cases
(Formerly 92Hk3 Consumer Protection)

Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP) is a remedial statute that should be liberally construed to effect its objective of protecting consumers in a number of various activities. 73 P.S. � 201-1 et seq.

[20] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(A) In General
29Tk139 Persons and Transactions Covered Under General Statutes
29Tk145 k. Goods or Services. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)

Business of a loan broker is conduct which is clearly a sale of a service within the scope of Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP). 73 P.S. � 201-1 et seq.

[21] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(C) Particular Subjects and Regulations
29Tk209 k. Finance and Banking in General; Lending. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)

Mortgage broker violated catch-all provision of Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP) by: (1) failing to disclose to mortgagor the detrimental effect of refinancing loan with 9% interest rate for loan with 17.99% interest rate, (2) failing to notify mortgagor that loan amount was $19,500 when she requested $10,000 loan, (3) failing to adequately disclose to uneducated mortgagor that executing balloon note would result in final, large, lump-sum payment, (4) failing to disclose or estimate amount of lump-sum payment, (5) failing to inform mortgagor that proceeds received from $19,500 loan would be less than $500, which was clearly insufficient to complete intended home improvements, and (6) failing to notify mortgagor that loan approved by mortgagee limited cash disbursements to $1,950, or 10% of total loan, insufficient to cover intended home improvements. 73 P.S. � 201-2(4)(xxi).

[22] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(2) k. Particular Cases. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

Mortgagor was entitled to at least some actual damages under Pennsylvania's �unfair or deceptive acts and practices� statute (UDAP) as a result of mortgage broker's conduct in violating UDAP's catch-all provision. 73 P.S. � 201-2(4)(xxi).

[23] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk18 k. Actions. Most Cited Cases

29T Antitrust and Trade Regulation KeyCite Notes
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk395 Costs
29Tk396 k. In General. Most Cited Cases
(Formerly 92Hk42 Consumer Protection)

29T Antitrust and Trade Regulation KeyCite Notes
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk395 Costs
29Tk397 k. Attorney Fees. Most Cited Cases
(Formerly 92Hk42 Consumer Protection)

Both Pennsylvania's Credit Services Act (CSA) and its �unfair or deceptive acts and practices� statute (UDAP) permit recovery of reasonable attorney fees and costs. 73 P.S. �� 201-1 et seq., 2181 et seq.

[24] KeyCite Notes

106 Courts
106II Establishment, Organization, and Procedure
106II(G) Rules of Decision
106k99 Previous Decisions in Same Case as Law of the Case
106k99(1) k. In General. Most Cited Cases

Under �law of the case� doctrine, court should change its prior ruling only when that ruling is clearly erroneous and it would work a manifest injustice to adhere to it.

[25] KeyCite Notes

92B Consumer Credit
92BI In General
92Bk17 k. Effect of Violation of Regulations or Lack of License. Most Cited Cases

As damages under the Pennsylvania Credit Services Act (CSA) for loan broker's breach of fiduciary duty that it owed to borrower, in failing to disclose detrimental effects of refinancing borrower's current loan at rate of nine percent with one that bore interest at 17.99% rate, in procuring consolidation loan for $19,500 and not the $10,000 home improvement loan requested by borrower, in allowing borrower to sign balloon note without disclosing amount of final lump sum payment, and in failing to disclose maximum cash disbursement, borrower was entitled, at minimum, to return of broker's $1,950 commission. 73 P.S. � 2191.

[26] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk390 k. Measure and Amount. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

As damages under the Pennsylvania Unfair and Deceptive Practices Act (UDAP) for loan broker's breach of fiduciary duty that it owed to borrower, in failing to disclose detrimental effects of refinancing borrower's current loan at rate of nine percent with one that bore interest at 17.99% rate, in procuring consolidation loan for $19,500 and not the $10,000 home improvement loan requested by borrower, in allowing borrower to sign balloon note without disclosing amount of final lump sum payment, and in failing to disclose maximum cash disbursement, borrower was entitled, in addition to order requiring broker to return its commission, to statutory damages of $100 for each of broker's five discrete fiduciary breaches. 73 P.S. � 201-9.2(a).

[27] KeyCite Notes

29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk387 Monetary Relief; Damages
29Tk389 Grounds and Subjects
29Tk389(1) k. In General. Most Cited Cases
(Formerly 92Hk40 Consumer Protection)

Plaintiff's failure to quantify damages does not preclude a finding that he or she is entitled to recover some damages under the Pennsylvania Unfair and Deceptive Practices Act (UDAP). 73 P.S. � 201-9.2(a).

[28] KeyCite Notes

115 Damages
115V Exemplary Damages
115k91.5 Grounds for Exemplary Damages
115k91.5(1) k. In General. Most Cited Cases
(Formerly 115k91(1))

Under Pennsylvania law, punitive damages may be awarded only if actor's conduct was malicious, wanton, willful, oppressive, or exhibited a reckless indifference to rights of others.

[29] KeyCite Notes

115 Damages
115V Exemplary Damages
115k87 Nature and Theory of Damages Additional to Compensation
115k87(1) k. In General. Most Cited Cases

Under Pennsylvania law, purpose of punitive damages is to punish guilty party for outrageous conduct and to deter similar conduct in the future.

[30] KeyCite Notes

115 Damages
115V Exemplary Damages
115k94 Measure and Amount of Exemplary Damages
115k94.2 k. Nature of Act or Conduct. Most Cited Cases
(Formerly 115k94)

In determining amount of punitive damages to award, Pennsylvania courts consider the act or omission together with motive of wrongdoer and relationship between parties.

[31] KeyCite Notes

115 Damages
115V Exemplary Damages
115k94 Measure and Amount of Exemplary Damages
115k94.1 k. In General. Most Cited Cases
(Formerly 115k94)

Under Pennsylvania law, amount of punitive damages award should be gauged by gravity of offense and defendant's financial position.

[32] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k38 Actions for Negligence or Wrongful Acts of Broker
65k38(7) k. Damages. Most Cited Cases

Punitive damages were appropriate under Pennsylvania law, in action brought by borrower to recover for loan broker's alleged breach of fiduciary duty, inter alia, in failing to disclose detrimental effects of refinancing at significantly higher interest rate and in allowing borrower to sign balloon note without disclosing amount of final lump sum payment, where broker's conduct revealed flagrant disregard of duty to act as fiduciary upon borrower's behalf.

[33] KeyCite Notes

115 Damages
115V Exemplary Damages
115k94 Measure and Amount of Exemplary Damages
115k94.6 k. Actual Damage or Compensatory Damages; Relationship and Ratio. Most Cited Cases
(Formerly 115k94)

Pennsylvania law does not mandate that punitive damages bear a direct relationship to compensatory damages.

[34] KeyCite Notes

115 Damages
115V Exemplary Damages
115k87 Nature and Theory of Damages Additional to Compensation
115k87(2) k. Necessity of Actual Damage. Most Cited Cases

Under Pennsylvania law, specific actual damages are not necessary to support award of punitive damages.

[35] KeyCite Notes

65 Brokers
65IV Duties and Liability to Principal
65k38 Actions for Negligence or Wrongful Acts of Broker
65k38(7) k. Damages. Most Cited Cases

Punitive damages award in amount of $5,000 was appropriate, in action brought by borrower to recover for loan broker's alleged breach of fiduciary duty, inter alia, in not disclosing detrimental effects of refinancing at significantly higher interest rate and in allowing borrower to sign balloon note without disclosing amount of final payment, where broker was relatively small commercial business that operated out of one office, such that award of $5,000 in punitive damages would be a rather substantial penalty.

*254
________________________________________ (Cite as: 251 B.R. 250, *254) ________________________________________
Alan M. White, Community Legal Services, Philadelphia, PA, for Debtor.
Bonnie Golub, Philadelphia, PA, for Altegra Credit Company.
William Goldstein, Bensalem, PA, for Gelt Financial Corporation.
Stuart A. Eisenberg, Warminister, PA, for McGlawn & McGlawn, Inc.
Edward Sparkman, Philadelphia, PA, trustee.
OPINION

DAVID A. SCHOLL, Bankruptcy Judge.
A. INTRODUCTION

What remains of the instant adversary proceeding (�the Proceeding�) is the issue of whether, and if so in what amount, a mortgage Broker may be held liable to a Debtor-mortgagor for damages resulting from a detrimental loan transaction procured by the Broker on behalf of the Debtor, particularly when the mortgagee in the transaction and its assignee reached a pre-trial settlement with the Debtor.

We find that the Broker clearly engaged in numerous deceptive and unfair practices that constitute fraud, breach of a fiduciary duty, and violations of the State Credit Services Act, 73 P.S. � 2181, et seq. (�the CSA�), as well as 73 P.S. � 201-1, et seq., Pennsylvania's law prohibiting unfair and deceptive practices act (�UDAP�). However, prior to the trial, we approved a settlement which effectively restated the mortgage obtained by the Debtor in the transaction at issue to include many of the terms of her pre-transaction mortgage. The Debtor raised the possible application of the CSA and posited a measurement of damages which is bewildering to us for the first time in her post-trial brief. The Broker, meanwhile, confined its post-trial arguments to futilely contesting its liability. In light of these circumstances, we will request the parties to address the proper measurement of damages in supplemental briefing.

B. PROCEDURAL AND FACTUAL HISTORY

BEATRICE BARKER (�the Debtor�) filed an individual Chapter 13 bankruptcy petition on September 23, 1999. Her Third Amended Chapter 13 plan, paying her mortgagee's claim consistent with the settlement of same, was confirmed on May 3, 2000.

On November 24, 1999, the Debtor filed a Complaint to Challenge the Validity/Priority/Extent of Lien against ALTEGRA CREDIT COMPANY (�Altegra�), GELT FINANCIAL CORPORATION (�Gelt�), and WILLIAM McGLAWN t/a McGLAWN & McGLAWN. The trial of the Proceeding was originally Scheduled on January 11, 2000, and continued by agreement until March 9, 2000. Meanwhile, on February 29, 2000, the Debtor filed (1) a motion to approve a settlement with Altegra; (2) a motion seeking a default against Gelt; and (3) a motion to amend the Complaint, mainly to substitute McGLAWN & McGLAWN, INC. (�the Broker�) for William McGlawn as a defendant.

The trial was again continued to April 27, 2000, on a must-be-heard basis. On March 24, 2000, the Debtor filed another motion to approve a settlement, this time with both Gelt and Altegra. The Broker did not object to this settlement (�the Settlement�), and this Court issued an Order approving the same on April 6, 2000.

Under the terms of the Settlement, Altegra reduced its secured claim of $23,765 under a mortgage loan calling for interest at 17.99 percent and payments of $293.73 monthly to a claim of $8000 to be repaid with interest at nine (9%) percent over 15 years, resulting in monthly payments of $81.00 monthly. In addition Gelt and Altegra agreed to pay $4000 and $750, respectively, towards the Debtor's claims for attorneys' fees. The trial against the only remaining defendant, the Broker, was continued again on a must-be-heard basis until *255
________________________________________ (Cite as: 251 B.R. 250, *255) ________________________________________
May 11, 2000. At the close of trial on May 11, 2000, the parties agreed to submit opening briefs by May 25, 2000, and reply briefs by June 1, 2000. Both parties submitted briefs to us on May 26, 2000, and neither submitted any other brief.

It was established at trial, through her brief testimony, that the Debtor contacted the Broker in March, 1998, to obtain a loan in the amount of $10,000 for the purpose of financing improvements to her home at 3027 West Colona Street, Philadelphia, PA (�the Home�). The Home was purchased in 1970 for $4000 and is co-owned by the Debtor and her 28-year-old daughter. The Debtor had heard about the Broker from certain media advertisements and indicated that she relied on its representations that it would obtain the desired home improvement loan for her.

Prior to the loan in question, the Debtor had a mortgage loan procured through the Pennsylvania Homeowner's Emergency Mortgage Assistance Program (�HEMAP�) with a balance of approximately $8200. Although the Debtor was unable to recall the interest rate on the loan, it was asserted by her counsel without dispute that the maximum interest rate for HEMAP loans is fixed by law at nine (9%) percent. The Debtor testified that she had never requested a loan to refinance this obligation or to pay any of her other indebtednesses, but only to finance home improvements. However, the loan transaction arranged by the Broker paid off the Debtor's previous mortgage and many of her other obligations, which included over $4000 in delinquent water and sewer bills and over $1500 owed to the Philadelphia Gas Works.

Documents offered at trial revealed that the Debtor participated in two closings on the loan at issue because certain unexplained �errors� were committed at the first closing of June 22, 1998 (�Closing One�). The Debtor, along with her daughter, who co-signed on the loan, executed various documents at Closing One. The documents included a Truth-in-Lending disclosure statement describing a loan in the total amount of $19,500, a statement indicating that the Broker would change a fee of ten (10%) percent of the total loan amount, a Balloon Note, and a settlement statement stating the Debtor would receive a net disbursement in the amount of $612.21. The Debtor testified that, at Closing One, nobody explained to her that the Balloon Note obligated her to make a large lump sum payment at the end of the loan term, and that she was unaware of this fact. The Debtor also testified that, after Closing One, she still believed that she would receive the $10,000 she had requested for home improvements, although no funds whatsoever were disbursed to the Debtor at Closing One and no such disbursement was in fact contemplated.

The second closing (�Closing Two�) occurred on July 8, 1998. The settlement statement completed at Closing Two revealed that the cash proceeds the Debtor would receive were reduced to $424.24. Despite receipt of only this amount, the Debtor stated that she was still unaware that she was not going to eventually receive the balance requested for her desired home improvements. Of course, she never received that sum.

During cross-examination, counsel for the Broker interrogated the Debtor concerning her past credit history, past due bills, and delinquent loans. Although this testimony revealed that the Debtor had previously held loans with numerous loan companies, we find that this evidence does not support the conclusion that the Debtor had much knowledge or experience with loan transactions, or with financial matters in general. Rather, we find that the Debtor was a credible witness who seemed extremely unsophisticated concerning financial matters. Specifically, we find that the Debtor was unaware that the loan transaction doubled the interest rate on her mortgage from nine (9%) percent to almost eighteen (18%) percent, that her home improvements would not be financed *256
________________________________________ (Cite as: 251 B.R. 250, *256) ________________________________________
thereby, and that the Balloon Note required a further lump-sum payment at its conclusion fifteen (15) years later.

Reginald McGlawn testified on behalf of the Broker. Although the record does not disclose his position, we assume that McGlawn is a principal of the Broker. McGlawn testified that his firm has specialized knowledge of the mortgage industry and holds itself out as having special expertise to procure loans for individuals with credit problems.

McGlawn's testimony, along with exhibits offered at trial, revealed that the Debtor first contacted the Broker on or about March 9, 1998, for a home improvement loan. A Gelt Pre-approval Conditions form (�the Form�) submitted into evidence disclosed that Gelt approved a mortgage in the amount of $19,500 at an interest rate of 17.99% on March 10, 1998. One of the conditions included as an additional provision by Gelt specifically for this loan stated �MAX CASH OUT IS 10% OF LOAN AMOUNT.�

The Broker conceded that the Form, not given to the Debtor, provided it with positive knowledge, as of March 10, 1998, that the interest rate offered by Gelt was 17.99% and that the cash proceeds from the loan of $19,500 would be insufficient to finance the desired home improvements. McGlawn never stated that this information was disclosed to the Debtor.

McGlawn challenged the Debtor's assertion that she was not given notice of the Broker's fee prior to Closing One by stating that all of its clients are made aware of its fees during telephone conversations prior to scheduling an appointment with the Broker. This testimony did not outweigh the Debtor's testimony to the contrary.

The Debtor, in her post-trial submissions, alleges two general types of causes of action against the Broker: (1) common law fraud and breach of fiduciary duties; and (2) statutory claims based on UDAP and the CSA, the latter of which is not referenced in the Amended Complaint. The common-law fraud claim is premised on the Broker's misrepresentations and omissions, that include (1) representing to the Debtor that she would get the sums which she requested for her desired $10,000 home improvements, even though, as early as March 10, 1998, the Broker had positive knowledge that the Debtor was not authorized to receive more than $1,950 in cash; (2) failing to offer convincing evidence to support its assertion that the Debtor had knowledge of the ten (10%) percent of its fee prior to Closing One or at even after Closing Two; (3) failing to explain to the Debtor that executing a Balloon Note created an obligation to make a large lump sum payment at the end of the loan term; and (4) failing to advise the Debtor of the detrimental financial consequences of refinancing a HEMAP loan with a nine (9%) percent interest rate with a loan bearing an 18% interest rate.

The Debtor then noted that loan brokers are subject to regulation under the CSA and that the Broker did not comply with that law. She averred that the commissions of the common law torts and the Broker's violations of the CSA gave rise to claims under UDAP.

The Debtor then calculated her damages by beginning with an estimate that she would have paid an additional $43,000 in interest over the term of the loan procured by the Broker, as compared to the interest she would have paid on the $8,200 principal balance of the HEMAP loan with its nine (9%) percent interest rate, if the loan had not been recast in the Settlement. This figure was then discounted to its alleged present value of $25,000, and total actual damages are thereupon estimated at $28,716.54, calculated by adding to the $25,000 the amount of $3,716.54 in fees and costs charged by the Broker. Finally, the Debtor invoked UDAP's provision allowing treble damages, 73 P.S. � 201-9.2(a), resulting in a calculation of total damages at $86,149.62.

*257
________________________________________ (Cite as: 251 B.R. 250, *257) ________________________________________
Only at this point is the Debtor's settlement with Gelt and Altegra referenced, as to which it is averred that it reduced the principal loan amount from $19,500 to $8,000 and restored the nine (9%) percent interest rate of the HEMAP loan. Thus, the settlement's effect is measured as reducing the loan principal by $11,500 and eradicating $25,000 in excess interest payments. The Debtor concluded that the Broker is liable for $49,649.62, by taking the difference between the $86,149.62 damage estimate and the $36,500 alleged value of her settlement with Gelt and Altegra.

The Broker's short brief begins from the faulty premise that the Debtor either wanted or needed a consolidation loan to pay off her bills and not a loan to finance home improvements. Without further explanation, the fraud claim is denounced as � �made up� without basis.� The Broker argued there was no fiduciary duty because this was not a relationship in which it exercised superiority, influence, and control over the Debtor.

Finally, the Broker argued that it did not violate UDAP because there was no evidence of illegal charges and no testimony in the record that the Debtor was informed that she would benefit from the transaction. Moreover, the Broker avers that the Debtor did in fact benefit from the transaction because certain of her delinquent obligations were paid.

The Broker's position was, basically, that it is not liable for any damages whatsoever suffered by the Debtor. Therefore, it never addressed the measurement of any damages against it in the seemingly likely alternative event that liability were found.

As a result of these submissions, we find that the parties have addressed only two alternatives, i.e., to either hold that the Broker is not liable for any monetary damages, or to conclude that it is liable for $49,649.62, based on calculations which do not reflect the impact of the Settlement until the back end. We conclude that both damage assessments are significantly flawed. For the reasons set forth in our Discussion at pages 257-262 infra, we find that the Broker clearly engaged in deceptive and unfair trade practices that constituted fraud and a breach of its fiduciary duty, as well as violations of the various consumer protection laws invoked by the Debtor.

Intuitively, the Debtor's calculation of damages appears grossly excessive. It is only after damages are computed and trebled that the alleged benefits of the settlement are deducted. Particularly in light of the UDAP provision that only �actual damages sustained� can be trebled, 73 P.S. � 201-9.2(a), it seems clear to us that an analysis of the Debtor's actual damages, taking into account the terms of the Settlement, must precede any trebling. As a result, we will direct the parties to submit supplemental briefs, on or before June 23, 2000, addressing the issue of damages.

C. DISCUSSION
1. The Broker Has Committed Common-Law Fraud.

The instant underlying loan transaction is another of the sort of oppressive transactions that were at issue in In re Jackson, 245 B.R. 23 (Bankr.E.D.Pa.2000); In re Murray, 239 B.R. 728 (Bankr.E.D.Pa.1999); In re Williams, 232 B.R. 629 (Bankr.E.D.Pa.1999), aff'd as corrected, 237 B.R. 590 (E.D.Pa.1999); and In re Ralls, 230 B.R. 508 (Bankr.E.D.Pa.1999). Unlike these cases, which focused exclusively on the mortgagees and/or their assignees, the Proceeding, in its present posture, focuses solely on the conduct of the Broker. Compare Williams, supra, 232 B.R. at 633 (involved the same Broker).

[1] [2] To establish a valid fraud claim against the Broker, the Debtor was required to demonstrate each of the following: (1) the Broker made a representation; (2) that representation was material to the loan agreement; (3) the Broker had actual knowledge that this representation was *258
________________________________________ (Cite as: 251 B.R. 250, *258) ________________________________________
false, or acted with reckless indifference to its truth; (4) the Broker's intent was to mislead the Debtor; (5) the Debtor was justified in relying on the Broker's representations; and (6) her damages were the proximate result of the Broker's conduct. See In re Zisholtz, 226 B.R. 824, 828 (Bankr.E.D.Pa.1998), citing In re Wright, 223 B.R. 886, 896 (Bankr.E.D.Pa.1998). See also, e.g., In re Orthopedic Bone Screw Products Liability Litigation, 159 F.3d 817, 822 (3d Cir.1998); and Wittekamp v. Gulf & Western, Inc., 991 F.2d 1137, 1142 (3d Cir.), cert. denied, 510 U.S. 917, 114 S.Ct. 309, 126 L.Ed.2d 256 (1993). The Debtor has the burden of proving every one of these elements of fraud by the exacting standard of clear and convincing evidence. See, e.g., Wright, supra, 223 B.R. at 897.

[3] [4] We find that the Debtor has satisfied the exacting standard of proving every element of her claim for fraudulent misrepresentations and omissions. The Broker represented that the Debtor would get the money for home improvements, even though, as early as March 10, 1998, Gelt had provided the Broker with written notice that the cash disbursement to the Debtor could not be greater than $1,950, representing ten (10%) percent of the loan proceeds. The Broker also failed to provide the Debtor with information concerning its fee prior to Closing One.

Further, the Broker omitted any explanation of the Balloon Note, which obligated the Debtor to make a large lump sum payment at the end of the loan term. In fact, we have carefully reviewed a copy of the Note and are unable ourselves to find any disclosure whatsoever of even a general estimate of the lump sum that will be required. The presence and amount of this payment could be ascertained only with tables or extensive calculations which the Debtor was clearly incapable of making. The failure to provide such pertinent information to the Debtor certainly constitutes a material omission.

Finally, we find that a business which holds itself out to the public as having expertise in the mortgage industry commits a material omission where it fails to advise its own client of the potential detrimental effects of entering into such a transaction. Here, the Broker allowed an unsophisticated borrower to refinance a mortgage that doubled her previous interest rate. In fact, the evidence at trial indicates that the Debtor was never informed that her HEMAP loan was paid off as part of the new loan and that she was unaware of the consequences of this until it was too late to do anything about it.

Thus, the Debtor has satisfied the first four elements of fraud because the foregoing material omissions and misrepresentations were committed by an experienced mortgage broker. At a minimum, the Broker acted with reckless indifference by leading an unsophisticated consumer into a detrimental loan transaction. It is quite clear to us that the Broker's intent was in fact to mislead the Debtor.

Moreover, we find that the Debtor was justified in relying on the Broker's representations. As a consumer who recognized her inexperience in the area of finances, the Debtor consulted a broker that advertised its �expertise� in the field. The Debtor indicated to the Broker her reason for seeking a loan, i.e., to finance home improvements, and the Broker had assured her that she would be able to secure the loan for her desired purpose. There was no reason that the Debtor should have suspected that the Broker's intentions were anything less than securing the most advantageous loan possible for its client.

Finally, the Debtor adequately demonstrated that her reliance on the Broker resulted in some proximate financial damages. The Debtor's calculations reveal that she would have paid thousands of dollars in additional interest over the term of the loan had it not been recast by the terms of the Settlement. Thus, the Debtor has proved all the elements of common law fraud, and has only failed to adequately *259
________________________________________ (Cite as: 251 B.R. 250, *259) ________________________________________
address precisely how her damages should be measured because of the presence of the Settlement, which has relieved the Debtor from certain potential damages.

2. The Broker Breached Its Fiduciary Duties to the Debtor.

[5] [6] [7] [8] [9] Having found that the Broker defrauded the Debtor leads almost inevitably to the conclusion that the Broker breached its fiduciary duties to the Debtor as well. As the Debtor argued, the Broker was the agent of the Debtor-principal charged with the undertaking of obtaining a loan to finance home improvements. See Basile v. H & R Block, Inc., 1999 PA Super 44, 729 A.2d 574, 580-82, appeal allowed, 560 Pa. 717, 745 A.2d 1216 (1999) (tax preparer is agent of its customer); and Eckrich v. DiNardo, 283 Pa.Super. 84, 90, 423 A.2d 727, 729 (1980) (�It is established that the broker-client relationship is primarily that of principal and agent. Brown & Zortman v. Pittsburgh, 375 Pa. 250, 100 A.2d 98 (1953); Seligson v. Young, 189 Pa.Super. 510, 151 A.2d 792 (1959).�). As the Court states in Garbish v. Malvern Federal Savings & Loan Ass'n, 358 Pa.Super. 282, 296, 517 A.2d 547, 553-54 (1986):

Under Pennsylvania law, the duty of an agent to his principal is one of loyalty in all matters affecting the subject of his agency, and �the agent must act with the utmost good faith in the furtherance and advancement of the interests of his principal.� Sylvester v. Beck, 406 Pa. 607, 178 A.2d 755 (1962). This duty is the same as that of a fiduciary which has been described as the duty to act for the benefit of another as to matters within the scope of the relation. Restatement of Trusts, 2d, � 2. Fiduciary relations include, among others, principal and agent. Id., comment (b). Because the relationship between the parties in this case was an agency relationship, appellant owed appellees a fiduciary duty and its conduct must be measured against the standard of care owed by a fiduciary.

[10] In its role as an agent, a broker has a duty to �advise his principals of relevant facts and circumstances known to the broker.� Alfaro v. E.F. Hutton & Co., Inc., 606 F.Supp. 1100, 1120 (E.D.Pa.1985). See also Lichtenstein v. Kidder, Peabody, & Co., Inc., 840 F.Supp. 374, 388 (W.D.Pa.1993); Merrill Lynch, Pierce, Fenner & Smith v. Perelle, 356 Pa.Super. 165, 183, 514 A.2d 552, 560 (1986) (agent has a duty to use a reasonable effort to give principal information which is relevant to affairs entrusted to him); and RESTATEMENT (SECOND) OF AGENCY, � 381, at 182 (1958).

[11] In defense, the Broker cited Pennsylvania Dep't of Transp. v. E-Z Parks, Inc., 153 Pa.Cmwlth. 258, 268, 620 A.2d 712, 717 (1993), for the principle that no fiduciary relationship existed between the Broker and the Debtor because the latter did not vest the former with substantial control over her financial affairs. E-Z Parks involved a quite distinct attempt of a party contracting with a state agency to argue that the agency had fiduciary duties to it. It is difficult to imagine a state agency as a fiduciary of a private party with which it contracts. A contractual relationship does not create a fiduciary relationship. However, the instant relationship of the Debtor and the Broker was not simply a contractual relationship. The unsophistcated Debtor entrusted the acquisition of a home improvement loan which would best save her interests to the Broker. In fact, the Debtor's lack of financial sophistication and knowledge caused her to entrust almost a blind faith to the Broker in its undertaking.

[12] As it developed, the Broker failed to obtain the home improvement financing sought by the Debtor and substituted a consolidation loan to satisfy certain of her indebtednesses without informing her and without taking either her wishes or needs into consideration. The loan obtained did *260
________________________________________ (Cite as: 251 B.R. 250, *260) ________________________________________
not serve the Debtor's wants or needs. Thus, the Broker's motivation for producing the loan was clearly not to serve the Debtor's interest in obtaining a home improvement loan, but to serve its own interest of obtaining a handsome broker's fee. Such self-dealing constitutes a flagrant violation of the Broker's fiduciary duties to the Debtor. See Shapiro v. Stahl, 195 F.Supp. 822, 825-26 (M.D.Pa.1961).

For the foregoing reasons, we conclude rather easily that the Broker is guilty of breaching the duties arising from its fiduciary relationship with the Debtor.

3. The Broker Is Liable to the Debtor for Certain Damages Under the CSA.

[13] In her brief the Debtor, for the first time, references claims which she asserts against the Broker under the CSA. The CSA is Pennsylvania state legislation enacted in 1992 to regulate the conduct of �credit services organizations� and �loan brokers,�

With certain exceptions which do not appear applicable, the CSA defines a �loan broker,� at 73 P.S. � 2182, as

(1) [a] person who

(i) For or in expectation of a consideration fee arranges or attempts to arrange or offers to fund a loan of money, a credit card or line of credit for personal, family or household purposes.

(ii) For or in expectation of a consideration fee assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit or related guarantee, enhancement or collateral of any kind or nature.

(iii) Acts for or on behalf of a loan broker for the purpose of soliciting borrowers.

(iv) Holds himself out as a loan broker.

The Broker clearly appears to meet all of these criteria.

[14] The CSA provides, at 73 P.S. � 2188(c)(2), as follows:

(c) Prohibited acts.- No loan broker shall:

...

(2) Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage directly or indirectly in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of services of a loan broker, notwithstanding the absence of reliance by the buyer....

Our findings, at pages 257-260 supra, that the Broker engaged in common law fraud and violated its fiduciary duties to the Debtor constitute sufficient support, in and of themselves, to result in a violation of 73 P.S. � 2188(c)(2).

[15] The CSA further states that any violations of its provisions are deemed to be violations of UDAP. 73 P.S. � 2190(a). In addition, the CSA includes its own measure of damages, at 73 P.S. � 2191, which states as follows:

Any buyer or borrower injured by a violation of this act or by the credit services organization's or loan broker's breach of a contract subject to this act may bring an action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer or borrower to the credit services organization or loan broker, plus reasonable attorney fees and costs. An award, if the trial court deems it proper, may be entered for punitive damages (emphasis added).

[16] The CSA thus enhances the principle that the Broker's fraud and breach of fiduciary duties constitutes a violation of UDAP which may qualify for UDAP's treble damages provision. In addition, the CSA provides that, if any actual damages whatsoever are proven, the offending loan *261
________________________________________ (Cite as: 251 B.R. 250, *261) ________________________________________
broker is liable for an amount no less than the amount of fees paid to it by the borrower, as well as reasonable attorney fees and costs. Here, the Broker charged the Debtor fees of $1950. It is therefore difficult to see how the Broker's damages for the pertinent CSA violation could be less than that amount.

The issue which the parties must address is whether damages must be allowed in a greater amount under the common law tort theories advanced by the Debtor or, most notably, under UDAP. At this point, we will only add a discussion of the Broker's potential damages under UDAP.

4. The Broker Appears Liable for at Least Some Additional Damages Under UDAP.

[17] Like most states, Pennsylvania, in 1968, enacted UDAP as a statute aimed at generally prohibiting and punishing certain deceptive trade practices. See In re Russell, 72 B.R. 855, 870 (Bankr.E.D.Pa.1987). In 1976, 73 P.S. � 201-9.2 was added to UDAP to expressly provide parties victimized by practices prohibited thereby with a private cause of action against those who victimized them. Id. at 871. Although there is a broad range of other Pennsylvania consumer protection legislation, 73 P.S. � 201-9.2(a) is often the only section that specifically provides a private cause of action to aggrieved consumers as to many of these laws. Any substantial violation of any of these consumer protection laws would �certainly seem to us to constitute per se �fraudulent conduct which creates a likelihood of confusion or of misunderstanding.� � Id.

[18] [19] Under UDAP, a plaintiff must have suffered �ascertainable loss of money or property� to recover actual damages, which may be trebled, or $100.00, whichever is greater. UDAP is a remedial statute that should be liberally construed to effect its objective of protecting consumers in a number of various activities. Commonwealth v. Monumental Properties, Inc., 459 Pa. 450, 457-58, 329 A.2d 812, 815-16 (1974).

[20] The business of a loan broker such as the instant Broker is conduct which is clearly a sale of a service within the scope of UDAP. In In re Andrews, 78 B.R. 78, 82 (Bankr.E.D.Pa.1987), we held that any violation of consumer protection laws by a mortgage lender may give rise to a cause of action within the scope of UDAP. See also In re Jungkurth, 74 B.R. 323, 329 (Bankr.E.D.Pa.1987), aff'd, 87 B.R. 333 (E.D.Pa.1988) (extending scope of UDAP to business loans secured by mortgages).

Other jurisdictions have applied similar consumer protection laws to mortgage brokers. A Michigan court applied a state consumer protection statute to a mortgage broker who advertised its services as procuring loans for borrowers seeking personal home loans in In re Dukes, 24 B.R. 404, 410 (Bankr.E.D.Mich.1982). Moreover, the CSA, at 73 P.S. � 2190(a), expressly states that any violation of the CSA is deemed to be a violation of UDAP.

[21] In the instant case, the Broker's conduct was clearly unfair and deceptive. We find the Broker may have violated the UDAP's specific prohibitions on �[a]dvertising ... services with an intent not to sell them as advertised,� 73 P.S. � 201-2(4)(ix), and �[k]nowingly misrepresenting that services, ... are needed if they are not needed.� 73 P.S. � 201-2(4)(xv). In any event, the Broker clearly violated the �catch-all� provision barring it from �[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding,� 73 P.S. � 201-2(4)(xxi), by (1) failing to disclose to the Debtor the detrimental effect of refinancing a loan with a nine (9%) percent interest rate for a loan with a 17.99% interest rate; (2) failing to give notice to the Debtor that the loan amount was $19,500 when she requested a loan for $10,000; (3) failing to adequately disclose to the uneducated Debtor that executing a *262
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Balloon Note would result in a final large lump sum payment; (4) failing to disclose or estimate the amount of the lump sum payment in the Balloon Note. ( Compare In re Fricker, 115 B.R. 809, 822 (Bankr.E.D.Pa.1990)); (5) failing to inform the Debtor that the proceeds that she would ultimately receive from a $19,500 loan were less than $500, an amount clearly insufficient to complete the intended home improvements; and (6) failing to notify the Debtor that the loan approved by Gelt on March 10, 1998, limited cash disbursements to $1,950, representing 10% of the total loan, which is an amount clearly insufficient to cover the intended home improvements.

In measuring the Debtor's damages under UDAP, we draw the parties' attention to our decision in In re Milbourne, 108 B.R. 522, 543-44 (Bankr.E.D.Pa.1989). There, we found that a lender violated the UDAP �catch-all� provision by failing to advise borrowers of their economic detriment in refinancing loans as opposed to writing requests for further advances as new loans. Id. at 535-39. This conduct of recasting mortgages in forms detrimental to borrowers is similar in substance to the conduct of the Broker in its effect on the Debtor. See also Fricker, supra, 115 B.R. at 818-24 (violation of state Debt Pooling Act, 18 Pa.C.S.A. � 7312, in refinancing of business loan transaction is violative of UDAP). However, when we found that the Milbourne debtor-plaintiff had suffered certain actual damages but we were unable to accept the debtor plaintiff's quantification of her actual damages, we allowed the plaintiff to recover $100 for each of five transactions in which this conduct took place.

[22] [23] We therefore conclude that the Debtor is entitled to at least some actual damages under UDAP as a result of the Broker's conduct. However, for the reasons stated at pages 256-258 supra, we are unwilling to qualify same without giving the parties at least some additional opportunity to address this issue further. We also note that both the CSA and UDAP permit recovery of reasonable attorneys' fees and costs, and we further cannot quantify any such amounts until the damages are fixed.

D. CONCLUSION

An order finding the Broker liable to the Debtor for fraud, breach of a fiduciary duty, and violation of the CSA and UDAP, but directing the parties to render supplemental submissions on this subject, is therefore entered. Of course, we urge the parties, guided by this Opinion, to settle the issue of damages between them.

SUPPLEMENTAL OPINION
A. INTRODUCTION

In our Opinion of June 15, 2000, in the instant adversary proceeding (�the Proceeding�), now reported only at 2000 WL 777857 (� Barker I�), we held that MCGLAWN & MCGLAWN, INC., a mortgage broker (�the Broker�), committed fraud, breached its fiduciary duty to the Debtor-borrower, BEATRICE BARKER (�the Debtor�), and violated two Pennsylvania consumer protection statutes in arranging a loan transaction for the Debtor which we found was detrimental to the Debtor's interests. However, we refrained from liquidating the Debtor's damages until we gave the Broker and the Debtor, who posed the following extreme respective positions, an opportunity to address a proper measurement of damages in light of Barker I: (1) no damages occurred; and (2) the debtor was entitled to over $86,000 damages by disregarding a settlement between the mortgagee, its assignee, and the Debtor.

Unfortunately, both parties, in supplement submissions, refused to compromise their initial extreme postures. We nevertheless proceed to apply the principles of Barker I in concluding that the Broker is liable for statutory damages in the amount of the $1950 fee that it collected as compensation for procuring the detrimental *263
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loan under the state Credit Services Act, 73 P.S. � 2181, et seq. (�the CSA�); statutory damages in an additional total amount of $500 for its numerous violations of Pennsylvania's unfair and deceptive practices act, 73 P.S. � 201-1, et seq. (�UDAP�); and punitive damages in the amount of $5000, resulting in a total award to the Debtor of $7450, plus reasonable attorneys fees and costs to be subsequently determined.

B. PROCEDURAL AND FACTUAL HISTORY

As this opinion supplements Barker I, we incorporate same, at *1-*4, to the point of that Opinion. At the end of Barker I, at *10, we directed the parties to submit supplemental briefs, on or before June 23, 2000, addressing the issue of damages in light of that decision.

In her briefing prior to Barker I, the Debtor had calculated her damages under UDAP by first asserting that she would have had to have paid an additional $43,000 in interest over the term of the loan procured by the Broker with an interest rate of nearly eighteen (18%) percent, as compared to the interest she would have repaid under her previously pending loan with a principal balance of $8200 and an interest rate of nine (9%) percent. The Debtor then postulated that the $43,000 excessive interest payments reduced to their present value would have resulted in $25,000 damages. Fees and costs to the Broker totaling $3,716.54 were added to the Debtor's calculation to arrive at total actual damages at $28,716.54. The Debtor then invoked UDAP's provision for treble damages, 73 P.S. � 201-9.2(a), resulting in a calculation of gross damages at $86,149.62.

The Debtor next posited that the value of her settlement (�the Settlement�) with the original lender in the loan transaction at issue, Gelt Financial Corporation (�Gelt�), and Gelt's assignee, Altegra Credit Company (�Altegra�), was $36,500. In so doing, she reasoned that the terms of the Settlement reduced the principal loan balance from $19,500 to $8,000, resulting in a reduction of $11,500. Further, she alleged that the Settlement saved her the $25,000 in the present value of her excess interest payments. Thus, the $86,149 .62 total damage calculation was reduced by $36,500, leaving the Broker liable for $49,649.62.

In response to these submissions, we stated in Barker I, at *4, that �the Debtor's calculation of damages appears grossly excessive� because �it seems clear to us that an analysis of the Debtor's actual damages, taking into account the terms of the Settlement, must precede any trebling� of damages under UDAP. Nevertheless, in her supplemental brief, the Debtor did not proffer a different formula or analysis to calculate her damages in light of Barker I. Rather, she merely reiterated her position that the Broker is liable for $49,649.62, this time merely explaining in greater detail how she arrived at this figure. Alternatively, the Debtor suggested that we should award punitive damages in the amount of $28,716.54, which represents her figure for �actual damages� prior to invoking UDAP's treble-damage provision.

Similarly, the Broker, in its supplemental brief, stubbornly maintains its position that it is not liable to the Debtor for any damages whatsoever or alternatively, for no more than $100 in damages. In its pre- Barker I briefing, the Broker argued that the Debtor actually benefitted from the original loan transaction because various of her bills were paid off by the loan procured by the Broker. However, in Barker I, at *7, we stated that

[t]he loan obtained did not serve the Debtor's wants or needs. Thus, the Broker's motivation for producing the loan was clearly not to serve the Debtor's interest in obtaining a home improvement loan, but to serve its own interest of obtaining a handsome broker's fee. Such self-dealing constitutes a flagrant violation of the Broker's fiduciary duties to the Debtor....

*264
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Nevertheless, the Broker's position, as expressed in its supplemental brief, continues to be that the Debtor should not be awarded any or very little monetary damages because she benefitted from the loan transaction.

Thus, although the Broker was seemingly bound by our Barker I conclusions, at *4-*6, that it engaged in fraud; breached its fiduciary duties to the Debtor, id. at *6-*7; and was at least liable for $1950 in statutory damages under 73 P.S. � 2191 of the CSA, id. at *8, the most that the Broker conceded is that the Debtor might recover damages of $100, based on our finding of UDAP damages under the facts of In re Milbourne, 108 B.R. 522, 543-44 (Bankr.E.D.Pa.1989).

C. DISCUSSION
1. Neither Party Has Adhered to �the Law of the Case� Established in Barker I in Their Present Briefing.

[24] We begin our discussion by noting that both the Debtor and the Broker have failed to limit their supplemental briefs to the narrow issue of the calculation of damages in light of our decision in Barker I. In so preceding the parties failed to recognize the principles of the �law of the case� doctrine, which provide that a court should change a prior ruling in a case �only where that ruling is �clearly erroneous' and it �would work a manifest injustice� to adhere to it.� In re Cole, 89 B.R. 433, 436 (Bankr.E.D.Pa.1988), citing, e.g., Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983); Cowgill v. Raymark Industries, Inc., 832 F.2d 798, 802-04 (3d Cir.1987); and Zichy v. Philadelphia, 590 F.2d 503, 508 (3d Cir.1979).

The approaches of both parties can thus be likened to the �regurgitating issues and arguments that we rejected� in a prior decision, which we regarded with �considerable dismay� in In re Rothman, 206 B.R. 99, 104 (Bankr.E.D.Pa.1997). Therefore, we are compelled to proceed, with little help from the parties, to make a determination of the damages properly payable by the Broker to the Debtor in the Proceeding in light of Barker I.

2. The Broker Is Clearly Liable for Statutory Damages in the Amount of the $1950 Fee It Charged the Debtor, Pursuant to the CSA.

[25] The CSA explicitly states, at 73 P.S. � 2191, that a borrower injured by a loan broker is entitled to recover �in no case less than the amount paid by the buyer or borrower to the ... loan broker.� See also 73 P.S. � 2188. Our research has not yielded any cases applying the CSA; however, the Broker in the instant case meets the definition of �loan broker� within the CSA. Moreover, in Barker I, at *8, we found that � 2188(c)(2) of the CSA prohibits exactly the kind of deceptive behavior engaged in by the Broker. The Broker is thus prohibited from retaining its commission received in the transaction because it engaged in intentional, improper practices. Our findings that the Broker engaged in common law fraud and violated its fiduciary duties are quite sufficient to establish blatant and fundamental violations of the CSA on its part. See Barker I, at *7-*8.

The Broker's proposal for calculating damages is flawed because it disregards the express language of the CSA. The only case the Broker cites in its supplemental brief is Milbourne, supra, for the proposition that the maximum amount the Debtor in the instant case should recover is $100. However, the Milbourne Debtor received $100 for each of five separate violations of UDAP, in addition to other remedies, including recession of the loans and other monetary damages under the Truth in Lending Act. 108 B.R. at 544-45. Here, the Broker failed to acknowledge that its conduct violated the express language of the CSA, in addition to UDAP violations, and the minimum amount of a borrower's recovery as established by 73 P.S. � 2191 of the CSA, as indicated above, is the broker's fee. See 73 P.S. � 2191. Thus, *265
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we reject the Broker's argument that it is liable to the Debtor for a maximum of $100 in damages and easily find that the Debtor must recover at least the $1950 Broker's fee under the CSA.

3. The Debtor Failed to Quantify Any �Actual Damages� Pursuant to UDAP; However, the Broker's Conduct Renders It Liable for an Additional $500 in Statutory Damages Under UDAP.

[26] UDAP expressly limits recovery to �actual damages,� which may be trebled, or $100, whichever is greater. 73 P.S. � 201-9.2(a). In Barker I, at *8-*10, we held that the Broker had violated at least UDAP's �catch-all� provision that prohibits any �fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding.� 73 P.S. � 201-4(xxi). The Broker's distinct acts of misconduct in the instant case, as set forth in Barker I, at *9, include (1) failing to disclose to the Debtor the detrimental effect of refinancing her pending loan with a nine (9%) percent interest rate in a loan with a 17.99% interest rate; (2) procuring a consolidation loan for $19,500, although the Debtor requested a home improvement loan for $10,000; (3) allowing the Debtor to execute a balloon note without disclosing the amount of the final lump payment, or even explaining to the na�ve Debtor that a balloon note requires a large payment at the end of the loan term; and (4) failing to disclose to the Debtor that the maximum cash disbursement that would be permitted by the lender to her was $1,950, and that the cash proceeds she would ultimately receive would be less than $500, an amount clearly insufficient to fund the home improvements the she intended to finance with the loan proceeds.

We conclude that each of the above acts is sufficiently discrete and �unfair� to constitute a separate violation of UDAP's �catch-all� provision. Pursuant to our holding in Milbourne, the Broker had a duty to disclose to the Debtor more economically feasible options than refinancing a mortgage with a nine (9%) percent interest rate with a mortgage bearing interest of approximately eighteen (18%) percent. Likewise, the Debtor should have been advised of the economic consequences of executing a balloon note. Like the debtor in In re Smith, 866 F.2d 576, 584-85 (3d Cir.1989), the instant Debtor had the right to expect fair and aboveboard treatment from the Broker, who was allegedly procuring the best loan terms available for her to obtain the desired home improvements on her behalf. Each of the acts set forth in the preceding paragraph reveals distinct incidents of substantially unfair treatment of the Debtor by the Broker which are sufficient to constitute discrete UDAP violations in the context of the fiduciary relationship that existed between the parties.

In Barker I, at *7, we also stated the Broker may have violated UDAP's prohibition on �[a]dvertising ... services with an intent not to sell them as advertised,� 73 P.S. � 201-4(ix), and �[k]nowingly misrepresenting that services ... are needed if they are not needed.� 73 P.S. � 201-4(xv). The record was not sufficiently developed to support a finding that the Broker engaged in false advertising practices. However, we find that there are ample facts of record to support the conclusion that the Broker knowingly misrepresented to the Debtor that she needed unnecessary services. Specifically, the Broker led the Debtor into a transaction where she refinanced an existing mortgage when the Debtor had requested home improvement financing. In fact, we found in Barker I, at *6, that the Broker arranged the use of the loan proceeds to pay off the Debtor's various unsecured debts �without informing her and without taking either her wishes or needs into consideration.�

[27] In Milbourne, supra, we stated that �a showing of �actual damages' is a prerequisite of any successful cause of action under 73 P.S. � 201-9.2(a).� 108 B.R. at 544. Nevertheless, we have also held *266
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elsewhere that a plaintiff's failure to quantify damages does not preclude a finding that a plaintiff is entitled to recover some damages. In re Jungkurth, 74 B.R. 323, 335-36 (Bankr.E.D.Pa.1987), aff'd, 87 B.R. 333 (E.D.Pa.1988). See also In re Chapman, 77 B.R. 1, 6 (uncertainty as to the correct measure of damages does not preclude recovery if a defendant is clearly liable to the plaintiff).

The lender in Milbourne was liable under UDAP for failing to disclose to the debtor the advantages of making new loans, as opposed to refinancing existing ones. See also Besta v. Beneficial Loan Co. of Iowa, 855 F.2d 532 (8th Cir.1988) (lender has a duty to at least disclose more economical feasible options to borrowers); In re Stewart, 93 B.R. 878, 887 (Bankr.E.D.Pa.1988) (retailer marked up prices of appliances to credit customers to such an extent that it violated UDAP); and In re Wernly, 91 B.R. 702, 704 (Bankr.E.D.Pa.1988) (check casher's charges were so unconscionable that they amounted to UDAP violations). In Smith, supra, the court found that a lender's substantially unfair conduct was sufficient to constitute a violation of UDAP because a homeowner borrowing money from a lending institution �may reasonably expect that he or she will receive fair and aboveboard treatment in their dealings and no undue advantage will be taken by the lender.� 866 F.2d at 584.

Because we found that the Milbourne debtor had suffered certain actual damages, but that these were incapable of quantification, we awarded the plaintiff $100 for each of five transactions that violated UDAP. 108 B.R. at 544-45. However, the Milbourne debtor was not entitled to recover additional damages for UDAP violations arising from the lender's failure to disclose the advantages to it of taking multiple mortgages because the debtor failed to demonstrate that she incurred any actual damages as a result of the lender's omission. Id.

The Debtor cites several out-of-state cases to support a proposition contrary to our conclusion in Barker I, at *4, referenced at page 263 supra, that actual damages should be trebled prior to deducting the value of the Settlement with the co-defendants. However, the circumstances which caused the courts to so proceed in those cases are distinguishable from those of the instant case. In Seafare Corp. v. Trenor Corp., 88 N.C.App. 404, 408, 363 S.E.2d 643, 648 (1988), one of the cases cited by the Debtor, there was a jury verdict for the plaintiff in the amount of $400,000. The trial court deducted a $137,000 settlement with one defendant prior to trebling the $263,000 difference. The court relied on a state statute and a Texas case to conclude the trial court erred in deducting the settlement prior to trebling the judgment amount. 88 N.C.App. at 416-17, 363 S.E.2d at 652-53. The applicable statute, N.C.Gen.Stat. � 75-16 (1999), provided that �judgment shall be rendered ... for treble the amount fixed by verdict.�

In contrast to the instant case, the dispute in Seafare was whether settlement with a co-defendant should be deducted from the amount of a judgment based on a jury verdict before or after trebling. Here, there has been no judgment. We are unwilling to equate the Debtor's asserted losses with actual losses determined by a jury verdict or a final judgment.

Similarly, Providence Hospital v. Truly, 611 S.W.2d 127 (Tex.Civ.App.1980), the Texas case cited by the Seafare court in support of its decision, holds that actual damages should be trebled prior to deducting the settlement with a co-defendant. However, the actual damage figure was, again, determined by a jury. The Truly jury found that a woman injured when a contaminated drug was injected in her eye during surgery was entitled to $15,000 as fair and reasonable compensation for her injuries. Id. at 130. The $15,000 was trebled to determine the Truly plaintiff's total damages. It is also noteworthy that the provision for trebling actual damages is mandatory under the Texas Deceptive *267
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Trade Practices Act, whereas in Pennsylvania the court may use its discretion in deciding whether to award treble damages. Compare Tex.Bus. & Com.Code Ann., � 17.50 (West 1999), with 73 P.S. � 201-9.2(a).

Thus, in both of the cases cited by the Debtor, the basis of the damages was a jury verdict quantifying the �actual damages.� Here, the Debtor is basing her damages on potential losses which did not in fact occur because of the Settlement and which no jury or other court has ever sustained. In these circumstances, we reiterate our unwillingness to accept the Debtor's damage calculations as any sort of basis for fixing her �actual damages� under UDAP. However, because we found that the Debtor incurred some unquantifiable actual damages as a result of five separate UDAP violations by the Broker, despite the Settlement, we will, as in Milbourne, award $100 for each of these five UDAP violations, or a total of $500 in consideration of the Broker's UDAP violations.

4. The Debtor Is Entitled to a Punitive Damage Award of $5000 Because the Broker Engaged in Fraud and Violated Its Fiduciary Duties to Her.

[28] [29] Under Pennsylvania law, punitive damages may be awarded �only if an actor's conduct was malicious, wanton, willful, oppressive, or exhibited a reckless indifference to the rights of others.� Johnson v. Hyundai Motor America, 698 A.2d 631, 639 (Pa.Super.1997). The purpose of punitive damages is to punish a guilty party for outrageous conduct and to deter similar conduct in the future. See Kirkbride v. Lisbon Contractors, Inc., 521 Pa. 97, 103, 555 A.2d 800, 803 (1989). See also In re Aponte, 82 B.R. 738, 745-46 (Bankr.E.D.Pa.1988); and In re Tigue, 82 B.R. 724, 737-38 n. 3 (Bankr.E.D.Pa.1988).

[30] [31] In determining the amount of the punitive damages to award, the trier of fact must consider the act or omission together with the motive of the wrongdoer and the relationship between the parties. See Feld v. Merriam, 506 Pa. 383, 395, 485 A.2d 742, 748 (1984), quoting Chambers v. Montgomery, 411 Pa. 339, 345, 192 A.2d 355, 358 (1963). The amount of punitive damages awarded should be gauged by the gravity of the offense and the defendant's financial position because �[t]he award must be sufficient to sting the pocketbook of the wrongdoer.� Aponte, supra, 82 B.R. at 745, quoting Mercer v. DEF, Inc., 48 B.R. 562, 566 (Bankr.D.Minn.1985).

A case in point is In re B. Cohen & Sons Caterers, Inc., 97 B.R. 808, 817-18 (Bankr.E.D.Pa.1989), aff'd in part & rev'd in part, 108 B.R. 482 (E.D.Pa.1989), appeal dismissed, 908 F.2d 961 (3d Cir.1990), clarified on remand, 1990 WL 2632 (Bankr.E.D.Pa. Jan.11, 1990), aff'd, 124 B.R. 642 (E.D.Pa.), aff'd, 944 F.2d 896 (3d Cir.1991), where we awarded $10,000 in punitive damages to a catering business because its landlord had violated the automatic bankruptcy stay and destroyed or damaged a large amount of the debtor's property. We noted in that case that we did not consider this to be a particularly liberal damage award, given that the landlord was a large realty company that owned several shopping centers. Id. at 818. The debtor was justified in receiving $10,000 in punitive damages because the landlord's conduct was shocking, willful, and �characterized by a mode of destruction and disrespect for the law [and] the needs and interests of the Debtor ... which we find intolerable.� Id.

By way of comparison, in Aponte, supra, the court noted that the wrongdoer was an individual of moderate income who operated a small and deteriorating commercial business. 82 B.R. at 746. Thus, the Aponte court awarded the Debtor only $2,000 in punitive damages as an appropriate amount to deter the wrongdoer from repeating his reprehensible conduct. Id. See also In re Wagner, 74 B.R. 898, 905 (Bankr.E.D.Pa.1987) (punitive damages of *268
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$500 for an aggravated violation of the automatic stay was sufficient because the wrongdoer was a private individual with a moderate income).

[32] [33] [34] This is an instance where the deterrent and punitive purposes of a punitive damage award would be well-served. Punitive damages are appropriate here because the Broker's conduct revealed a flagrant disregard of its duty to act as a fiduciary on the Debtor's behalf. We also note that we are authorized to award the Debtor punitive damages in an amount in excess of the Debtor's compensatory or actual damages because Pennsylvania law does not mandate that punitive damages bear a direct relationship to compensatory damages. See In re Valley Forge Plaza Associates, 113 B.R. 892, 908 (Bankr.E.D.Pa.), aff'd in part & rev'd in part on other grounds, 120 B.R. 789 (E.D.Pa.1990). See also Kirkbride, supra, 521 Pa. at 103, 555 A.2d at 803. In fact, specific �actual damages� are not necessary to award punitive damages. Valley Forge Plaza, supra, 113 B.R. at 909; and Kirkbride, supra, 521 Pa. at 102, 555 A.2d at 802.

[35] In the instant case, we determine that $5000 in punitive damages is an appropriate award in light of the Broker's economic circumstances, as well as in light of its fraudulent conduct, blatant disregard for the CSA and UDAP, and lack of good faith and breach of fiduciary duties in intentionally deceiving an unsophisticated consumer. The record does not contain much evidence concerning the scale of the Broker's business or its financial condition. We believe, however, that the Broker is a relatively small commercial business that operates out of one office. Thus, we feel that an award to the Debtor of $5000 in punitive damages represents a rather substantial penalty which should adequately punish the Broker and deter any future similarly reprehensible conduct. The Broker's misstatements and omissions were shocking, particularly in light of our holding in Barker I that the Broker had a fiduciary duty to act in the best interests of the Debtor. Moreover, we found that the Broker's conduct was intentional or, at a minimum, sufficiently reckless to warrant an award of $5,000 in punitive damages to the Debtor.

Accordingly, we reject the Debtor's suggestion that we award her punitive damages of $28,716.34. That amount appears grossly excessive, particularly since the record did not contain evidence to support the conclusion that such an amount is reasonable in light of the Broker's financial position. Further, we reiterate that the gravity of the harm the Debtor suffered was greatly reduced by the terms of the Settlement with the other defendants.

In its supplemental brief, the Debtor devoted some attention to arguing that it is at this juncture entitled to attorneys' fees of $10,650 and costs of $587.10 from the Broker under the CSA, 73 P.S. � 2191, and under UDAP, 73 P.S. � 201-9.2(a), as interpreted in, e.g., In re Andrews, 78 B.R. 78, 85 (Bankr.E.D.Pa.1987); and Croft v. P. & W. Foreign Car Service, Inc., 383 Pa.Super. 435, 439, 557 A.2d 18, 20 (1989), after taking account of the $4750 paid by Gelt and Altegra on account of the Debtor's attorneys fees.

However, It is not our practice to fix or even commence the process of awarding reasonable attorneys' fees and costs until after a final order fixing the damages has been entered. We are just now at that stage.

Our within order incorporates our usual procedure for determining such amounts. It also requires that the considerable damages awarded to the Debtor be, at best in the first instance, subject to administration by the Standing Chapter 13 Trustee.

D. CONCLUSION

An Order finding the Broker liable to the Debtor for total damages of $7,450.00 and establishing the procedure for payment of this sum and submission of an application for attorneys' fees and costs *269
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due to the Debtor from the Broker will be entered.

For additional information about starting a credit repair company in [STATE] contact your state or an attorney.

Requirements for Surety Bond for Credit Repair Business in Pennsylvania

A few states do require a surety bond. (At the time of this writing most states do not require a bond.) If your state does require a bond, you are not required to secure your bond from your same state.

Bonds are a minimal expense (usually under a few hundred dollars) because you order them from a bond service and pay only a small fraction of the bond yourself. A Credit Repair Services Organization Bond protects you. For more information about Credit Repair Services Organization Bonds, contact BondsExpress.

If you get your bond through a bonds service, the amount you pay will generally be 2-3% of the total bond amount (this cost varies depending upon your credit).

Statute of Limitation on Debt in Pennsylvania

Pennsylvania credit repair businesses must be knowledgeable about the statute of limitation governing debt in Pennsylvania because this will guide your business decisions and enable you to best help your clients. The statue of limitations essentially limits the time that a creditor can legally sue a consumer for payments for a debt. Statutes of Limitation (SOL) do vary by state and debt type. In general, it is usually between 3 to 6 years, but sometimes longer.

To learn more about the statute of limitation laws for your state, click here.

Pennsylvania Credit Repair License

We’re not aware of a state requirement for a “credit repair license” to operate a credit repair business in Pennsylvania. However, many find getting training and a certification useful because it:

  • Conveys competence to prospective clients
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Market Potential for a Pennsylvania Credit Repair Business

Market Temperature:

0 1 2 3 4 5 6 7 8 9 10
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Percentage Of Credit Reports That Have Errors

79%

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Total Number of People Living in Pennsylvania

12.78 Million

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Average Debt on Credit Report

$5,700

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Percent of Population With Credit Scores Below 700

44.3%

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Percent of home buyers getting a mortgage for their home purchase

88%

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Frequently asked questions

How can I check that the name I want for my credit repair business is available in Pennsylvania?

The Pennsylvania Department of Community and Economic Development has an advanced online tool where you can search for already registered credit repair companies. Using this search tool, you can check to see if the name you want for your business is available, what other credit repair companies are located in Pennsylvania, as well as other helpful information.

What are the steps to starting a credit repair business in Pennsylvania?

The Pennsylvania Department of State has put together a very detailed and useful guide for starting a new business in Pennsylvania, which can be found here. It includes filing guidelines, methods of filing, and a schedule of fees.

Do I need Workers’ Compensation Insurance for credit repair business in Pennsylvania?
If you have one or more employees who works for your credit repair company in Pennsylvania, you are required to carry Workers’ Compensation Insurance. There are certain exclusions, which can be found in this Pennsylvania Workers’ Compensation Employers Information document. The document has detailed information about Workers’ Compensation for your business repair company.

What Other Credit Repair Businesses Say

ROB Y

Laredo, TX

We have a tax preparation business. My partner and I decided to branch out into credit repair. Credit Repair Cloud now helps us to build our customer base for the tax business. It is a wonderful tool for lead generation. Credit-Aid provides superior customer service. You have gained a customer for life!
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MANAL MASSIS

Houston, TX

I love your system! This was the best investment ever and the customer service with Credit Repair Cloud is excellent. You have a very good team. I wish companies were just like you. I've tried everybody out there and your system is very powerful. Thank you for helping me. God bless you!
MANAL MASSIS

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How to Quickly Start a Profitable Credit Repair Business

MINUTESSECONDS
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Secret 1

How Credit Repair is the LOWEST COST & MOST PROFITABLE business you can launch. . .

Secret 2

How our step-by-step “Dispute Process Blueprint” gives you EASY Credit Repair Results without being a credit expert. . .

Secret 3

How our easy method gets you UNLIMITED Clients without paying for advertising. . .

Legal disclaimer: Our software products and resources offer credit information, not legal advice. We make every effort to ensure the accuracy of the information and to clearly explain your options. However, we do not provide legal advice (i.e.; the application of the law to your individual circumstances). For legal advice, please consult an attorney, your city or your state.