In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2455
T RAVIS M. B ONTE and JOLENE A. B ONTE,
Plaintiffs-Appellants,
v.
U.S. B ANK, N.A.,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 3:08-cv-00696—Stephen L. Crocker, Magistrate Judge.
A RGUED F EBRUARY 9, 2010—D ECIDED O CTOBER 19, 2010
Before P OSNER, R OVNER, and S YKES, Circuit Judges.
R OVNER, Circuit Judge. Travis and Jolene Bonte sued
U.S. Bank, N.A. under the Truth in Lending Act (“TILA”),
15 U.S.C. §§ 1640, et seq., seeking mortgage rescission.
Their complaint alleges that U.S. Bank succeeded a mort-
gage lender that violated TILA by misstating certain
charges related to the Bontes’ mortgage. The district
court granted U.S. Bank’s motion to dismiss, Fed. R. Civ.
P. 12(b)(6), after concluding that the Bontes failed to
2 No. 09-2455
respond to U.S. Bank’s contention that none of the mis-
statements identified in the complaint were “material,” as
required by TILA for mortgage rescission. The Bontes
appeal, but again fail to provide any meaningful re-
sponse to U.S. Bank’s claim that none of the allegedly
misstated disclosures entitle them to rescission. We
thus affirm the dismissal of their complaint.
I.
According to the facts in the complaint, which we
accept as true at this stage, the Bontes own their home
in Woodville, Wisconsin. In December 2005, they took
out a third mortgage on the home through FMF Capital,
LLC for approximately $315,000, payable over a 30-year
period. The proceeds of the mortgage were used, in part,
as payment on the Bontes’ first mortgage with Chase
Bank and their second mortgage with Bremer Bank.
Subsequently, the loan was transferred to U.S. Bank,
which initiated foreclosure proceedings against
the Bontes. The foreclosure action was dismissed in
April 2007.
The Bontes later filed suit in federal district court
seeking rescission of the third mortgage based on “inaccu-
rate and inconsistent disclosures” in their HUD-1 settle-
ment statement and required TILA statement and dis-
closures. U.S. Bank moved to dismiss the Bontes’ com-
plaint under Federal Rule of Civil Procedure 12(b)(6)
for failure to state a claim, arguing that none of the
alleged errors in the disclosure statements related to
a “material” disclosure, as required for rescission more
No. 09-2455 3
than three days after the mortgage. In response, the
Bontes reiterated the allegations in their complaint and
argued generally that TILA should be liberally con-
strued in favor of consumers.
The district court granted U.S. Bank’s motion to
dismiss, concluding that the Bontes had failed to demon-
strate that the facts laid out in their complaint entitled
them to rescission. In response to U.S. Bank’s assertion
in its motion to dismiss that none of the ten allegedly
misstated charges identified in the Bontes’ complaint
were “material,” the Bontes had simply restated the
facts set forth in their complaint and described the
general legal standards applicable in TILA cases. Con-
cluding that this failure to respond amounted to
waiver, the district court dismissed their complaint
for failure to state a claim. Waiver aside, the district
court further concluded that U.S. Bank’s arguments
were substantively correct, entitling it to dismissal on
the merits.
II.
We review de novo the district court’s grant of a
motion to dismiss under Fed. R. Civ. P. 12(b)(6). E.g., Reger
Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 763 (7th
Cir. 2010). We accept all facts in the complaint as true,
view them in the light most favorable to the Bontes, and
draw all reasonable inferences in their favor. Id. Although
the bar to survive a motion to dismiss is not high, the
complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible
4 No. 09-2455
on its face.’ ” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Because the Bontes seek rescission of their loan well
outside the ordinary three-day period allowed under
TILA, see 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(a)(3),
they must demonstrate that the lender failed to make
a required “material” disclosure, see 15 U.S.C. § 1635(f)
(extending right of rescission to earlier of three years
or until the sale of the property); 12 C.F.R. § 226.23(a)(3);
see also R.G. Fin. Corp. v. Vergara-Nunez, 446 F.3d 178,
187 (1st Cir. 2006) (noting that TILA allows rescission
for up to three years when lender omits certain
material disclosures). The Bontes’ complaint identifies
ten separate charges that differed on their TILA state-
ment and disclosures and the accompanying HUD-1
settlement statement for the mortgage. The Bontes allege
that taken together, the discrepancies between the two
documents (both attached to the complaint) misstated
the “APR, the amount financed, and finance charge
associated with this transaction.”
The disclosure requirements under TILA may be
found in the statute itself, 15 U.S.C. §§ 1601 et seq., the
implementing regulation (“Regulation Z,” promulgated
by the Federal Reserve Board), 12 C.F.R. §§ 226.1-226.59,
and the Federal Reserve Board’s binding Staff Commen-
tary, 12 C.F.R. pt. 226, Supp. I; see also 15 U.S.C. § 1604(a)
(directing the Board to prescribe regulations imple-
menting TILA) amended by PL 111-203, July 21, 2010, 124
Stat 1376. Ordinarily, we defer to the Commentary when
interpreting TILA and its disclosure requirements. See
No. 09-2455 5
Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980)
(“[D]eference [to the Federal Reserve Board] is especially
appropriate in the process of interpreting the Truth in
Lending Act and Regulation Z.”); Hamm v. Ameriquest
Mortg. Co., 506 F.3d 525, 528 (7th Cir. 2007) (“Courts
pay particular heed to the FRB Staff Commentary to
TILA’s regulations when evaluating an alleged TILA
violation.”). Section 226.18 of Regulation Z identifies
eighteen pieces of information to be disclosed to bor-
rowers in credit transactions such as the Bontes’ mort-
gage. See 12 C.F.R. § 226.18(a)-(r).
Of these eighteen disclosures, the following five qualify
as “material” so as to support rescission for up to three
years: (1) the annual percentage rate (“APR”); (2) the
finance charge; (3) the amount financed; (4) the total of
payments; and (5) the payment schedule. See 12 C.F.R.
§ 226.23(a)(3). As stated above, the Bontes’ complaint
alleges that the charges listed on their TILA disclo-
sure statement (which conformed to the model Truth-in-
Lending Disclosure Statement in Appendix H-2 of Reg-
ulation Z) misstated the finance charge, the APR, and
the amount financed. But the Bontes never explain how
the ten allegedly misstated charges are related to the
finance charge, the APR, and the amount financed.
The finance charge includes any fee or charge repre-
senting the cost of credit, from interest (ordinarily the
largest component of the finance charge) to any trans-
action fees “imposed directly or indirectly by the
creditor as an incident to or a condition of the extension
of credit.” 12 C.F.R. § 226.4(a). The APR and the amount
6 No. 09-2455
financed are derived from the finance charge and the
amount of the note. See 12 C.F.R. § 226.22(a)(1) (“The
annual percentage rate is a measure of the cost of
credit, expressed as a yearly rate[.]”). The amount
financed is the total loan amount after subtracting out
any pre-paid finance charges. See 12 C.F.R. § 226.18(b)
(amount financed is net amount of credit extended for
the consumer’s use). Thus, the APR and the amount
financed are derived from the finance charge. The three
together essentially represent the cost of credit. Cf. Fed.
Deposit Ins. Corp., FDIC Law, Regulations, Related Acts,
Part 226—Truth In Lending (Regulation Z) §226.1(b),
http://www.fdic.gov/regulations/laws/rules/6500-1400.html
(explaining that purpose of TILA “is to promote the
informed use of consumer credit by requiring disclosures
about its terms and cost”).
In its motion to dismiss and again in its brief on
appeal, U.S. Bank explains, with citations to the relevant
regulations and Commentary, why none of the ten al-
legedly inaccurate charges identified in the Bontes’ com-
plaint are part of the APR, finance charge, or amount
financed—in short, “material” disclosures as required
for rescission under TILA. For example, four of the al-
legedly misstated charges identified in the complaint
relate to disbursement of loan proceeds—i.e., how the
Bontes used their loan (to pay off other mortgages). U.S.
Bank maintains that disbursements to creditors and
loan payoffs are unrelated to the finance charge, the
APR, or the amount financed.
The Bontes also allege a discrepancy in the disclosure
of property taxes, but property taxes are specifically
No. 09-2455 7
excluded from the finance charge by the binding Com-
mentary. 12 C.F.R. Part 226, Supp. I, § 226.4(a)(1)(i)(A)
(explaining that “taxes . . . paid by both cash and credit
customers” are not finance charges). U.S. Bank further
explains that four more of the alleged errors—title in-
surance, ARM endorsement, recording service fees, and
courier fees—relate to charges paid to a title company,
not a creditor. But with limited exceptions not alleged
here, TILA specifically exempts fees payable to third
parties such as title companies. See 15 U.S.C. § 1605(a)
(“The finance charge shall not include fees and amounts
imposed by third party closing agents (including . . . title
companies)[.]”); 12 C.F.R. § 226.4(a)(2) (same). Moreover,
these four charges are exempted from the finance
charge by 15 U.S.C. § 1605(e)(1)-(6), which excludes fees
for “title insurance” and other fees for “preparing loan-
related documents.” See also 12 C.F.R. § 226.4(c)(7). That
leaves only the alleged misstatement of the settlement
fees, which U.S. Bank contends are exempted by the
same two exclusions just discussed. Moreover, U.S. Bank
points out that the Bontes allege an overstatement of
their settlement fees, and TILA prohibits only the under-
statement of the required disclosures. See 15 U.S.C.
§ 1605(f)(1)(B); 12 C.F.R. § 226.23(g)(1)(ii); see also Car-
michael v. The Payment Center, Inc., 336 F.3d 636, 641-42
(7th Cir. 2003) (affirming summary judgment for lender
that overstated finance charge and total of payments
because TILA “protects consumers only when the
stated amount is less than the amount required to be
disclosed”) (emphasis in original).
In response, the Bontes repeat the mistake they made
in the district court and essentially ignore U.S. Bank’s
8 No. 09-2455
substantive arguments. Instead, they argue generally
that their complaint properly alleged a TILA violation
and that the district court erroneously held their com-
plaint to a higher standard than that envisioned by
Twombly and its progeny. They also by and large ignore
the district court’s holding on waiver and spend the
majority of their brief discussing the liberal standard to
be applied to complaints on a motion to dismiss and the
fact that TILA is to be construed liberally in favor of
consumers. True as that may be, it does little to establish
that the allegations in the Bontes’ complaint are in fact
enough “to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555. U.S. Bank has cogently
explained why, taking all of the allegations in the com-
plaint as true, the Bontes have failed to demonstrate
their entitlement to rescission under TILA.
The Bontes insist that their complaint is sufficient
because it lays out with specificity “ten material and
substantial errors in Lender’s TILA disclosure of the
amount financed, the finance charge, and the applicable
APR.” But as detailed above, none of the ten errors are
in fact related to the amount financed, the finance
charge, and the applicable APR, notwithstanding the
Bontes’ unsupported legal statement to the contrary.
Although we are required at this stage to accept the
Bontes’ factual allegations as true, we are not “ ‘bound
to accept as true a legal conclusion couched as a factual
allegation.’ ” Id. (quoting Papasan v. Allain, 478 U.S. 265,
286 (1986)); see also Iqbal, 129 S. Ct. at 1949 (“[T]he tenet
that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclu-
sions.”).
No. 09-2455 9
Instead of responding to U.S. Bank’s arguments and
explaining how a single charge in their complaint does
relate to the cost of credit, the Bontes continue to
protest that their allegation of ten discrepancies between
the HUD-1 settlement statement and the TILA disclosures
amounts to a satisfactory “short and plain statement of
the claim,” Fed. R. Civ. P. 8(a)(2), showing their entitle-
ment to relief. Not so. U.S. Bank has explained that the
facts alleged, taken as true, simply do not give rise to a
right to rescission—the only relief requested in the com-
plaint. Thus, the liberal construction of TILA that the
Bontes urge cannot save them from their failure to
respond to U.S. Bank with an argument that the
complaint does indeed support their entitlement to
relief. See Segal v. Geisha NYC, LLC, 517 F.3d 501, 504 (7th
Cir. 2008) (“[I]t is . . . clear that a complaint that satisfies
Rule 8(a)’s pleading requirements might still warrant
dismissal under Rule 12(b)(6) if the facts pled cannot
result in any plausible relief.”).
As explained by the Supreme Court in Iqbal, we follow
a two-pronged approach in assessing the sufficiency of
a complaint. First, we consider whether the complaint
contains an adequate “short and plain statement of the
claim showing that the pleader is entitled to relief,” as
required by Rule 8(a)(2). Iqbal, 129 S. Ct. at 1949. As
the Bontes argue vigorously on appeal, their com-
plaint satisfies this standard. It lays out the alleged dis-
crepancies between the HUD-1 settlement statement
and the TILA disclosures, and then labels them misstate-
ments of the APR, amount financed, and finance
charge—errors that would in theory be material and
10 No. 09-2455
support entitlement to rescission. On its face, it appears
to be a plausible enough theory. See Twombly, 550 U.S.
at 570 (“[W]e do not require heightened fact pleading
of specifics, but only enough facts to state a claim to
relief that is plausible on its face.”).
Secondly, when the complaint contains well-pleaded
factual allegations, “a court should assume their veracity
and then determine whether they plausibly give rise
to an entitlement to relief.” Iqbal, 129 S. Ct. at 1950. As it
is now abundantly clear, it his here that the Bontes’
complaint falls short. Assuming the truth of each of the
ten allegedly misstated charges in the complaint, U.S.
Bank lays out why the Bontes still are not entitled to
rescission. The silence resulting from the Bontes’ failure
to file a response brief is deafening.
That silence leaves us to conclude, as did the dis-
trict court, that the Bontes concede that the charges iden-
tified in their complaint are not “material” disclosures
that would warrant rescission under TILA. Failure to
respond to an argument—as the Bontes have done
here—results in waiver. See United States v. Farris, 532
F.3d 615, 619 (7th Cir. 2008) (“Farris failed to respond to
the Government’s argument in a Reply Brief, and ac-
cordingly, we find that Farris waived his sufficiency
of the evidence challenge[.]”); Williams v. REP Corp.,
302 F.3d 660, 667 (7th Cir. 2002) (“Yet, given another
opportunity to address the effect of Trial Rule 4.4 in
his reply brief, Mr. Williams again ignored the issue
and, indeed, failed to respond to REP International’s
waiver argument. Under these circumstances, we must
No. 09-2455 11
hold that Mr. Williams has waived any argument that
Trial Rule 4.4 would permit the exercise of personal
jurisdiction over REP International.”). Just as the Bontes
fail on appeal to grapple with the basis of the district
court’s decision, they fail completely to respond to the
specific arguments set forth in U.S. Bank’s brief as to
why their complaint fails to state a claim for relief. Kirksey
v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1042 (7th
Cir. 1999) (“If [judges] are given plausible reasons for
dismissing a complaint, they are not going to do the
plaintiff’s research and try to discover whether there
might be something to say against the defendants’ rea-
soning.”); see also County of McHenry v. Ins. Co. of the
West, 438 F.3d 813, 818 (7th Cir. 2006) (“When presented
with a motion to dismiss, the non-moving party
must proffer some legal basis to support his cause of
action.”) (internal quotations omitted).
As to the district court’s similar conclusion that the
Bontes conceded the validity of U.S. Bank’s arguments
by failing to respond, they have yet again provided
precious little in the way of argument. The Bontes do
assert in their brief that their response in the district
court to U.S. Bank’s motion to dismiss was not tanta-
mount to waiver. Specifically, the Bontes claim that
because they “opposed the lender’s motion for dismissal,
and identified for the lower court the factual and legal
basis for their claim for TILA rescission,” their response
“did not constitute a ‘waiver’ by any stretch of the imagi-
nation.” But they seem to have again missed the point:
identifying the “factual and legal basis” of their claim
does little to save them from dismissal when U.S. Bank
12 No. 09-2455
has painstakingly explained precisely why that factual
basis, taken as true, does not in fact warrant the re-
quested relief.
In sum, the Bontes have largely failed on appeal to
grapple with the basis of the district court’s decision—
their waiver resulting from their failure to respond to
the merits of U.S. Bank’s motion to dismiss. More im-
portantly, they have repeated that failure again on ap-
peal. Their failure to respond to U.S. Bank’s arguments
leads us also to conclude that they have waived any
argument that the allegedly erroneous TILA disclosures
are in fact “material.” This leaves us no choice but to
accept U.S. Bank’s assertions—supported as they are
by pertinent legal authority—that the allegations in the
Bontes’ complaint do not entitle them to relief.
III.
For the foregoing reasons, we A FFIRM the judgment of
the district court dismissing the Bontes’ complaint for
failure to state a claim upon which relief may be granted.
10-19-10