American General Finance, Inc. v. Bassett (In re Bassett)

Darlene Bassett (debtor) filed for bankruptcy. Bassett owed money to American General Finance, Inc. (Finance) (creditor). In the bankruptcy action, Bassett signed an agreement reaffirming her promise to pay Finance an agreed amount of money. Under federal law, this agreement would be enforceable after Bassett’s bankruptcy discharge only if it contained clear and conspicuous statements that Bassett had a right to rescind the agreement within 60 days or any time before her bankruptcy discharge. The agreement that Bassett signed was two pages long. The top three-fourths of the first page contained only blanks for specific details, like her name and the relevant numbers, and white space. The bottom fourth of the first page contained three preprinted sentences. The first two sentences were in ordinary lowercase sentence formatting. The very first sentence provided the required right-to-rescind statement. The second sentence stated that any rescission would be a default of the reaffirmation agreement. The third sentence was written in all capital letters and affirmed that Bassett knew that she was not legally obligated to sign the agreement. The second page of the agreement contained a declaration from Bassett’s attorney that she had been advised of her legal rights and signature lines. After Bassett’s bankruptcy was discharged, she eventually stopped paying Finance. Finance attempted to collect its debt. Bassett reopened her bankruptcy action and filed unlawful-collection claims against Finance. Bassett argued that Finance’s collection efforts were unlawful because (1) it was trying to collect under the reaffirmation agreement and (2) that agreement violated federal law because the right-to-rescind statement was not conspicuous. The bankruptcy court found the statement was conspicuous and dismissed the claims. The bankruptcy appellate panel reversed the dismissal, finding that the right-to-rescind sentence was not conspicuous because it was written in lowercase and overshadowed by the nearby all-capital sentence. Finance appealed.