Brown v. Payday Check Inc.

• Decision Date: 02 February 2000
• Docket Number: N,No. 99-3625,No. 99-3110,99-3110,99-3625
• Citation: 202 F.3d 987
• Parties: (7th Cir. 2000) Sandra Brown, Deborah Jackson, and Victoria Davis, Plaintiffs-Appellants, v. Payday Check Advance, Inc., and Payday Check Advance, llc, both doing business as Payday Express, Defendants-Appellees. Marguerite Mitchem, Plaintiff-Appellant, v. Payday Check Advance, Inc., doing business as Payday Express, Defendant-Appellee. Denise Laws, Plaintiff-Appellant, v. Payday Loan Corp. of Illinois, Defendant-Appellee. o. 99-3353 ,
• Court: U.S. Court of Appeals — Seventh Circuit

Page 987

202 F.3d 987 (7th Cir. 2000)

Sandra Brown, Deborah Jackson, and Victoria Davis, Plaintiffs-Appellants, v. Payday Check Advance, Inc., and Payday Check Advance, llc, both doing business as Payday Express, Defendants-Appellees.

Marguerite Mitchem, Plaintiff-Appellant, v. Payday Check Advance, Inc., doing business as Payday Express, Defendant-Appellee.

Denise Laws, Plaintiff-Appellant, v. Payday Loan Corp. of Illinois, Defendant-Appellee.

No. 99-3110, No. 99-3353 , No. 99-3625

In the United States Court of Appeals For the Seventh Circuit

Submitted January 5, 2000

Decided February 2, 2000

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 2074--James B. Zagel, Judge.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 1869--Matthew F. Kennelly, Judge.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 5562--Joan B. Gottschall, Judge. [Copyrighted Material Omitted] Before Bauer, Easterbrook, and Kanne, Circuit Judges.

Easterbrook, Circuit Judge.

These related cases present questions concerning damages under the Truth in Lending Act. Three district judges concluded that the kind of violations asserted by the plaintiffs do not lead to the awards (called statutory damages) that are available under 15 U.S.C. sec.1640(a)(2) without regard to injury. Because plaintiffs declined to allege any actual injury, the cases were terminated on the pleadings. Two of the decisions are available at 1999 U.S. Dist. Lexis 16225 (N.D. Ill. Sept. 30, 1999) and 1999 U.S. Dist. Lexis 17423 (N.D. Ill. Aug. 3, 1999); the third is unpublished.

All three of these cases arise from transactions known as "payday loans"--short-term, high-interest, single-payment credit for which the lender requires a post-dated check that can be cashed after the borrower's next payday. See Smith v. Cash Store Management, Inc., 195 F.3d 325 (7th Cir. 1999); Smith v. Check-N-Go of Illinois, Inc., No. 99-2666 (7th Cir. Dec. 23, 1999). Two of the three challenge the lender's application of the phrase "total payment" to the borrower's obligation. According to plaintiffs, the Act requires lenders either to use the phrase "total of payments" to describe the sum of the amount financed and the finance charge, see 15 U.S.C. sec.1638(a)(5), or not to describe this sum at all, when the borrower will make just one payment. The district judges sensibly rejected this contention, because the Federal Reserve (which administers the TILA) permits a lender to dispense with the "total of payments" disclosure when there will be only one payment. 12 C.F.R. sec.226.18(h) n.44 (part of the Federal Reserve's Regulation Z). Omitting the phrase "total of payments" does not imply that the lender must keep mum about how much the borrower needs to repay.

Although we agree with the district judges that the lenders may use the term "total payment," this does not mean that lenders may put it anywhere they please on their forms. All disclosures required by federal law must be grouped together and "conspicuously segregated" from other information. 15 U.S.C. sec.1638(b)(1). Given 12 C.F.R. sec.226.18(h) n.44, the "total payment" for a one-payment loan is not a disclosure required by federal law and therefore must be kept separate from information such as the finance charge and the annual percentage rate. Yet the lenders put the "total payment" in the "federal box" (the portion of the form devoted to the mandatory disclosures), just as if it were a "total of payments" item. Because the TILA receives a hypertechnical reading, see Smith v. No. 2 Galesburg Crown Finance Corp., 615 F.2d 407, 417 (7th Cir. 1980), the lenders' use of "total payment" rather than "total of payments" in the federal box yields a violation of the segregation rule. Some of the forms violate sec.1638(b)(1) in other ways, such as including an itemization in the federal box of the amount financed (itemizations are supposed to be outside the federal box) and providing space for the number of the check that the borrower provides (again this information should have been elsewhere).

Forms provided to the five plaintiffs depart from the statutory model in other ways. Some of them fail to provide adequate descriptive explanations of terms such as "finance charge" and "annual percentage rate"; this shortcoming violates 15 U.S.C. sec.1638(a)(8). At least one form, received by plaintiff Denise Laws, is deficient because the phrases "finance charge" and "annual percentage rate" are in the same typeface as "amount financed" and "total of payments." Because the former terms must be "disclosed more conspicuously than" the latter, Payday Loan Corp. has violated 15 U.S.C. sec.1632(a). See also 12 C.F.R. sec.226.17(a)(2).

What remedies are available for violations of sec.1632(a), sec.1638(a)(8), and sec.1638(b)(1), the provisions transgressed by these defendants? Compensatory damages for any actual injury, surely. 15 U.S.C. sec.1640(a)(1). But plaintiffs forswear any claim of injury and seek only statutory damages under sec.1640(a)(2). We set out the portions of sec.1640(a) that bear on plaintiffs' contentions.

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, or part D or E of this subchapter with respect to any person is liable to such person in an amount equal to the sum of--

(1) any actual damage sustained by such person as a result of the failure;

(2)(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; or (B) in the case of a class action, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same creditor shall not be more than the lesser of $500,000 or 1 per centum of the net worth of the creditor;

. . .

. . . In connection with the disclosures referred to in subsections (a) and (b) of section 1637 of this title, a creditor shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 1635 of this title, section 1637(a) of this title, or of paragraph (4), (5), (6), (7), (8),(9), or (10) of section 1637(b) of this title or for failing to comply with disclosure requirements under State law for any term or item which the Board has determined to be substantially the same in meaning under section 1610 (a)(2) of this title as any of the terms or items referred to in section 1637(a) of this title or any of those paragraphs of section 1637(b) of this title. . . . In connection with the disclosures referred to in section 1638 of this title, a creditor shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 1635 of this title or of paragraph (2)(insofar as it requires a disclosure of the "amount financed"), (3), (4), (5), (6), or (9) of section 1638(a) of this title, or for failing to comply with disclosure requirements under State law for any term which the Board has determined to be substantially the same in meaning under section 1610(a)(2) of this title as any of the terms referred to in any of those paragraphs of section 1638(a) of this title.

The reference to "this part" in the opening sentence of sec.1640(a) is to Part B of the TILA, 15 U.S.C. sec.sec. 1631-49. Statutory damages therefore are available for violations of any requirement in these 19 sections, "[e]xcept as otherwise provided in this section". Cf. Strange v. Monogram Credit Card Bank, 129 F.3d 943 (7th Cir. 1997). The "otherwise" comes in the two long unnumbered sentences that begin "[i]n connection with the disclosures referred to in" either sec.1637 or sec.1638. Section 1637 deals with open-end consumer credit (such as revolving loans on a credit card). Payday loans come within sec.1638, which addresses all consumer loans other than open-end credit plans. It is sec.1638 that requires the disclosures to plaintiffs. The more-conspicuous-disclosure obligation of sec.1632(a) works "[i]n connection with the disclosures referred to in section 1638", so the final sentence we have reproduced in the block quotation reads on all of the claims made by all of our plaintiffs.

Statutory damages are available, this final sentence says, "only for failing to comply with the requirements of section 1635 of this title or of paragraph (2) (insofar as it requires a disclosure of the 'amount financed'), (3), (4), (5), (6), or (9) of section 1638(a) of this title, or for" other situations not presented by these cases. "Only," the word we have italicized, is conclusive against plaintiffs, for it confines statutory damages to a closed list. Failure to emphasize the typeface of "finance charge" and "annual percentage rate" violates sec.1632(a); omission of descriptive explanations violates sec.1638(a)(8); appearance of extra matter in the federal box violates sec.1638(b)(1). None of these subsections is on the list of violations eligible for statutory damages.

Plaintiffs insist that information has been "disclosed" in compliance with sec.1638 only if all of the TILA and all of Regulation Z have been followed. On this understanding, although the lenders informed the borrowers of correctly calculated finance charges and annual percentage rates, and made all other mandatory disclosures, they did not comply with the sections requiring these disclosures, because they did not...