Childs v. Ford Motor Credit Co.

• Decision Date: 24 May 1979
• Docket Number: Civ. A. No. 74-L-1011-S.
• Citation: 470 F. Supp. 708
• Parties: Terrell CHILDS, Plaintiff, Carolyn Strickland, Intervenor, v. FORD MOTOR CREDIT COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Alabama

470 F. Supp. 708

Terrell CHILDS, Plaintiff Carolyn Strickland, Intervenor, v. FORD MOTOR CREDIT COMPANY, Defendant.

Civ. A. No. 74-L-1011-S.

United States District Court, N. D. Alabama, S. D.

May 24, 1979.

Jerry O. Lorant, Birmingham, Ala., for plaintiff.

J. Gusty Yearout, Lange, Simpson, Robinson & Somerville, Birmingham, Ala., for intervenor.

Charles Cleveland, Gordon, Cleveland & Gordon, Birmingham, Ala., for defendant.

MEMORANDUM OPINION

LYNNE, Senior District Judge.

The submission herein was on cross-motions for summary judgment, filed by plaintiff on November 4, 1977, and July 13, 1978, and by defendant on November 26, 1976, and July 17, 1978. On June 21, 1977, this Court entered an order certifying this cause as a class action under Rule 23(a) and (b)(3), FRCP. The class is defined as

All persons who engaged in consumer credit transactions with Defendant, Ford Motor Credit Company, as a result of purchasing a motor vehicle from Bondy's Ford, Inc., 131 South St. Andrews Street, Dothan, Alabama, during the period of time from one year prior up to and including the date of filing the original complaint herein, or from September 5, 1973, through September 5, 1974, in which disclosure statements identical or substantially similar to the disclosure statement appended to the final amended complaint designated as Attachment "A" were utilized.

By order dated May 3, 1978, the class description was modified to include only those transactions occurring during the period from September 6, 1973, through September 5, 1974. Therein it was established that the individual class members had been identified and it was directed that notice required by Rule 23(c)(2), FRCP, of the action be given to the members of the plaintiff class.

Notices were mailed out and the following individual class members duly opted out: Carson McNeal, Maggie Lou Epps, Mathew M. Cospelich, and James A. Smith. The petition of Carolyn Strickland to intervene as party-plaintiff was granted on July 24, 1978.

STATEMENT OF FACTS

The following facts are without dispute. The named plaintiff purchased a 1973 Ford pickup truck from Bondy's Ford, Inc., in Dothan, Alabama, in September 1973. A purchase order dated September 5 and a sales contract dated September 6 were signed by the plaintiff. On September 14, the sale contract was assigned to defendant, Ford Motor Credit Company. Copies of these documents appear of record.

APPLICATION OF LAW

Plaintiff charges the defendant with three violations of the Truth in Lending Act, 15 U.S.C. § 1640 et seq.:

(1) Failure to print "annual percentage rate" and "finance charge" more conspicuously than other disclosures;

(2) Failure to identify itself as a creditor; and

(3) Failure to disclose certain components of the cash price.

I. First Contention

The first is clearly without merit and has not been pursued by the plaintiff. A quick glance at the disclosure statement reveals that the various captions are all printed in bold face type with some words being capitalized. "Finance charge" and "annual percentage rate" are both in bold face and are totally capitalized. Clearly they are more conspicuous than those phrases which are not totally capitalized.

II. Is FMCC a "Creditor"?

In order for defendant to be liable for failure to clearly identify itself and for shortcomings in the disclosure statement, it must be demonstrated that the defendant is a creditor. Regulation Z defines "creditor" to include, inter alia, "a person who in the ordinary course of business regularly extends or arranges for the extension of consumer credit." Hence, a credit sale may involve two creditors, one who arranges for the extension of credit, and one who actually extends the credit.

Philbeck v. Timmers Chevrolet, 361 F.Supp. 1255 (N.D.Ga.1973), rev'd on other grounds 499 F.2d 971 (5th Cir. 1974), held that a finance company is a creditor if it "works so closely with an extender of consumer credit that the finance company prepares the credit forms and the extender then executes those forms and regularly assigns the consumer credit contracts back sic to the finance company." This describes the situation in the case sub judice. The form shows on its face that it was prepared by Ford Motor Credit Company, and the size of the class is indicative of the regularity with which these forms were assigned to it.

Additional evidence of the fact that the extension of credit had been prearranged may be found in the documents involved. On the face of the contract is an assignment clause with the name of the Ford Motor Credit Company preprinted as the assignee. On the back is a clause detailing the terms of the assignment throughout which Ford Motor Credit Company is referred to. Also, the car invoice prepared by Bondy's Ford on September 7, states that the car is subject to a lien in favor of Ford Motor Credit in the amount of $2,242.91. This is the amount financed plus the finance charge.

Hence, it is clear that from the very inception of the loan it was intended that the creditor ultimately would be Ford Motor Credit. The technical legality that Ford Motor Credit could refuse the assignment and that the assignment did not take legal effect for several days does not alter the true nature of the transaction. Practically speaking, Bondy's Ford acted as the agent of Ford Motor Credit Company in arranging for the extension of credit. The conclusion, therefore, is that both constitute creditors under the truth-in-lending regulations. Compare Meyers v. Clearview Dodge Sales, Inc., 539 F.2d 511 (5th Cir. 1976).

III. Second Contention

Under § 226.6(d), both creditors are obligated to clearly identify themselves. The contract used by Ford Motor Credit Company is originally in the form of five documents with carbons in between. At the top of the package of documents is the Ford insignia in an oval, followed by the phrase "Ford Motor Credit Company" in white against a dark blue background. This would constitute clear identification except for the fact that when the documents are separated from each other this label is left behind. Hence, the copy given to the customer does not have this identification on it.

However, Ford Motor Credit Company is referred to in the contract. On its face in unemphasized type there is the following clause: "The foregoing contract hereby is accepted by the seller and assigned to Ford Motor Credit Company in accordance with the terms of the assignment set forth on the reverse side hereof." On the reverse of the contract is a large assignment clause constituting about 40 percent of the writing on the page in which Ford Motor Credit Company is repeatedly referred to as the assignee or transferee of the seller.

Obviously, Ford Motor Credit Company is identified in the contract. It is not so patent that it is clearly identified. Several cases are noted on both sides of the issue. Supporting the position that Ford Motor Credit Company is not clearly identified are Rogers v. Frank Jackson Lincoln-Mercury, 458 F.Supp. 1387 (N.D.Ga.1978); Cenance v. Bohn Ford, 430 F.Supp. 1064 (E.D.La.1977); Milhollin v. Ford Motor Credit Company, C.A. 75334 (D.Or.1976), aff'd on other grounds 588 F.2d 753 (9th Cir. 1978); and Lauletta v. Valley Buick, 421 F.Supp. 1036 (W.D.Pa.1976) (by analogy). But supporting clear identification are the following: Milhollin v. Ford Motor Credit Co., 588 F.2d 753 (9th Cir. 1978); Sharp v. Ford Motor Credit Company, 452 F.Supp. 465 (S.D.Ill. 1978); Augusta v. Marshall Motor Company, 453 F.Supp. 912 (N.D.Ohio 1977); Main v. Fuller Ford, C.A. 74-337 (W.D.Pa.1976); and Grey v. European Health Spas, 428 F.Supp. 841 (D.Conn.1976) (by extension).

This Court considers the better reasoning to be found in the cases holding that Ford Motor Credit Company is clearly identified. The distinguishing rationale can be found in Grey v. European Health Spas, supra. The requirement that a creditor be identified is not to be equated with a requirement that a creditor be disclosed. In Grey the Court is dealing with the identification requirement of § 226.8(a), but the analogy to § 226.8(d) seems proper. Section 226.8(a) requires that the "creditor shall furnish the customer with a duplicate of the instrument or a statement by which the required disclosures are made and on which the creditor is identified." Hence, the regulations consider the identification of the creditor as something other than a required disclosure. If the identity of the creditor were to constitute a disclosure, then under § 226.6(a) "annual percentage rate" and "finance charge" would be required to be more conspicuous than any identification of the creditor. Finance companies would have to be careful that the name of the company at the top of the page does not exceed the level of emphasis of these two terms further down on the page. Also, when federal disclosures must be separated from state law disclosures under § 226.6(c), the name of the creditor must appear below the caption stating that the disclosures are made in compliance with federal law. Clearly, such anomalous results go beyond the intention of the drafters of the regulations.

Since the identification of the creditors does not constitute a disclosure, § 226.6(a) does not require the identification to be conspicuous. An identification can be clear, i. e. unambiguous and not obscure, and yet not be conspicuous. Cf. Official Staff Interpretation of Regulation Z, 41 Fed.Reg. 41908 (1976).

The identification of the defendant on the face of the contract is hardly conspicuous, but then neither is it ambiguous or obscure. It appears only an inch from the place for the buyer's signature, and it clearly identifies the defendant as the assignee of the contract. Identification of the defendant as the assignee is accurate and adequately informs the purchaser of the nature of his relationship with the Ford Motor Credit Company. The regulations do not require that the defendant be identified as a "credi...