Dixey v. Idaho First Nat. Bank

• Decision Date: 09 January 1981
• Docket Number: Civ. No. 79-4085.
• Citation: 505 F. Supp. 846
• Parties: Jim DIXEY, Plaintiff, v. The IDAHO FIRST NATIONAL BANK, a national banking association, Defendant.
• Court: U.S. District Court — District of Idaho

505 F. Supp. 846

Jim DIXEY, Plaintiff, v. The IDAHO FIRST NATIONAL BANK, a national banking association, Defendant.

Civ. No. 79-4085.

United States District Court, D. Idaho.

January 9, 1981.

Idaho Legal Aid Services, Inc., Nancy Ferris, Pocatello, Idaho, for plaintiff.

David M. Edson, Boise, Idaho, for defendant.

MEMORANDUM DECISION

CALLISTER, District Judge.

I. INTRODUCTION

This action arises out of a consumer credit transaction. On October 17, 1978, the plaintiff, Jim Dixey, purchased from Ron Sayer, Inc., a 1974 Chevrolet pickup truck. The defendant, The Idaho First National Bank, loaned to plaintiff the principal sum of $2,391.02 to facilitate the acquisition of the vehicle. In turn, Ron Sayer, Inc., assigned to the defendant the Sale and Loan Agreement which evidenced the transaction.

The plaintiff subsequently filed suit alleging several violations of the Truth in Lending Act, 15 U.S.C. § 1601, et seq., and Federal Reserve Board Regulation Z, 12 C.F.R. § 226.1, et seq., which implements the Act. This Court's jurisdiction is invoked pursuant to 15 U.S.C. § 1640(e) and 28 U.S.C. § 1337.

The plaintiff has now moved for summary judgment and contends that the defendant has violated the Truth in Lending Act (hereinafter "TILA") as a matter of law in the following respects:

1. By failing to place all prepayment charges and delinquency charges together on the same side of the same page as other required disclosures in violation of Regulation Z, 12 C.F.R. § 226.8(a);

2. By failing to print the terms "finance charge" and "annual percentage rate" more conspicuously than other required disclosures in violation of Regulation Z, 12 C.F.R. § 226.6(a);

3. By failing to clearly identify the creditor in the transaction in violation of Regulation Z, 12 C.F.R. § 226.8(a);

4. By failing to clearly and meaningfully disclose the consequences which acceleration of the debt would have on the unearned finance charge in violation of Regulation Z, 12 C.F.R. § 226.8(b)(7);

5. By failing to disclose a security interest in the insurance proceeds in violation of 15 U.S.C. § 1639(a)(8) and Regulation Z, 12 C.F.R. § 226.8(b)(5);

6. By failing to disclose default charges in violation of 15 U.S.C. § 1639(a)(7) and Regulation Z, 12 C.F.R. § 226.8(b)(4);

7. By incorrectly placing signature lines in violation of Regulation Z, 12 C.F.R. § 226.8(a) and Regulation Z Interpretations § 226.801;

8. By failing to use the required terminology regarding the notice of information on the reverse side in violation of Regulation Z, 12 C.F.R. § 226.8(a) and Regulation Z Interpretations § 226.801; and

9. By using incorrect type size and by incorrectly placing the home solicitation notice in violation of Regulation Z, 12 C.F.R. § 226.6(c).

II. DISCUSSION

The Congressional objective in enacting TILA is disclosed in 15 U.S.C. § 1601(a).

(a) The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this subchapter 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 and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.

Briefly stated, the goal which Congress sought to achieve was the informed use of consumer credit by requiring financial institutions to meaningfully disclose credit terms.

It appears, from a review of the defendant institution's Sale and Loan Agreement, that Idaho First National Bank has drafted a form which essentially satisfies the goal of meaningful disclosure of credit terms. However, the form suffers from several technical defects under TILA and Regulation Z. A brief discussion follows of each of the alleged violations.

A. Failure to Clearly Identify the Creditor — 12 C.F.R. § 226.8(a):

Regulation Z, 12 C.F.R. § 226.8(a), provides that the customer shall receive a copy of the disclosure statement at the time the disclosures are made "and on which the creditor is identified." No indication is given as to the extent to which the creditor must be identified other than the general requirement in 12 C.F.R. § 226.6 that all disclosures be made clearly and conspicuously.¹

The logo of the defendant bank, including the words "Idaho First — The Bank," appears at the top of its form. However, the plaintiff maintains that the address or branch must also be disclosed, and cites In re Wilson, 411 F.Supp. 751 (S.D.Ohio 1975) in support of his assertion. Wilson, however, is hardly dispositive of the issue in the instant case, since the bank in Wilson altogether omitted its name from the disclosure statement. Perhaps more analogous to the instant case is Welmaker v. W. T. Grant Company, 365 F.Supp. 531 (N.D.Ga.1972). In that case, the contract forms disclosed the seller as "W. T. Grant Company, 441 Broadway, New York, N.Y. 10018." Under the blank entitled "seller's place of business" was the designation "# 70," indicating store number 70. The court held that the identification was insufficient. It should be noted, however, that the court's conclusion was based on a finding that the insertion of "# 70" served to confuse the customer. Furthermore, in finding for the customer on that issue the court conceded that the violation was a "technical" one. In a later case in the same district, Houston v. Atlanta Federal Savings and Loan Ass'n, 414 F.Supp. 851 (N.D.Ga.1976), the Special Master concluded that Welmaker was not controlling. Welmaker was distinguished on the ground that the creditor in Houston, unlike the creditor in Welmaker, was not a national chain having offices and stores in many states. Instead, the Special Master found that the defendant conducted business under the name Federal Savings and Loan solely in the Atlanta metropolitan area, through some 21 offices, and that plaintiffs could make loan payments at any of these offices or by mail. The district court, in following the Special Master's recommendation, made the following comment:

Unlike the circumstances in the Welmaker case, there is no possibility that plaintiffs herein could be confused or misled concerning the identity of their creditor. Although better practice requires disclosure of the creditor's full address, in the circumstances presented, where the creditor is a mortgage lender located in one area of one state, full disclosure of the name of the creditor is all that is required. Plaintiffs' arguments to the contrary are without merit. 414 F.Supp. at 859.

The circumstances in the instant case are more akin to those in Houston than in Welmaker. The bank's operations are not nationwide, but statewide; the number of branches is relatively small, and the plaintiff, like the plaintiffs in Houston, could make payments by mail or at any of the defendant's branch offices. In addition, Ralph C. Clontz, Jr., author of Truth-in-Lending Manual (4th ed. 1976), and one of the leading authorities regarding Regulation Z offers this advice: "It is suggested that a court should not award civil damages for a failure to furnish an address, so long as the creditor is adequately identified." Clontz, supra, at ¶ 2.066 (Supp.1980). Consequently, this Court concludes that the plaintiff is not entitled to judgment as a matter of law regarding the adequacy of the identification of the creditor.

B. Failure to Disclose the Consequences of Acceleration — § 226.8(b)(7):

The plaintiff alleges that the defendant has violated TILA by disclosing the right of acceleration but failing to mention the effect which acceleration has on the unearned finance charge. The precedential value of the case cited by plaintiff in support of this allegation, St. Germin v. Bank of Hawaii, 573 F.2d 572 (9th Cir. 1977), has been undermined by a recent Supreme Court decision, Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980). In Milhollin, the Court of Appeals for the Ninth Circuit had held that TILA imposes a general acceleration clause disclosure requirement. Rather than holding that acceleration is a default charge, the Court of Appeals based its decision on the Regulation Z requirement that the creditor disclose: (1) whether a rebate of unearned interest will be made upon acceleration, and (2) the method by which the amount of the rebate will be computed. The Supreme Court, deferring to Federal Reserve Board staff interpretations, reversed the ruling of the Court of Appeals and held that the right of acceleration need not be disclosed, and that the rebate practice under acceleration must be disclosed only if it differs from the creditor's rebate policy with respect to voluntary prepayment. In arriving at its conclusion, the court made this observation: "Meaningful disclosure does not mean more disclosure. Rather, it describes a balance between `competing considerations of complete disclosure ... and the need to avoid ... informational overload.'" 444 U.S. at 568, 100 S.Ct. at 798 (emphasis in original). The plaintiff has not established, nor has he even alleged, that the creditor's rebate policy upon acceleration of the debt is different from the policy upon voluntary prepayment of the debt. Plaintiff is therefore not entitled to summary judgment on this issue.

C. Failure to Disclose a Security Interest — 15 U.S.C. § 1639(a)(8) and 12 C.F.R. § 226.8(b)(5):

Under the heading "Property Insurance and Taxes" defendant's form provides that "if the collateral is lost or damaged, you can use the insurance proceeds to replace or repair it, or repay my loan." Plaintiff argues that this language effectively gives the bank a security interest in the proceeds of insurance, but has cited no case in support of...