Owens v. Magee Finance Serv. of Bogalusa, Inc.

• Decision Date: 13 August 1979
• Docket Number: Civ. A. No. 77-3151.
• Citation: 476 F. Supp. 758
• Parties: Lois OWENS, A/K/A Lois Williams and Betty J. Maddock v. MAGEE FINANCE SERVICE OF BOGALUSA, INC.
• Court: U.S. District Court — Eastern District of Louisiana

476 F. Supp. 758

Lois OWENS, A/K/A Lois Williams and Betty J. Maddock v. MAGEE FINANCE SERVICE OF BOGALUSA, INC.

Civ. A. No. 77-3151.

United States District Court, E. D. Louisiana.

August 13, 1979.

COPYRIGHT MATERIAL OMITTED

CHARLES SCHWARTZ, Jr., District Judge.

This matter came before the Court for trial on June 7, 1979, and was thereafter taken under submission pending the filing of post-trial briefs by the parties. Having received the post-trial submissions and having carefully considered the written and oral arguments of counsel, the record, and the applicable law, the Court rules as follows:

To the extent that any of the following findings of fact constitute conclusions of law, they are adopted as such, and to the extent that any of the following conclusions of law constitute findings of fact, they are so adopted.

FINDINGS OF FACT

Plaintiffs, Lois Owens, a/k/a Lois Williams ("Owens"), and Betty J. Maddock ("Maddock"), who are natural persons of the age of majority and residents of the City of Bogalusa in Washington Parish, Louisiana, have brought this action for Truth-in-Lending violations and an Equal Credit Opportunity violation arising out of consumer credit transactions with defendant, Magee Finance Service of Bogalusa, Inc. ("Magee"), a Louisiana corporation doing business in Bogalusa, Louisiana. Magee, in the ordinary course of its business, regularly extends consumer credit, or offers to extend such credit, which is payable by agreement in more than four installments and for which the payment of a finance charge is required in connection with loans. Plaintiffs claim damages based on three consumer credit transactions with Magee.

On October 21, 1976 Owens applied for a direct loan of approximately $650.00 with Magee ("Transaction # 1"), the proceeds of which she intended to, and ultimately did, use to pay personal and family bills. Magee, however, would not approve Owens's application unless she could provide a creditworthy indorser. Thus, in order to obtain the credit, Owens had her sister, Betty Maddock, who had previously done business with Magee and who was considered by Magee as creditworthy, serve as co-signer and indorser, and on that same day Maddock signed the loan papers.

On May 27, 1977 Maddock applied for a direct loan of approximately $925.00 with Magee ("Transaction # 2"), the proceeds of which she intended to, and ultimately did, use to pay personal and family bills and obligations.

On July 13, 1978 Maddock again applied for a direct loan with Magee of approximately $400.00 ("Transaction # 3"), the proceeds of which she promptly needed, and ultimately used, for repairs to her disabled family car. Also, on July 13, 1978 Maddock telephoned Magee's office and spoke with Mr. Lloyd Ball, the co-manager, with authority to bind Magee, up to $2,500.00, to make the oral application for the loan. Mr. Ball requested that she come to the office to complete the transaction, and allegedly, prior to her actually receiving credit, she was requested to execute a document to release her pending Truth-in-Lending claims against Magee which she and Owens had filed in connection with Transaction # 1.

All of the insurance policies issued in connection with these three consumer credit transactions carried Magee as the "First Beneficiary," or loss payee, whereby Magee would receive the proceeds thereof in case of death, disability, and/or casualty; additionally, in the regular and ordinary course of its business, and in these present transactions Magee applied any rebates and/or unearned premiums as a result of these insurance policies to the respective customer's account in the event of prepayment, loss, and/or casualty.

Plaintiffs' Truth-in-Lending claims with respect to the three transactions are as follows:

1. Failure to disclose all of the required disclosures early, conspicuously, and in a meaningful sequence and, in the case of required numerical amounts and percentages, in not less than the required 10-point printed type prescribed by 12 C.F.R. § 226.6(a), i. e., defendant failed to disclose required numerical amounts and percentages in the disclosure statement text located between the "insurance authorization" portion and the "security" portion in not less than 10-point printed type (Transactions #'s 1, 2, 3); Magee also failed to disclose the term "FINANCE CHARGES" and "ANNUAL PERCENTAGE RATE" (Transactions #'s 1, 2) or "TOTAL FINANCE CHARGE" and "ANNUAL PERCENTAGE RATE" (Transaction # 3) more conspicuously than other terminology required by the Act and Regulation "Z" and failed to disclose clearly and conspicuously the due dates of payments subsequent to the first payment's due date (Transactions #'s 1, 2, 3).

2. Failure to disclose all "security interest(s)" retained by Magee in connection with the proceeds and/or unearned premiums of the insurance coverages issued in connection with the transactions, together with a clear and otherwise proper description of all properties, monies, policies, and/or proceeds covered, see, 12 C.F.R. § 226.8(b)(5); (Transactions #'s 1, 2, 3).

3. Failure to comply with 12 C.F.R. § 226.8(b)(5) in omitting the identification of the "One Living Room Suite and One Television" on the disclosure statement itself since the length of identification of these properties did not require reference to and use of the chattel mortgage document itself for this purpose; (Transaction # 2).

4. Failure to disclose the correct amount of the "amount financed," see 12 C.F.R. § 226.8(d)(1), i. e., the "amount of loan" indicated in the underlying promissory note contravenes this disclosure; (Transactions #'s 1, 2, 3).

5. If this loan was a pre-computed loan, Magee failed to disclose the correct finance charge as required by 12 C.F.R. § 226.8(d)(3) computed at the annual percentage on an "amount of loan" stated in the note, and failure to use the required terminology for disclosure of the "Finance Charge," i. e., the plural of this term, "Finance Charges," (Transactions #'s 1, 2) and "TOTAL FINANCE CHARGE" (Transaction # 3) is not sanctioned by Regulation "Z."

6. If this loan was an interest-bearing loan, Magee falsely disclosed the fact that it had a right to charge a default charge of 5% of the unpaid amount of the installment but not exceeding $5.00 or the deferral charge that would be permitted to defer an unpaid installment, see 12 C.F.R. § 226.8(b)(4) or that a certain rebate will be made if prepaid, see id., or that a certain rebate will be made if prepaid, see 12 C.F.R. § 226.8(b)(7) (Transactions #'s 1, 2, 3).

7. Disclosing a false and incorrect statement of the annual percentage rate, since the note signed by plaintiffs evidencing this obligation provides that "if this consumer loan is written on an interest bearing basis it shall bear interest at the annual percentage rate stated above . . ." when, in fact, no annual percentage was stated above, (Transactions #'s 1, 2, 3).

8. Disclosing an incorrect annual percentage rate by more than one-quarter of one percent (¼%), since the note evidencing this obligation states that "if this loan is precomputed it shall bear interest after contractural maturity at the highest rate authorized by the Louisiana Consumer Credit Law" (i. e. 36%), when in fact, an annual percentage rate in excess of 36% was disclosed by defendant, (Transaction # 1).

9. Failure properly to disclose the additional "security interest(s)" Magee retained in connection with the waiver of homestead rights and/or exemptions contained in the accompanying Chattel Mortgage documents, (Transactions #'s 1, 2, 3).¹

Moreover, plaintiff Maddock asserts a claim under the prohibited discrimination sections of the Federal Equal Credit Opportunity Act for alleged violations by Magee in connection with the circumstances circumscribing and including the transaction of July 13, 1978 and the accompanying "settlement" document executed by Maddock, claiming actual and punitive damages up to the maximum of $10,000.00, and attorney fees should the Court find that Magee did engage in prohibited discrimination under the Federal Equal Credit Opportunity Act, and requesting that the Court invoke its equitable powers and invalidate and declare as null and void the "release and compromise" document signed by plaintiff Maddock with respect to her claims for Transaction # 1.

The disclosure statements that were executed are as follows: Transaction # 1 (Exhibit P-2); Transaction # 2 (Exhibit P-10); Transaction # 3 (Exhibit P-20). Moreover, it was stipulated that the typeface on the lower third portion of Magee's forms with respect to "FINANCE CHARGE" was 8 point type.

The testimony of Mr. Lloyd Ball, ("Ball") Magee's manager, Mrs. Maddock, and Barbara Thomas, ("Thomas") secretary in Magee's office, is relevant to determine whether Maddock released her rights by the execution of the settlement and release document (Exhibit P-28) and whether Magee engaged in discriminatory practices under the Equal Credit Opportunity Act with respect to the settlement document and the consummation of Transaction # 3. Mr. Ball testified that Maddock, who was considered by him to be creditworthy and a good customer as demonstrated by her credit history at Magee, was known by Magee to have filed a lawsuit on her Truth-in-Lending claims for Transactions #'s 1 and 2, even though the Magee personnel had not seen anything in writing and their records did not reflect a pending suit. Ball testified that after Maddock called to negotiate Transaction # 3 over the telephone, that the loan papers were prepared, Maddock came into the office on July 13, 1978, signed the document while sitting in the cubicle that Magee maintains for effecting credit transactions, and that she voluntarily, after a conversation with Ball about the pending claims, offered to release her pending claims. He testified that he was going to ask her about the pending claims, did so, and then presented her with a release for her to...