Philbeck v. Timmers Chevrolet, Inc.
| Decision Date | 03 October 1974 |
| Docket Number | No. 73-3586.,73-3586. |
| Citation | 499 F.2d 971 |
| Parties | Norlinda D. PHILBECK, Plaintiff-Appellee, v. TIMMERS CHEVROLET, INC. and General Motors Acceptance Corporation, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Joseph W. Crooks, Atlanta, Ga., for Timmers Chevrolet, Inc.
A. Mims Wilkinson, Jr., R. Byron Attridge, G. Lemuel Hewes, Atlanta, Ga., for General Motors Acceptance Corp.
John Harris Paer, Fred L. Cavalli, Atlanta, Ga., for plaintiff-appellee.
W. Rhett Tanner, Andrew J. Britton, Atlanta, Ga., for National Consumer Finance Assn. and Georgia Consumer Finance Assn., amicus curiae.
W. Stell Huie, Terrence Lee Croft, Lawrence L. Thompson, Atlanta, Ga., for Ga. Bankers' Assn., amicus curiae.
Steven Gottlieb, Atlanta, Ga., for Atlanta Legal Aid Society, Inc., amicus curiae.
Before MOORE*, AINSWORTH and RONEY, Circuit Judges.
Rehearing and Rehearing En Banc Denied October 3, 1974.
This case presents a significant question concerning the applicability of disclosure provisions of the Truth in Lending Act to the term of optional credit life insurance sold in connection with a closed-end consumer credit transaction, when the term of the insurance coincides with the term of the credit obligation.
On December 31, 1971, Norlinda D. Philbeck executed a written contract with Timmers Chevrolet, Inc., to purchase an automobile for a cash price of $4,701.57, $2,850 of which was to be financed over a 36-month period.1 Subsequently, Philbeck's contract with Timmers was purchased by and assigned to General Motors Acceptance Corporation.
The contract Philbeck signed consummating the credit sale is a standard GMAC form entitled "Instalment Sale Contract." The face of the contract form provides for the ordinary disclosures, including unpaid balance (amount financed), finance charge, total of payments, deferred payment price, annual percentage rate, and payment schedule. Also on the face of the contract, listed under Item 4, "Other Charges," are optional provisions for the customer to choose various types of insurance associated with the ownership and financing of an automobile.2 Item 4C is designated for listing the cost of creditor insurance. It is clearly indicated in capitalized, boldface type that coverage of the buyer by such creditor insurance is not required by the seller. Three types of creditor insurance are listed: "Life," "Disability (Accident and Health)," and "Other (describe)." Separate spaces are provided for listing the cost of each type of creditor insurance. The type of creditor insurance desired is to be indicated by checking an appropriate box. Below these listings is a statement in capitalized, boldface type indicating the buyer's desire to obtain the type of creditor insurance noted. Approval of the statement is affirmatively shown by the buyer's separately dating and signing Item 4C of the contract.
The purpose of obtaining credit life insurance is to cover the buyer's credit obligation during part or all of the term of the financing. The insurance is procured by and in the name of the seller or assignee of the contract.
Philbeck indicated to Timmers her desire to obtain the optional credit life insurance. On Philbeck's contract, the box denoting her desire for the life insurance was checked; and, on the same line, the premium for the insurance was disclosed as $110.12. Philbeck's approval was dated, and she separately signed Item 4C of the contract, thus affirmatively indicating her desire to obtain the credit life insurance.
Next to the line on the contract containing the designation and premium cost for credit life insurance, three asterisks direct the buyer's attention to a block on the face of the contract, approximately two thirds of the way down the page, consisting of two and one-half lines of type, in which it is noted that the life insurance is issued in accordance with the "Notice of Proposed Creditor Insurance on Life of Buyer" contained on the reverse side of the contract.3 That section heading appears almost two thirds of the way down the reverse side of the contract in capitalized, boldface type. The section contains in paragraph (a) a description of the credit life insurance. In the following paragraph (b), there is notice that the term of the life insurance is coextensive with the term of the credit obligation.4 The provision reads in full:
(b) If the insurance becomes effective, the term thereof shall commence on the date of this contract and will (in absence of default on instalment payments) continue until the date on which the unpaid balance of the obligation hereunder is or becomes paid in full, unless the insurance is terminated earlier in accordance with the terms and conditions set forth in the policy or certificate issued by the aforesaid insurer.5
Within a month of her purchase, Philbeck became dissatisfied with the terms of the contract, particularly the annual percentage (interest) rate for financing the car and the credit life insurance premium. She contacted the Finance Manager of Timmers and requested cancellation of her optional credit life insurance policy. This was done, and the unused portion of the premium was refunded to her.
On June 5, 1972, Philbeck filed this action alleging violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and Regulation Z, 12 C.F.R. § 226 (1973), and Federal Reserve Board Interpretation § 226.402, 12 C.F.R. § 226.402 (1973), promulgated thereunder, naming Timmers and GMAC as defendants.6 The district court granted summary judgment to Philbeck. We are concerned only with determining whether disclosure is required of the term of the optional credit life insurance chosen by Philbeck, where the term is the same as the credit obligation; and, if required, what the applicable disclosure standard is. The district court held that the term of the life insurance must be disclosed to the customer and that the appropriate standard of disclosure is the specific disclosure section of Regulation Z, § 226.8(a), 12 C.F.R. § 226.8(a), which, if applied here, requires disclosure of the term on the face of the credit document.7 Thus, the court below found that disclosure of the term of the optional credit life insurance only on the reverse side of the Philbeck contract constituted noncompliance.8 We reverse.
It is the declared congressional purpose of the Truth in Lending Act to assure consumers a meaningful disclosure of credit provisions, thus to enable the consumer to compare more readily various available credit terms and to avoid the uninformed use of credit. Truth in Lending Act § 102, 15 U.S.C. § 1601; see Mourning v. Family Publications Service, Inc., 411 U.S. 356, 364, 93 S.Ct. 1652, 1658, 36 L.Ed.2d 318 (1973).9 "To accomplish its desired objective, Congress determined to lay the structure of the Act broadly and to entrust its construction to an agency with the necessary experience and resources to monitor its operation." Mourning v. Family Publications Service, Inc., supra, at 364, 93 S.Ct. at 1658. Section 105 of the Act, 15 U.S.C. § 1604, thus delegated to the Federal Reserve Board broad regulatory and rulemaking powers to effectuate the purposes of the Act. See Bone v. Hibernia Bank, 9 Cir., 1974, 493 F.2d 135, 138.10
In deciding the question whether disclosure of the term of optional credit life insurance is required when the policy runs for the full term of the credit obligation, we deal primarily with four sources of law and interpretation: the Truth in Lending Act itself; Regulation Z, which was promulgated by the Board pursuant to the broad powers granted it under section 105 of the Act; the Federal Reserve Board Interpretations of Regulation Z, 12 C.F.R. §§ 226.201 et seq.; and the Federal Reserve Board staff opinions, which explain the provisions of the three foregoing authorities, usually in answer to a query regarding a particular factual situation. The three latter authorities, though not binding on the Court, are entitled to great weight, for they constitute part of the body of "informed experience and judgment of the agency to whom Congress delegated appropriate authority." See Mourning v. Family Publications Service, Inc., supra, at 372, 93 S.Ct. at 1662; Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 165, 89 L.Ed. 124 (1944); Allen M. Campbell Co. Gen. Con., Inc. v. Lloyd Wood Const. Co., 5 Cir., 1971, 446 F.2d 261, 265; Bone v. Hibernia Bank, supra, 493 F.2d at 140. We are not free to substitute our "own discretion for that of administrative officers who have kept within the bounds of their administrative powers." American Telephone & Telegraph Co. v. United States, 299 U.S. 232, 236, 57 S.Ct. 170, 172, 81 L.Ed. 142 (1936); see Taylor v. R. H. Macy & Company, Inc., 9 Cir., 1973, 481 F.2d 178, 180, cert. denied, 414 U.S. 1068, 94 S.Ct. 577, 38 L.Ed.2d 473; Roy Bryant Cattle Co. v. United States, 5 Cir., 1972, 463 F.2d 418, 420. Furthermore, the construction which the Federal Reserve Board gives its own Regulation Z in its Interpretations and staff opinions is especially entitled to great deference "because of the important interpretive and enforcement powers granted this agency by Congress" in this highly technical field. Bone v. Hibernia Bank, supra, 493 F.2d at 139; see, e. g., Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413-414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945); Allen M. Campbell Co. Gen. Con., Inc. v. Lloyd Wood Const. Co., supra, 446 F.2d at 265.11
The specific language of the Truth in Lending Act, in section 106(b), 15 U.S.C. § 1605(b), refers, in the context of this case, only to "charges or premiums for credit life" insurance and makes no specific mention of the term of the insurance. The section requires that such costs be included in the finance charge unless it is clearly disclosed in...
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