Roberts v. Allied Finance Co., 47805
| Decision Date | 03 April 1973 |
| Docket Number | Nos. 1,2,No. 47805,3,47805,s. 1 |
| Parties | Annie E. ROBERTS v. ALLIED FINANCE COMPANY |
| Court | Georgia Court of Appeals |
David A. Webster, Atlanta, Gary Flack, Decatur, for appellant.
Syllabus Opinion by the Court
On April 13, 1971, defendant Ann Roberts entered into a loan agreement with plaintiff Allied Finance Company, a licensee under the Industrial Loan Act (Code Ann. § 25-301 et seq.). The note sued upon provided for 15 monthly instalment payments of $30, a total of $450, commencing on May 13, 1971 with final instalment due July 13, 1972. Defendant made a payment in May and one in July, but defaulted completely thereafter. On November 23, 1971, in accordance with a provision of the contract authorizing acceleration of 'all remaining instalments,' plaintiff accelerated the entire unpaid balance on the note, including interest which was discounted in advance for computational purposes but which was necessarily included in the instalment payments.
On December 10, 1971, plaintiff filed suit for this entire amount plus late charges. Defendant answered alleging that the claim sued upon was void under the Industrial Loan Act, and asserting a counterclaim pursuant to 15 U.S.C. § 1640 (Supp.1972) for plaintiff's alleged violation of the Truth in Lending Act (15 U.S.C. § 1601 et seq. (Supp.1972)) and Regulation Z, 12 C.F.R. § 226.8. At the trial defendant moved for a directed verdict as to the plaintiff's claim and as to her counterclaim. The motions were overruled, and judgment was entered in plaintif's favor in the amount used for and also in plaintiff's favor on defendant's counterclaim. Defendant appeals. Held:
1. The Main Claim.
(a) Judgment was demanded for defendant on plaintiff's claim, and it was error to overrule the motion for directed verdict and enter judgment in any amount for plaintiff. Under Code Ann. § 25-315(a), the maximum allowable rate of interest is 8 percent per annum on the face amount of the contract. Here the face amount ($450) 1 times maximum rate (.08) times the period of the contract (1.25 years) equals $45, the precise interest charged and maximum allowable on the note. The total of payments-amount of note, or $450, includes this interest charge of $45; and the $450, which includes the interest, is to be repaid in 15 monthly instalments of $30. The result is that when plaintiff elected to declare 'all remaining instalments at once due and collectible' as the contract provides, plaintiff, by authority of this acceleration clause, charged defendant with the total amount of the interest within a period of indebtedness of less than eight months, instead of the original 15 months upon which interest was computed to the maximum allowed by § 25-315(a). Hence the effective interest rate calculated upon the contract period as foreshortened is greater than 8 percent per annum (see Reese v. Termplan, Inc., 125 Ga.App. 473(2), 188 S.E.2d 177); and, since this result is directly attributable to the exercise of the contract clause providing for acceleration of 'instalments,' which include discounted interest, the obligation as thus accelerated is void and unenforceable. 2 Code Ann. § 25-9903; Lewis v. Termplan, Inc., 124 Ga.App. 507, 184 S.E.2d 473. It is somewhat like compounding interest, as to which see Nash Loan Co. v. Dixon, 181 Ga. 297, 182 S.E. 23; Frazier v. City Investment Co., 42 Ga.App. 585(2), 157 S.E. 102; Lanier v. Consolidated Loan & Finance Co., 47 Ga.App. 148(3), 170 S.E. 99. Accordingly, the judgment must be reversed with direction that judgment be entered in defendant's favor as to the main claim. Code Ann. § 81A-150(e).
We do not hold that there can be no acceleration of the debt-we simply hold that the acceleration, combined with a claim of unearned interest, renders the obligation usurious and void under the provisions of the Industrial Loan Act.
(b) The above ruling disposes of the main claim entirely, rendering it unnecessary to rule upon defendant's motion for partial directed verdict as to the method of assessment of late charges.
2. The Counterclaim.
(a) One ground of the counterclaim asserted pursuant to 15 U.S.C. § 1640 (Supp.1972) was that plaintiff failed to provide defendant with a copy of required Truth in Lending disclosures before the transaction was consummated in violation of Regulation Z, 12 C.F.R. § 226.8(a). While defendant testified that her copy of the disclosure statement was mailed to her, the statement itelf, dated April 13, 1971, recites 'the undersigned acknowledges receipt of a copy of this disclosure statement,' beneath which appears a signature acknowledged by defendant to be hers. In these circumstances it does not appear that plaintiff violated 12 C.F.R. § 226.8(a) in the manner contended. Compare Chrysler Credit Corp. v. Barnes, 126 Ga.App. 444, 452, 191 S.E.2d 121.
(b) Nor is a finding demanded that plaintiff violated 12 C.F.R. § 226.8 by failing to label the fee charged pursuant to Code Ann. § 25-315(b) a 'prepaid finance charge.' While 12 C.F.R. § 226.8, paragraphs (e)(1) and (d)(2), provide that any finance charge paid separately, in cash or otherwise, directly or indirectly to the creditor or withheld by him from the proceeds of the credit extended shall be disclosed using the term 'prepaid finance charge,' the disclosure statement here is as follows:
The terminology used here-'fee-up to $600; fee-above $600' is in accordance with Code Ann. § 25-315(b) providing for a fee not greater than 8 percent of the first $600 of the face amount of the contract, plus 4 percent of the excess. The fee charged here is added to the interest provided for by Code Ann. § 25-315(a) to arrive at the 'total finance charge.' Since the stated purpose of the Truth in Lending Act is 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' (15 U.S.C. § 1601 (Supp.1972)); 'Truth in Lending and Regulation Z, A Primer,' by W. Rhett Tanner, 6 Ga.St.B.J. 19, it is our view that the disclosure made here, which reveals the 'total finance charge' composed of interest and the fee, each of which is stated, is in substantial compliance with the Act and Regulation Z. Knowing the total finance charge and what it consisted of, defendant was in a position to compare her credit alternatives. Belton v. Columbus Finance & Thrift Co., 127 Ga.App. 770, 195 S.E.2d 195.
The contract documents, including the application for the loan and the statement...
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