Sanders v. Auto Associates, Inc., Civ. A. No. 77-1631.
| Decision Date | 12 April 1978 |
| Docket Number | Civ. A. No. 77-1631. |
| Court | U.S. District Court — District of South Carolina |
| Parties | Nezzie SANDERS, Plaintiff, v. AUTO ASSOCIATES, INC., and Tran-South Financial Corporation, Defendants. |
Nancy C. McCormick, Legal Aid Service Agency, Columbia, S. C., for plaintiff.
This suit was brought pursuant to the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., to recover the penalty established by § 1640. On August 19, 1976, plaintiff purchased a used car from defendant Auto Associates, Inc., and financed part of the purchase price. In connection with this loan, this defendant completed a loan form entitled "Installment Contract and Security Agreement" in which the terms of the loan and the security agreement were set forth. This contract was purchased from Auto Associates by defendant TranSouth Financial Corporation which has been dismissed by a previous order of this Court. Plaintiff seeks by this lawsuit to recover $743.84, which is double the amount of the finance charge, because of certain discrepancies between the disclosures on the form and the requirements imposed by the Truth in Lending Act and Regulation Z. This matter is presently before the Court on plaintiff's motion for summary judgment.
The purpose behind Congress' enactment of the Truth in Lending Act is stated by 15 U.S.C. § 1601 as follows:
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.
The Act and regulations require that lenders clearly disclose loan terms to consumer borrowers and these disclosure requirements must be construed and applied in light of the congressional purpose of promoting the "informed use of credit." Any disclosure made by a particular lender which comes under judicial scrutiny cannot be analyzed in a vacuum by a strict application of the language of the statutes and regulations. The disclosure requirements should be liberally construed to effectuate the congressional purpose of the Truth in Lending Act and applied in a manner which results in justice and fairness to both the lender and the borrower. Unfortunately, many of the truth in lending cases which have been instituted in this court have not been brought by plaintiffs who were misled or misinformed by the loan forms they attack. These plaintiffs have merely sought a windfall penalty from a lender by picking apart its loan form word by word in search of a technical deviation from the language of the statutes and regulations. The Truth in Lending Act was never meant to make the district courts forums for word games between lenders and borrowers in which a borrower's attorney who is adept at using legalese and arguing technicalities is awarded a prize for himself and his client. In order to avoid such misuse of the Truth in Lending Act, this Court will strongly construe its provisions against borrowers who were not misled by a lender's disclosure but merely seek a penalty for finding a technical problem with the loan form which could not have conceivably influenced his choice of credit. This Court will, however, liberally construe the disclosure requirements in favor of borrowers who were misled or might have been misled by a confusing or incomplete loan form.
In the instant case, plaintiff alleges that the defendant's loan form violates the Truth in Lending Act in three respects: (1) that the security interest was improperly identified in violation of 15 U.S.C. § 1638(a)(10) and 12 CFR § 226.8(b)(5), (2) that disclosures were made on the reverse side of the loan document with no requirement that the borrower sign this side in violation of 12 CFR § 226.8(a); and (3) that the lender failed to make the required disclosures clearly, conspicuously, and in meaningful sequence in violation of 15 U.S.C. § 1631 and 12 CFR § 226.6(a).
Since the loan in this case was made to finance the purchase of an automobile, a security interest in that automobile was retained by the lender to insure repayment. The loan form contains a paragraph which states that the security interest in the automobile also includes "all equipment, tires, accessories and parts now or hereafter attached to or used in connection therewith." Under the heading "Additional Terms," the form states that the "customer agrees . . . that all equipment, tires and accessories and parts shall become part of the goods by accession." Plaintiff complains that, by this language, defendants purported to take a security interest in after acquired consumer goods without explaining that such interests are only valid for ten days under S.C. Code Ann. § 36-9-204 (1976). Defendants respond1 that the after-acquired security interest clause applies only to "accessions" which are not covered by the ten day rule of § 36-9-204. The resolution of this issue depends on whether the language in the loan form extends the security interest to goods which cannot be considered "accessions." Liberally construing the language of the loan document with a view to the congressional purpose of the Truth in Lending Act, this Court finds that defendants only acquired a security interest in accessions such that no explanation of the ten day rule was required. Technicalities in language will not be elevated over the substance of the transaction when to do so would result in injustice. There is no indication of bad faith by the defendant in connection with the...
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Dalton v. Bob Neill Pontiac, Inc.
...a technical problem with the loan form which could not have conceivably influenced his choice of credit. Sanders v. Auto Associates, Inc., 450 F.Supp. 900, 902 (D.S.C.1978). (emphasis One Court has observed that "`the obvious intent of Congress was to set standards by which to achieve meani......
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Kramer v. Marine Midland Bank
...plaintiff may not establish liability merely by arguing that the clarity of the disclosure could be improved. Sanders v. Auto Associates, Inc. (D.S.C.1978) 450 F.Supp. 900, 904. Accordingly, we hold that the VSI insurance premium was properly excluded from the calculation of the finance VI ......
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Super Chief Credit Union v. Gilchrist
...a disclosure form which did not influence choice of credit would have the TILA construed against them. See also Sanders v. Auto Associates, Inc., 450 F.Supp. 900 (D.S.C.1978). In reversing one Truth in Lending decision, the United States Supreme Court directed lower courts to not lose sight......
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Malfa v. Household Bank, FSB, 92-8584-CIV.
...within the meaning of the Truth in Lending Act has been decided by courts as a question of law. See Sanders v. Auto Associates, Inc., 450 F.Supp. 900, 904 (D.S.C.1978); Bryson v. Bank of New York, 584 F.Supp. 1306, 1312-1313 (S.D.N.Y.1984). Not surprisingly, the Malfas cannot cite any autho......