Thomas v. Myers-Dickson Furniture Company, 72-3461.

• Decision Date: 07 June 1973
• Docket Number: No. 72-3461.,72-3461.
• Citation: 479 F.2d 740
• Parties: Fannie THOMAS, Plaintiff-Appellee-Cross Appellant, v. MYERS-DICKSON FURNITURE COMPANY, Defendant-Appellant-Cross Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

479 F.2d 740 (1973)

Fannie THOMAS, Plaintiff-Appellee-Cross Appellant, v. MYERS-DICKSON FURNITURE COMPANY, Defendant-Appellant-Cross Appellee.

No. 72-3461.

United States Court of Appeals, Fifth Circuit.

June 7, 1973.

Cleburne E. Gregory, Alexander Cocalis, John C. Gray, Atlanta, Ga., for appellant.

John Harris Paer, Atlanta, Ga., for appellee.

Before BELL, GOLDBERG and SIMPSON, Circuit Judges.

GOLDBERG, Circuit Judge:

Chief Justice Burger has very recently expressed the guiding philosophy for our interpretation of the Federal Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq., more popularly known as the Truth in Lending Act, and Regulation Z, 12 C.F.R. § 226, promulgated thereunder, see 15 U.S.C. § 1604:

"Passage of the Truth-in-Lending Act in 1968 culminated several years of congressional study and debate as to the propriety and usefulness of imposing mandatory disclosure requirements on those who extend credit to consumers in the American market. By the time of passage, it had become abundantly clear that the use of consumer credit was expanding at an extremely rapid rate. From the end of World War II through 1967, the amount of such credit outstanding had increased from $5.6 billion to $95.9 billion, a rate of growth more than 4½ times as great as that of the economy. Yet, as the congressional hearings revealed, consumers remained remarkably ignorant of the nature of their credit obligations and of the costs of deferring payment. Because of the divergent, and at times fraudulent, practices by which consumers were informed of the terms of the credit extended to them, many consumers were prevented from shopping for the best terms available and, at times, were prompted to assume liabilities they could not meet. Joseph Barr, then Under Secretary of the Treasury, noted in testifying before a Senate subcommittee that such blind economic activity is inconsistent with the efficient functioning of a free economic system such as ours, whose ability to provide desired material at the lowest cost is dependent on the asserted preferences and informed choices of consumers.

"The Truth-in-Lending Act was designed to remedy the problems which had developed. The House Committee on Banking and Currency reported, in regard to the then proposed legislation:

`By requiring all creditors to disclose credit information in a uniform manner, and by requiring all additional mandatory charges imposed by the creditor as an incident to credit be included in the computation of the applicable percentage rate, the American consumer will be given the information he needs to compare the cost of credit and to make the best informed decision on the use of credit.\'

This purpose was stated explicitly in § 102 of the legislation enacted:

`The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaging 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 costs 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 hearings held by Congress reflect the difficulty of the task it sought to accomplish. Whatever legislation was passed had to deal not only with the myriad forms in which credit transactions then occurred, but also with those which would be devised in the future. 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. Section 105 delegated to the Federal Reserve Board broad authority to promulgate regulations necessary to render the Act effective. The language employed evinces the awareness of Congress that some creditors would attempt to characterize their transactions so as to fall one step outside whatever boundary Congress attempted to establish. It indicates as well the clear desire of Congress to insure that the Board had adequate power to deal with such attempted evasion. In addition to granting to the Board the authority normally given to administrative agencies to promulgate regulations designed to `carry out the purposes' of the Act, Congress specifically stated:

`These regulations may contain such classifications, differentiations, or other provision, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper . . . to prevent circumvention or evasion of the Act, or to facilitate compliance therewith.\'

The Board was thereby empowered to define such classifications as were reasonably necessary to insure that the objectives of the Act were fulfilled, no matter what adroit or unscrupulous practices were employed by those extending credit to consumers."

Mourning v. Family Publications Service, Inc., 1973, 411 U.S. 356, 93 S.Ct. 1652, 1657, 36 L.Ed.2d 318, (1973) (footnotes omitted), reversing 5 Cir. 1971, 449 F.2d 235. Further, in the words of Chief Justice Burger we are told:

"The Truth-in-Lending Act reflects a transition in congressional policy from a philosophy of let-the-buyer-beware to one of let-the-seller-disclose. By erecting a barrier between the seller and the prospective purchaser in the form of hard facts, Congress expressly sought `to . . . avoid the uniformed use of credit.\' 15 U.S.C. § 1601. Some may claim that it is a relatively easy matter to calculate the total payments to which petitioner was committed by her contract with respondent; but at the time of sale, such computations are often not encouraged by the solicitor or performed by the purchaser. Congress has determined that such purchasers are in need of protection . . . .

"That the approach taken may reflect what respondent views as an undue paternalistic concern for the consumer is beside the point. The statutory scheme is within the power granted to Congress under the Commerce Clause. It is not a function of the courts to speculate as to whether the statute is unwise or whether the evils sought to be remedied could better have been regulated in some other manner."

Id., 411 U.S. at 377, 93 S.Ct. at 1664 (footnotes omitted).

This is a case raising three important questions of first impression regarding the proper application of various provisions of the Truth in Lending Act and Regulation Z. More specifically, we are here concerned with Regulation Z's requirement that creditors include the cost of "credit life insurance" in the computations of "finance charges" and "annual percentage rates" that they are required to disclose to consumers. See 12 C.F.R. § 226.4(a)(5). We are called upon to decide (1) whether "open end credit accounts" in existence prior to the effective date of the regulatory scheme must nonetheless strictly comply with those disclosure requirements, (2) whether the statutorily minimum damages may be imposed for each incorrect disclosure of this information and thus are not limited to one imposition per customer account, i. e., whether minimum damages may be imposed for each violative "periodic statement," and (3) whether attorney's fees may be awarded for work done on appeal on behalf of a successful litigant. Only the first two of these questions were before the trial judge, and he answered both in the affirmative. We agree that these issues were correctly decided, and we affirm both holdings. As to the third issue, we conclude that attorney's fees are authorized for appellate legal work, and we here award such fees in an amount to be determined by the District Court.

I. THE FACTUAL SETTING & ACTION BELOW

The facts giving rise to this action are not seriously disputed. Plaintiff, Fannie Thomas, opened an "open end credit account"¹ with defendant, Myers-Dickson Furniture Company, on October 16, 1968, at which time she made an initial purchase. She made additional purchases on April 14, 1970, September 25, 1970, and November 13, 1970, and each time the amount of the purchase was added to her account balance. During the period here in question, September 1970 to August 1971, defendant sent plaintiff eleven monthly statements of her account and plaintiff made one payment each month.

The Truth in Lending Act and Regulation Z became effective on July 1, 1969. On June 28, 1969, defendant had mailed plaintiff a "credit disclosure" letter in compliance with § 226.7(f) of Regulation Z.² Among the terms disclosed in the letter was the cost of credit life insurance carried on plaintiff's account with defendant. Defendant thereafter continued sending plaintiff monthly statements of her account, including the eleven statements here in question, none of which included the cost of credit life insurance as an element of the "finance charge" stated on each document. Each of the monthly statements did, however, contain a separately stated charge for credit life insurance.³ Since plaintiff was not required to and never chose to pay the entire outstanding balance on her account at one time, each "periodic statement" imposed a different and additional "finance charge" (computed on the then outstanding balance) as well as a new and different credit life insurance charge.

One of the disclosure requirements created by the Act and Regulation Z was that the "finance charge" must include, inter alia, the following:

"(5) Charges or premiums for credit life, accident, health, or loss of income insurance, written in connection with any credit transaction unless

(1) The insurance coverage is not required by the creditor and this fact is clearly and conspicuously disclosed in writing to the customer; and

(2) Any customer desiring such coverage gives specific dated and separately signed affirmative written indication of such desire

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