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October 24, 1973

Richard ANDRUCCI, et al., Plaintiffs,

Teitelbaum, District Judge.

The opinion of the court was delivered by: TEITELBAUM

On May 8, 1973, this Court entered an Order denying plaintiffs' motion for class determination in this case. (C.A. No. 69-905, May 8, 1973). In accord with Katz v. Carte Blanche Corp., 52 F.R.D. 510 (W.D.Pa.1971), aff'd (3d Cir. 1973), rehearing granted (3d Cir. 1973), the merits of this action for violation of the Truth-In-Lending Act (15 U.S.C. § 1601 et seq.) were scrutinized only to the extent necessary to determine whether plaintiffs had produced "a minimal demonstration that the complaint was 'sincere' or 'more than frivolous'." Katz, supra at 513. It was held that the action was not more than frivolous, and thus the plaintiffs were denied class representative status.

 The case is now before the Court on defendant's motion for summary judgment. In the preceding Opinion in this case, decided upon a stipulation of facts agreed upon by the parties, it was held that each of plaintiffs' five allegations *fn1" as to the manner in which defendant's July 1969 periodic statement had allegedly failed to comply with the disclosure requirements of the Truth-In-Lending Act and Regulation Z (12 C.F.R. § 226.1 et seq.) were without merit. It was held that plaintiffs' claims were not "more than frivolous"; that defendant's efforts to comply with the Act were "eminently successful"; and that the forms used by defendant Gimbels during the transition period provided for in Section 226.6(k) of Regulation Z *fn2" attained the required degree of disclosure "with honors". For the purpose of this summary judgment determination, these express findings amount to a conclusion by the Court as a matter of law that defendant Gimbels has fully complied with the Truth-In-Lending Act in its periodic statements. Thus, the only question which remains is whether there exist genuine issues of material fact which would preclude the granting of summary judgment. F.R.Civ.P. 56(c).

 Plaintiffs contend that there are two such factual issues. First, an issue of fact is said to exist as to whether defendant made all required disclosures in a clear and conspicuous manner. Second, plaintiffs contend there is a factual issue as to whether defendant took bona fide steps prior to July 1, 1969 to obtain the printed forms which would comply with the Act. Before an inquiry is undertaken into these questions, some background is necessary.

 The defendant, Gimbel Brothers, Inc., on July 1, 1969 and for a number of years prior thereto, was engaged in operating retail department stores throughout the United States and in the area around Pittsburgh, Pennsylvania. During this period defendant regularly extended credit to its customers as part of its business practice. The sixteen plaintiffs in this case are consumer customers of defendant to whom retail credit has been extended or offered.

 In the fall of 1968, defendant became aware of the passage of the Truth-In-Lending Act by Congress and of the necessity for revision of the credit billing statements sent to customers in light of the Act's requirements. The Act was to become effective July 1, 1969, after which date the prescribed information was required to be disclosed on all periodic statements. The July 1, 1969 date was to be effective in all cases except those situations covered by Section 226.6(k) of Regulation Z, which provides as follows:

"Transition Period. Any creditor who can demonstrate that he has taken bona fide steps, prior to July 1, 1969, to obtain printed forms which are necessary to comply with requirements of this part may, until such forms are received but in no event later than December 31, 1969, utilize existing supplies of printed forms for the purpose of complying with the disclosure requirements of this part, other than the requirements of paragraph (b) of § 226.9; Provided, That such forms are altered or supplemented as necessary to assure that all of the items of information the creditor is required to disclose to the customer are set forth clearly and conspicuously."

 Defendant set out to revise its periodic statements with the objective of having new forms in use by May 1, 1969, when it planned to open a branch store in Monroeville, which event in itself dictated a revision of its billing statements. In February of 1969, defendant sent copies of its revised periodic statement to its printer and to legal counsel for the Pennsylvania Retailers Association (P.R.A.). In March, P.R.A. counsel advised defendant of their substantial uncertainty as to the precise requirements of the Act. By April, counsel were able to suggest further revisions of the billing forms to defendant. At that time, P.R.A. counsel also advised that while Gimbels was working to incorporate the suggested revisions into its forms, it could continue to use existing forms until December 31, 1969. This latter piece of advice, of course, was given in accordance with the clear language of Section 226.6(k), set out above.

 On October 1, 1969, Gimbels began mailing out its fully revised billing forms. From July until October 1, 1969, in accordance with the advice of counsel and the proviso of Section 226.6(k), Gimbels supplemented its billing statement with a supplemental form designed to effect complete compliance with the Act.


 This capsulized history of defendant's efforts makes clear that they took bona fide steps to obtain printed forms which would meet the Act's requirements prior to July 1, 1969. Plaintiffs would have the Court believe that Congress and the Federal Reserve Board intended the Section 226.6(k) grace period to apply only to those creditors who, prior to the critical date, had satisfied themselves, their counsel and presumably the Federal Reserve Board itself that they possessed forms which conformed in every particular to the requirements of the Act and then found themselves faced with practical problems of printing and the like which prevented their distribution by July 1, 1969. Such an interpretation would clearly be unfounded.

 As was stated in the previous Opinion in this case, "the obvious intent of Congress was to set standards by which to achieve meaningful 'truth-in-lending' and not to deviously set traps by which windfalls could be reaped by fanciful lawyers". Section 226.6(k) embodies a similar intent -- to allow a grace period during which the confusion and uncertainty attendant to the Act could be brought into focus by the parties concerned without the possibility of legal penalties being imposed.

 The Truth-In-Lending Act, no less than many other pieces of legislation, was and is subject to more than one interpretation as to many of its sections. Astute and conscientious minds in both government and private legal circles have had some difficulty in ascertaining with precision the scope and impact of the Act. Whether this lack of legislative clarity is a matter of accident or design need not detain us here. What is important is that Section 226.6(k) impliedly recognizes the uncertainty to which the Act and Regulation Z were subject and allowed for the orderly, nonlitigous resolution of the problems involved.

 To hold upon this record that defendant's efforts to understand the Act and undertake full compliance with it were made in less than good faith simply cannot be done. It is held that defendant Gimbels took all necessary bona fide steps within the meaning of Section 226.6(k) of Regulation Z to obtain forms prior to July 1, 1969 ...

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