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DZADOVSKY v. LYONS FORD SALES

June 21, 1978

KATHLEEN M. DZADOVSKY, Plaintiff
v.
LYONS FORD SALES, INC. and CAPITOL CONSUMER DISCOUNT COMPANY, Defendants


Gerald J.


The opinion of the court was delivered by: WEBER

AND NOW this 21st day of June, 1978, it is ORDERED that the plaintiff's motion for summary judgment is DENIED and, since the Court finds no genuine issue of material fact, JUDGMENT is hereby ENTERED for the defendants and the plaintiff's action is dismissed.

 GERALD J. WEBER United States District Judge

 WEBER, J.

 In 1976 the plaintiff bought a 1971 Datsun automobile from defendant Lyons Ford Sales, Inc. who assigned their right to receive the balance of the purchase price to defendant Capitol Consumer Discount Company (Consumer Discount). Consumer Discount and the plaintiff entered into a credit agreement which obligated the plaintiff to repay the balance of the purchase price plus a finance charge to Consumer Discount. The plaintiff defaulted on the loan, and Consumer Discount sued and recovered a judgment which relieved the plaintiff of the burden of paying a substantial part of the money she borrowed. The plaintiff now brings this action in federal court on the grounds that the disclosure statement used by Consumer Discount did not comply with the Federal Consumer Credit Protection Act (hereinafter, "Truth in Lending Act"), 15 U.S.C. § 1601 et seq. and various regulations promulgated under the Act, 12 C.F.R. § 226 et seq. The plaintiff's motion for summary judgment is now before the Court. The plaintiff alleges that the disclosure statement she signed and which her parents co-signed is misleading and technically inaccurate. She makes no claim that she was actually deceived or injured by the alleged technical inaccuracies of the statement.

 The purpose of the credit disclosure provisions of the Truth in Lending statutes and their underlying regulations is to insure meaningful disclosure of credit terms so that the consumers are able to readily compare various available credit terms and to avoid the uninformed use of credit, 15 U.S.C. § 1601, 82 Stat. 146 (1968); see, Zeltzer v. Carte Blanche Corp., 514 F.2d 1156 (3d Cir. 1975). Although the regulations promulgated under the Truth in Lending statutes must be "clear and conspicuous", 15 U.S.C. § 1631 (1968), the statute expressly states that required disclosures need not appear in the order set forth in the statute. In addition, the statute allows the regulations to permit the use of terminology different from that used in the statute if the language used in the credit agreement "conveys substantially the same meaning", 15 U.S.C. § 1632(a) (Supp. 1978), unless the regulations provide that specific words be used.

 Although other courts have not apparently addressed the issues presented by the plaintiff's motion for summary judgment, they have discussed the policies of the Truth in Lending Act in the context of related issues and provide guidance in evaluating this case of first impression. In Jumbo v. Nester Motors, 428 F. Supp. 1085 (D. Ariz. 1977), plaintiff Robert Jumbo and the defendant entered an agreement for the credit sale of a pick-up truck. The plaintiff filed a complaint under the Truth in Lending Act on the grounds that the defendant did not give him a copy of the security agreement when he signed the security agreement and took delivery of the truck. The court acknowledged that the failure to provide a copy of the security agreement at the time of delivery violated certain provisions of the Act but indicated that the circumstances of the case did not warrant the imposition of civil liability. The court emphasized that the plaintiff and his wife understood the terms of the credit agreement and that the agreement was re-drafted several times until satisfactory to all parties. The Court held that the undisputed technical violation of the Act in no way undermined "the Congressional policy of assuring meaningful disclosure of credit terms and avoiding the uninformed use of credit," 428 F. Supp. at 1087. So emphasizing that the technical violation of the Act did not obstruct the achievement of the Congressional purpose of meaningful disclosure and fully informed debtors, the court granted the defendant's motion for summary judgment.

 In Shields v. Valley Natl. Bank of Arizona, 56 F.R.D. 448 (D. Ariz. 1971), the court emphasized that the rigorous technical requirements and attorney's fees provisions of the Truth in Lending Act should not become a tool for the unjust enrichment of debtors and their lawyers. Denying class certification under Fed.R.Civ.P. 23 to a proffered group of plaintiffs, the court said:

 
"At a time when large business firms in general appear to be a scapegoat for a great many of our Nation's problems, the Courts should not gratuitously add the final straw. The Truth-in-Lending Act has laudable purposes and should be strictly enforced by the Courts, but it should not be allowed to be used as means of oppression or harassment or unjust enrichment. An interpretation of the Act to allow class actions, such as sought by Mr. Shields, could be the means of curing an illness by killing the patient and in the process promoting unnecessary litigation mainly for the benefit of a few lawyers ready and willing to promote such cases.
 
Having so concluded, the Court finds that the plaintiff's attempt to make his individual action a class action, must fail. 56 F.R.D. at 451.

 These decisions confirm what seems intuitively obvious to the Court, namely, that the plaintiff should not win recovery of finance charges and attorney's fees under the Truth in Lending Act unless there is some relationship between the alleged violation of the Act and the Congressional purposes of meaningful disclosure and fully informed debtors. If a debtor is fully informed and completely understands the terms of the credit agreement, but the creditor failed to comply with some requirement of the Act which does not impede the debtor's understanding of the terms of his loan, there is no sensible rationale -- either in law or in equity -- for awarding damages.

 Despite the persistent questioning of the Court at the pretrial conference, the plaintiff's attorney gave no indication that the plaintiff was deceived or over-reached in any way by the disclosure document. Furthermore, plaintiff's counsel was unable to attribute the plaintiff's default on her loan to any particular deficiency on the disclosure document. At the pretrial conference, the plaintiff's attorney said that the bases for her claim were certain alleged technical deficiencies on the disclosure statement which are obviously unrelated to her inability to repay the debt she voluntarily assumed. After reviewing the disclosure document and the facts set forth in the pleadings and at the pretrial conference, we must conclude that any claim which the plaintiff now brings is not to redress any injury or deception but rather to capitalize on the generous recovery and attorney's fee provisions of a remedial statute. The tack plaintiff chooses is to focus on largely immaterial aspects of a clear, straightforward credit agreement which are clearly unrelated to her eventual default. Because the plaintiff has admitted that the violations she alleges did not impede her understanding of the terms of her loan and hence do not relate to the Congressional purpose of the Truth in Lending Act, we must deny the plaintiff's motion for summary judgment.

 In any event, we have examined each of the plaintiff's allegations of technical non-compliance and are unable to conclude that any one of them forms the basis of a violation of the Truth in Lending Act or its underlying regulations.

 1. The disclosure document describes the total finance charge ($517.74) as comprised of a "regular charge" ($502.74) plus a "prepaid finance charge" ($15.00). The plaintiff argues that these finance charge components are not disclosed in the precise terminology required by Regulation Z, 12 C.F.R. § 226.8(d)(3), and, as disclosed by the defendants, are not meaningful to the consumer. The plaintiff overlooks that § 226.8(d)(3) does not prescribe any precise language for the ...


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