The opinion of the court was delivered by: GILES
This action arises under the federal Truth-in-Lending Act, 15 U.S.C. §§ 1601-1693 (1976) and (Supp. IV 1981) ("the Act") and the regulations promulgated under it by the Board of Governors of the Federal Reserve System, Regulation Z, 12 C.F.R. §§ 226.1-.15. Jurisdiction is properly asserted under section 130(e) of the Act, 15 U.S.C. § 1640(e) (Supp. IV 1981).
The parties have filed cross motions for summary judgment and have agreed that the sole issue to be decided is whether a transaction entered into between the parties on April 1, 1979, was a "credit-sale" within the meaning of the Act. In deciding these cross-motions for summary judgment I must determine whether there exists a disputed issue of material fact and whether judgment as a matter of law is appropriate. Fed.R.Civ.Pro. 56(c). Applying these standards to the undisputed facts as set forth below, I find that the transaction is a credit sale within the meaning of the Act and is therefore subject to the disclosure requirements of the Truth-in-Lending Act. Accordingly, I grant plaintiff's motion for summary judgment.
The parties have stipulated to the following facts. Defendant Colonial Securities Corp. ("Colonial") is a Pennsylvania-registered corporation whose president and sole stockholder is defendant Milton E. Selig.
Colonial purchased through bulk sales over 100 homes from the Department of Housing and Urban Development ("HUD"), including the house leased by plaintiff.
On April 1, 1979, Selig executed a written agreement on behalf of Colonial with Davis for the lease of a house at 3819 North Delhi Street, Philadelphia, Pennsylvania.
The agreement was prepared on a pre-printed lease form and provided for a monthly rental of $ 150.00. The lease further provided that it was for a one month period, and could be terminated by either party on ten days notice. Absent notice, the lease would continue on a month-to-month basis. In addition, the lease contained the following typewritten paragraphs:
12. In consideration of the reduced rental, lessee agrees to make any and all repairs at his own cost and expenses and to comply with all city notices.
13. If lessee pays the rent promptly on the due date, make (sic) all repairs at his own expense and pays all taxes, water and sewer rent and insurance, plus interest on the unpaid balances at the rate of 113/4% on unpaid balances (sic), he shall receive a deed to the premises at the expiration of 10 years upon payment of the sum of $ 1.00.
Defendants admittedly never provided plaintiff with the disclosures prescribed by the Act and Regulation Z. Defendants contend, however, that the transaction was a lease and that they had no federal disclosure obligations. Plaintiffs contend that despite defendants' use of lease terminology, the transaction was in essence a "credit sale" as defined in 15 U.S.C. § 1602(g) (1976) so that plaintiff should have received the required disclosures, such as the cash price of the sale and the amount of the finance charge. See 12 C.F.R. § 226.8(b) and (c).
Title 15 U.S.C. § 1602(g) (1976) provides:
Defendant argues that the lease in this case does not fit within the above definition. Since both parties had the right to terminate the agreement upon 10 days notice the sole obligation of plaintiff under the agreement was to pay $ 150.00 per month, plus taxes, water and sewer rent, and insurance-hardly a sum substantially equivalent to, or in excess of, the aggregate value of the property within the meaning of section 1602(g).
In support of this argument, defendant cites an unofficial letter issued by the Federal Reserve Board ("FRB") which concludes that rental agreements, terminable at any time by the consumer, are not credit sales within the meaning of the Truth-in-Lending Act, since they do not require payment of a sum equal to, or in excess of, the aggregate value of the property. FRB Letter No. 750, CCH Consumer Credit Guide P 31,069. See also FRB Letter No. 761, CCH Consumer Credit Guide P 31,083; FRB Letter No. 1192, CCH Consumer Credit Guide P 31,623.
Several courts have reached the same conclusion, in cases involving terminable rental agreements to purchase television sets with an option to purchase. See, e.g., Lemay v. Stroman's Inc., 510 F. Supp. 921 (E.D.Ark.1981); Clark v. Rent-It Corp., 511 F. Supp. 796 (S.D.Iowa 1981); Dodson v. Remco Enterprises, Inc., 504 F. Supp. 540 (E.D.Va.1980); Stewart v. Remco Enterprises, Inc., 487 F. Supp. 361 (D.Neb.1980); Smith v. ABC Rental Systems of New Orleans, Inc., 491 F. Supp. 127 (E.D.La.1978), aff'd mem. 618 F.2d 397 (5th Cir. 1980). In these cases, courts have relied upon the termination provision present in the rental agreement to conclude that the definition of ...