PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

TIMOTHY GIBSON, 

Plaintiff-Appellee,

v.  No. 04-2110

LTD, INCORPORATED,

Defendant-Appellant. 

TIMOTHY GIBSON, 

Plaintiff-Appellant,

v.  No. 04-2131

LTD, INCORPORATED,

Defendant-Appellee. 

Appeals from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Leonie M. Brinkema, District Judge.

(CA-03-1374-1)

Argued: September 19, 2005

Decided: January 11, 2006

Before NIEMEYER and LUTTIG, Circuit Judges,

and Robert J. CONRAD, Jr., United States District Judge for the

Western District of North Carolina, sitting by designation.

Affirmed in part, reversed in part, vacated in part, and remanded in

part by published opinion. Judge Niemeyer wrote the opinion, in

which Judge Luttig and Judge Conrad joined. 
COUNSEL

ARGUED: Yama Anthony Shansab, WALTON & ADAMS, P.C.,

Reston, Virginia, for Appellant/Cross-Appellee LTD, Incorporated.

Alexander Hugo Blankingship, III, BLANKINGSHIP & ASSOCIATES, P.C., Alexandria, Virginia, for Appellee/Cross-Appellant

Timothy Gibson. ON BRIEF: Robert V. W. Adams, III, WALTON

& ADAMS, P.C., Reston, Virginia, for Appellant/Cross-Appellee

LTD, Incorporated. Thomas B. Christiano, BLANKINGSHIP &

ASSOCIATES, P.C., Alexandria, Virginia, for Appellee/CrossAppellant Timothy Gibson. 

OPINION

NIEMEYER, Circuit Judge: 

In order to obtain financing for the purchases of a 2002 Dodge

truck and a 2003 Dodge truck from Lustine Toyota/Dodge, Inc., in

Woodbridge, Virginia, Timothy Gibson executed a total of five retail

installment sales contracts — two in connection with the 2002 purchase and three in connection with the 2003 purchase. After Gibson

wrecked his 2002 truck and returned the 2003 truck upon Lustine’s

demand when Lustine learned that Gibson was no longer employed,

Gibson commenced this action challenging the legality of disclosures

made in the retail installment sales contracts. He alleged violations of

the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and

related Virginia law. 

The district court held that disclosures in the first 2002 contract and

the first 2003 contract constituted violations of TILA and awarded

Gibson statutory damages, as well as $53,627.50 for statutorily authorized attorneys fees. The court rejected Gibson’s claim that Lustine

improperly disclosed a charge for the inclusion of "GAP insurance"1

as part of the amount financed in the second 2003 contract. 

1When a vehicle is totaled, "GAP insurance" ("Guaranteed Auto Protection" insurance) pays off the consumer’s outstanding loan balance if

the reimbursement by the consumer’s property damage insurance carrier

is insufficient. 

2 GIBSON v. LTD, INC.
For the reasons that follow, we affirm the district court’s findings

that two contracts violated TILA and reverse its rejection of Gibson’s

claim that the GAP insurance cost was improperly disclosed as part

of the amount financed on the second 2003 contract. We also vacate

the district court’s award of attorneys fees to permit the court to reassess its award in light of Gibson’s additional meritorious claim. 

I

Timothy Gibson, a young welder from Texas who did not complete

high school and who had little credit history, came to Virginia in 2002

with his older brother to work for a contractor in Dumfries, Virginia.

After having had to hitch rides with his brother and to take taxicabs

for transportation, Gibson decided to purchase a truck from Lustine

Toyota/Dodge ("Lustine") on October 31, 2002. After selecting a new

2002 Dodge Dakota truck, a Lustine employee who sells aftermarket

products asked Gibson whether he was interested in purchasing

undercoating, paint sealant, fabric protector, floor mats, or other aftermarket products. According to Gibson, he told the sales representative

that he did not want any such products — a fact that Lustine has not

disputed. The sales representative nonetheless saved in her file an

"After Sale Invoice," not signed by Gibson, showing a $499 charge

for undercoating and paint sealant. Later that day, Gibson signed a

buyer’s order for the truck and a retail installment sales contract to

finance it that committed him to pay $21,201.39, after applying his

down payment. This sum included a $499 charge for "AFTER

MRKT," but no such charge was disclosed on the retail installment

sales contract. The charge was included in the gross amount financed.

In his buyer’s order, Gibson agreed to permit Lustine to follow its

practice of selling his retail installment sales contract to a third party.

Moreover, the buyer’s order provided:

If Purchaser is financing this transaction, it is conditioned

upon approval of Purchaser’s proposed retail installment

sale contract as submitted to or through the Dealer. If that

proposed retail installment sale contract is not approved

GIBSON v. LTD, INC. 3
under the terms agreed to with the Dealer, Purchaser may

cancel this invoice . . . .2

In a financing addendum to the retail installment sales contract, Gibson also agreed that he was accepting delivery of the truck that day

"pending approval by a financing source" and that if Lustine did not

receive approval from a financing source, Lustine could rescind the

transaction. Lustine remained bound, however, until it gave notice

that it was rescinding the contract by its failure to sell the loan. As

to Gibson, the retail installment sales contract provided that he

remained bound after he signed the contract and that he could "only

cancel it if the seller agree[d] or for legal cause." Gibson took delivery of the truck on October 31, 2002, the same day he entered the

dealership and signed the retail installment sales contract. 

Lustine was unable to find a third-party finance company to purchase Gibson’s retail installment sales contract because of Gibson’s

low credit rating. Accordingly, Lustine had Gibson return to the

dealership on November 11, 2002, to restructure the deal and execute

a new retail installment sales contract that reduced the amount

financed to $17,114.17. This was accomplished by deleting the $499

"AFTER MRKT" charge, deleting a $500 GAP insurance charge, and

increasing Gibson’s down payment. As restructured, this second retail

installment sales contract was sold to Triad Financial Corporation. 

In early 2003, Gibson crashed his truck into a pole, totaling it. On

February 5, 2003, he returned to Lustine to purchase a replacement

truck. He chose a new 2003 Dodge Dakota truck and again signed a

buyer’s order as well as a retail installment sales contract to finance

$22,889.36, after applying his down payment. This amount included

a $500 charge for GAP insurance and an overcharge in the amount

2

In the 2003 form of Retail Installment Sales Contract that Lustine

used, the wording of this provision was changed slightly, to provide: 

If Purchaser is financing this transaction or leasing the vehicle,

the transaction is conditioned upon approval of Purchaser’s retail

installment sale contract or lease by a financial source on terms

acceptable to the Dealer. If the retail installment sale contract or

lease is not approved, Purchaser or Dealer may cancel this sale

. . . . 

4 GIBSON v. LTD, INC.
of $12.39 resulting from Lustine’s miscalculation of the dealer’s business license tax. The inclusion of the GAP charge on the buyer’s

order and on the retail installment sales contract was authorized by an

addendum that Gibson signed, agreeing to purchase the GAP insurance. Gibson took delivery of the 2003 truck that day. 

Again, Lustine was unable to sell this 2003 retail installment sales

contract to a finance company. One finance company, however,

agreed to purchase the loan if it were restructured to provide for an

amount financed no greater than $21,900. Accordingly, Gibson

returned to the dealership on February 12, 2003, and signed a second

retail installment sales contract that provided for financing the amount

of $21,248.70. Under this restructured arrangement, Gibson increased

his down payment and thereby decreased the amount financed. This

second 2003 contract again included a $500 charge for GAP insurance, even though Gibson did not again sign an addendum to authorize the charge as he had a week earlier for the first 2003 contract. 

A couple of days after Gibson signed the second 2003 retail installment sales contract — on February 14, 2003 — Lustine was advised

that Gibson still owed Triad Financial money on the loan for his 2002

truck because the insurance payout on the totaled vehicle was less

than the amount of the outstanding loan. Because Gibson did not have

GAP insurance, Lustine proposed to cover Gibson’s deficiency by

absorbing part of it and passing on the remainder to Gibson as an

increase in the price of the 2003 truck. Gibson returned to the dealership on February 18 to sign a third retail installment sales contract

agreeing to this arrangement. 

After Gibson signed the February 18 retail installment sales contract, Lustine learned that Gibson had quit his job on February 6,

2003, the day after he signed his credit application for financing the

2003 truck. Because of Gibson’s unemployment, Lustine told Gibson

that he had to return the vehicle, and Gibson did so. 

After returning the 2003 truck, Gibson commenced this action

against Lustine, alleging multiple violations of TILA, a violation of

the Virginia Consumer Protection Act, and common law fraud. On

cross motions for summary judgment, the district court ruled in favor

of Lustine in all of Gibson’s claims except two: The court ruled in

GIBSON v. LTD, INC. 5
Gibson’s favor finding (1) that the $499 charge for "AFTER MRKT"

on the first retail installment sales contract was improperly included

in the amount financed inasmuch as it was "undisputed" that Gibson

did not order, nor did he receive, aftermarket products and (2) that the

first 2003 retail installment sales contract included an overcharge of

$12.39 for the dealer’s business license tax. In making these findings,

the district court rejected Lustine’s principal argument that, because

neither of the retail installment sales contracts on which violations

were found had been purchased by third-party finance companies and

no monies were ever loaned on them, the contracts were not "consummated" as required by federal law. The court relied on our decision

in Nigh v. Koons Buick Pontiac GMC, Inc., 319 F.3d 119 (4th Cir.

2003), rev’d in part 125 S. Ct. 460 (2004), to reject Lustine’s argument. The parties agreed that Nigh dictated an award of $63,847.94,

twice the sum of the two finance charges related to Gibson’s successful claims.3

 And because Gibson was a successful plaintiff under the

TILA, Gibson submitted a claim for attorneys fees in the amount of

$82,957.50, pursuant to 15 U.S.C. § 1640(a)(3). The district court

awarded Gibson $53,627.50. 

From the district court’s judgment, Lustine appeals, challenging the

court’s conclusion that the relevant retail installment sales contracts

were "consummated" and its holding that Gibson was improperly

charged $499 for aftermarket products on the first 2002 contract. Gibson filed a cross-appeal challenging the district court’s rejection of his

claim that the second 2003 retail installment sales contract improperly

included a charge for GAP insurance in the amount financed. 

II

Lustine’s overarching contention is that neither of the violations

found by the district court are actionable because they arose from

retail installment sales contracts that were not "consummated." The

claim for the improper disclosure of the $499 aftermarket charge

arose from the first 2002 retail installment sales contract, which was

rejected by third-party lenders and replaced by a second one; and the

3Gibson has stipulated that because the Supreme Court has since

reversed the judgment in Nigh, these statutory damages should now be

reduced to $2,000, $1,000 for each violation. 

6 GIBSON v. LTD, INC.
claim based on the $12.39 overcharge related to the first 2003 retail

installment sales contract, which was superseded by a second contract

entered into a week later. Because neither of the two contracts was

purchased by a third-party finance company and credit was never

extended to Gibson on either of them, Lustine argues that any violation with respect to them cannot lead to sanctions imposed by TILA,

which regulates only "consummated" credit contracts. See 15 U.S.C.

§ 1638(b)(1); 12 C.F.R. § 226.17(b). 

Recognizing that our holding in Nigh might be applied to hold that

the transactions in this case were indeed consummated, Lustine

argues that Nigh is "inapposite" because it "analyzed neither the [Federal Reserve Board’s] Official Commentary nor state law." Appellant’s Br. at 24. Lustine asserts that Federal Reserve Board’s

Commentary "expressly interprets consummation under Regulation Z

to impose a state law construct." Id. at 19-20 (discussing ¶ 2(a)(13)-

1 of the Official Staff Commentary to 12 C.F.R. Pt. 226, Supp. I

("Official Staff Commentary"), which provides: "State law governs.

When a contractual obligation on the consumer’s part is created is a

matter to be determined under applicable law; Regulation Z does not

make this determination"). Lustine contends that under Virginia law,

a condition precedent must be fulfilled before the "contract shall take

effect," Smith v. McGregor, 376 S.E.2d 60, 65 (Va. 1989), and reasons that a contract that does not take effect until a condition precedent is fulfilled is one that is not "consummated." Appellant’s Br. at

22, 24 ("There was no consummation, and hence no TILA liability").

The Truth in Lending Act was enacted to inform consumers’ use

of credit by increasing their awareness of credit costs. See 15 U.S.C.

§ 1601(a). Consequently, the Act requires "meaningful disclosure of

credit terms so that the consumer will be able to compare more readily the various credit terms available to him." Id. To this end, TILA

requires the disclosure of, among other things, the "amount financed"

and the "finance charge." See id. § 1638(a) & (b). The "amount

financed" is defined to be the "amount of credit of which the consumer has actual use," id. § 1638(a)(2)(A), and the "finance charge"

is defined as all charges "imposed directly or indirectly by the creditor

as an incident to the extension of credit." The finance charge "does

not include charges of a type payable in a comparable cash transaction." Id. § 1605(a). 

GIBSON v. LTD, INC. 7
These and the other required disclosures must be made "before the

credit is extended." 15 U.S.C. § 1638(b)(1). Regulation Z, the Federal

Reserve Board’s primary TILA regulation, elaborates on this timing

requirement, providing that a creditor must "make disclosures before

consummation of the transaction." 12 C.F.R. § 226.17(b) (emphasis

added). "Consummation" in turn is defined to occur at the "time that

a consumer becomes contractually obligated on a credit transaction."

Id. § 226.2 (emphases added). This definition of "consummation,"

adopted in 1982, moved away from the pre-1982 definition which

provided that a "transaction shall be considered consummated at the

time a contractual relationship is created between a creditor and a

customer . . . irrespective of the time of performance of either party."

Id. § 226.2 (kk) (January 1, 1981 version) (emphasis added). As one

district court noted soon after the 1982 change, "[u]nder the new,

revised definition . . . courts should only look at the point in time that

the consumer becomes contractually obligated on the credit transaction." Zoumayaiwan v. Jack Haggerty Olds, Inc., 1985 WL 1453

(N.D. Ill. 1985); see also 46 Fed. Reg. 20848, 20851 (Apr. 7, 1981)

("As before, state law determines when the contractual obligation

arises, but the revised definition focuses on when the consumer

becomes obligated"). 

In Nigh, we construed Regulation Z, concluding that because the

regulation "expressly refers solely to the consumer’s commitment"

and because of "TILA’s express purpose of protecting consumers

from receiving inadequate disclosures prior to their entering into

credit transactions," "consummation . . . encompasses unfunded,

financing agreement options to which consumers contractually commit, and under which they can be bound at the lender’s sole discretion." Nigh, 319 F.3d at 124. We reasoned that consummation occurs

when a consumer has done all he can to be committed to the terms

of a credit transaction, for 

[i]f consummation, or extension of credit, does not encompass a consumer’s commitment to a financing agreement

that provides unilateral power for the creditor to execute the

agreement later, creditors could intentionally provide faulty

disclosures to consumers, obtain their commitment, and then

afterwards provide accurate disclosures prior to closing the

transaction, which if provided earlier might have dissuaded

8 GIBSON v. LTD, INC.
the consumer from accepting the credit, all without incurring TILA liability. 

Id. Thus, we concluded that a consumer "consummates" an unfunded

retail installment sales contract when he signs it even if the dealer has

not signed it. Id. at 123. 

In view of the language of the Act, as well as Regulation Z, we find

unpersuasive Lustine’s assertion that Nigh is inapposite. The change

to Regulation Z in 1982 altered the definition of consummation from

when a "contractual relationship is created" to when the "consumer

becomes contractually obligated on a credit transaction." It is this distinction on which Nigh focused — determining not when a contract

becomes effective under state law, but when the consumer becomes

"contractually obligated." See Nigh, 319 F.3d at 122 ("Nigh, having

signed the contracts and turned them over to Koons Buick, was committed to the transaction and obliged to perform upon countersignature by Koons Buick"). The amended Regulation Z focuses only

on the consumer and his obligations. Accordingly, the question in this

case is not whether a contract was created under state law, as urged

by Lustine, because such an analysis would revert to the old Regulation Z. Instead, the question is whether Gibson was obligated to the

terms of credit in the retail installment sales contracts upon which he

bases his TILA claims. 

Applying Nigh, we conclude that when the purchaser of a motor

vehicle signs a retail installment sales contract after which he no longer can alter the terms of credit and after which the dealer retains the

exclusive right to decide when the financing arrangement takes effect,

the transaction is "consummated" for TILA purposes. See Nigh, 319

F.3d at 124; see also Official Staff Commentary ¶ 2(a)(13)-2

("Consummation does not occur when the consumer becomes contractually committed to a sale transaction, unless the consumer also

becomes legally obligated to accept a particular credit arrangement")

(emphasis in original). We specifically held in Nigh that, when the

consumer had signed a buyer’s order and a retail installment sales

contract, the transaction was "consummated." After signing the contract, the consumer could no longer change the financing terms even

though the dealer had not yet signed the contract. If these unsigned

documents in Nigh were sufficient to justify the conclusion that the

GIBSON v. LTD, INC. 9
consumer was contractually obligated for purposes of TILA, then, a

fortiori, a document signed by both parties that would be a contract

but for an unfulfilled condition that a third-party finance company

purchase the loan on terms acceptable to dealer likewise contractually obligated the consumer for TILA purposes. Thus, we need not

decide whether, under Virginia law, these contracts contained valid

conditions precedent so long as Lustine, not Gibson, had control over

satisfaction of them. 

The Eleventh Circuit has applied the Nigh construction of "consummation" to that very circumstance where the condition precedent

was controlled by the dealer. See Bragg v. Bill Heard Chevrolet, Inc.,

374 F.3d 1060, 1066 (11th Cir. 2004) (adopting Nigh and agreeing

that "consummation occurred not when title to the automobile passed

or when a bilateral contract was formed, but rather when [the purchaser] signed the [retail installment sales contract], thereby becoming obligated on the credit agreement"). The contract in Bragg stated

that "neither party hereto shall be bound to the other until terms of the

credit have been approved by both parties." Id. at 1067. The court

rejected the dealer’s argument that because the transaction was conditioned on securing third-party financing, the agreements were not

consummated until they were funded, observing that the condition

precedent was within the dealer’s own control. The court explained

that to allow such a condition to prevent "consummation" would frustrate TILA’s primary purposes. See id. at 1067-68. Based on our reading of Regulation Z, we find Bragg persuasive. 

With the controlling legal principles in hand, we now turn to the

circumstances before us to determine specifically whether the two

retail installment sales contracts in question — the first 2002 contract

and first 2003 contract — were "consummated." 

Both Gibson and Lustine signed the two retail installment sales

contracts in question, and after each contract was signed, Gibson took

delivery of the truck he purchased. More importantly, after signing

each contract, Gibson could no longer alter the terms of the credit.

The first paragraph in each contract stated that "by signing this contract you choose to buy the vehicle on credit under the agreements on

the front and back of this contract." Each contract also stated that

"[a]fter you sign this contract, you may only cancel it if the seller

10 GIBSON v. LTD, INC.
agrees or for legal cause. You cannot cancel this contract simply

because you change your mind." (Emphasis added). The contracts did

not give Gibson any power to approve third-party proposals for purchasing his loan, as the contract in Bragg arguably did. Instead, the

contracts in this case vested in Lustine alone the power to fulfill the

purported condition precedent by securing outside financing, "on

terms acceptable to [Lustine]." Thus, after Gibson signed the retail

installment sales contract in each case, he became contractually obligated to the credit transaction and could be released from it only with

Lustine’s approval. In these circumstances, we conclude that the contracts were "consummated" in the sense used by TILA when Gibson

signed them. See 12 C.F.R. § 226.2; Nigh, 319 F.3d at 124; Bragg,

374 F.3d at 1066; Zoumayaiwan, 1985 WL 1453. 

Lustine makes much of the mutual power to revoke the sales transaction if financing could not be found and of Gibson’s state-created

right to terminate a delivery if financing could not be found. Even if

we assume the existence of these conditional revocation powers, they

do not prevent "consummation," for consummation is postponed only

when the consumer has not yet become contractually obligated to the

terms of credit. The fact remains that if Lustine had found an "acceptable" lender, Gibson could not have exercised either power to revoke

the terms of credit. He would have been required to proceed with the

purchase on the loan terms contained in the retail installment sales

contract that he signed. 

Accordingly, we agree with the district court that Gibson "consummated" the retail installment sales contracts at issue in this case and

therefore could claim specific TILA violations with respect to each of

them. 

III

Lustine does not challenge the district court’s conclusion that the

$12.39 overcharge for the dealer’s business licensing tax in the first

2003 retail installment sales contract constituted a violation of TILA.

Its only argument with respect to that charge is that the retail installment sales contract was not consummated, an argument that we have

now rejected. Accordingly, we affirm the district court’s ruling on

that contract. See 12 C.F.R. § 226.18(c)(1)(iii). Regulation 226.18(c)

GIBSON v. LTD, INC. 11
requires a creditor to itemize charges, like taxes, that are "paid to

other persons by the creditor on the consumer’s behalf." If the creditor intends to overcharge and retain a portion of such a sum, it may

do so provided that such a retention is disclosed. See Official Staff

Commentary, ¶ 18(c)(1)(iii)-2. In this case, no such disclosure was

made. 

IV

Finally, Lustine contends that it properly included a $499 charge

for undercoating and paint sealant in the amount financed by the first

2002 retail installment sales contract. Lustine notes that its file contained an "After Sale Invoice" for $499 for undercoating and paint

sealant, signed by Lustine but not Gibson, and that the buyer’s order,

which Gibson did sign, includes a charge in the amount of $499 for

"AFTER MRKT," which was a component part of the "balance due

on delivery" in the amount of $21,201.39. The retail installment sales

contract signed at the same time congruently states that the "amount

financed" is $21,201.39. Thus, by signing these documents, according

to Lustine, Gibson agreed to charges for undercoating and paint sealant later to be applied by the dealer. 

Gibson contends that it is undisputed that he explicitly refused Lustine’s offer to purchase undercoating and paint sealant; that he never

received those products; and that he was never promised them by

Lustine. He argues therefore that he never had "actual use" of the

products and any charge for them was illegal under TILA, citing 15

U.S.C. § 1638(a)(2)(A) and Nigh, 319 F.2d at 124. 

The district court concluded as a matter of law that the undisputed

facts in the record showed that Gibson did not order aftermarket products; that they were not included on his truck when he took delivery

of it; and that they were never promised to Gibson. The court also

concluded that despite these facts, the $499 charge was included in

the amount financed by the first 2002 retail installment sales contract

that Gibson signed. The district court rejected any suggestion that the

presence of the "After Sale Invoice" in Lustine’s file created a genuine factual dispute on this issue. The court explained that Lustine’s

sales representative was "unable to either confirm or contradict" Gibson’s sworn testimony that he declined the offer for undercoating and

12 GIBSON v. LTD, INC.
paint sealant, and therefore the reason for the "After Sale Invoice" in

Lustine’s file could only be deduced by "conjecture and surmise."

Moreover, the invoice itself was not signed and did not include a date

for the installation of undercoating and paint sealant, as was called for

on the invoice form. 

Lustine does not disagree with the facts on which the district court

relied. Rather, it argues that "Gibson, who signed the [buyer’s order

and the retail installment sales contract], is presumed to know and

assent to their terms," citing Sydnor v. Conseco Financial Services

Corp., 252 F.3d 302, 306 (4th Cir. 2001), and General Insurance of

Roanoke, Inc. v. Page, 464 S.E.2d 343, 344 (Va. 1995). Their terms

explicitly included a $499 charge for "AFTER MRKT," which Lustine argues is an agreement to purchase undercoating and paint sealant

for $499. 

Lustine’s response is flawed at two levels. First, Lustine cannot

demonstrate that Gibson knew or should have known that the $499

charge on the buyer’s order was for undercoating and paint sealant.

The record contains no evidence that (1) Gibson accepted the offer for

undercoating and paint sealant; (2) that Gibson signed anything other

than the buyer’s order which could have referred to undercoating and

paint sealant; and (3) that Gibson received any document evidencing

Lustine’s obligation to apply undercoating and paint sealant at some

future date. Indeed, as to this last fact, Lustine’s practice was to give

the consumer a "we owe" memorandum that would have disclosed its

obligation to install undercoating and paint sealant at some future

date. This "we owe" memorandum was not prepared with respect to

Gibson’s transaction. Thus, Lustine is left with the single notation on

the buyer’s order — "AFTER MRKT - $499.00" — from which to

argue that Gibson should be imputed with an agreement to purchase

undercoating and paint sealant. 

Although Lustine might be able to argue reasonably that "AFTER

MRKT" refers to aftermarket products as distinguished from some

other aftermarket charge, service, or expense, it reaches too far to

claim that a casual consumer would understand what an aftermarket

product is when that term has not been defined for the consumer by

the dealer. Absent such an explanation, "AFTER MRKT" is virtually

meaningless, particularly when it is part of a list of unexplained

GIBSON v. LTD, INC. 13
charges or credits that also includes "dealer’s business license tax,"

"Virginia title tax," "processing fee for consumer services," "license

fee," and "dealer incentive." Without more evidence of an understanding by Gibson, the mere entry on an invoice of "AFTER MRKT" does

not amount to a disclosure sufficient to support the claim that Gibson

agreed to pay for undercoating and paint sealant. 

Second — and more important to the legal analysis — Lustine has

not established that even if Gibson is to be imputed with an understanding of the term "AFTER MRKT," he ever had "actual use" of

undercoating and sealant for which the charge could be included in

the amount financed. See 15 U.S.C. § 1638(a)(2)(A) (specifying that

the amount financed "shall be the amount of credit of which the consumer has actual use" (emphasis added)). While the fact that undercoating and paint sealant had not been applied to Gibson’s truck when

he took delivery of it and was never applied during the months that

followed might not be fatal if Lustine had clearly obligated itself to

apply undercoating and paint sealant at a date to be arranged, the

record does not contain any evidence of such an obligation. To the

contrary, the dealer’s practice at the time was to sign and deliver a

"we owe" memorandum committing the dealer to apply aftermarket

products. Yet, no "we owe" memorandum was signed or delivered to

Gibson. Moreover, as observed by the district court, the unsigned

"After Sale Invoice" that Lustine had in its own file did not have Gibson’s signature nor a date for which the proposed products would be

installed, as called for on the "After Sale Invoice" form. Thus, it can

hardly be argued that when Gibson did not receive undercoating and

paint sealant at the time of sale and was not promised them at the time

of sale for installation at some future date, he nonetheless had "actual

use" of the products so that a charge for them could legally be

included in the amount financed. 

TILA § 1638 defines "amount financed" as "the amount of credit

of which the consumer has actual use." 15 U.S.C. § 1638(a)(2)(A)

(emphasis added). If a lender has no basis for including a charge for

undercoating and paint sealant as part of the purchaser’s amount

financed, the disclosure of the "amount financed" is erroneous, and

the error gives rise to TILA liability. We therefore affirm the district

court on this claim. 

14 GIBSON v. LTD, INC.
V

In his cross-appeal, Gibson contends that Lustine’s inclusion of a

GAP insurance charge in the amount financed on his second 2003

retail installment sales contract violated TILA because he did not

authorize the charge. Without his authorization, he contends, Lustine

could only include the charge as part of the finance charges, not as

part of the amount to be financed, as Lustine did. 

Lustine argues that the written instrument that Gibson signed,

authorizing a GAP insurance charge in connection with his first 2003

retail installment sales contract, continued to apply and that the

dealership did not again have to obtain that authorization when the

parties modified the deal only a week later. Lustine maintains that

Virginia law supports its position, which would treat the two transactions a week apart as sufficiently contemporaneous to be a single

transaction. Lustine also points to Federal Reserve Board Commentary, which provides that "[i]f the parties informally agree to a modification of the legal obligation, the modification should not be reflected

in the disclosures unless it rises to the level of a change in the terms

of the legal obligation." See Official Staff Commentary, ¶ 17(c)(1)-2.

TILA, however, does not permit the inclusion of charges such as

a GAP insurance charge in the "amount financed" — as distinct from

a "finance charge" — unless the consumer explicitly agrees to such

a charge in writing. Regulation Z, 12 C.F.R. § 226.4(d)(3)(i), provides

that "[c]harges or premiums paid for debt cancellation coverage . . .

may be excluded from the finance charge, whether or not the coverage is insurance," if three conditions are fulfilled: (1) the lender discloses in writing that debt cancellation coverage is not required; (2)

the lender discloses the fee for the initial term of coverage; and (3)

the consumer signs or initials an "affirmative written request for coverage after receiving" these two disclosures. 

While Gibson signed an authorization that satisfied this regulation

before signing the first 2003 retail installment sales contract, it is

undisputed that he did not sign such an authorization before signing

the second 2003 retail installment sales contract a week later. Under

Regulation Z, the disclosure would not have to be repeated if the second 2003 retail installment sales contract modified the first and if the

GIBSON v. LTD, INC. 15
modification did not rise "to the level of a change in the terms of the

legal obligation." We conclude, however, that the modifications in

the second 2003 retail installment sales contract materially changed

Gibson’s legal obligations. Under the second contract, Gibson

increased the down payment for the truck and thereby reduced the

amount financed. With this change, all of the material figures in the

contract changed, including most importantly, the amount of the

finance charge. Gibson thus became legally obligated to pay wholly

new amounts. In short, the second 2003 retail installment sales contract consummated a new finance arrangement, and Regulation Z

requires that the lender make new disclosures before its consummation. See 12 C.F.R. § 226.17. 

Because the second 2003 retail installment sales contract was not

accompanied by the disclosures required by 12 C.F.R.

§ 226.4(d)(3)(i), Lustine was not entitled to include the GAP insurance charge as part of the amount financed, as it did. Rather, it could

only include that charge as a component of the finance charge.

Because this violation occurred with respect to the second 2003 retail

installment sales contract, we reverse the district court on this claim

and remand for imposition of the appropriate sanction. 

Lustine’s appeal to Virginia law is of no moment on this issue

because federal law, not Virginia law, governs the determination of

this aspect of TILA liability. 

VI

TILA entitles the plaintiff in "any successful action" enforcing

TILA liability to costs and a "reasonable attorney’s fee as determined

by the court." 15 U.S.C. § 1640(a)(3). Because Gibson has been successful on three TILA claims, not just the two found by the district

court, we vacate the district court’s award of attorneys fees and

remand to permit the court to reassess its award in view of these

changed circumstances. 

The parties have briefed the issue whether the district court’s attorneys fees award should stand in light of the Supreme Court’s reversal

of Nigh, which constitutes an intervening change in the decisional law

reducing Gibson’s maximum recovery from $63,848 to $2,000 (now

16 GIBSON v. LTD, INC.
perhaps $3,000). Lustine argues that the attorneys fees award in the

amount of $53,627.50 is no longer proportional in light of Gibson’s

reduced recovery.

Because we have vacated the attorneys fees award, we will not

address this issue, giving the parties an opportunity to address their

arguments in the first instance to the district court. Moreover, we

express no opinion on whether the district court should modify its

attorneys fees award. 

AFFIRMED IN PART, REVERSED IN PART,

VACATED IN PART, AND REMANDED IN PART

GIBSON v. LTD, INC. 17