Opinion ID: 401053
Heading Depth: 1
Heading Rank: 4

Heading: Did Metalcraft Violate TILA?

Text: 24 Davis alleges that Metalcraft violated TILA in four respects. First, she contends that the numerical amounts on the disclosure were not legibly handwritten. Second, she contends that Metalcraft used improper terminology in disclosing the amount financed. Third, she asserts that Metalcraft failed to disclose the annual percentage rate of interest with sufficient accuracy. Finally, Davis argues that Metalcraft failed to identify the method of computing any unearned portion of the finance charge in the event of prepayment. We disagree with all four of these contentions. 25
26 Regulation Z requires all numerical amounts and percentages to be printed in specified-minimum-size typescript or to be legibly handwritten. 12 C.F.R. § 226.6(a). Davis contends that the handwritten numerical figures on the copy of the contract that she received are illegible, because they are so dim as to be virtually unreadable. 27 The copy of the contract introduced at trial is on yellow NCR paper, the paper with which carbon copies may be made without the use of carbon paper. We have carefully scrutinized this document, and we conclude that, although it is indeed rather dim in some places, all numerical figures are totally legible. Therefore, the plaintiff is not entitled to relief due to illegibility of the document. 28
29 Regulation Z mandates disclosure of the amount financed, with the numerical amount identified by the precise term amount financed. 12 C.F.R. § 226.8(c)(7). Because of the importance of standardization of terms, different terms with the same meaning will not do; only the words amount financed will suffice. See, e.g., Chapman v. Rhode Island Trust National Bank, 444 F.Supp. 439, 441-44 (D.R.I.1978) (use of the term unpaid balance insufficient). 30 In the challenged October contract, Metalcraft used the term unpaid balance of amount financed rather than the simple term amount financed. Davis contends that the disclosure therefore is not in accord with TILA. We cannot agree. 31 In Lewis v. Walker-Thomas Furniture Co., Inc., 416 F.Supp. 514 (D.D.C.1976), the only case we have found that is arguably on point, the creditor used the term total amount financed rather than amount financed. The court held that this was sufficient, because there was no possibility that the prefacing of the term amount financed with the word total would in any way undercut or interfere with the disclosures required by the Act. 416 F.Supp. at 516. The court also noted that the addition of the word total was permissible pursuant to 12 C.F.R. § 226.6(c), which states: 32 At the creditor's option, additional information or explanations may be supplied with any disclosure required by this part, but none shall be stated, utilized, or placed so as to mislead or confuse the customer or contradict, obscure, or detract attention from the information required by this part to be disclosed .... 33 (Emphasis added.) See also 15 U.S.C. § 1632(b). 34 Similarly, in the present case, we find that the prefacing of the mandatory term amount financed with the phrase unpaid balance of does not constitute a TILA violation. The precise term required by Regulation Z was included, and we do not find that the additional language might cause confusion or otherwise mislead the consumer. Accordingly, we reject the plaintiff's argument on this issue. 35
36 At the time the October contract was executed, Regulation Z required Metalcraft to disclose the annual percentage interest rate with an accuracy at least to the nearest 1/4 of one percent. See 12 C.F.R. § 226.5(b) (amended on Dec. 31, 1979 to require accuracy to within the nearest 1/8 of one percent). Davis alleges that, because the contract discloses an annual interest rate of 22.29%, Metalcraft has violated § 226.5(b), because the actual annual rate is 22.00%, which means that the deviation is greater than the permitted 1/4 of one percent. 37 This argument, however, overlooks 12 C.F.R. § 226.6(h). Davis alleges that the contract overstates the correct rate of interest, and § 226.6(h) provides that overstatements of percentage rates do not constitute TILA violations, unless the overstatement is for the purpose of circumvention or evasion of disclosure requirements. Thus, because there are no allegations or showing of intent to evade disclosure requirements, the plaintiff's argument on this issue is without merit. 38 D. Disclosure of the Method of Computing Any Unearned Portion of the Finance Charge in the Event of Payment 39 Because the October contract included a precomputed finance charge, Metalcraft was required to identify the method of computing any unearned portion of the finance charge in the event of prepayment, and to state the amount or method of computing any charge that might be deducted from the amount of any rebate of such unearned finance charge. See 12 C.F.R. § 226.8(b)(7). Davis concedes that such a disclosure was made in the challenged contract, but she asserts that the wording of the disclosure is ambiguous and incomprehensible. The relevant portion of the contract states: 40 REBATE FOR PREPAYMENT IN FULL: There is no prepayment penalty and a refund of the finance charge will be given based on a rebate of 6% per annum on all installments paid in advance. 41 We find this disclosure to be adequate. In our opinion, the provision unambiguously entitles the consumer to a rebate of a full 6% on an installment paid twelve months in advance, to a rebate of 11/12 of 6% on an installment paid eleven months in advance, and so forth. The courts and the Federal Reserve Board (the agency authorized by Congress to promulgate TILA-implementing regulations) have declined to require lengthy and complicated mathematical statements of rebate formulas, on the theory that they would be uninformative to the consumer, and would be likely to detract from other important disclosures. See, e.g., Bone v. Hibernia Bank, 493 F.2d 135, 139-40 (9th Cir. 1974). We therefore hold that Metalcraft complied with Regulation Z.