Opinion ID: 770271
Heading Depth: 3
Heading Rank: 3

Heading: Applicability of the public utility exemption

Text: 140 NTF argues that TILA's public utility exemption is applicable with respect to the water and sewer claims. See 15 U.S.C. S 1603(4) (This subchapter does not apply to the following: . . . (4) Transactions under public utility tariffs, if the Board [of Governors of the Federal Reserve System] determines that a State regulatory body regulates the charges for the public utility services involved, the charges for delayed payment, and any discount allowed for early payment.). Regulation Z provides:This regulation does not apply to the following: . .. (c) Public utility credit. An extension of credit that involves public utility services provided through pipe, wire, other connected facilities, or radio or similar transmission . . ., if the charges for service, delayed payment, or any discounts for prompt payment are filed with or regulated by any government unit. 141 12 C.F.R. S 226.3(c) (2000) (footnote omitted); see Aronson v. Peoples Natural Gas Co., 180 F.3d 558 (3d Cir. 1999) (discussing this exemption). 142 NTF contends that it has charged the same interest and penalty rates with respect to the water and sewer claims as the rates established by City ordinance and PWSA resolution; thus, NTF contends that the rates are filed with or regulated by the government entities. NTF further contends that the Purchase Agreements and Servicing Agreements between the government entities and NTF and CARC have imposed tight governmental oversight over NTF's and CARC's conduct. 143 The district court held that the exemption is not applicable: 144 Defendants argue that . . . when a debt arises from public utility services, it cannot constitute consumer credit. We disagree. While we recognize that a public utility is exempt from TILA disclosures upon extending credit to a debtor for utility services, the exemption is applicable only if the charges are filed [with] or regulated by a governmental unit. 145 In the instant case, as we have established, the payment plans offered by defendants constituted a new extension of credit. This new extension was made well after the liens and claims were acquired by National Tax [NTF]. Defendants cannot claim reliance on the public utility exemption, despite the fact that the nature of the utility claims and liens have not changed in essence by the assignment to National Tax. The distinction here is that utilities are overseen and regulated by a governmental unit to which National Tax is not subject. 146 The credit charges assessed by National Tax are not `filed with or regulated by any government unit,' as required under Regulation Z. While defendants argue that the City and relevant authorities approved all payment plans and charges, this type of contractual relationship is too tenuous to constitute the governmental unit regulation required for the exemption. 147 Pollice, 59 F. Supp.2d at 490 (footnote omitted). 148 We agree with the district court that the public utility exemption is not applicable. It is true that 12 C.F.R. S 226.3(c) does not contain an explicit requirement that the credit be extended by a public utility; the extension of credit must simply involve[ ] public utility services. Nevertheless, we believe that Congress and the Board intended the exemption to apply only to public utilities--entities which are highly regulated by the government. See 66 Pa. Cons. Stat. Ann. S 1301 et seq. (regulating public utility rates and rate-making). Although NTF is an assignee of claims arising from public utility services, and thereby stands in the shoes of the assignors, we reject its attempt to invoke the public utility exemption. 149