Opinion ID: 629257
Heading Depth: 2
Heading Rank: 2

Heading: TILA, Regulation Z, and Staff Commentary

Text: 22 To decide whether a particular loan closing expense constitutes a finance charge under TILA, courts must consult the statute, 15 U.S.C. Sec. 1605(a), and the applicable portion of Regulation Z, 12 C.F.R. 226.4(b)(3), promulgated by the Federal Reserve Board. The official staff interpretations of Regulation Z, unless demonstrably irrational, are binding. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565, 100 S.Ct. 790, 796, 63 L.Ed.2d 22 (1980). 23 The official staff commentary to Regulation Z indicates that [c]harges imposed on the consumer by someone other than the creditor for services not required by the creditor are not finance charges, as long as the creditor does not retain the charges. Regulation Z, Supplement I--Official Staff Interpretations (Commentary), 12 C.F.R. Sec. 226.4(a)(3) (1991). Because Tower did not retain the fees listed as paid to Lowe, Lowe's fees were finance charges only if the brokerage services were required by the creditor, Tower. 24 The Mances concede that they contacted Lowe after reading her newspaper advertisement and that Tower did not encourage them to consult Lowe. Thus, there is no evidence that Tower actually pressured the Mances into using Lowe's services. On the contrary, the Mances sought Lowe's assistance on their own. Nevertheless, the Mances contend that Tower informally requires all borrowers to use the services of a loan broker. By contacting a broker before obtaining their loan from Tower, the Mances suggest that they complied with Tower's broker requirement without realizing that it was a requirement. If so, then Lowe's fees should have been disclosed as part of the finance charges. 25 Tower denies that it had any practice, formal or informal, that required the services of loan brokers. In support of its position, Tower submits affidavits denying that any such practice occurred. Tower also shows the Court that many Tower loans did not involve loan brokers. According to the Plaintiffs' own evidence, only 83.5% of Tower's loan transactions from June 21, 1990 to November 26, 1991, involved broker-originators. Thus, over 15% of Tower's loans involved no brokers. This evidence suggests that Tower did not require borrowers to use loan brokers. 26 In response to the summary judgment motion, the Mances present no affirmative evidence that would establish a genuine issue of material fact. The Mances do not, for example, offer affidavits of other borrowers who contacted Tower and were directed to use a broker or told that they could not obtain a loan without a broker. Instead, the Mances ask the Court to infer a broker requirement from the fact that 83.5% of Tower's loans involved a broker. As Tower argues, this inference is not a reasonable one. Although Tower's borrowers often use brokers, the Mances have produced no evidence whatsoever that Tower requires borrowers to use a broker. Because Tower did not require the Mances to use Lowe or another broker, the Court finds that her fee was not a finance charge. 27 The Mances urge the Court to deny Tower's motion for summary judgment even if the Court finds that Tower did not require the use of a broker. First, the Mances contend that Lowe's fees are an origination fee, which is a finance charge under Georgia law. This contention is irrelevant to the Mances' claim that Tower violated TILA, a federal law. 28 Second, the Mances argue that the Court should not follow the official staff commentary to Regulation Z, 12 C.F.R. 226.4(b)(3), because it is demonstrably irrational. See Ford Motor Credit, 444 U.S. at 565, 100 S.Ct. at 796. The Court disagrees. The creditor required provision is consistent with the statute itself, which defines a finance charge as the sum of all charges payable ... by the person to whom credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. 15 U.S.C. Sec. 1605(a) (emphasis added). Thus, the official staff commentary provides a reasonable interpretation of the statute and regulation.