Opinion ID: 770271
Heading Depth: 3
Heading Rank: 2

Heading: Whether NTF is a creditor

Text: 127 NTF argues that it is not a creditor under TILA. Creditor is defined in pertinent part as follows: 128 The term `creditor' refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. 15 U.S.C. S 1602(f). Regulation Z provides: 129 Creditor means: (i) A person (A) who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than 4 installments (not including a downpayment), and (B) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. 130 12 C.F.R. S 226.2(a)(17)(i) (2000). 37 [W]hether one is a TILA creditor is a bifurcated question, requiring a person both to be a `creditor' in general, by extending credit in a certain minimum number of transactions, and to be the `creditor' in the specific transaction in dispute. James Lockhart, Annotation, Who is Creditor within Meaning of S 103(f) of Truth in Lending Act, 157 A.L.R. Fed. 419, 443 (1999). 131 NTF does not present an argument on appeal, and apparently did not present an argument in the district court, regarding the first prong of the definition requiring that a person regularly extends consumer credit. Rather, NTF limits itself to the second prong of the definition. It contends that, even assuming the payment plans constitute consumer credit transactions, there are no debt[s] arising from the payment plans. In this connection, NTF argues that the only debts involved are the water, sewer and tax obligations, which were initially payable to the government entities, not NTF. 132 Like the district court, we reject NTF's arguments and thus hold that it is a creditor with respect to the water and sewer payment plans. 38 The payment plans are the only consumer credit transactions involved here, as they represent the first time that anyone extended the homeowners the right to defer payment of their water and sewer obligations. On the face of the payment plan enrollment forms, they are directed to make payments to NTF through a custodian. See app. at 98, 213-21. Accordingly, any debts arising from these consumer credit transactions are initially payable to NTF. 39 133 The question arises, then, whether there are any debts arising from the payment plans. We have given due consideration to NTF's argument that there are no debts arising from the plans because the plans merely provide for the extended payment of debts which previously arose from homeowners' dealings with the government entities. The definition of credit, however, encompasses not only a right granted by a creditor to incur debt and defer its payment but also a right to defer payment of debt. See section 1602(e). This latter phrase must encompass situations in which a debtor is granted the right to pay over time a pre-existing debt. See Bright v. Ball Mem'l Hosp. Ass'n, Inc., 616 F.2d 328, 336 (7th Cir. 1980) (indicating that a hospital which reached agreements with its patients prior to discharge to pay their bills in more than four installments was a creditor under section 1602(f)); Rogers Mortuary, Inc. v. White, 594 P.2d 351, 353 (N.M. Ct. App. 1979) (Credit is extended [under TILA] when a consumer incurs a debt and the parties agree to a repayment schedule which allows for the deferred payment of the debt.). Yet, in such situations, the argument may be raised that the grantor of the right to defer payment is not a creditor under section 1602(f) because the debt does not aris[e] from the consumer credit transaction. We reject such a construction, as we believe the term creditor was intended to apply to one who confers such a right to defer the payment of a pre-existing obligation. 134 We believe the statutory definition of creditor is satisfied in such cases because there is in essence a new debt which aris[es] from the consumer credit transaction. Thus, there really are two types of debt at issue here. The first is the original debt owed by a homeowner to one of the government entities and later assigned to NTF. It is this debt as to which NTF has granted the right . . . to defer payment within the meaning of section 1602(e), and in turn the granting of this right gives rise to a consumer credit transaction within the meaning of section 1602(h). The second debt is the new debt which aris[es] from the consumer credit transaction [the payment plan] within the meaning of section 1602(f). It is this debt which is initially payable to NTF. 40 135 NTF contends that a person who grants a right to defer payment of a pre-existing debt is a creditor only if he agrees to modify the relationship so as to give rise to some new obligation which is initially payable to him. According to NTF, 136 the `right to defer' portion of section 1602(e) applies where an existing creditor agrees to modify a previously-agreed consumer debt, for example, by extending maturity of the debt in exchange for a higher interest rate. In that situation, there is (1) `credit' within the meaning of section 1602(e), (2) a `consumer credit transaction' under section 1602(h), and (3) a `creditor' under section 1602(f), because the new interest obligation is a `debt arising from' the new extension of credit, which is initially payable to the creditor. 137 Reply br. of cross-appellants in Nos. 99-3856 and 99-3857 at 2. We reject NTF's argument, as we see nothing in the language of section 1602 imposing such a requirement. Indeed, the language of section 1602(f) indicates that a person may be a creditor even if he does not impose any charge for the extension of credit--the first prong of the definition of creditor refers to a person who regularly extends consumer credit which either involves a finance charge or is payable in more than four installments. See section 1602(f). Thus, the definition contemplates that one who confers a right to pay a pre-existing debt in more than four installments will be a creditor regardless of whether any charge is imposed as an incident to such extension of credit. 41 See Bright, 616 F.2d at 334 n.2 (Even if these agreements [to pay a hospital bill over time] did not involve an agreement to pay a monthly 3/4% finance charge, they could still be a `credit' agreement requiring disclosures since payment was to be in more than four installments.). We believe that a consumer who is given the right to pay a pre-existing debt in installments may benefit from TILA-mandated disclosures even if no charge is imposed for the extension of credit. 138 In sum, we conclude that NTF is a TILA creditor with respect to the payment plans for the water and sewer obligations, and accordingly the district court did not err in denying NTF summary judgment. 139