Opinion ID: 2187452
Heading Depth: 2
Heading Rank: 2

Heading: As to TLA, Paglia advances two contentions.

Text: 1. He first maintains that because of his pawnbroker status the act does not apply. We can find no indication of such an exemption in the act. The staff of the Federal Reserve Board stated in Staff Letter No. 419 C.C.G. (CCH) ¶ 30,066 (June 26, 1970): It is the opinion of the Board's staff, as well as the staff of the Truth in Lending section of the Federal Trade Commission, that pawn shops do fall under the provisions of the Act. A federal appeals court stated in Bright v. Ball Memorial Hospital Ass'n, Inc., 616 F.2d 328, 333 (7th Cir.1980) (citation omitted): [W]hile Federal Reserve Board interpretive regulations and staff opinion letters are not binding upon the courts, these constructions of the statutes and the Board regulations are entitled to substantial deference because of the important interpretive powers granted to the agency in this very complex field. We hold that Paglia is not exempt from TLA on the basis of his pawnbroker status. 2. The second question on this part of the case is whether Paglia is within the definition of creditor in TLA. The law has changed since the time of the transaction which gave rise to this suit. We therefore apply the regulations under Regulation Z in effect when Paglia obtained this note and mortgage. A creditor is defined as follows in the pertinent part of title 15 of the United States Code, section 1602(f): 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. The regulations essentially restate this definition in 12 C.F.R. 226(a)(12). The only issue under these laws is whether Paglia regularly extends credit. In subsequently promulgated regulations effective April 1, 1981, footnote 2 to section 226.2(a)(17) states that a lender is said to extend credit regularly only if it extended credit more than 25 times (or more than 5 times for transactions secured by a dwelling) in the preceding calendar year. While the new regulations do not apply to the situation at hand, they give some clue as to the meaning of regularly extends... credit. As Paglia received about a hundred pawns per month, we hold he regularly extended credit. We approve the conclusion of the trial court that TLA applies. II. Rescission. Mrs. Elliott contended at trial, and the trial court held, that she was entitled to rescind the transaction at the time she endeavored to do so, because at the time of the transaction itself Paglia did not give her the three-day notice of her right to rescind. See 15 U.S.C. § 1635; 12 C.F.R. § 226.9(h). Subsection (f) of section 1635 contains a three-year time limit to rescind in cases in which the required three-day notice was not given. The transaction took place on December 29, 1980. On May 2, 1983, Mrs. Elliott served Paglia with her notice to rescind. The notice was thus timely. Paglia contends that Mrs. Elliott's right to rescind expired when she sold part of the property. See 15 U.S.C. § 1635(f). Assuming that this part of paragraph (f) applies to a loan transaction, paragraph (h) of regulation 226.9 requires that to be disqualified for rescission the customer must transfer all of his or her interest. We construe paragraph (h) to mean all of his or her interest quantitively as well as all of it as to legal rights in the property. We thus reject Paglia's contentions and hold that rescission is proper in this case. The mechanics for rescission, applied by the trial court, are set forth in 12 C.F.R. 226.9(d). III. Payments. Paglia argues that Mrs. Elliott paid no more than $16,500 on the note and mortgage, and that we should so find. The trial court found that she paid $21,400. The record is confusing on this fact question. The determination must rest primarily on judging the credibility of each of the two main witnesses. The trial court's finding has substantial evidentiary support and, although the record would permit us to find otherwise, we are reluctant to do so. Trial judges are in a better position than we to pass upon the credibility of witnesses. See In Re Marriage of Vrban, 359 N.W.2d 423 (Iowa 1984). We therefore uphold the trial court's finding as to payments. IV. Unconscionability. Paglia asserts that the portion of the debt which was set aside by the trial court, $25,000, was not unconscionable. Again much depends on credibility of the witnesses and the weight of their testimony. On this issue the rule is especially applicable that, although we are not bound by the trial court's fact findings, we give them weight. Iowa R.Civ.P. 14(f)(7). Section 537.5108 of ICCC deals with the subject of unconscionability. Paragraph 4 sets forth criteria. Paraphrased, these are: belief by the lender that the debtor cannot repay the debt; knowledge by the lender that the debtor will not derive substantial benefit from the property or services; gross disparity between value and price of the item; separate charges in the purchase of insurance with respect to a consumer credit sale or loan with the effect of making the loan, as a whole, unconscionable; overreaching a physically or mentally infirm consumer; and conduct which would likely be restrained by a court. See also Home Federal Savings & Loan Ass'n v. Campney, 357 N.W.2d 613, 618 (Iowa 1984) (other indicia of unconscionability include factors of assent, unfair surprise, notice, disparity of bargaining power, and substantive unfairness). Upon review of the evidence, we find ourselves in complete agreement with the trial court that this transaction, as to the item of $25,000 at least, was unconscionable. The case presents a classic illustration of two grandsons who were fleecing their grandmother, and of two outsiders, fully aware of the circumstances, who participated in bringing about the grandmother's financial downfall. In our opinion this is the kind of case the unconscionability provisions of ICCC were intended to reach. We uphold the trial court's decision on the issue. We make no attempt to sort out the rights and liabilities, if any, that Paglia, Tasler, Cherry, and Wheeler may have inter se. V. Penalty, attorney fees, costs. Mrs. Elliott is entitled to a penalty, attorney fees, and district court costs, pursuant to subsections (1) and (8) of section 537.5201 of the Iowa Code. By the same token, Paglia is not entitled to attorney fees. § 537.2507. We uphold the judgment in this regard.