Opinion ID: 1406886
Heading Depth: 1
Heading Rank: 3

Heading: The Application of TILA

Text: (4) As indicated above, plaintiffs have also alleged, in their second cause of action, that defendant Bank violated TILA, a federal consumer protection act requiring disclosure of specified information to consumers in various commercial transactions. In particular, it is alleged that the contract between the parties failed to specify the cash price, unpaid balance of cash price, or deferred payment price, as those terms are used in the federal regulations (see 12 C.F.R. § 226.8(c)), and that the contract failed to set forth adequately the penalty in the event of prepayment (see 12 C.F.R. § 226.8(a)(6)). Plaintiffs seek to recover statutory penalties and attorneys' fees, as provided in TILA (see 15 U.S.C. § 1640). TILA distinguishes between consumer credit sales and consumer loans (see 15 U.S.C. § 1602, subds. (f), (g)). The regulations upon which plaintiffs rely, and which Bank allegedly violated, pertain only to credit sales, and not to consumer loans. (Other disclosure requirements, not at issue herein, are applicable to consumer loans; see 15 U.S.C. § 1639.) The question before us is whether plaintiffs have alleged sufficient facts from which it may be inferred that defendant Bank participated in a credit sale within the meaning of TILA. Credit sale is defined by TILA as ... any sale with respect to which credit is extended or arranged by the seller.... (15 U.S.C. § 1602, subd. (g).) We conclude that, by reason of plaintiffs' allegations regarding the nature of Bank's participation in the sale of insurance to plaintiffs, and Bank's close connection with defendant Roberts in procuring insurance for plaintiffs, as set forth in section 1 hereof, plaintiffs have adequately alleged facts disclosing a credit sale by bank within the meaning of TILA. In Glaire v. La Lanne-Paris Health Spa, Inc., supra, 12 Cal.3d 915, 925, we reviewed the obligations of an assignee finance company whose close relationship with the seller led us to treat it as the extender of consumer credit which the seller has merely arranged. ( Id. ) Similarly, in Stefanski v. Mainway Budget Plan, Inc. (5th Cir.1972) 456 F.2d 211, the federal court found TILA's credit sales disclosure requirements applicable despite the form of the transaction as a cash sale of automobile insurance followed by an assertedly independent loan to finance the premium. The court explained that plaintiff should be permitted to prove a close relationship between the seller and lender which might establish a credit sale in substance. (P. 212; see also Mourning v. Family Publications Service, Inc. (1973) 411 U.S. 356, 365 [36 L.Ed.2d 318, 327, 93 S.Ct. 1652]; Joseph v. Norman's Health Club, Inc. (8th Cir.1976) 532 F.2d 86, 90-93.) Although the foregoing cases involve varying factual situations, and are not directly on point herein, their underlying rationale would readily support plaintiff's position that Bank participated in a credit sale under TILA. Defendant Bank relies upon Manning v. Princeton Consumer Discount Co., Inc. (3d Cir.1976) 533 F.2d 102, but that case is not persuasive. In Manning, an automobile dealer sold plaintiff a car and arranged financing with a commercial lender. The lender made the appropriate disclosures required by TILA for a consumer loan, but neither the dealer nor the lender disclosed the requisite credit sale information. The court held that it was the dealer's obligation to furnish this information, and that, for the sake of avoiding multiple disclosures of identical information, the lender would be excused from this responsibility. In the present case, it does not appear from the complaint whether or not plaintiffs ever received the appropriate credit sale disclosures. Furthermore, in Manning, supra, at page 106, footnote 4, no close connection was alleged to exist between the financing entity and the seller or the sales transaction. The judgment is reversed.