Court Opinion

ID: 9492598
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:45:00.392602+00
Date Added: 2024-06-11T17:55:23.209095
License: Public Domain

MANION, Circuit Judge,
concurring in part and dissenting in part.
I certainly agree with the court regarding the security issue. The Cash Store did not violate the Truth in Lending Act by informing Smith that it was holding her post-dated check as security for her loan. While possessing a post-dated check does not create a “security interest” as that term is usually understood, possession of the check nevertheless provided the Cash Store with added security for the loan. Although the Cash Store was not obligated under TILA to inform Smith that it held this check as security, lenders that seek to provide more information than is necessary under TILA should not be penalized for following the spirit of the statute. Thus, this court correctly affirmed the district court on this, the most substantive issue before this court on appeal.
The court’s decision to reverse the district court on Smith’s “receipt” claim is a concern. It is important to note that there are two facets to this claim. Smith asserts that stapling a small receipt to “the top of the ‘Consumer Loan Agreement’ ” violated TILA by (1) contradicting the TILA-man-dated disclosures; and (2) obscuring the required disclosures. Complaint ¶ 19. Smith possibly stated a claim regarding the “obfuscation” assertion because there could be a fact question as to exactly where the receipt was stapled and what it specifically obscured. But on its face the receipt clearly does not “contradict” the finance charge and the annual percentage rate, and it should cause no confusion regarding the terms of the agreement itself.
With respect to Smith’s contention that the receipt obscured the required disclosures, for starters it appears that no court has ever held that obstructing a borrower’s immediate view of the TILA disclosures violates TILA. The text of the statute and the regulations interpreting the statute do not indicate that this constitutes a violation. This is literally a matter of first impression, on a claim that is weak at best. For that reason alone the district court’s dismissal of this claim has merit. See 15 U.S.C. § 1638; 12 C.F.R. § 226.17(a)(1) & n. 37 (“The disclosures may include an acknowledgment of receipt....”). That aside, the documents attached to Smith’s complaint include an 8/é x 11 inch disclosure form and a % x 3 inch receipt that supposedly obstructed some of the mandated disclosures. Perhaps there is a plausible set of facts regarding the obstruction claim that could *332require looking beyond the complaint to determine if Smith would be entitled to any relief. The complaint states that the receipt was stapled to the “top” of the agreement. The court’s opinion refers to stapling to the “upper left-hand corner.” The district court noted that the staple mark was on the upper left-hand corner of the receipt and the loan document itself had no marks. If “top” could mean “front” and if Smith could show that the receipt was consistently stapled in the middle of the page covering the boxes boldly labeled “Annual Percentage Rate” and “Finance Charge,” perhaps she would have a claim. But if this relatively small receipt is routinely stapled to the upper left-hand corner with the lowest part barely covering one of the boxes and which could easily be lifted, there would not be any material obscuring of the TILA disclosures.1 More importantly, even assuming that an unsophisticated borrower would not lift up the receipt to see the small portion of the loan agreement covered by the receipt, such a borrower would still be able to clearly see the portions of the loan agreement which specify the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, the security posted for the loan, the penalty for late payment, and a notice telling the borrower to examine the other side of the agreement for important information. Congress enacted TILA to ensure that consumers had access to this information so that they could comparatively shop for loans. See Walker v. Wallace Auto Sales, Inc., 155 F.3d 927, 930 (7th Cir.1998) (citing Brown v. Marquette Sav. & Loan Ass’n, 686 F.2d 608, 612 (7th Cir.1982) (Congress enacted TILA to “provide information to facilitate comparative credit shopping and thereby the informed use of credit by consumers.”)). So by clearly communicating these terms, the Cash Store complied with the Act. The two pieces of information that the receipt would obstruct (if stapled to the upper left-hand corner), the lender’s name and the borrower’s own name, are not material to comparing interest rates and the like (and the names were printed on the receipt anyway). Accordingly, unless the Cash Store attached the small receipt to the middle of the loan agreement, implicitly to purposely obstruct and prevent an easy review of this information, there is no violation of TILA’s requirements that the mandated disclosures be clear and conspicuous, and plaintiff fails to state a claim under the Act.
Smith also contends that the contents of the receipt contradicted the TILA-mandat-ed disclosures. An obvious contradiction of a material term would constitute a violation of TILA. See Rodash v. AIB Mortgage Co., 16 F.3d 1142, 1146 (11th Cir.1994). Thus, when a lender informs a borrower of his right to rescind, but also contradicts this notice by telling the borrower that he had waived his right to rescind, the borrower may state a claim under the Act. Id. But Smith has not made such an assertion here. In assessing a complaint under Rule 12(b)(6) we again look at the exhibits attached to the complaint, and the receipts attached to Smith’s complaint on their face do not contradict the disclosures in the loan agreement. The receipts here contain the amount borrowed on the same line as the words or word fragments: “DEFERRED CHECKS” or “DEFERRED DEPOSIT EXTENSI.” As there are no assertions made in the receipt, these words in no way contradict the information contained in the loan agreement. Furthermore, as the district court stated:
The receipt is an insignificant and unofficial-looking document in comparison *333with the attached loan document. The “deferred deposit check fee” is a single, small entry on the receipt. The loan agreement, on the other hand, disclosed the finance charge and interest rate in large, boldface type in a conspicuous position on the front of the loan document. Even an unsophisticated borrower, receiving the two documents together, could not be confused as to the terms of the loan.
Perhaps the 500% interest rate is an “unconscionable” exploitation of the needs of the unsophisticated consumer as Smith’s claim under state law asserts. As with the purchase of lottery tickets or cigarettes, consumers of payday loans likely know a bad deal when they see it but ignore the risks and take the loan anyway. A new state or federal law could eliminate these loans regardless of market demand. Until then TILA should not be stretched beyond its terms to restrict a product sophisticated consumers don’t like. Because Smith’s complaint and the exhibits attached thereto indicate that there was no contradiction (much less an obvious contradiction of a material term), she has failed to state a claim under TILA. Accordingly, the district court also correctly dismissed this part of the claim under Rule 12(b)(6).

. Although Smith alleges that the receipt obstructed the disclosures, the size of the exhibits indicates otherwise. Where exhibits contradict the allegations in a complaint to which they are attached, the exhibits trump the allegations. Northern Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 454 (7th Cir.1998). This allows courts to avoid unnecessary proceedings when an undisputed fact establishes that the plaintiff cannot satisfy the 12(b)(6) standard. See General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1081 (7th Cir.1997).