Court Opinion

ID: 9476928
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:09:23.114623+00
Date Added: 2024-06-11T17:45:35.557716
License: Public Domain

JERRE S. WILLIAMS, Circuit Judge,
specially concurring:
The opinion for the Court omits a highly significant fact in this case, and as a result reaches a conclusion which extends the definition of “finance charges” under the law beyond reasonable statutory limits. The critical fact is that the Bank recommended two attorneys regularly who were closely associated with the Bank to draft the chattel mortgages which the Bank required. The inclusion of those fees in the “amounts financed” portion of the disclosure form was automatic, and the bank collected the fees and paid the attorneys. Under these *552circumstances I agree that these fees were finance charges.
At least some of the chattel mortgages were drafted by other attorneys in the community who were not recommended by and had no connection with the Bank. The FDIC takes the position that the fees charged by those attorneys also are finance charges of the Bank but then specifically eschews any attempt to take action against the Bank for failure to include those fees on the ground of pragmatic difficulty.
Since the opinion for the Court does not properly distinguish between a wholly independent action by a lawyer which is necessary and properly required by the Bank before it will issue a loan from the “in house” actions of the Bank in this case, I find it important to dispute this broad interpretation of the statute by the FDIC and by the panel opinion.
I start with the proposition that it is reasonable and sound for a Bank to require that before it gives an automobile loan it will demand a chattel mortgage. It is also reasonable for the Bank to require that the chattel mortgage be drafted by a lawyer. These are simply qualifications which a Bank has a right to make before it will engage in the voluntary act of granting a loan on an automobile. We are not here testing the right of the Bank to demand professional qualifications. Under the reasoning of the panel opinion, if the chattel mortgage had been drafted by the applicant on a standard form sold in the stores or anyone else, the cost of purchasing the form would, under the reasoning of the majority, constitute a “finance charge”. If the Bank required that such loan applications be typed, the cost of typing the applications would be a finance charge. If the automobile in question had been purchased at a foreclosure sale, the cost of obtaining the requisite documents to establish clear title from the court clerk would also be a finance charge. I suppose even the ink or pencil used by an individual applicant to fill out an application would be a finance charge.
I recognize that the regulation and the statute provide that all charges payable directly or “indirectly” by the person to whom the credit is extended and imposed directly or “indirectly” by the creditor are covered. But “indirectly” must have reasonable and sensible limits.
The net effect of the position of the panel majority is the implication that the Bank does not have the right to demand the chattel mortgage in connection with the automobile loan because the law does not “require” that it obtain a chattel mortgage. Thus, while it is free to do so, it must include the cost of this completely reasonable requirement in its competitive interest rate. I venture that it would be remarkable indeed if the State of Louisiana would be willing to hold in a case in which the Bank charged the maximum interest rate that the fact that to qualify for the loan a wholly independent hiring of an attorney by the consumer to help prepare the loan application papers would result in a finding that the Bank was charging usurious interest. Yet this is the implication of the majority opinion. I cannot read the statute that broadly.
“Indirect” is, of course, one of the most illusive concepts in the law. It can run the gamut from the broadest of meaning to the narrowest. In breadth we have the constitutional “indirect effect” upon interstate commerce of home grown wheat for home grown consumption only, Wickard v. Filburn, 317 U.S. 111, 663 S.Ct. 82, 87 L.Ed. 122 (1942) and the fact that all federal taxes, to the shock of many taxpayers, are “indirect” under the Constitution Art. I, Sec. 9, Par. 4 and the Sixteenth Amendment (virtually all experts are now in agreement that a net income tax is an indirect tax. The Sixteenth Amendment, however, was passed to overturn a contrary Supreme Court decision.) On the other hand, the narrow meaning of “indirect” covers such instances as a routine real estate transaction in which the property is conveyed through a third person or the creation of a third party beneficiary under a contract.
This sweeping vagueness of the word “indirect” simply requires an analysis of the use of the word in context. I for one *553cannot conceive that a wholly independent fee paid directly to an attorney or someone else to help in an application for a loan to a Bank must be considered a “finance charge” of the Bank and could result in a claim of usury against the Bank. These are not finance charges by the Bank at all.
We have guidance on these matters in our own prior decisions. In Berryhill v. Rich Plan of Pensacola, 578 F.2d 1092, 1099 (5th Cir.1978), we undertook to define those charges required to be included as “finance charges” in the Truth in Lending Act. “The important question is whether the seller refuses to extend credit until the customer agrees to another charge.” An independent legal fee paid by the debtor directly to the attorney is not such a required charge. It is a matter of a completely personal arrangement between attorney and client. In Watts v. Key Dodge Sales, Inc., 707 F.2d 847 (5th Cir.1983), contrary to an informal staff interpretation letter of the Federal Reserve Board, we held that the notarial fee incurred by the bank in obtaining the required authentication of a chattel mortgage need not be listed as a “finance charge” so long as the form disclosed by itemization that the debt- or was being required to pay the bank for it. From these two cases we discover that if the charge is something the Bank does not collect and with which it has nothing to do it is not an indirect finance charge and that some charges even collected by the Bank can be excluded from finance charges as long as they are properly disclosed by itemization to the consumer.
I concur fully in the holding in this case, including the requirement of payment of back fees to the consumer, because all that the FDIC is undertaking to enforce are the fees that arose from the preparation of the chattel mortgages by the two lawyers who had close connections with the Bank and worked with the Bank under circumstances which led the Bank automatically to collect those attorneys fees as part of the cost of obtaining the loan. These fees are distinguishable from the notarial fee in Watts because in Watts notarization was required by law although the fee itself was not set by law. Beyond Banks themselves indirectly furnishing the legal services, sensible and reasonable requirements of Banks that lead to wholly independent hirings of help by loan applicants with direct payment of fees from the applicants to the persons hired are not within the statutory definition of finance charges. The FDIC claims that they are. But it disavows any attempt to enforce its own rule under those circumstances. This is not the way the law should be applied nor is intended to be applied.
I concur fully in the decision in this case but on the narrower ground set out in this opinion.