Court Opinion

ID: 9463618
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:11:04.687627+00
Date Added: 2024-06-11T17:38:11.315329
License: Public Domain

HOLLOWAY, Circuit Judge,
dissenting:
I respectfully dissent and would affirm.
The undisclosed acceleration provision in paragraph 19 on “Default” says unequivocally that if the buyer defaults on any payment, and in certain other circumstances, the “Seller shall have the right to declare all amounts due or to become due hereunder to be immediately due and payable.” See n.7, ante at 1247. To me, this means beyond doubt that the seller-creditor has reserved and can assert the right in such a case to accelerate the entire debt, including the unearned finance charges in full, and that the creditor then can collect all such unearned finance charges.
This is not only the assertion of a “remedy” by way of acceleration but instead it spells out the obligation of the debtor to pay additional, specific pecuniary sums resulting from the fact that the finance charge was computed on the full credit period to maturity, which is however, shortened by acceleration. See Johnson v. McCrackin-Sturman Ford, Inc., 527 F.2d 257, 265-66 (3d Cir.).
I feel that acceleration clauses which include such provisions allowing unearned finance charges to be collected from the debt- or on acceleration come within the reach of the disclosure requirements for “default, delinquency, or similar charges payable in the event of late payments . . .”, 15 U.S.C. § 1638(a)(9) (1970), and within the similar terms of Regulation Z covering “[t]he amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments.” 12 CFR § 226.8(b)(4) (1973). See Barrett v. Vernie Jones Ford, Inc., 395 F.Supp. 904, 909 (N.D.Ga.); McDaniel v. Fulton National Bank, 395 F.Supp. 422, 428 (N.D.Ga.). To me, interpretation of the statute and the regulation as requiring disclosure of such terms is in accord with the Congressional purpose of obtaining “. meaningful disclosure of credit terms . . .” 15 U.S.C. § 1601 (1970); see Mourning v. Family Publications Service, Inc., 411 U.S. 356, 377, 93 S.Ct. 1652, 36 L.Ed.2d 318.10 And this conclusion is also supported by a Federal Reserve Board Staff Opinion Letter.11
*1250Defendant Ziems argues that it properly disclosed, as required by Regulation Z, 12 CFR § 226.8(b)(7), the rebate provisions for payments made prior to maturity of the obligation in paragraph 14 of the contract. (See note 6, ante at 1247). Defendant says that this part of the contract and state law, discussed below, required credit to the buyer of the unearned portion of the finance charge if the acceleration option were exercised (there having been no default in this case), and that since the buyer would not be required to pay an additional amount if the acceleration option were exercised, there is no need to disclose the right of acceleration (Brief for Defendant-Appellant, 11-12). However, this paragraph, which was in the disclosures, dealt only with voluntary prepayment by the debtor where the “. [bjuyer may prepay his obligations. . . ” It revealed nothing about the provisions for involuntary acceleration by the seller in paragraph 19 on the back of the contract, which contain no terms for the rebate of unearned finance charges.
In addition, defendant says that rebate of unearned charges is required by the New Mexico Motor Vehicle Sales Finance Act. See New Mexico Statutes Annotated § 50-15-9 (1953). The statute makes provision, however, only that the “buyer may pay in full” notwithstanding the provisions of a contract and then may receive a refund credit of a portion of the finance charge as specified in the statute. It does not include a provision for such a rebate where there is involuntary repossession as did the Pennsylvania statute considered in Johnson v. McCrackin-Sturman Ford, Inc., supra, 527 F.2d at 265 n.13. Since rebate of unearned charges was not required by law or the contract, I feel that disclosure was required of the provisions for acceleration.
I am convinced that where, as here, acceleration carries with it the right to collect unearned finance charges, disclosure is required. Such provisions come within the meaning of “default, delinquency, or similar charges payable in the event of late payment . . .’’If the lighter burden in paragraph 14 of no more than $5.00 for a late payment is a required disclosure where acceleration of the whole debt is not demanded, why should not the heavier burden of all unearned finance charges being collectible as a part of the accelerated debt be disclosed?
APPENDIX
No. 851
§ 226.8(b) The rebate effects of an acceleration of payments clause should be disclosed in the same manner as if prepayment were voluntary and such clause does not constitute a charge for late payment except to the extent that the creditor retains unearned finance charges in excess of that which was disclosed as being rebated
October 22, 1974
This is in response to your letter of . inquiring whether an acceleration clause in an instalment contract is a “charge” payable in the event of late payment within the meaning of § 226.8(b)(4) of Regulation Z and therefore must be disclosed with other required items.
For the purposes of Truth in Lending disclosures, this staff views an acceleration of payments as essentially a prepayment of the contract obligation. As such, the disclosure provisions of § 226.8(b)(7) of the Regulation, which require the creditor to identify the method of rebating any unearned portion of the finance charge or to disclose that *1251no rebate would be made, apply. If the creditor rebates under one method for acceleration and another for voluntary prepayment, both methods would need to be identified under § 226.8(b)(7). Failure to disclose the method of rebate or nonrebate would be a violation of the Truth in Lending Act.
If, under the acceleration provision, a rebate is made by the creditor in accordance with the disclosure of the rebate provisions of § 226.8(b)(7), we believe that there is no additional “charge” for late payments made by the customer and therefore no need to disclose under the provisions of § 226.-8(b)(4). On the other hand, if upon acceleration of the unpaid remainder of the total of payments, the creditor does not rebate unearned finance charges in accordance with the rebate provisions disclosed in § 226.8(b)(7), any amounts retained beyond those which would have been rebated under the disclosed rebate provisions represent a “charge” which should be disclosed under § 226.8(b)(4).
Sincerely yours,
Frederic Solomon Director

. See also S.Rep. 392, 90th Cong., 1st Sess. 2-3; H.R.Rep. No. 1040, 90th Cong., 1st Sess. 9 (1967), U.S.Code Cong. & Admin.News 1968, p. 1962.

. See Federal Reserve Board Staff Opinion Letter No. 851, Oct. 22, 1974, 4 CCH Consumer Credit Guide (131,-173, reproduced in the appendix to this dissent, which stated in part:
. On the other hand, if upon acceleration of the unpaid remainder of the total of payments, the creditor does not rebate unearned finance charges in accordance with the rebate provisions disclosed in § 226.-8(b)(7), any amounts retained beyond those which would have been rebated under the disclosed rebate provisions represent a *1250“charge” which should be disclosed under § 226.8(b)(4).
Defendant Ziems itself relies on this Opinion Letter as supporting its position that acceleration options are not “charges” as the term is used in requirements for Truth in Lending disclosure (Brief for Defendant-Appellant, 10-11).