Court Opinion

ID: 2968242
Source: CourtListenerOpinion
Date Created: 2015-09-22 04:37:05.400104+00
Date Added: 2024-06-11T11:43:17.879097
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

TIMOTHY GIBSON,                          
                   Plaintiff-Appellee,
                  v.                               No. 04-2110
LTD, INCORPORATED,
              Defendant-Appellant.
                                         
TIMOTHY GIBSON,                          
                  Plaintiff-Appellant,
                  v.                               No. 04-2131
LTD, INCORPORATED,
              Defendant-Appellee.
                                         
           Appeals from the United States District Court
         for the Eastern District of Virginia, at Alexandria.
                Leonie M. Brinkema, District Judge.
                          (CA-03-1374-1)

                       Argued: September 19, 2005

                       Decided: January 11, 2006

       Before NIEMEYER and LUTTIG, Circuit Judges,
 and Robert J. CONRAD, Jr., United States District Judge for the
    Western District of North Carolina, sitting by designation.

Affirmed in part, reversed in part, vacated in part, and remanded in
part by published opinion. Judge Niemeyer wrote the opinion, in
which Judge Luttig and Judge Conrad joined.
2                         GIBSON v. LTD, INC.
                              COUNSEL

ARGUED: Yama Anthony Shansab, WALTON & ADAMS, P.C.,
Reston, Virginia, for Appellant/Cross-Appellee LTD, Incorporated.
Alexander Hugo Blankingship, III, BLANKINGSHIP & ASSO-
CIATES, P.C., Alexandria, Virginia, for Appellee/Cross-Appellant
Timothy Gibson. ON BRIEF: Robert V. W. Adams, III, WALTON
& ADAMS, P.C., Reston, Virginia, for Appellant/Cross-Appellee
LTD, Incorporated. Thomas B. Christiano, BLANKINGSHIP &
ASSOCIATES, P.C., Alexandria, Virginia, for Appellee/Cross-
Appellant Timothy Gibson.

                               OPINION

NIEMEYER, Circuit Judge:

   In order to obtain financing for the purchases of a 2002 Dodge
truck and a 2003 Dodge truck from Lustine Toyota/Dodge, Inc., in
Woodbridge, Virginia, Timothy Gibson executed a total of five retail
installment sales contracts — two in connection with the 2002 pur-
chase and three in connection with the 2003 purchase. After Gibson
wrecked his 2002 truck and returned the 2003 truck upon Lustine’s
demand when Lustine learned that Gibson was no longer employed,
Gibson commenced this action challenging the legality of disclosures
made in the retail installment sales contracts. He alleged violations of
the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and
related Virginia law.

   The district court held that disclosures in the first 2002 contract and
the first 2003 contract constituted violations of TILA and awarded
Gibson statutory damages, as well as $53,627.50 for statutorily autho-
rized attorneys fees. The court rejected Gibson’s claim that Lustine
improperly disclosed a charge for the inclusion of "GAP insurance"1
as part of the amount financed in the second 2003 contract.
    1
    When a vehicle is totaled, "GAP insurance" ("Guaranteed Auto Pro-
tection" insurance) pays off the consumer’s outstanding loan balance if
the reimbursement by the consumer’s property damage insurance carrier
is insufficient.
                          GIBSON v. LTD, INC.                            3
   For the reasons that follow, we affirm the district court’s findings
that two contracts violated TILA and reverse its rejection of Gibson’s
claim that the GAP insurance cost was improperly disclosed as part
of the amount financed on the second 2003 contract. We also vacate
the district court’s award of attorneys fees to permit the court to reas-
sess its award in light of Gibson’s additional meritorious claim.

                                     I

   Timothy Gibson, a young welder from Texas who did not complete
high school and who had little credit history, came to Virginia in 2002
with his older brother to work for a contractor in Dumfries, Virginia.
After having had to hitch rides with his brother and to take taxicabs
for transportation, Gibson decided to purchase a truck from Lustine
Toyota/Dodge ("Lustine") on October 31, 2002. After selecting a new
2002 Dodge Dakota truck, a Lustine employee who sells aftermarket
products asked Gibson whether he was interested in purchasing
undercoating, paint sealant, fabric protector, floor mats, or other after-
market products. According to Gibson, he told the sales representative
that he did not want any such products — a fact that Lustine has not
disputed. The sales representative nonetheless saved in her file an
"After Sale Invoice," not signed by Gibson, showing a $499 charge
for undercoating and paint sealant. Later that day, Gibson signed a
buyer’s order for the truck and a retail installment sales contract to
finance it that committed him to pay $21,201.39, after applying his
down payment. This sum included a $499 charge for "AFTER
MRKT," but no such charge was disclosed on the retail installment
sales contract. The charge was included in the gross amount financed.

  In his buyer’s order, Gibson agreed to permit Lustine to follow its
practice of selling his retail installment sales contract to a third party.
Moreover, the buyer’s order provided:

     If Purchaser is financing this transaction, it is conditioned
     upon approval of Purchaser’s proposed retail installment
     sale contract as submitted to or through the Dealer. If that
     proposed retail installment sale contract is not approved
4                              GIBSON v. LTD, INC.
        under the terms agreed to with the Dealer, Purchaser may
        cancel this invoice . . . .2

In a financing addendum to the retail installment sales contract, Gib-
son also agreed that he was accepting delivery of the truck that day
"pending approval by a financing source" and that if Lustine did not
receive approval from a financing source, Lustine could rescind the
transaction. Lustine remained bound, however, until it gave notice
that it was rescinding the contract by its failure to sell the loan. As
to Gibson, the retail installment sales contract provided that he
remained bound after he signed the contract and that he could "only
cancel it if the seller agree[d] or for legal cause." Gibson took deliv-
ery of the truck on October 31, 2002, the same day he entered the
dealership and signed the retail installment sales contract.

   Lustine was unable to find a third-party finance company to pur-
chase Gibson’s retail installment sales contract because of Gibson’s
low credit rating. Accordingly, Lustine had Gibson return to the
dealership on November 11, 2002, to restructure the deal and execute
a new retail installment sales contract that reduced the amount
financed to $17,114.17. This was accomplished by deleting the $499
"AFTER MRKT" charge, deleting a $500 GAP insurance charge, and
increasing Gibson’s down payment. As restructured, this second retail
installment sales contract was sold to Triad Financial Corporation.

   In early 2003, Gibson crashed his truck into a pole, totaling it. On
February 5, 2003, he returned to Lustine to purchase a replacement
truck. He chose a new 2003 Dodge Dakota truck and again signed a
buyer’s order as well as a retail installment sales contract to finance
$22,889.36, after applying his down payment. This amount included
a $500 charge for GAP insurance and an overcharge in the amount
    2
   In the 2003 form of Retail Installment Sales Contract that Lustine
used, the wording of this provision was changed slightly, to provide:
        If Purchaser is financing this transaction or leasing the vehicle,
        the transaction is conditioned upon approval of Purchaser’s retail
        installment sale contract or lease by a financial source on terms
        acceptable to the Dealer. If the retail installment sale contract or
        lease is not approved, Purchaser or Dealer may cancel this sale
        ....
                         GIBSON v. LTD, INC.                          5
of $12.39 resulting from Lustine’s miscalculation of the dealer’s busi-
ness license tax. The inclusion of the GAP charge on the buyer’s
order and on the retail installment sales contract was authorized by an
addendum that Gibson signed, agreeing to purchase the GAP insur-
ance. Gibson took delivery of the 2003 truck that day.

   Again, Lustine was unable to sell this 2003 retail installment sales
contract to a finance company. One finance company, however,
agreed to purchase the loan if it were restructured to provide for an
amount financed no greater than $21,900. Accordingly, Gibson
returned to the dealership on February 12, 2003, and signed a second
retail installment sales contract that provided for financing the amount
of $21,248.70. Under this restructured arrangement, Gibson increased
his down payment and thereby decreased the amount financed. This
second 2003 contract again included a $500 charge for GAP insur-
ance, even though Gibson did not again sign an addendum to autho-
rize the charge as he had a week earlier for the first 2003 contract.

   A couple of days after Gibson signed the second 2003 retail install-
ment sales contract — on February 14, 2003 — Lustine was advised
that Gibson still owed Triad Financial money on the loan for his 2002
truck because the insurance payout on the totaled vehicle was less
than the amount of the outstanding loan. Because Gibson did not have
GAP insurance, Lustine proposed to cover Gibson’s deficiency by
absorbing part of it and passing on the remainder to Gibson as an
increase in the price of the 2003 truck. Gibson returned to the dealer-
ship on February 18 to sign a third retail installment sales contract
agreeing to this arrangement.

   After Gibson signed the February 18 retail installment sales con-
tract, Lustine learned that Gibson had quit his job on February 6,
2003, the day after he signed his credit application for financing the
2003 truck. Because of Gibson’s unemployment, Lustine told Gibson
that he had to return the vehicle, and Gibson did so.

   After returning the 2003 truck, Gibson commenced this action
against Lustine, alleging multiple violations of TILA, a violation of
the Virginia Consumer Protection Act, and common law fraud. On
cross motions for summary judgment, the district court ruled in favor
of Lustine in all of Gibson’s claims except two: The court ruled in
6                         GIBSON v. LTD, INC.
Gibson’s favor finding (1) that the $499 charge for "AFTER MRKT"
on the first retail installment sales contract was improperly included
in the amount financed inasmuch as it was "undisputed" that Gibson
did not order, nor did he receive, aftermarket products and (2) that the
first 2003 retail installment sales contract included an overcharge of
$12.39 for the dealer’s business license tax. In making these findings,
the district court rejected Lustine’s principal argument that, because
neither of the retail installment sales contracts on which violations
were found had been purchased by third-party finance companies and
no monies were ever loaned on them, the contracts were not "consum-
mated" as required by federal law. The court relied on our decision
in Nigh v. Koons Buick Pontiac GMC, Inc., 319 F.3d 119 (4th Cir.
2003), rev’d in part 125 S. Ct. 460 (2004), to reject Lustine’s argu-
ment. The parties agreed that Nigh dictated an award of $63,847.94,
twice the sum of the two finance charges related to Gibson’s success-
ful claims.3 And because Gibson was a successful plaintiff under the
TILA, Gibson submitted a claim for attorneys fees in the amount of
$82,957.50, pursuant to 15 U.S.C. § 1640(a)(3). The district court
awarded Gibson $53,627.50.

   From the district court’s judgment, Lustine appeals, challenging the
court’s conclusion that the relevant retail installment sales contracts
were "consummated" and its holding that Gibson was improperly
charged $499 for aftermarket products on the first 2002 contract. Gib-
son filed a cross-appeal challenging the district court’s rejection of his
claim that the second 2003 retail installment sales contract improperly
included a charge for GAP insurance in the amount financed.

                                    II

   Lustine’s overarching contention is that neither of the violations
found by the district court are actionable because they arose from
retail installment sales contracts that were not "consummated." The
claim for the improper disclosure of the $499 aftermarket charge
arose from the first 2002 retail installment sales contract, which was
rejected by third-party lenders and replaced by a second one; and the
    3
   Gibson has stipulated that because the Supreme Court has since
reversed the judgment in Nigh, these statutory damages should now be
reduced to $2,000, $1,000 for each violation.
                          GIBSON v. LTD, INC.                          7
claim based on the $12.39 overcharge related to the first 2003 retail
installment sales contract, which was superseded by a second contract
entered into a week later. Because neither of the two contracts was
purchased by a third-party finance company and credit was never
extended to Gibson on either of them, Lustine argues that any viola-
tion with respect to them cannot lead to sanctions imposed by TILA,
which regulates only "consummated" credit contracts. See 15 U.S.C.
§ 1638(b)(1); 12 C.F.R. § 226.17(b).

   Recognizing that our holding in Nigh might be applied to hold that
the transactions in this case were indeed consummated, Lustine
argues that Nigh is "inapposite" because it "analyzed neither the [Fed-
eral Reserve Board’s] Official Commentary nor state law." Appel-
lant’s Br. at 24. Lustine asserts that Federal Reserve Board’s
Commentary "expressly interprets consummation under Regulation Z
to impose a state law construct." Id. at 19-20 (discussing ¶ 2(a)(13)-
1 of the Official Staff Commentary to 12 C.F.R. Pt. 226, Supp. I
("Official Staff Commentary"), which provides: "State law governs.
When a contractual obligation on the consumer’s part is created is a
matter to be determined under applicable law; Regulation Z does not
make this determination"). Lustine contends that under Virginia law,
a condition precedent must be fulfilled before the "contract shall take
effect," Smith v. McGregor, 376 S.E.2d 60, 65 (Va. 1989), and rea-
sons that a contract that does not take effect until a condition prece-
dent is fulfilled is one that is not "consummated." Appellant’s Br. at
22, 24 ("There was no consummation, and hence no TILA liability").

   The Truth in Lending Act was enacted to inform consumers’ use
of credit by increasing their awareness of credit costs. See 15 U.S.C.
§ 1601(a). Consequently, the Act requires "meaningful disclosure of
credit terms so that the consumer will be able to compare more read-
ily the various credit terms available to him." Id. To this end, TILA
requires the disclosure of, among other things, the "amount financed"
and the "finance charge." See id. § 1638(a) & (b). The "amount
financed" is defined to be the "amount of credit of which the con-
sumer has actual use," id. § 1638(a)(2)(A), and the "finance charge"
is defined as all charges "imposed directly or indirectly by the creditor
as an incident to the extension of credit." The finance charge "does
not include charges of a type payable in a comparable cash transac-
tion." Id. § 1605(a).
8                         GIBSON v. LTD, INC.
   These and the other required disclosures must be made "before the
credit is extended." 15 U.S.C. § 1638(b)(1). Regulation Z, the Federal
Reserve Board’s primary TILA regulation, elaborates on this timing
requirement, providing that a creditor must "make disclosures before
consummation of the transaction." 12 C.F.R. § 226.17(b) (emphasis
added). "Consummation" in turn is defined to occur at the "time that
a consumer becomes contractually obligated on a credit transaction."
Id. § 226.2 (emphases added). This definition of "consummation,"
adopted in 1982, moved away from the pre-1982 definition which
provided that a "transaction shall be considered consummated at the
time a contractual relationship is created between a creditor and a
customer . . . irrespective of the time of performance of either party."
Id. § 226.2 (kk) (January 1, 1981 version) (emphasis added). As one
district court noted soon after the 1982 change, "[u]nder the new,
revised definition . . . courts should only look at the point in time that
the consumer becomes contractually obligated on the credit transac-
tion." Zoumayaiwan v. Jack Haggerty Olds, Inc., 1985 WL 1453
(N.D. Ill. 1985); see also 46 Fed. Reg. 20848, 20851 (Apr. 7, 1981)
("As before, state law determines when the contractual obligation
arises, but the revised definition focuses on when the consumer
becomes obligated").

   In Nigh, we construed Regulation Z, concluding that because the
regulation "expressly refers solely to the consumer’s commitment"
and because of "TILA’s express purpose of protecting consumers
from receiving inadequate disclosures prior to their entering into
credit transactions," "consummation . . . encompasses unfunded,
financing agreement options to which consumers contractually com-
mit, and under which they can be bound at the lender’s sole discre-
tion." Nigh, 319 F.3d at 124. We reasoned that consummation occurs
when a consumer has done all he can to be committed to the terms
of a credit transaction, for

     [i]f consummation, or extension of credit, does not encom-
     pass a consumer’s commitment to a financing agreement
     that provides unilateral power for the creditor to execute the
     agreement later, creditors could intentionally provide faulty
     disclosures to consumers, obtain their commitment, and then
     afterwards provide accurate disclosures prior to closing the
     transaction, which if provided earlier might have dissuaded
                          GIBSON v. LTD, INC.                          9
    the consumer from accepting the credit, all without incur-
    ring TILA liability.

Id. Thus, we concluded that a consumer "consummates" an unfunded
retail installment sales contract when he signs it even if the dealer has
not signed it. Id. at 123.

   In view of the language of the Act, as well as Regulation Z, we find
unpersuasive Lustine’s assertion that Nigh is inapposite. The change
to Regulation Z in 1982 altered the definition of consummation from
when a "contractual relationship is created" to when the "consumer
becomes contractually obligated on a credit transaction." It is this dis-
tinction on which Nigh focused — determining not when a contract
becomes effective under state law, but when the consumer becomes
"contractually obligated." See Nigh, 319 F.3d at 122 ("Nigh, having
signed the contracts and turned them over to Koons Buick, was com-
mitted to the transaction and obliged to perform upon counter-
signature by Koons Buick"). The amended Regulation Z focuses only
on the consumer and his obligations. Accordingly, the question in this
case is not whether a contract was created under state law, as urged
by Lustine, because such an analysis would revert to the old Regula-
tion Z. Instead, the question is whether Gibson was obligated to the
terms of credit in the retail installment sales contracts upon which he
bases his TILA claims.

   Applying Nigh, we conclude that when the purchaser of a motor
vehicle signs a retail installment sales contract after which he no lon-
ger can alter the terms of credit and after which the dealer retains the
exclusive right to decide when the financing arrangement takes effect,
the transaction is "consummated" for TILA purposes. See Nigh, 319
F.3d at 124; see also Official Staff Commentary ¶ 2(a)(13)-2
("Consummation does not occur when the consumer becomes con-
tractually committed to a sale transaction, unless the consumer also
becomes legally obligated to accept a particular credit arrangement")
(emphasis in original). We specifically held in Nigh that, when the
consumer had signed a buyer’s order and a retail installment sales
contract, the transaction was "consummated." After signing the con-
tract, the consumer could no longer change the financing terms even
though the dealer had not yet signed the contract. If these unsigned
documents in Nigh were sufficient to justify the conclusion that the
10                        GIBSON v. LTD, INC.
consumer was contractually obligated for purposes of TILA, then, a
fortiori, a document signed by both parties that would be a contract
but for an unfulfilled condition that a third-party finance company
purchase the loan on terms acceptable to dealer likewise contractu-
ally obligated the consumer for TILA purposes. Thus, we need not
decide whether, under Virginia law, these contracts contained valid
conditions precedent so long as Lustine, not Gibson, had control over
satisfaction of them.

   The Eleventh Circuit has applied the Nigh construction of "con-
summation" to that very circumstance where the condition precedent
was controlled by the dealer. See Bragg v. Bill Heard Chevrolet, Inc.,
374 F.3d 1060, 1066 (11th Cir. 2004) (adopting Nigh and agreeing
that "consummation occurred not when title to the automobile passed
or when a bilateral contract was formed, but rather when [the pur-
chaser] signed the [retail installment sales contract], thereby becom-
ing obligated on the credit agreement"). The contract in Bragg stated
that "neither party hereto shall be bound to the other until terms of the
credit have been approved by both parties." Id. at 1067. The court
rejected the dealer’s argument that because the transaction was condi-
tioned on securing third-party financing, the agreements were not
consummated until they were funded, observing that the condition
precedent was within the dealer’s own control. The court explained
that to allow such a condition to prevent "consummation" would frus-
trate TILA’s primary purposes. See id. at 1067-68. Based on our read-
ing of Regulation Z, we find Bragg persuasive.

   With the controlling legal principles in hand, we now turn to the
circumstances before us to determine specifically whether the two
retail installment sales contracts in question — the first 2002 contract
and first 2003 contract — were "consummated."

   Both Gibson and Lustine signed the two retail installment sales
contracts in question, and after each contract was signed, Gibson took
delivery of the truck he purchased. More importantly, after signing
each contract, Gibson could no longer alter the terms of the credit.
The first paragraph in each contract stated that "by signing this con-
tract you choose to buy the vehicle on credit under the agreements on
the front and back of this contract." Each contract also stated that
"[a]fter you sign this contract, you may only cancel it if the seller
                          GIBSON v. LTD, INC.                         11
agrees or for legal cause. You cannot cancel this contract simply
because you change your mind." (Emphasis added). The contracts did
not give Gibson any power to approve third-party proposals for pur-
chasing his loan, as the contract in Bragg arguably did. Instead, the
contracts in this case vested in Lustine alone the power to fulfill the
purported condition precedent by securing outside financing, "on
terms acceptable to [Lustine]." Thus, after Gibson signed the retail
installment sales contract in each case, he became contractually obli-
gated to the credit transaction and could be released from it only with
Lustine’s approval. In these circumstances, we conclude that the con-
tracts were "consummated" in the sense used by TILA when Gibson
signed them. See 12 C.F.R. § 226.2; Nigh, 319 F.3d at 124; Bragg,
374 F.3d at 1066; Zoumayaiwan, 1985 WL 1453.

   Lustine makes much of the mutual power to revoke the sales trans-
action if financing could not be found and of Gibson’s state-created
right to terminate a delivery if financing could not be found. Even if
we assume the existence of these conditional revocation powers, they
do not prevent "consummation," for consummation is postponed only
when the consumer has not yet become contractually obligated to the
terms of credit. The fact remains that if Lustine had found an "accept-
able" lender, Gibson could not have exercised either power to revoke
the terms of credit. He would have been required to proceed with the
purchase on the loan terms contained in the retail installment sales
contract that he signed.

   Accordingly, we agree with the district court that Gibson "consum-
mated" the retail installment sales contracts at issue in this case and
therefore could claim specific TILA violations with respect to each of
them.

                                   III

   Lustine does not challenge the district court’s conclusion that the
$12.39 overcharge for the dealer’s business licensing tax in the first
2003 retail installment sales contract constituted a violation of TILA.
Its only argument with respect to that charge is that the retail install-
ment sales contract was not consummated, an argument that we have
now rejected. Accordingly, we affirm the district court’s ruling on
that contract. See 12 C.F.R. § 226.18(c)(1)(iii). Regulation 226.18(c)
12                       GIBSON v. LTD, INC.
requires a creditor to itemize charges, like taxes, that are "paid to
other persons by the creditor on the consumer’s behalf." If the credi-
tor intends to overcharge and retain a portion of such a sum, it may
do so provided that such a retention is disclosed. See Official Staff
Commentary, ¶ 18(c)(1)(iii)-2. In this case, no such disclosure was
made.

                                  IV

   Finally, Lustine contends that it properly included a $499 charge
for undercoating and paint sealant in the amount financed by the first
2002 retail installment sales contract. Lustine notes that its file con-
tained an "After Sale Invoice" for $499 for undercoating and paint
sealant, signed by Lustine but not Gibson, and that the buyer’s order,
which Gibson did sign, includes a charge in the amount of $499 for
"AFTER MRKT," which was a component part of the "balance due
on delivery" in the amount of $21,201.39. The retail installment sales
contract signed at the same time congruently states that the "amount
financed" is $21,201.39. Thus, by signing these documents, according
to Lustine, Gibson agreed to charges for undercoating and paint seal-
ant later to be applied by the dealer.

   Gibson contends that it is undisputed that he explicitly refused Lus-
tine’s offer to purchase undercoating and paint sealant; that he never
received those products; and that he was never promised them by
Lustine. He argues therefore that he never had "actual use" of the
products and any charge for them was illegal under TILA, citing 15
U.S.C. § 1638(a)(2)(A) and Nigh, 319 F.2d at 124.

   The district court concluded as a matter of law that the undisputed
facts in the record showed that Gibson did not order aftermarket prod-
ucts; that they were not included on his truck when he took delivery
of it; and that they were never promised to Gibson. The court also
concluded that despite these facts, the $499 charge was included in
the amount financed by the first 2002 retail installment sales contract
that Gibson signed. The district court rejected any suggestion that the
presence of the "After Sale Invoice" in Lustine’s file created a genu-
ine factual dispute on this issue. The court explained that Lustine’s
sales representative was "unable to either confirm or contradict" Gib-
son’s sworn testimony that he declined the offer for undercoating and
                          GIBSON v. LTD, INC.                         13
paint sealant, and therefore the reason for the "After Sale Invoice" in
Lustine’s file could only be deduced by "conjecture and surmise."
Moreover, the invoice itself was not signed and did not include a date
for the installation of undercoating and paint sealant, as was called for
on the invoice form.

   Lustine does not disagree with the facts on which the district court
relied. Rather, it argues that "Gibson, who signed the [buyer’s order
and the retail installment sales contract], is presumed to know and
assent to their terms," citing Sydnor v. Conseco Financial Services
Corp., 252 F.3d 302, 306 (4th Cir. 2001), and General Insurance of
Roanoke, Inc. v. Page, 464 S.E.2d 343, 344 (Va. 1995). Their terms
explicitly included a $499 charge for "AFTER MRKT," which Lus-
tine argues is an agreement to purchase undercoating and paint sealant
for $499.

   Lustine’s response is flawed at two levels. First, Lustine cannot
demonstrate that Gibson knew or should have known that the $499
charge on the buyer’s order was for undercoating and paint sealant.
The record contains no evidence that (1) Gibson accepted the offer for
undercoating and paint sealant; (2) that Gibson signed anything other
than the buyer’s order which could have referred to undercoating and
paint sealant; and (3) that Gibson received any document evidencing
Lustine’s obligation to apply undercoating and paint sealant at some
future date. Indeed, as to this last fact, Lustine’s practice was to give
the consumer a "we owe" memorandum that would have disclosed its
obligation to install undercoating and paint sealant at some future
date. This "we owe" memorandum was not prepared with respect to
Gibson’s transaction. Thus, Lustine is left with the single notation on
the buyer’s order — "AFTER MRKT - $499.00" — from which to
argue that Gibson should be imputed with an agreement to purchase
undercoating and paint sealant.

   Although Lustine might be able to argue reasonably that "AFTER
MRKT" refers to aftermarket products as distinguished from some
other aftermarket charge, service, or expense, it reaches too far to
claim that a casual consumer would understand what an aftermarket
product is when that term has not been defined for the consumer by
the dealer. Absent such an explanation, "AFTER MRKT" is virtually
meaningless, particularly when it is part of a list of unexplained
14                       GIBSON v. LTD, INC.
charges or credits that also includes "dealer’s business license tax,"
"Virginia title tax," "processing fee for consumer services," "license
fee," and "dealer incentive." Without more evidence of an understand-
ing by Gibson, the mere entry on an invoice of "AFTER MRKT" does
not amount to a disclosure sufficient to support the claim that Gibson
agreed to pay for undercoating and paint sealant.

   Second — and more important to the legal analysis — Lustine has
not established that even if Gibson is to be imputed with an under-
standing of the term "AFTER MRKT," he ever had "actual use" of
undercoating and sealant for which the charge could be included in
the amount financed. See 15 U.S.C. § 1638(a)(2)(A) (specifying that
the amount financed "shall be the amount of credit of which the con-
sumer has actual use" (emphasis added)). While the fact that under-
coating and paint sealant had not been applied to Gibson’s truck when
he took delivery of it and was never applied during the months that
followed might not be fatal if Lustine had clearly obligated itself to
apply undercoating and paint sealant at a date to be arranged, the
record does not contain any evidence of such an obligation. To the
contrary, the dealer’s practice at the time was to sign and deliver a
"we owe" memorandum committing the dealer to apply aftermarket
products. Yet, no "we owe" memorandum was signed or delivered to
Gibson. Moreover, as observed by the district court, the unsigned
"After Sale Invoice" that Lustine had in its own file did not have Gib-
son’s signature nor a date for which the proposed products would be
installed, as called for on the "After Sale Invoice" form. Thus, it can
hardly be argued that when Gibson did not receive undercoating and
paint sealant at the time of sale and was not promised them at the time
of sale for installation at some future date, he nonetheless had "actual
use" of the products so that a charge for them could legally be
included in the amount financed.

   TILA § 1638 defines "amount financed" as "the amount of credit
of which the consumer has actual use." 15 U.S.C. § 1638(a)(2)(A)
(emphasis added). If a lender has no basis for including a charge for
undercoating and paint sealant as part of the purchaser’s amount
financed, the disclosure of the "amount financed" is erroneous, and
the error gives rise to TILA liability. We therefore affirm the district
court on this claim.
                          GIBSON v. LTD, INC.                         15
                                   V

   In his cross-appeal, Gibson contends that Lustine’s inclusion of a
GAP insurance charge in the amount financed on his second 2003
retail installment sales contract violated TILA because he did not
authorize the charge. Without his authorization, he contends, Lustine
could only include the charge as part of the finance charges, not as
part of the amount to be financed, as Lustine did.

   Lustine argues that the written instrument that Gibson signed,
authorizing a GAP insurance charge in connection with his first 2003
retail installment sales contract, continued to apply and that the
dealership did not again have to obtain that authorization when the
parties modified the deal only a week later. Lustine maintains that
Virginia law supports its position, which would treat the two transac-
tions a week apart as sufficiently contemporaneous to be a single
transaction. Lustine also points to Federal Reserve Board Commen-
tary, which provides that "[i]f the parties informally agree to a modifi-
cation of the legal obligation, the modification should not be reflected
in the disclosures unless it rises to the level of a change in the terms
of the legal obligation." See Official Staff Commentary, ¶ 17(c)(1)-2.

   TILA, however, does not permit the inclusion of charges such as
a GAP insurance charge in the "amount financed" — as distinct from
a "finance charge" — unless the consumer explicitly agrees to such
a charge in writing. Regulation Z, 12 C.F.R. § 226.4(d)(3)(i), provides
that "[c]harges or premiums paid for debt cancellation coverage . . .
may be excluded from the finance charge, whether or not the cover-
age is insurance," if three conditions are fulfilled: (1) the lender dis-
closes in writing that debt cancellation coverage is not required; (2)
the lender discloses the fee for the initial term of coverage; and (3)
the consumer signs or initials an "affirmative written request for cov-
erage after receiving" these two disclosures.

   While Gibson signed an authorization that satisfied this regulation
before signing the first 2003 retail installment sales contract, it is
undisputed that he did not sign such an authorization before signing
the second 2003 retail installment sales contract a week later. Under
Regulation Z, the disclosure would not have to be repeated if the sec-
ond 2003 retail installment sales contract modified the first and if the
16                        GIBSON v. LTD, INC.
modification did not rise "to the level of a change in the terms of the
legal obligation." We conclude, however, that the modifications in
the second 2003 retail installment sales contract materially changed
Gibson’s legal obligations. Under the second contract, Gibson
increased the down payment for the truck and thereby reduced the
amount financed. With this change, all of the material figures in the
contract changed, including most importantly, the amount of the
finance charge. Gibson thus became legally obligated to pay wholly
new amounts. In short, the second 2003 retail installment sales con-
tract consummated a new finance arrangement, and Regulation Z
requires that the lender make new disclosures before its consumma-
tion. See 12 C.F.R. § 226.17.

   Because the second 2003 retail installment sales contract was not
accompanied by the disclosures required by 12 C.F.R.
§ 226.4(d)(3)(i), Lustine was not entitled to include the GAP insur-
ance charge as part of the amount financed, as it did. Rather, it could
only include that charge as a component of the finance charge.
Because this violation occurred with respect to the second 2003 retail
installment sales contract, we reverse the district court on this claim
and remand for imposition of the appropriate sanction.

   Lustine’s appeal to Virginia law is of no moment on this issue
because federal law, not Virginia law, governs the determination of
this aspect of TILA liability.

                                   VI

  TILA entitles the plaintiff in "any successful action" enforcing
TILA liability to costs and a "reasonable attorney’s fee as determined
by the court." 15 U.S.C. § 1640(a)(3). Because Gibson has been suc-
cessful on three TILA claims, not just the two found by the district
court, we vacate the district court’s award of attorneys fees and
remand to permit the court to reassess its award in view of these
changed circumstances.

   The parties have briefed the issue whether the district court’s attor-
neys fees award should stand in light of the Supreme Court’s reversal
of Nigh, which constitutes an intervening change in the decisional law
reducing Gibson’s maximum recovery from $63,848 to $2,000 (now
                         GIBSON v. LTD, INC.                       17
perhaps $3,000). Lustine argues that the attorneys fees award in the
amount of $53,627.50 is no longer proportional in light of Gibson’s
reduced recovery.

   Because we have vacated the attorneys fees award, we will not
address this issue, giving the parties an opportunity to address their
arguments in the first instance to the district court. Moreover, we
express no opinion on whether the district court should modify its
attorneys fees award.

                    AFFIRMED IN PART, REVERSED IN PART,
                 VACATED IN PART, AND REMANDED IN PART