Turner v. West Memphis Federal Savings & Loan Ass'n

Conley Byrd, Justice, dissenting. I disagree with the majority that appellee, West Memphis Federal Savings & Loan Association failed to make a “material disclosure” in its Truth-in-Lending Statement as a matter of law as distinguished from a matter of fact. Appellee’s Truth-in-Lending Statement (attached hereto as an appendix) shows that the amount of the note is $38,500; that an origination fee of $385 was charged the borrower; the net amount financed ($38,500 — $385) was $38,115; the annual percentage rate of the finance charge was 9.25%; and the principal and interest was to be paid in 300 equal monthly installments of $323.10 with the first payment being due on the first day of October, 1975 and a like such payment being due on the first day of the. month thereafter. Therefore, the only two things the statement fails to show are the total amount of the finance charge and the total amount of the payments. However, these two items can easily be determined by simple arithmetic — i.e. 300 X $323.10 = $96,930, the total of the payments and when the amount financed, $38,115 is subtracted from the total payment we find that the total of the finance charges is $58,815. The record here as abstracted shows nothing about appellants’ abilities to determine whether these omitted items were material. Instead appellants rely solely upon the Truth-in-Lending Statement to bring themselves within the statutory definition of a material disclosure. If appellants should happen to be the president of a Commercial Bank or a competitive savings and loan bank or a person holding a master’s degree in mathematics 1 the Federal Reserve Board, who drew Regulation ( 12 CFR § 226.1 et seq.), would look “red faced” in trying to explain to any normal citizen how appellee’s Truth-in-Lending Statement failed to make a “material disclosure.” The Federal Reserve Board staff, Federal Register Volume 42, No. 144, July 27, 1977, agrees with my view — it is there stated:

“Section 226.9(a) provides that the three-day right of rescission begins on the date the transaction is consummated or the date of delivery of the rescission notice ‘and all other material disclosures required by this Part, whichever is later.’ It is staff’s opinion that where a creditor is making use of the provisions of § 226.9(g) and has provided its customers with printed information from which the items listed in that section can be determined, this information constitutes the ‘other material disclosures’ referred to in § 226.9(a).”

The foregoing statement is in accordance with the Truth-in-Lending Act § 102 ( 15 U.S.C. § 1601 ) which provides:

“The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this title to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.”

This position is not original with me, see Hervey v. Housing Development Corp., 451 F. Supp. 1198 (D.C. Mo. 1978), where the Truth-in-Lending Statement failed to show the total amount of the payments and Ivey v. United States Dept. of Housing & Urban Dev., 428 F. Supp. 1337 (D.C.N.D. Ga. 1977), wherein there was an error of $11.30 in calculating the total payments.

Just so that my position will not be misunderstood, it is that when the Truth-in-Lending Statement furnishes information from which any omission can be ascertained by simple mathematical calculation according to the math taught generally in the junior high schools, then such an omission standing alone should not be considered as a “material omission” within the meaning of 15 U.S.C. § 1635 . Now as to some aged or illiterate persons such an omission might become a material omission, but the person seeking rescission under 15 U.S.C. 1635 should shoulder the burden of showing that the non-disclosure was material as to him.

Finally, I note that the majority quote and rely upon 15 U.S.C. § 1640 which provides for the recovery of civil penalties and attorney’s fees for a non-disclosure. I can see no reason for the majority to rely upon 15 U.S.C. § 1640 because that statute contains a one year statute of limitations, 15 U.S.C. § 1640 (e). The loan here was made on September 9, 1975 and the Truth-in-Lending defense was first raised by an amended answer on July 14, 1978. Furthermore, the appellants did not rely upon 15 U.S.C. § 1640 in their argument before this court.

If one would read the Truth-in-Lending Act in its entirety instead of just a passage here and there, he would find that there is a material difference between the relief provided in 15 U.S.C. § 1640 and the relief provided in 15 U.S.C. § 1635 . The former, 15 U.S.C. § 1640 , which does not mention “material disclosures,” provides for the recovery of limited penalties plus an attorney’s fee but incorporates a statute of limitations of only one year from the date of the loan. However, 15 U.S.C. § 1635 provides for a rescission for material non-disclosures together with the recovery of all finance charges paid to the lender and has a three year statute of limitation. 15 U.S.C. § 1635 makes no provision for the recovery of attorney’s fees.

For the reasons herein stated, I respectfully dissent.

The record shows that all but $6,587.22 of this $38,115 loan was used to pay off four other bank loans to appellants.