Amicus Brief — Ford Motor Credit Co. v. Cenance

No. 80-1205

In the Supreme Court of the

United States

October Term, 1980

Forp Motor Crepir Company,

Petitioner,

vs.

JANET CENANCE, et al.,

Respondents.

Motion for Permission to File Brief Amicus Curiae

in Support of Petition for a Writ of Certiorari

to the United States Court of Appeals for the

Fifth Ciruit and Brief Amicus Curiae

Autmon B. McCaiium

650 California Street

Suite 1001

San Francisco, California 94108

(415) 433-1894

Attorney for Amicus Curiae

California Bankers

Association

Of Counsel:

Lorine E. ToccHin1

650 California Street

Suite 1001

San Francisco, California 94108

(415) 433-1894

SORG PRINTING COMPANY OF CALIFORNIA, 346 FIRST STREET, SAN FRANCISCO 94105

No. 80-1205

In the Supreme Court of the

United States

Ocroser TERM, 1980

Forp Moror Crepir Company,

Petitioner,

VS.

JANET CENANCE, et al.,

Respondents.

Motion for Permission to File Brief of Amicus

Curiae in Support of Petition for a Writ of

Certiorari to the United States Court

of Appeals for the Fifth Circuit

To tHE Honorasie, THE CHIEF JUSTICE AND THE ASSOCIATE

JUSTICES OF THE SUPREME Court OF THE UNITED STATES:

Pursuant to Rule 36.1 of the Rules of the Supreme Court

of the United States, the California Bankers Association

(hereinafter referred to as “CBA”) moves this Court for

permission to file a Brief Amicus Curiae in this ease in

support of the Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fifth Cireuit filed

by Petitioner.

In support of this motion, CBA respectfully alleges as

follows:

)

1, CBA is a trade association, and al! banks doing

business in California are members of CBA,

2. Banks in California provide wholesale financing

to automobile dealers and purchase retail installment

sale contracts from automobile dealers covering prod-

ucts sold by them.

3. These retail installment sale contracts are sub-

ject to the Truth in Lending Act (15 USC, Section 1601

et seq.) and Regulation Z (12 CFR Section 226),

4. The terms of sale, price, down payment, finance

charge, payment and other credit terms of installment

sale contracts purchased by banks are negotiated by

the automobile dealer with the buyer.

). As a general rule, banks have no contact with

the buyers signing installment sale contracts econcern-

ing the contract until after purchasing the contract on

an assignment from the dealer who made the sale,

6. The Federal Reserve Bank of San Francisco

advises that during April, 1979, banks in the Twelfth

Federal Reserve District purchased installment sale

contracts for the purchase of automobiles totaling

$312,000,000, and held a total of such contracts amount-

ing to $7,465,000,000.

7. In order to purchase automobile installment sale

contracts, banks need to know: (a) whether or not they

are to be treated as “creditors” or “subsequent assign-

ees,” (b) if they are treated as “creditors,” how they

must be identified on the disclosure statement, (¢) who

must make disclosures, and (d) if they are to be

treated as creditors, what disclosures they must make.

8. There is ambiguity and conflict among the deci-

sions of the various United States Courts of Appeals

regarding these issues.

3

9, CBA is familiar with the factual and legal issues

raised in this case, and believes that the decision in

this case has added to this ambiguity and conflict.

10. CBA has read the Petition for a Writ of Cer-

tiorari filed herein and wishes to add additional argu-

ment in support of the Petition concerning the impor-

tance of resolving the ambiguity and conflict concern-

ing these issues.

11. CBA has attempted, but has been unable, to

obtain the consent required by Rule 36.1 of the Rules

of the Supreme Court of the United States.

CBA respectfully requests that this Court grant it per-

mission to file an Amicus Curiae Brief in support of the

Petition for a Writ of Certiorari. The Brief, which is sub-

mitted with this Motion and has been served upon Peti-

tioners and Respondents, is limited in scope to setting forth

the reasons why the Petition should be granted.

Dated: February 11, 1981.

Respectfully submitted,

Autmon B. McCattum

Attorney for Amicus Curiae

California Bankers Association

Of Counsel:

LorinG EF. ToccHIni

IL.

IIT.

IV,

TABLE OF CONTENTS

Page

The Interest of CBA................c.cc.cccccssccssesecescsecseesensees 1

The Issues and Conflicts. ...0.....0..0.202...2:-2cceeceeceeeeeeeeeee 4

A. Creditor or ASSigmee ..00..00.00.000..cceecceesceseeeeeeeeeee 5)

B. If Bank Is Creditor, Must It Be Identified as

I oc ccniitntincsansinecneasincasssiseseessseesoosesee 7

C. Who Must Make Disclosures... 10

D. What Disclosures Must a Bank Make.............. 11

rr 13

CONCIUSION ooo... eeeeeeeeeeeeceeeeeeeececeeeeeeceveecceeseeeceeceeceeceseeeeee 14

TABLE OF AUTHORITIES

CasEs Pages

Augusta v, Marshall, 614 F.2d 1085 (6th Cir. 1979)...... 9

Boerner v. Colwell Co., 145 Cal. Rptr. 380 (1978)........ 6

Bouie v. City of Columbia, 378 U.S. 347, 12 L.ed 2d

Neen ns consescocedseneecnscecccenss +

Cenance v. Ford Motor Credit Co., 621 F.2d 130 (5th

ov oancsecnceseracececneceeeceeeecee 7

Ford Motor Credit Co. v. Milhollin, 444 U.S. 555

Hinkle v. Rock Springs National Bank, 538 F.2d 295

Ne isivsacecceesimasesnesséoveesevessusssensnseosecevecsecess 10

Joseph v. Norman’s Health Club, Inc., 532 F.2d 86

cc cdevecencaséssvescscnccsevesscorecereceoeee 12

Lanzetta v. New Jersey, 306 U.S. 451, 83 L.ed 888

eel sis dene ceckecénceorvccsenseccocnsccscceceness 4

Manning v. Princeton Consumer Discount Co., Ine.,

mae wee 202 (Sra Cir, 1976)............................0.0.20........ 11

Meyer’s v. Clearview Dodge Sales, Inc., 539 F.2d 511

Neen ee a sccasesecusevwsececsveccenencee 11

Milhollin v. Ford Motor Co., 588 F.2d 753 (9th Cir.

ee cass ccaveencsdvassecereesocsearesesccesecesees 8

Price v, Franklin Investment Co., Ine., 574 F.2d 594

ST Boo cavoicsscsecsenccrsensecinctsecenvecoceeeceseceorececeesere 10

Sharp v. Ford Motor Credit Co., 615 F.2d 423 (7th

Nc ccsseesusenccsssnacsssceceseres 8

TABLE OF AUTHORITIES ili

MISCELLANEOUS Pages

California Bankers Association, Articles of Incorpo-

gt SOI LEER Aa Se i ee OE EE SPILT NO

Federal Reserve Bank of San Francisco..................-..--+ 2

Official Staff Interpretation of Regulation Z, 41 Fed.

RL ARE NAAM Se NSS re PAL Prior ROE DOS 9

Oversight Hearings on the Simplification of the Truth

in Lending Act Before the Subcommittee on Con-

sumer Affairs of the House Committee on Banking,

Finance and Urban Affairs, 95th Cong., 2d Sess.

I ecaieiiss yu scsenocuteeespiclateassgeetsoncnnetine-caraabvcnmelanconinbinti 2

Petitioner’s Petition, Appendix D 0.00.0... eeeeeeeeeeeeeees

REGULATIONS

SA 8) sR enn an en en 2

Regulation Z, Section 226.8(C)..............s.sccsssssssssssesssseeses 11

Regulation Z, Section 226.6(d)...............0...cssccssscsessssssssees 10, 11

STATUTES

Truth in Lending Act, 15 USC, Section 1601 ......00..0..... 2

Truth in Lending Act, Sections 112, 130.......00.0000000000... 3

Hg Be A. <6. 5 Renae nee UES 5

Truth in Lending Simplification and Reform Act,

Public Law 96-221—Mar. 31, 1980... eeeeeeee 5

No. 80-1205

In the Supreme Court of the

United States

Octroser TERM, 1980

Forp Motor Crepir Company,

Petitioner,

vs.

JANET CENANCE, et al.,

Respondenis.

Brief Amicus Curiae in Support of Petition for

a Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

I

THE INTEREST OF CBA

The California Bankers Association (hereinafter re-

ferred to as “CBA”) is a trade association incorporaied

under the laws of the State of California, Its primary pur-

pose is “to promote, to provide a medium for study and

discussion of problems in respect to, and to express opin-

ions on questions affecting, the general welfare of commer-

cial banking and trust company businesses.” (Articles of

Incorporation)

All banks doing business in California are members of

CBA.

»

Among their activities, banks purchase a very sub-

stantial volume of “automobile dealer paper.” That is to

say, that banks, under varying arrangements with automo-

bile dealers, purchase the installment sale contracts which

automobile dealers have entered into with buyers pur-

chasing their products.

While figures showing the exact dollar volume of this

financing in California are not readily available, the Fed-

eral Reserve Bank of San Francisco advises that during

April, 1979, banks in the Twelfth Federal Reserve District

purchased automobile sale contracts totalling $312,000,000,

and held a total of such contracts amounting to

$7,465,000,000. If the average contract was $10,000, it

would mean that these banks purchased 31,200 contracts

and held a total of 746,500 contracts in April, 1979.

The banks in California are genuinely concerned about

complying with the laws and regulations governing their

business and investments, and make a conscientious effort

to do so. Complying with Regulation Z, 12 CFR § 226, (here-

inafter referred to as the “Regulation”) is expensive. For

example, General Motors Acceptance Corp. has testified

before Congress that since the effective date of the Truth

in Lending Act, 15 USC, Section 1601 et seq. (hereinafter

referred to as the “Act”’) and the Regulation, the company

has spent more than $3,000,000 to accomplish changes to its

forms. (Oversight Hearings on the Simplification of the

Truth in Lending Act Before the Subecomm. on Consumer

Affairs of the House Comm. on Banking, Finance and

Urban Affairs, 95th Cong., 2d Sess. 558, 1978). At the same

hearings the National Consumer Finance Association testi-

fied that one Cireuit Court decision engrafting a new re-

quirement onto the Regulation can cost between $3,000,000

and $6,000,000.

3

The complexity of the Act and the Regulation, with their

many judicial and agency interpretations, makes compli-

ance a difficult and expensive burden. When the court deci-

sions are in conflict, compliance becomes an impossible

burden.

The Act provides for fines or imprisonment for willful

and knowing violations and for civil liability for failure to

comply with any requirement of the Act. (Sections 112 and

130). Action may be brought within one year from the date

of violation, and civil liability, in the case of individual

actions, is fixed at twice the amount of the finance charge

in connection with the transaction, with limits of not less

than $100 or more than $1,000.

Because the finance charge for an automobile installment

sale contract is likely to be at least $500, any civil liability

for each of these contracts is likely to be the maximum of

$1,000.

If we assume that banks in the Twelfth Federal Reserve

District purchased 31,200 contracts in April 1979, as indi-

eated above, and that in April, 1980, they purchased only

half as many, i.e. 15,600 contracts, and that each of these

contracts is required to and fails to disclose the purchasing

bank in the manner required by the Fifth Circuit, the civil

penalties, aside from the criminal penalties, on these 15,600

contracts could amount to $15,600,000. Furthermore, if this

figure of 15,600 represents a monthly average of the number

of installment sale contracts purchased during the past 12

months (within the statute of limitations), and if they

contain similar violations, the civil penalties for an annual

total of 187,200 contracts could amount to as much as

$187,200,000.

In view of these criminal and civil penalties, banks have

the right to know what is required. On many occasions this

a

Court has recognized the publiec’s right to know what is

required to comply with the law.

In Bouie v. City of Columbia, 378 U.S. 347, 12 L.ed 2d

894, 898 (1964), the Court held:

“... We have recognized in such eases that ‘a statute

which either forbids or requires the doing of an act

in terms so vague that men of common intelligence

must necessarily guess at its meaning and differ as

to its application, violates the first essential of due

process of law.’ ”

In Lanzetta v. New Jersey, 306 U.S. 451, 83 L.ed. 888, 890

(1939), the Court held:

“No one may be required at peril of life, liberty or

property to speculate as to the meaning of penal stat-

utes. All are entitled to be inforined as to what the

state commands or forbids.” (Emphasis added).

II

THE ISSUES AND CONFLICTS

These cases (hereinafter referred to as the “Cenance”

cases) present four Truth-In-Lending issues faced by all

banks when they purchase an installment sale contract from

a dealer, These issues are:

A. Is the bank a “creditor” or an “assignee” within

the meaning of the Act and Regulation?

B. If the bank is a “creditor,” must it be identified as

“ereditor’’?

C. Who must make the disclosures?

D. If the bank is a “ereditor,” what disclosures must

it make?

Unlike many Truth-In-Lending cases where the issues

deal with what is in a particular contract, these four issues

0»

are present in every contract purchased by banks because

they relate to the basic structure of installment sales fi-

nancing and how disclosures should be made for Truth-In-

Lending purposes. Thus, a uniform and logical resolution

of these issues is vital and is of importance to the entire

industry.

Despite the urgent need for certainty and uniformity in

the disclosures that must be made in installment sales fi-

nancing, the Circuits are hopelessly in conflict on the above

issues. The Cenance cases sharply present this conflict.

A. Creditor Or Assignee

In the Cenance cases the Court held that Ford Motor

Credit was not a subsequent assignee.

The Act itself recognizes that the original ereditor and a

subsequent assignee are separate and different parties, and

provides different obligations for them.

Section 131 of the Act provides:

“Exeept as provided in section 125(¢) and exeept in

the ease of actions brought under section 130(d), in

any action or proceeding by or against any subsequent

assignee of the original creditor without knowledge to

the contrary by the assignee when he acquires the

obligation, written acknowledgment of receipt by a

person to whom a statement is required to be given

pursuant to this title shall be conclusive proof of the

delivery thereof and, unless the violation is apparent

on the face of the statement, of compliance with this

chapter. This section does not affect the rights of the

obligor in any action against the original creditor.”

Financial institutions hav~ relied on this distinction be-

tween a creditor and assignee for determining their obliga-

tions and in handling installment sale contracts.

The legislative history of the Act and the Truth In Lend-

ing Simplification and Reform Act, (Public Law 96-221-

6

Mar. 31, 1980) dealing with the liability of assignees and

Congress’s intention that assignees in typical installment

sales financing transactions are not to be considered

“ereditors” within the meaning of the Act, is carefully and

pointedly set forth in Appendix D, at page 94 of Peti-

tioners’s Petition.

The difference between the roles of a creditor and a third

party financing institution has been recognized by the

Supreme Court of California. In Boerner v. Colwell Co.

145 Cal. Rptr. 380, (1978) the California Supreme Court

stated:

“. . The question before us, therefore, resolves

itself to this: Does the mere participation by a non-

exempt financing institution in a transaction such as

that before us—no matter how well-intentioned and

no matter how fully disclosed to the contracting par-

ties—operate to convert what would otherwise be

regarded as a bona fide credit sale (such as, for ex-

ample, in the case where the builder is able to finance

the sale itself without institutional assistance) into a

loan subject to the usury laws?

“Under the law of this and the significant majority

of other jurisdictions the answer is clearly no.” (145

Cal. Rptr. 380, 390)

“The role of the financing institution in transactions

of this kind is basically a beneficial one, for the essence

of their function is that of providing needed financial

assistance to sellers unable to handle their own con-

sumer financing, thus permitting those sellers to com-

pete on a more equal footing with their more estab-

lished competitors. While regulation of these activities

is essential for the protection of the vital interests of

the consumer, the Unruh and Rees-Levering Acts pro-

vide ample evidence of the Legislature’s willingness

to provide such regulation; we must assume that the

ae

‘

lawmakers, in light of the instant opinion, will make

haste to treat the narrow, perhaps inadvertently un-

regulated area with which this case is concerned. (See

fn.12, ante.) In any event, it is our view that the in-

strument of the usury laws has no place in the field

of bona fide credit sale financing, and that its use must

be limited to those cases in which the record clearly

reveals that the substantial intent of the parties was

to effect the hire of money at an excessive rate of

interest rather than to finance a bona fide sale of prop-

erty. This is not such a case.” (145 Cal. Rptr. 380, 391)

There is a difference between an original creditor and a

subsequent assignee, and banks need to know which they

are deemed to be in order to determine their obligations.

B. If Bank Is Creditor, Must It Be Identified As "Creditor"

There is a conflict as to whether or not a financial insti-

tution must be disclosed as “creditor.”

In the Cenance cases the contract provided as follows:

“The foregoing contract hereby is accepted by the seller

and assigned to Ford Motor Credit Company in accordance

with the terms of assignment set forth on the reverse side

hereof.” The Fifth Cireuit Court found that: (1) the dealer

had a standing agreement with Ford Motor Credit, (2) the

dealer and Ford Motor Credit prearranged for the assign-

ment of the contract to Ford Motor Credit, (3) at no time

did the risk of finance reside with the dealer, (4) the sale

transaction was conditioned upon acceptance of the credit

application by Ford Motor Credit, and (5) the credit appli-

eation form was prepared by Ford Motor Credit. The Fifth

Circuit Court held that:

“Disclosure of Ford as subsequent assignee does not

clearly identify it as creditor. Additionally, Ford can-

not be both a creditor and a subsequent assignee...

Accordingly, because Ford is a creditor for Truth-In-

8

Lending purposes and did not disclose that status

except by reference to assignment, we hold that Ford

violated Section 226.6(d) of Regulation Z...” (621

F.2d 130, 1384)

In Milhollin v. Ford Motor Co., 588 F.2d 753 (9th Cir.

1978), rev'd on other grounds, Ford Motor Credit Co. v.

Milhollin, 444 U.S. 555 (1980), the contract had the same

notice of assignment to Ford Motor Credit as in the Cen-

ance cases. The Ninth Cireuit Court found that: (1) Ford

Motor Credit had a program for purchasing contracts from

the dealer, (2) Ford Motor Credit provided forms of credit

applications, contracts and rate charts, (3) the contracts

were typically assigned to Ford Motor Credit shortly after

the sales were consummated, and (4) the dealer may obtain

prior approval from Ford Motor Credit for customers with

marginal credit ratings. In Milhollin the Ninth Cireuit

Court held that:

“For our purposes it is unnecessary to decide

whether the identification of each creditor is a re-

quired disclosure or if Ford Credit is a creditor of

Consumers (Plaintiffs). Assuming an affirmative an-

swer to these questions, we conclude that the status of

Ford Credit, even if it is a creditor, was adequately

disclosed.” (588 F.2d 753, 756).

In Sharp v. Ford Motor Credit Co., 615 F.2d 423 (7th

Cir. 1980), the contract had the same notice of assignment

to Ford Motor Credit as in the Cenance and Milhollin

cases. The Seventh Circuit Court found that: (1) Ford

Motor Credit provided financing to dealers by purchasing

retail installment contracts, (2) Ford Motor Credit pro-

vided dealers with forms of credit applications and install-

ment sales contracts, (3) dealers, pursuant to a standing

arrangement, typically assigned executed contracts to Ford

9

Motor Credit within a few days after the sales were con-

summated, and (4) dealers may obtain prior approval from

Ford Motor Credit for customers with marginal credit

ratings. In Sharp the Seventh Cireuit Court held that:

“Assuming arguendo that Ford and General (the fi-

nance companies) were creditors within the meaning

of the Act and Regulation Z, we conclude that their

statuses were adequately identified to the appellants

on the faces of the installment contracts.” (615 F.2d

423, 426)

In Augusta v. Marshall, 614 F.2d 1085, (6th Cir. 1979),

the contract had the same notice of assignment to Ford

Motor Credit as in the Cenance and Milhollin eases, and

the facts were nearly identical. The Court held that:

“We need not decide whether Ford Credit was, as an

assignee, a creditor within the meaning of the Regu-

lation and need not decide whether the payment cou-

pon book gave timely notice, if such was required. We

determine that Judge Krupansky was correct in hold-

ing that the installment contract itself gave adequate

notice of Ford Credit’s involvement in the trans-

action.” (614 F.2d 1085, 1086).

Hence, the Fifth Cireuit Court is in conflict with the

Ninth, Seventh and Sixth Cireuit Courts as to how the

bank is to be identified.

Further, the Cenance cases also conflict with the Official

Staff Interpretation of Regulation Z, 41 Fed. Reg. 41908

(1976), which provides:

“Although the identification of a creditor is a required

disclosure under Section 226.8(a) (Regulation Z), this

disclosure does not constitute required ‘terminology.’ ”

In Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 63

L.ed. 2d 22 (1980) this Court held that the Federal

10

Reserve Board’s official staff interpretations are control-

ling unless they are demonstrably irrational. As stated by

this Court:

“That statutory provision signals an unmistakable

congressional decision to treat administrative rule-

making and interpretation under TILA as authorita-

tive. Moreover, language in the legislative history

evinces a decided preference for resolving interpretive

issues by uniform administrative decision, rather than

piecemeal through litigation.” (63 L.ed. 2d 22, 32)

C. Who Must Make Disclosures

There is a conflict as to who must make disclosures.

In the Cenance cases the Fifth Cireuit Court affirmed

the holding of the lower court that Ford Motor Credit was

liable for all disclosure violations.

In Hinkle v. Rock Springs National Bank, 538 F.2d 295

(10th Cir. 1976), and Price v. Franklin Investment Co.,

Inc., 574 F.2d 594 (D.C. Cir. 1978) the Tenth and D.C.

Cireuit Courts held that the financial institution was a

creditor in an installment sale transaction and that both

the dealer and the financial institution must make disclo-

sures under Section 226.6(d) of the Regulation.

Section 226.6(d) of the Regulation provides:

“Tf there is more than one creditor or lessor in a

transaction, each creditor or lessor shall be clearly

identified and shall be responsible for making only

those disclosures required by this Part which are with-

in his knowledge and the purview of his relationship

with the customer or lessee. If two or more creditors

or lessors make a joint disclosure, each creditor or

lessor shall be clearly identified. The disclosures re-

quired under paragraphs (b) and (c) of Section 226.8

shall be made by the seller if he extends or arranges

for the extension of credit...” (Hmphasis added)

11

In Manning v. Princeton Consumer Discount Co., Inc.,

533 F.2d 102 (8rd Cir. 1976), the Court found that: (1) the

dealer had arranged for a loan for the plaintiff to purchase

an automobile, (2) the lender (Princeton) made the con-

sumer loan disclosures to the plaintiff required by Section

129 of the Act, and (3) neither the dealer nor Princeton

made the “credit sale” disclosures listed in Section 128 of

the Act. The Third Cireuit Court held that credit sale dis-

closure should have been made, The Court stated:

“Tn short, we hold that if the transaction is one in

which the seller arranges credit, the obligation of dis-

closure is placed upon him by the third sentence of

Regulation Section 226.6(d). In that factual situation

the specific direction of the third sentence prevails

over the general language limiting the scope of dis-

closure to items within the ereditor’s knowledge and

the purview of his relationship with the customer.”

(5383 F.2d 102, 105).

Hence, the Fifth, Tenth, and D.C. Cireuit Courts are in

conflict with the Third Cireuit Court and the third sentence

of Section 226.6(d) of the Regulation.

D. What Disclosures Must a Bank Make

The Regulation provides specific and differing disclo-

sures for credit sales (Section 226.8(¢)) and for loans (See-

tion 226.8(d)).

In the Cenance cases the contract between the dealer and

buyer purported to give the disclosures required in a credit

sale transaction. Since the Fifth Cireuit held that Ford

Motor Credit was a creditor and liable for all disclosure

violations, it must be assumed that the Court determined

that Ford Motor Credit should have given credit sale dis-

closures.

This would be consistent with the Fifth Cireuit Court’s

decision in Meyer’s v. Clearview Dodge Sales, Inc., 5389 F.2d

12

O11 (5th Cir. 1976) where the Court held that the dealer

and the financial institution are both creditors and are

jointly obligated to make Truth-In-Lending sale disclo-

sures.

However, in Joseph v. Norman's Health Club, Inc., 532

F.2d 86 (Sth Cir. 1976) where the Court found that the

finance company must bear ful! responsibility for all dis-

closures required under the Act, the Court held that Truth-

In-Lending loan disclosures were required and said:

“. . . As we have discussed, the substance of the

transactions is the controlling factor. In that light, we

find the arrangement a mere pretext for consumer

loans which required disclosure under the Act by both

the club and the finance companies. Cf. Twin City Fed.

Sav. & Loan Association v. Transamerica Ins. Co., 413

F.2d 494 (8th Cir. 1969).” (532 F.2d 86, 93)

Hence, if banks are deemed to be “creditors,” there is a

conflict as to whether they are to make sale or loan dis-

closures to buyers.

Recharacterizing a sale transaction as a loan transaction,

or a loan transaction as a sale transaction, may also cause

usury and finance charge problems for dealers and banks.

In order to determine if a proper finance charge for a sale

or a proper interest rate for a loan is being charged, the

party making disclosure must know the nature of the trans-

action being disclosed.

Finally there is the question of what is best for the

consumer.

Is the consumer best served if he receives Joan disclosure

information when he thinks he is entering into a sale trans-

action, or receives sale disclosure information when he

thinks he is entering into a Joan transaction, or is he eon-

fused?

13

Is the consumer best served when he is given disclosure

information by a party he does not know and with whom

he has had no dealings, as is the case when he has talked

with the dealer only and has had no contact with the finane-

ing institution, or is he confused?

Is the consumer best served if he is given both sale and

loan disclosures, or is he confused?

The admonition of this Court in Ford Motor Credit Co.

v. Milhollin, (supra) is appropriate:

« .. The concept of ‘meaningful disclosure’ that ani-

mates TILA ... cannot be applied in the abstract.

Meaningful disclosure does not mean more disclosure.

Rather, it describes a balance between ‘competing con-

siderations of complete disclosure ... and the need to

avoid... informational overload.’ ” (63 L.ed. 2d 22, 33)

UI

SUMMARY

To summarize :

1. Banks have substantial investments in dealer

paper involving many transactions and millions of

dollars.

2. Banks need to know what is required of them

when purchasing dealer paper.

3. There are conflicting opinions among the Cir-

cuit Courts and confusion as to the status and obliga-

tions of banks when purchasing dealer paper.

4. Particularly, banks need and should be able to

know:

(A) whether or not they are “creditors” or “as-

signees,”

(B) whether or not they are required to be identi-

fied as “creditors,”

(C) who must make disclosures, and

(D) what, if any, disclosures they must make.

14

IV

CONCLUSION

The resolution of these matters is important to banks,

and CBA respectfully urges this Honorable Court to grant

Petitioner’s Petition for a Writ of Certiorari in this matter.

Dated: February 11, 1981.

Respectfully submitted:

Autmon B. McCattum

Attorney for Amicus Curiae

California Bankers Association

Of Counsel:

Lorine EK. Toccuin1