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NESBITT v. BLAZER FINANCIAL SERVICES
August 9, 1982
ROSELDA E. NESBITT, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
BLAZER FINANCIAL SERVICES, INC., DEFENDANT.WILLIE MAE MILLS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF, V. BLAZER FINANCIAL SERVICES, INC., DEFENDANT.
The opinion of the court was delivered by: Moran, District Judge.
These consolidated lawsuits have been brought as class
actions to recover damages for alleged violations of the Truth
in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and
Regulation Z, 12 C.F.R. § 226.1 et seq., issued pursuant to
TILA. Plaintiffs, Roselda E. Nesbitt ("Nesbitt") and Willie Mae
Mills ("Mills"), representing certified classes composed of
consumers who entered into loan transactions with defendant
Blazer Financial Services, Inc. ("Blazer"), and who received
disclosure statements similar to those received by Nesbitt or
Mills, claim that Blazer violated federal law in six respects:
(1) It failed to make required disclosures clearly,
conspicuously, and in meaningful sequence.
(2) Its notes and disclosure statements contain terms and
information which are confusing, misleading and contradictory.
(3) It failed to comply with regulations governing
disclosure of insurance costs.
(4) It did not disclose, in the Nesbitt transaction, that
the note contains a provision for confession of judgment,
which constitutes a security interest in property, and it
failed to describe the property taken as security.
(5) In the Mills transaction it failed to disclose that
after-acquired property was subject to a security interest and
to adequately describe the security interest in that it did
not state that a confession of judgment clause permits entry
of a judgment without prior notice or hearing.
(6) It failed to make reference, in the Nesbitt disclosure
statement, to a separate document itemizing the personal
property subject to a security interest, and did not disclose
that after-acquired property was also subject to a security
MAGISTRATE'S RECOMMENDATIONS TO WHICH THERE ARE NO
Magistrate Jurco recommended that Blazer's motion for
summary judgment be granted with respect to claims one through
three set forth above. In light of the Magistrate's lucid and
thorough report on these claims and in the absence of any
objections thereto, this court adopts her recommendations with
the following brief discussion.
A. Plaintiffs' First Claim
Regulation Z, 12 C.R.F. § 226.6(a), imposes on creditors the
duty to make the disclosures required by TILA and regulations
thereunder "clearly, conspicuously, [and] in meaningful
sequence. . . ." In Allen v. Beneficial Finance Company of
Gary, 531 F.2d 797 (7th Cir.), cert. denied, 429 U.S. 885, 97
S.Ct. 237, 50 L.Ed.2d 166 (1976), the Seventh Circuit Court of
Appeals defined "meaningful sequence" as follows:
[M]eaningful sequence first requires groupings of
logically related terms. Second, meaningful
sequence requires that terms in the groupings be
arranged in a logically sequential order
emphasizing the most important terms.
Plaintiffs contend that TILA and Regulation Z require Blazer
to group two sets of logically-related items: (1) the number,
amount and dates of payments, and (2) the amount financed, the
finance charge and the annual percentage rate.*fn2 But the
law does not mandate such rigidity. While the burden is on the
creditor "to be able to support his belief that his
disclosures meet the requirements of the Regulation," he can
do so in a "multitude of ways." Public Position Letter No. 545
(November 4, 1971), CCH Consumer Credit Guide ¶ 30,759.*fn3
Read horizontally, the first line of Blazer's disclosure
statement informs the consumer of the number and amount of
payments. The sum of these individual payments is the total
amount paid by the consumer, which is the next disclosure in
the line. Following that, Blazer lists the portion of the
total payment constituting interest.
On the second line — again reading horizontally — the
statement presents the total amount financed, itemized charges
and the "net to customer(s)," which is the "amount of credit of
which the obligor will have the actual use."
15 U.S.C. § 1639(a)(1). This latter figure is reached by subtracting the
itemized charges from the amount financed.
On the third line Blazer lists — again in horizontal order
— the term of the loan, the due date of each payment and the
maturity date of the loan. Finally, Blazer highlights the
finance charge and annual percentage rate, two essential terms
of the loan, by isolating them in boldface type on the far
right side of the disclosure statement.
While Blazer's disclosure format may not comport with
plaintiffs' preferred logic, this court believes that its
sequential presentation of facts relating to the money
involved in the loan, followed by facts about the dates of the
loan, is logical and permits easy arithmetical computation.
See Johnson v. Blazer Financial Services, Inc., No. 75-178-MAC,
slip op. at p. 6 (M.D.Ga. April 19, 1976) (upholding identical
disclosure statement). In its disclosure statement Blazer has
presented the required disclosures in a reasonably if not
optimally comprehensible fashion, and that is all that is
required. Warren v. Credi-thrift of America, Inc.,
599 F.2d 829, 832 (7th Cir. 1979).
B. Plaintiffs' Second Claim
Plaintiffs' second claim concerns the acceleration,
delinquency and prepayment provisions of the notes and
disclosure statements in question. This claim has two
components*fn4 and Blazer is entitled to summary judgment on
each of them.
1. Failure to Disclose Default Charges in the Context of
Plaintiffs allege in their complaints that Blazer violated
Regulation Z, 12 C.F.R. § 226.8(b)(4) by failing to disclose as
a default charge its contractual right to accelerate the
balance of the loan on default. In Ford Motor Credit v.
Milhollin, 444 U.S. 555, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980),
the Supreme Court, relying heavily on the official
interpretations and positions of the Federal Reserve Board,
held that an acceleration clause is a default charge for
disclosure purposes only when the debtor does not receive a
rebate of unearned finance charges and that disclosure is
required only where the policy of the creditor relating to
rebate upon acceleration differs from the creditor's rebate
policy in the case of voluntary prepayment of the debt.
The Mills and Nesbitt disclosure statements provide that the
debtors "shall be entitled to a rebate of" the unearned
portion of the finance charge upon prepayment of the unpaid
balance of the loan. The notes contain clauses which provide
that "[a] default in the making of any payment . . . shall, at
the option of the Creditor . . . render the unpaid balance due
and payable less any refunds or credits then due . . . ." The
disclosure statements contain no reference to Blazer's rebate
policy in the event of acceleration.
Plaintiffs contend that summary judgment may not be granted
on this claim because there is a disputed question of fact as
to Blazer's rebate policy upon acceleration — the factor that
triggers disclosure requirements under Milhollin. In its answer
to Plaintiffs' Interrogatory No. 21, however, Blazer stated
that its policy on acceleration of a debt was to rebate the
unearned portion of the finance charge in the same manner as
rebate upon prepayment. Since Blazer's rebate policy was the
same with respect to acceleration and prepayment, Milhollin
requires no more disclosure than was ...