{ "id": 8549359, "name": "ARNOLD R. LOWERY, and SONJA LOWERY v. FINANCE AMERICA CORPORATION, formerly GAC FINANCE INCORPORATED OF NORTH CAROLINA", "name_abbreviation": "Lowery v. Finance America Corp.", "decision_date": "1977-01-19", "docket_number": "No. 7621DC584", "first_page": "174", "last_page": "185", "citations": [ { "type": "official", "cite": "32 N.C. App. 174" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "12 C.F.R. \u00a7 226.1", "category": "laws:admin_compilation", "reporter": "C.F.R.", "opinion_index": -1 }, { "cite": "15 U.S.C. \u00a7 1601", "category": "laws:leg_statute", "reporter": "U.S.C.", "opinion_index": -1 }, { "cite": "15 U.S.C. \u00a7 1640", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 5, "pin_cites": [ { "page": "(c)" }, { "page": "(a)", "parenthetical": "A" }, { "page": "(a)" }, { "page": "(e)" }, { "parenthetical": "a" } ], "opinion_index": -1 }, { "cite": "12 C.F.R. \u00a7 226.4", "category": "laws:admin_compilation", "reporter": "C.F.R.", "weight": 2, "pin_cites": [ { "page": "(a)", "parenthetical": "i" }, { "parenthetical": "a" } ], "opinion_index": -1 }, { "cite": "12 C.F.R. \u00a7 226.8", "category": "laws:admin_compilation", "reporter": "C.F.R.", "weight": 4, "pin_cites": [ { "parenthetical": "i" }, { "page": "(a)" }, { "page": "(b)(5)" } ], "opinion_index": -1 }, { "cite": "15 U.S.C. \u00a7 1639", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 3, "pin_cites": [ { "page": "(a)" } ], "opinion_index": -1 }, { "cite": "414 F. Supp. 851", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3872534 ], "year": 1976, "opinion_index": 0, "case_paths": [ "/f-supp/414/0851-01" ] }, { "cite": "522 F. 2d 749", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1111885 ], "year": 1975, "opinion_index": 0, "case_paths": [ "/f2d/522/0749-01" ] }, { "cite": "329 F. Supp. 270", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 5593573 ], "weight": 2, "year": 1971, "opinion_index": 0, "case_paths": [ "/f-supp/329/0270-01" ] }, { "cite": "531 F. 2d 815", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1074747 ], "year": 1976, "opinion_index": 0, "case_paths": [ "/f2d/531/0815-01" ] }, { "cite": "396 F. Supp. 12", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3809176 ], "year": 1975, "opinion_index": 0, "case_paths": [ "/f-supp/396/0012-01" ] }, { "cite": "386 F. Supp. 194", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3338491 ], "weight": 2, "year": 1974, "pin_cites": [ { "page": "199" } ], "opinion_index": 0, "case_paths": [ "/f-supp/386/0194-01" ] }, { "cite": "395 F. Supp. 9", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3801914 ], "weight": 2, "year": 1975, "opinion_index": 0, "case_paths": [ "/f-supp/395/0009-01" ] }, { "cite": "12 C.F.R. \u00a7 226.6", "category": "laws:admin_compilation", "reporter": "C.F.R.", "weight": 2, "pin_cites": [ { "page": "(a)" }, { "page": "(c)" } ], "opinion_index": 0 }, { "cite": "414 F. Supp. 737", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3872811 ], "weight": 2, "year": 1976, "opinion_index": 0, "case_paths": [ "/f-supp/414/0737-01" ] }, { "cite": "525 F. 2d 961", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1094847 ], "year": 1976, "opinion_index": 0, "case_paths": [ "/f2d/525/0961-01" ] }, { "cite": "15 U.S.C. \u00a7 1605", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 2, "pin_cites": [ { "parenthetical": "b" }, { "page": "(b)" } ], "opinion_index": 0 }, { "cite": "15 U.S.C. \u00a7 1601", "category": "laws:leg_statute", "reporter": "U.S.C.", "opinion_index": 0 }, { "cite": "15 U.S.C. \u00a7 1640", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 6, "pin_cites": [ { "page": "(c)" }, { "page": "(c)" }, { "parenthetical": "f" }, { "page": "(f)" }, { "page": "(a)", "parenthetical": "A" }, { "parenthetical": "a" } ], "opinion_index": 0 }, { "cite": "12 C.F.R. \u00a7 226.4", "category": "laws:admin_compilation", "reporter": "C.F.R.", "weight": 4, "pin_cites": [ { "page": "(a)", "parenthetical": "ii" }, { "page": "(a)", "parenthetical": "i" }, { "page": "(a)" }, { "page": "(a)", "parenthetical": "ii" } ], "opinion_index": 0 }, { "cite": "12 C.F.R. \u00a7 226.8", "category": "laws:admin_compilation", "reporter": "C.F.R.", "weight": 8, "pin_cites": [ { "page": "(i) and (j)" }, { "page": "(j)" }, { "parenthetical": "i" }, { "parenthetical": "i" }, { "parenthetical": "i" }, { "parenthetical": "j" }, { "page": "(a)" }, { "page": "(b)" } ], "opinion_index": 0 }, { "cite": "15 U.S.C. \u00a7 1639", "category": "laws:leg_statute", "reporter": "U.S.C.", "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 809, "char_count": 24095, "ocr_confidence": 0.682, "pagerank": { "raw": 1.562759547902439e-07, "percentile": 0.6772024160481943 }, "sha256": "8c862a1a6a69904b1e131793417443b1179c2d661c26a8a908e82bc5d5857174", "simhash": "1:b9361c2d0ae868e6", "word_count": 3972 }, "last_updated": "2023-07-14T16:52:52.366891+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges Morris and Clark concur." ], "parties": [ "ARNOLD R. LOWERY, and SONJA LOWERY v. FINANCE AMERICA CORPORATION, formerly GAC FINANCE INCORPORATED OF NORTH CAROLINA" ], "opinions": [ { "text": "ARNOLD, Judge.\nPlaintiffs assign error to the court\u2019s holding that \u201cthe June 8, 1973, transaction is a subsequent advance under a prior agreement to extend credit and is not subject to\u201d the disclosure requirements of the Act. They contend that the December 1972 and June 1973 loans were separate transactions, and that both were subject to the disclosure requirements of the Act and Regulation Z. Plaintiffs\u2019 position is that the court erred in refusing to award them the statutory penalty and reasonable attorney\u2019s fee. According to plaintiffs, the disclosures were insufficient in each transaction because (1) FAC excluded the insurance premiums from the amount of the finance charges; (2) FAC did not disclose the total number and amount of payments; and (3) FAC did not accurately disclose the nature of the security interest.\nThe trial court erred in holding that the 8 June 1973 transaction was not a new transaction but only a subsequent advance, made pursuant to the 7 December 1972 Loan Agreement, which was not subject to additional disclosure requirements of the Act and Regulation Z. The June 1973 loan was a new transaction, and additional disclosures were required.\nTwo sections of Regulation Z are pertinent, 12 C.F.R. \u00a7 226.8(i) and (j). Plaintiffs rely on 12 C.F.R. \u00a7 226.8(j) which provides: \u201cIf ... an existing obligation is increased, such transaction shall be considered a new transaction subject to the disclosure requirements\u201d of the Act and Regulation Z. The amount of the December 1972 obligation was increased from $667.75 to $1,118.10 in June 1973.\nFAC relies on 12 C.F.R. \u00a7 226.8 (i) which dispenses with additional disclosures \u201c[i]f a loan is one of a series of advances made pursuant to a written agreement under which a creditor is or may be committed to extend credit to a customer up to a specified amount.\u201d FAC contends that its Loan Agreement (exhibit 1) is such a \u201cwritten agreement.\u201d We disagree.\nThe purpose of 12 C.F.R. \u00a7 226.8 (i) is to eliminate unnecessary and redundant disclosures. See, Public Position Letter of the Federal Reserve Board, No. 456 (17 March 1971). A second disclosure need not precede a second advance when the customer has already \u201capproved in writing the annual percentage rate or rates, the method of computing the finance charge or charges, and other terms\u201d of the second advance.\nIn the Loan Agreement of December 1972 it provides:\n\u201cLender may, at its option, make advances to Debtors from time to time aggregating not more than the statutory maximum amount of $900.00. . . . Lender is hereby committed to make loans up to a high credit of $900,00. ...\u201d\nThis does not comport with 12 C.F.R. \u00a7 226.8 (i) since it does not provide for a \u201cseries of advances.\u201d It merely indicates that FAC will make additional loans from \u201ctime to time\u201d in the future. The Loan Agreement does not call for a series of advances on a single loan commitment, but it creates a line of credit upon which separate loans will be made.\nMoreover, the disclosures made prior to the December 1972 loan are insufficient to satisfy \u00a7 226.8 (i). The annual percentage rate, finance charge and other terms disclosed then were different from those of the June 1973 loan. The amount financed, the total of payments, the number of payments, the finance charge and insurance premiums were all increased. The annual percentage rate decreased from 25.70 percent to 21.57 percent, which tends to show there were two transactions instead of a series. And, finally, the 1973 transaction increased the 1972 obligation. \u201cIf ... an existing obligation is increased, such transaction shall be considered a new transaction subject to the disclosure requirements [of Regulation Z and the Act].\u201d 12 C.F.R. \u00a7 226.8 (j).\nWe further conclude that the trial court erred by failing to find that FAC violated the Act and Regulation Z by excluding the cost of credit life insurance and credit disability insur-anee from the amount of finance charge disclosed in both transactions. FAC treated the credit insurance premiums as parts of the amount financed and not as parts of the finance charges. This is correct procedure only if\n\u201c(1) the coverage of the debtor by the insurance is not a factor in the approval by the creditor of the extension of credit, and this fact is clearly disclosed in writing to the person applying for or obtaining the extension of credit; and\n\u201c(2) in order to obtain the insurance in connection with the extension of credit, the person to whom the credit is extended must give specific affirmative written indication of his desire to do so after written disclosure to him of the cost thereof.\u201d 15 U.S.C. \u00a7 1605 (b).\nPlaintiffs argue that FAC failed to comply with the above section in both transactions, and that in the June 1973 transaction the insurance requisition appearing on the back of the check lacked the date as required by 12 C.F.R. \u00a7 226.4(a) (5) (ii).\nWritten disclosures relating to insurance premiums are among those which must appear on the same -side of either the note evincing the debt or some separate disclosure statement. 12 C.F.R. \u00a7 226.8(a). FAC adopted the latter method of disclosure in this case. Insurance disclosures appear on the Federal Disclosure Statement, Borrower\u2019s Copy (exhibit 3), and the combination disclosure statement-insurance requisition which was signed by Arnold Lowery and retained by FAC (exhibit 2).\nPlaintiffs contend that the insurance requisition must appear on the Federal Disclosure Statement. However, the disclosure statement need not contain the insurance requisition. Burton v. G.A.C. Finance Co., 525 F. 2d 961 (5th Cir. 1976); Gillard v. Aetna Finance Co., Inc., 414 F. Supp. 737 (E.D. La. 1976). The Act and Regulation Z do not speak of the insurance requistion as a disclosure, nor do they expressly require the insurance requisition to be among the disclosures. What are required to be disclosed are the cost of the insurance and the fact that insurance is not a factor in the decision to grant or withhold a loan.\nAccording- to Regulation Z, 12 C.F.R. \u00a7 226.6(a), \u201cThe disclosures required ... by this part shall be made clearly, conspicuously, [and] in meaningful sequence. ...\u201d Premiums for credit insurance cannot be excluded from the finance charge unless the fact that insurance is not required by the creditor is \u201cclearly and conspicuously disclosed in writing to the customer.\u201d 12 C.F.R. \u00a7 226.4(a) (5) (i).\nThe insurance disclosures contained in the Federal Disclosure Statement given to the Lowerys are not clear, conspicuous and in meaningful sequence. First, the cost of the insurance is neither clearly nor conspicuously revealed. The cost is typed in two of many boxes at the top of the page. These boxes are designated \u201cCredit Life\u201d and \u201cCredit Dis.\u201d The meaning of these words is not clear to laymen for whose protection the Act and Regulation are meant. 15 U.S.C. \u00a7 1601. Since the insurance cost disclosures are not clear, these cost disclosures also are not conspicuous. See, Woods v. Beneficial Finance Co., 395 F. Supp. 9 (D. Oregon, 1975).\nSecond, the insurance disclosures are not in a meaningful sequence. The boxes containing the insurance costs are at the top of the page while the written explanation that the insurance is optional is contained in paragraphs at the bottom of the page. Unrelated material is contained between the insurance costs and the written explanations. There is not even any reference in the written text to the boxes of information at the top of the page. Id.\nFAC did not disclose the insurance information in a clear, conspicuous and meaningful way, and for that reason the cost of the insurance ought to have been included in the amount of the finance charge. This error by FAC violates 15 U.S.C. \u00a7 1605(b) and 12 C.F.R. \u00a7 226.4(a) and makes FAC liable for the statutory penalties.\nWe are aware of factually similar cases which reach contrary results. See, e.g., Gillard v. Aetna Finance Co., Inc., supra; Simmons v. American Budget Plan, Inc., 386 F. Supp. 194 (E.D. La., 1974). The court in Simmons said of a disclosure statement using a group of boxes to disclose insurance and other costs, that \u201cdefendants\u2019 form was sufficiently clear that minimal possibility of confusion existed.\u201d Id. at 199. These cases are sui generis. Each case, as the one before us, must be decided on its own facts. In this case we do not find the disclosures to be \u201csufficiently clear\u201d in either the December 1972 or June 1973 transaction.\nPlaintiffs correctly argue that FAC failed to obtain a dated insurance authorization for the June 1973 transaction. This violates 12 C.F.R. \u00a7 226.4(a) (5) (ii), requiring a \u201cspecific dated and separately signed affirmative written indication of [the] desire\u201d to obtain insurance.\nAmong the boxes at the top of the Federal Disclosure Statement is one which explains the repayment schedule. It says:\n\u201cLoan Is Repayable In Monthly Payments The First One X $_,._ And _ X $_ Each Except The Final Payment Shall Be Unpaid Balance With Interest After Maturity At 6% Per Annum.\u201d\nThe Lowerys assert that this form is inadequate because it does not state the total number of payments; because it uses a confusing formula to disclose the number and amounts of payments; and because the final clause, \u201cEach Except Final Payment Shall Be Unpaid Balance With Interest After Maturity At 6% Per Annum,\u201d is confusing. Their argument has merit.\nFirst, the case of Powers v. Sims and Levin Realtors, 396 F. Supp. 12 (E.D. Va., 1975), says that the total number of payments must be expressed in a single figure. The disclosure is not sufficient when the borrower has to add the total number of payments for himself. Second, we find that even if the disclosures were otherwise sufficient, the final clause is so unclear as to obscure the preceding disclosures, and violates 12 C.F.R. \u00a7 226.6(c).\nA final argument by the Lowerys is that the court erred in not finding that FAC violated the Act by inaccurately disclosing the nature of the security interest taken in after-acquired household goods. The court did err. 15 U.S.C. \u00a7 1639(a) (8), and Regulation Z, 12 C.F.R. \u00a7 226.8(b) (5) both require that the disclosure of a security interest clearly identify the property to which the security interest relates. FAC\u2019s disclosure statements indicate that FAC has a security interest in all of the borrowers\u2019 after-acquired household goods. In fact, G.S. 25-9-204(4) (b) limits this security interest to household goods acquired within ten days after the lender loans the money to the borrower. The disclosure statement is misleading by indicating that FAC has a greater security interest than in fact it does. Tinsman v. Moline Beneficial Finance Co., 531 F. 2d 815 (7th Cir., 1976); Woods v. Beneficial Finance Co., supra.\nFAC argues that certain \u201cgood faith\u201d defenses present in the Act protect it from liability. We disagree. FAC relies on 15 \u00dc.S.C. \u00a7 1640(c), which protects the creditor who makes an unintentional and \u201cbona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.\u201d As the reference to \u201cprocedures\u201d implies, 15 U.S.C. \u00a7 1640(c) is limited to clerical errors, mistakes in arithmetic and other errors of this sort. Ratner v. Chemical Bank, 329 F. Supp. 270 (S.D. N.Y., 1971). FAC also relies on 15 U.S.C. \u00a7 1640 (f), which says:\n\u201cNo provision of this section or section 1611 of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation or interpretation thereof by the Board . . . . \u201d\nSection 1640(f) is a recent addition and has been construed only a few times. The leading case, Ives v. W. T. Grant Co., 522 F. 2d 749 (2d Cir., 1975), limits the rule to situations where a disclosure statement, prepared in accordance with the rules or regulations, is later determined to be invalid because the relied upon rules or regulations are invalid or no longer in effect. See, Houston v. Atlanta Federal Sav. & Loan Ass\u2019n., 414 F. Supp. 851 (N.D. Ga., 1976); Gillard v. Aetna Finance Co., Inc., supra. FAC has not met its burden of showing that it prepared its statement \u201cin conformity with any rule, regulation or interpretation.\u201d Accordingly, 15 U.S.C. \u00a7 1640(f) provides no help for FAC.\nSince the facts of this case are not in dispute we hold that the FAC disclosure statements are defective as a matter of law. Plaintiffs are entitled to the statutory penalty provided by 15 U.S.C. \u00a7 1640(a) (2) (A). It matters not that the Lowerys suffered no actual damage, since the purpose of the penalty provisions is to encourage the public to enforce the Act. Ratner v. Chemical Bank, supra. In addition, the Lowerys are entitled to recover their reasonable attorney\u2019s fees. 15 U.S.C. \u00a7 1640 (a) (3). This provision, also, is meant to encourage enforcement of the Act.\nJudgment was entered for FAC on its counterclaim in the amount of $885.85, plus interest at 6% per annum calculated from 24 January 1974. The Lowerys do not challenge this part of the judgment, and it is affirmed.\nReversed in part and remanded.\nJudges Morris and Clark concur.", "type": "majority", "author": "ARNOLD, Judge." } ], "attorneys": [ "Herman L. Stephens for plaintiff appellants.", "Henry C. French for defendant appellee." ], "corrections": "", "head_matter": "ARNOLD R. LOWERY, and SONJA LOWERY v. FINANCE AMERICA CORPORATION, formerly GAC FINANCE INCORPORATED OF NORTH CAROLINA\nNo. 7621DC584\n(Filed 19 January 1977)\n1. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 increase in obligation \u2014 disclosure requirements\nProvisions of a loan agreement that \u201cLender may, at its option, make advances to Debtors from time to time aggregating not more than the statutory maximum of $900.00\u201d and that \u201cLender is hereby committed to make loans up to a high credit of $900.00\u201d did not call for a series of advances on a single loan commitment but created a line of credit upon which separate loans would be made; therefore, when the amount of the debtors\u2019 obligation to the lender was thereafter increased, the second transaction was a new transaction which was subject to the disclosure requirements of the Federal Truth in Lending Act and Federal Regulation Z. 15 U.S.C. \u00a7 1639; 12 C.F.R. \u00a7 226.8 (i) and (j).\n2. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 insurance disclosures\nWritten disclosures relating to insurance premiums must appear on the same side of either the note evincing the debt or some separate disclosure statement; however, the disclosure statement need not contain the insurance requisition. 12 C.F.R. \u00a7 226.8(a).\n3. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 finance charge \u2014 premiums for credit insurance\nPremiums for credit insurance cannot be excluded from the finance charge unless the fact that insurance is not required by the creditor is \u201cclearly and conspicuously disclosed in writing to the customer.\u201d 12 C.F.R. \u00a7 226.4(a) (5) (i).\n4. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 finance charge \u2014 failure to include credit insurance premiums\nA lender violated the Federal Truth in Lending Act and Federal Regulation Z by excluding the cost of credit life and disability insurance from the amount of the finance charge disclosed to the borrower for the reason that the insurance disclosures were not clear, conspicuous and in meaningful sequence where the disclosure statement contained a group of boxes at the top of the page disclosing insurance and other costs, the insurance costs were typed in two boxes designated \u201cCredit Dis.\u201d and \u201cCredit Life,\u201d and the written explanation that the insurance was optional was contained in paragraphs at the bottom of the page.\n5. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 insurance authorization \u2014 necessity for date\nA lender violated the Truth in Lending Act by obtaining an insurance authorization which contained no date. 12 C.F.R. \u00a7 226.4 (a) (5) (ii).\n6. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 payment schedule \u2014 disclosure of number of payments\nA repayment schedule in a disclosure statement stating \u201cLoan Is Payable In Monthly Payments The First One X $38.75 And 17 X $37.00 Each Except Final Payment Shall Be Unpaid Balance With Interest After Maturity at 6% Per Annum\u201d was insufficient under the Truth in Lending Act since (1) the total number of payments must be expressed in a single figure, and (2) the final clause is so unclear as to obscure the preceding disclosures.\n7. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 inaccurate disclosure of security interest\nA lender violated the Truth in Lending Act by inaccurately disclosing the nature of the security interest in after-acquired household goods where the lender\u2019s disclosure statement indicated it had a security interest in all of the borrowers\u2019 after-acquired household goods when, in fact, G.S. 25-9-204(4) (b) limited the security interest to household goods acquired within ten days after the lender loaned the money to the borrower. 15 U.S.C. \u00a7 1639(a) (8); Federal Regulation Z, 12 C.F.R. \u00a7 226.8(b)(5).\n8. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 unintentional error \u2014 clerical error\nSection of the Truth in Lending Act absolving a creditor from liability for an unintentional and \u201cbona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error\u201d relates only to clerical errors, mistakes in arithmetic and similar errors. 15 U.S.C. \u00a7 1640(c).\n9. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 good faith act \u2014 reliance on invalid regulations\nSection of the Truth in Lending Act absolving a creditor from liability for \u201cany act done or omitted in good faith in conformity with any rule, regulation or interpretation thereof by the Board\u201d relates only to situations where a disclosure statement, prepared in accordance with the rules or regulations, is later determined to be invalid because the relied upon rules or regulations are invalid or no longer in effect.\n10. Interest \u00a7 3\u2014 Truth in Lending Act \u2014 insufficient disclosure \u2014 recovery of penalty and attorney\u2019s fees\nWhere a lender\u2019s disclosure statements were defective as a matter of law, the borrowers were entitled to recover the statutory penalty and their reasonable attorney\u2019s fees, notwithstanding they suffered no actual damage. 15 U.S.C. \u00a7 1640(a) (2) (A); 15 U.S.C. \u00a7 1640(a) (2).\nAppeal by plaintiffs from Clifford, Judge. Judgment entered 11 March 1976 in District Court, Forsyth County. Heard in the Court of Appeals 7 December 1976.\nPlaintiffs, Arnold and Sonja Lowery, brought this action against defendant, Finance America Corporation (FAC), to recover the statutory penalty for violations of the Truth-in-Lending Act, 15 U.S.C. \u00a7 1601, et seq., (the Act), and Federal Regulation Z, 12 C.F.R. \u00a7 226.1, et seq., (Regulation Z), adopted by the Federal Reserve Board pursuant to the Act. FAC counterclaimed, alleging plaintiffs\u2019 default on the loans. Having jurisdiction under 15 U.S.C. \u00a7 1640(e), the court, without a jury, decided this matter upon the allegations of the amended pleadings and the stipulations of fact made in the pretrial order.\nBy their amended complaint, plaintiffs allege that they borrowed money from FAC on 7 December 1972 and 8 June 1973. They further allege that FAC failed to make certain disclosures required by the Act, 15 U.S.C. \u00a7 1639, and Regulation Z, 12 C.F.R. \u00a7 226.8. Accordingly, they ask for the statutory civil penalty, twice the finance charge on each transaction, plus costs and reasonable attorneys\u2019 fee. 15 U.S.C. \u00a7 1640 (a). FAC, in its answer and counterclaim, alleges that the necessary disclosures were made and asks to receive the amount outstanding and due to it on the Lowerys\u2019 promissory note, plus interest. The Lowerys, in their reply, allege that the amount of FAC\u2019s statutory liability to them exceeds the amount outstanding on their note to FAC. They ask for a declaratory judgment, plus a judgment for the excess, costs and attorneys\u2019 fees.\nThe stipulated facts are as follows: On 7 December 1972 the parties entered into a loan agreement, formalized in four documents. The first was a Loan Agreement (exhibit 1), subscribed by the Lowerys, which provided that FAC was \u201ccommitted to make loans up to . . . $900.00\u201d to the Lowerys. The Loan Agreement was \u201cmade on the terms and conditions set forth [t] herein and was incorporated by reference\u201d in the remaining three documents. The second document (exhibit 2) consisted of a disclosure statement plus a voluntary insurance requisition. At the top of this document appeared a block of boxes as follows:\nThis document indicated that the loan was secured by a security interest in \u201call of the Household Goods belonging to the Borrowers,\u201d including after-acquired household goods. Next, the document explained, in this order, the default provisions, prepayment provisions, credit insurance provisions, and the range of annual percentage rates, which depended on the size and terms of the loan. The document was signed by Arnold Lowery. Below his signature was a \u201cVoluntary Insurance Requisition,\u201d relating to the insurance disclosures, made above, which informed the borrower in ordinary size type that credit life and credit disability insurance were not required by the lender in connection with the advance. The requisition itself said that the borrower \u201celect [ed] to have the Lender obtain Credit Life and/or Credit Disability insurance\u201d for him, after the lender revealed the cost of this insurance to him. Lowery\u2019s signature again appeared beneath this requisition.\nThe third document was a Federal Disclosure Statement, Borrower\u2019s Copy (exhibit 3). This was identical to exhibit 2, except it omitted the insurance requisition and contained a statement revealing that there were no comakers on the note. It was not signed by Lowery. Finally, the Statement of Contract-Voucher (exhibit 4) repeated all the information in the boxes on the disclosure forms (exhibits 2 and 3), except the annual percentage rate. This Contract-Voucher explained that the contract consisted of the Loan Agreement, the Federal Disclosure Statement, the check and/or the Contract-Voucher. It repeated the default provisions and prepayment provisions. It stated that by signing the attached receipt the borrower agreed to repay the cash advance, and it reiterated that credit insurance was not required and that the loan was secured by household goods. The document then stated the amount of cash advanced, $547.83, and substracted the insurance premiums and recording charge, a total of $41.41, leaving $506.42 as the cash given to the Lowerys. Both Arnold and Sonja Lowery signed this receipt.\nThe Lowerys reduced their outstanding debt to FAC to $407.88. Then, on 8 June 1973, they obtained more money from FAC. The 8 June 1973 transaction was based on the December Loan Agreement. In addition, the parties executed three new documents. The Federal Disclosure Statement (exhibit 6) was identical in form to that of 7 December 1972. The boxes at the top appeared as follows:\nThe Statement of Contract-Voucher (exhibit 7) showed a cash advance to the Lowerys of $900.00, less a check to them for $414.32, which left a total of $485.68 in cash owed to them. All of this cash was immediately used to pay the balance due on the 7 December 1972 loan, plus the insurance premiums on the 8 June 1973 loan.\nThe final document involved in this transaction was the check for $414.32 (exhibit 5). On the back of the check was a statement to the effect that credit insurance was not required. Beneath this was a statement entitled \u201cVoluntary Credit Life And/Or Disability Insurance Requisition.\u201d It was thereafter provided that the undersigned could \u201celect to have lender\u201d obtain insurance coverage \u201cchecked below.\u201d Both credit life insurance, at a cost of $44.64, and credit disability insurance, at a cost of $32.56, were checked. Although it was not dated, both Lowerys signed this voluntary insurance requisition. In a space below the insurance requisition the Lowerys endorsed the check, thereby \u201cacknowledging] receipt of Federal Disclosure Statement and Statement of Credit-Voucher.\u201d\nThere is an outstanding balance of $885.85, plus interest, due to FAC. From a judgment that FAC recover the outstanding balance plus interest, and that the Lowerys recover nothing, the Lowerys appeal.\nHerman L. Stephens for plaintiff appellants.\nHenry C. French for defendant appellee." }, "file_name": "0174-01", "first_page_order": 202, "last_page_order": 213 }