Anderson Bros. Ford v. Valencia

Justice Stewart, with whom The Chief Justice, Justice Brennan, and Justice Marshall join,

dissenting.

The Court correctly states that the respondents in this case maintain “that the plain language of the statute and the *224regulation requires the result reached by the court below.” Ante, at 211-212. Yet the Court nowhere attempts a direct answer to the respondents’ contention. Despite the elementary principle that the starting point in construing a statute is the language of the statute itself, the Court simply ignores the plain language of the TILA and the equally plain language of the only applicable Federal Reserve Board construction of it. Instead, the Court contrives to discover contrary legislative intent in such dubious materials as the legislative history of a subsequent statute which does not cover the transaction at hand, a regulation issued to implement that inapplicable statute, and an unofficial administrative staff interpretation which, by its own express terms, is a mere proposal intended to have no legal effect.1

In my opinion, the statutory language at issue here unequivocally supports the decision of the Court of Appeals, and should itself dispose of this case. See United States v. Wiltberger, 5 Wheat. 76, 95-96 (Marshall, C. J.). But even were the Court justified in leaping over the language of Congress in search of a conflicting indication of congressional intent, the secondary authority on which the Court relies does not withstand examination. As a result, the Court does damage to settled principles of administrative law and statutory construction — damage that could extend to issues of far greater moment than the very narrow question under the Truth in Lending Act at issue here.

*225Section 128 (a) (10) of the TILA requires the creditor to disclose

“[a] description of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates.” 15 U. S. C. § 1638 (a)(10) (emphasis added).2

The word “any” can only mean exactly what it says, and so the sole question is whether the credit company’s right to the consumer’s unearned insurance premium is a “security interest.” The credit contract requires the consumer to buy physical damage insurance “protecting the interests of Buyer and Seller,” and grants to the seller any unearned insurance premiums, to be “applied toward replacement of the Property or payment of the indebtedness hereunder in the sole discretion of Seller.” If unaided common sense cannot identify the seller’s rights under this clause as a “security interest,” the language of the applicable Federal Reserve Board definition of “security interest” under the TILA quickly and unmistakably does so:

‘Security interest’ and ‘security’ mean any interest in property which secures payment or performance of an obligation. The terms include, hut are not limited to, security interests under the Uniform Commercial Code, real property mortgages, deeds of trust, and other consensual or confessed liens whether or not recorded, mechanic’s, materialmen’s, artisan’s, and other similar liens, vendor’s liens in both real and personal property, the in*226terest of a seller in a contract for the sale of real property, any lien on property arising by operation of law, and any interest in a lease when used to secure payment or performance of an obligation.” 12 CFR § 226.2 (gg) (1980) (emphasis added).

Ford’s assignment clause clearly meets the Federal Reserve Board definition. First, the assignment clause plainly creates an interest in property. In this case, the annual premium for physical damage insurance was $216, and in other instances it could be considerably higher. The amount of the unearned insurance premium acquired by the creditor will depend on the timing of the cancellation which triggers the creditor’s rights under the assignment clause. But except in the rare case in which the repossession of the car precisely coincides with the end of the insurance term, the creditor will be able to recover a refund of some sort, and since repossession might occur right after a new term of insurance begins, the contract essentially represents an interest equal to the value of the premium itself.3

Second, the assignment clause clearly “secure [s] payment or performance of an obligation.” The contract expressly *227states that the creditor is to use any refunded premiums for “replacement of the Property or payment of the indebtedness hereunder.” Even if Ford is correct in asserting that the purpose of the assignment is to continue the insurance coverage on the car during the life of the loan, see ante, at 208, n. 3, the assignment is still a security interest under Regulation Z, since it will be used to secure performance of the buyer’s obligation to maintain insurance coverage.4 The applicable statute and regulation thus both clearly declare the assignment of unearned insurance premiums to be a security interest which must be disclosed on the face of the credit contract.5

Virtually ignoring the Federal Reserve Board definition of “security interest” in § 226.2 (gg) of Regulation Z — the applicable administrative pronouncement which effectively settles the issue in favor of the respondents — the Court relies instead on an unofficial staff interpretation which, by its own *228terms, is entitled to no weight whatsoever. In September 1980, the Board released Proposed Official Staff Interpretation FC-0173, 45 Fed. Reg. 63295, asking for comments on a proposed staff opinion that a creditor’s right to unearned insurance premiums is not required to be disclosed under the statute. The proposal expressly stated:

“(2) The letter is being issued as a proposal, rather than in final form, and interested persons are invited to submit relevant comment.
“(3) After comments are considered, this official staff interpretation may be amended, may be withdrawn or may remain unchanged.”

The Board went on to tell creditors in a November 1980 mailing that “[t]his proposed interpretation may not be relied upon until final action is taken.” As the Court correctly notes, the Board has never taken any final action. On December 16, 1980, it deferred further consideration indefinitely.6 The Court’s reliance on this proposal therefore directly contravenes the intention of the proposal itself — that it is to have no legal effect.7

*229Whatever the significance of the present case, the Court’s approach threatens general damage to important principles of administrative law and statutory interpretation. An administrative agency issues proposals to invoke public comment which the agency can evaluate and assimilate in formulating new regulations. If an agency is to infer from the Court’s opinion that its proposals may be ascribed significant or even decisive weight in litigation involving construction of the statute governing the agency, it may take any of three extremely unfortunate courses. First, an agency may decide not to issue proposals at all for fear of binding itself in future action. Second, an agency may rush to issue ill-conceived proposals in the hope of affecting the decisions of courts or the conduct of regulated persons, evading the risks and responsibilities of submitting its proposals to public comment and other rulemaking procedures. Third, an agency may frame its proposals in interrogative, rather than declarative, form, thereby denying itself the benefit of public comments that evaluate or interpret the precise language of a hypothetical final rule. The Court’s use of FC-1073 here thus threatens to undermine the very purpose of public comment in rulemaking procedures.8

*230The Court continues its attack on established principles of statutory construction by invoking the Truth in Lending Simplification and Reform Act of 1980 to help it discover the meaning of the TILA, which was enacted 12 years earlier. First, the Court considers the revised sections of Regulation Z issued by the Board to implement the new statute, and in a remarkable ipse dixit, pronounces that the new definition, which excludes such “incidental interests” as liens on insurance premiums, reveals “no indication that the definition was being changed with respect to unearned premiums.” Ante, *231at 215. The new definition is, of course, utterly inconsistent with the earlier definition. The Court then mistakenly declares that the Board explanation for the new definition published in the Federal Register in 1981 “applies to the TILA as well as to the 1980 Act.” Ante, at 216.9

To compound the error, the Court goes on to examine the legislative history of the 1980 Simplification Act. There is no suggestion that the new statute applies retroactively, and there could not be. Rather, the Court states that the legislative history of the 1980 Act “fully supports the Board’s revised regulation . . . and its proposed interpretation of the unrevised regulation.” Ante, at 218 (emphasis added). Since the new regulation, issued to implement a new non-retroactive statute, cannot apply to the case at hand, I caii-not understand how it is at all relevant in this case that the new regulation is consistent with the new statute.

The legislative history of the 1980 Act cited by the Court, ante, at 218-219, proves the perfectly reasonable — and irrelevant — proposition that the new Regulation Z properly construes the intent of the 1980 Act in excluding liens on unearned insurance premiums as security interests. But nothing in the Report of the Senate Committee on Banking, Housing, and Urban Affairs suggests any intent to construe the old law applicable to this case. “If the legislative history . . . indicates anything, it is that Congress thought that it was changing the law by changing the language of the Act.” United States v. Plesha, 352 U. S. 202, 208. Doubtless Congress thought the TILA deficient, but that is why it wrote a new law.

The Court also cites a statement by Senator Garn purportedly attributing to the TILA a meaning contrary to its *232plain language. Ante, at 218-219. But the postenactment pronouncements of individual legislators purporting to construe an earlier statute have little, if any, weight in the judicial construction of the statute. E. g., Quern v. Mandley, 436 U. S. 725, 736, n. 10. And according any weight to the pronouncements of a single legislator is particularly unjustified when the legislator, like Senator Garn in this case, was not even a Member of Congress when the law was enacted. United States v. Mine Workers, 330 U. S. 258, 281-282.10

The Court believes that requiring disclosure of an assignment of unearned insurance premiums on the face of the credit contract would be a gratuitous “informational overload” of no significant benefit to the consumer. Ante, at 223. But when the statute and regulation governing the transaction speak unambiguously to the contrary, any independent judgment about the psychology and economics of consumer credit is not for the Court to make.11

I respectfully dissent.

The Court does indirectly refer to the plain language of the TILA when it concedes that “[u]naided by an administrative construction of the TILA and Regulation Z, a court could easily conclude, based on the language of the statute and Regulation Z, that the interest in unearned insurance premiums acquired by the creditor in this case should be characterized as a 'security interest’ that must be disclosed.” Ante, at 222. But the Court does not rely on the one administrative construction that resolves any possible uncertainty in the statutory language, see 12 CFR §226.2 (gg) (1980), and never explains why any further aid is necessary.

Regulation Z virtually duplicates the statutory language, requiring a creditor to disclose

“[a] description or identification of the type of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates . . . .” 12 CFR §226.8 (b)(5) (1980) (emphasis added).

The assignment clause may therefore be of more than minor significance to a buyer. It would allow the creditor to attach, without full court procedure, perhaps hundreds of dollars which the buyer has spent on insurance for a car which he no longer possesses. A consumer might well want to avoid giving his creditor such a right, and so disclosure of the assignment might well advance the congressional goal of informed credit shopping by consumers. 15 U. S. C. § 1601. But in any event, where the language of the statute clearly covers this security interest, it is not for the courts to assess the significance of the interest.

The Court quotes, apparently with approval, the concurring opinion of Judge Cudahy of the Court of Appeals in this case, which laments that disclosure of the “virtually inconsequential information” about the assignment of the insurance premiums trivializes the disclosure “for no apparent benefit.” Ante, at 211, n. 8. Even were Judge Cudahy right about the value of the disclosure at issue here, he, unlike today’s Court, did not allow his own appraisal of the question to obscure unequivocal statutory language.

Even if the comprehensive language with which the applicable version of Regulation Z begins were insufficient to demonstrate that the assignment clause is a security interest under the TILA, the assignment falls within at least two of the nonexhaustive enumerated examples in the definition. Clauses assigning unearned insurance premiums may well qualify as “consensual . . . liens whether or not recorded,” 12 CFR § 226.2 (gg) (1980), or “security interests under the Uniform Commercial Code,” see in. Rev. Stat., ch. 26, ¶¶ 1-201 (37), 9-102 (2), 9-306, 9-312 (1979).

The Court seeks to find some support for its restrictive reading of the TILA in the legislative history of the Act. Representative Cahill, who introduced the “security interest” provision in the House, stated that the primary reason for the provision was to combat the second-mortgage schemes to which many homeowners had fallen prey, and sponsors of the provision in both Houses appear to have reinforced this view. But the quoted statements from the legislative history do not purport to be explanations of specific statutory language. Rather, they are generalized declarations about the primary purpose of the bill, and so do not preclude other situations clearly covered by the language of the statute. Indeed, the Court seems to agree, recognizing that the narrow focus of the quoted legislative history on the problem of second mortgages on real estate cannot possibly explain the broad language of §128 (a) (10). Ante, at 222.

Conceding, as it must, that the Board took no final action on the proposal, the Court offers two unpersuasive reasons for nevertheless according it weight in interpreting the statute. Ante, at 213. First, the Court notes that the period for public comment ended on October 24, 1980. That fact hardly justifies treating the proposed rule as final, because we do not know the views expressed in the comments received, nor can we speculate on whether those comments would have reinforced or altered the staff’s view on the statutory question at hand. Second, the Court states that the Board deferred final action only because it thought final action was inappropriate in light of our grant of certiorari in the present case. I do not see how this purported ground for deferral indicates what the Board would have done had it not deferred final action. If anything, we might assume that the Board thought its opinion on the issue unnecessary in light of the impending decision by this Court. If so, it is rather curious that the Court believes it can rely on the proposal.

That the Board intended the proposal to have no legal effect finds further proof in the unusual procedure the Board used in issuing the pro*229posal. Normally, a creditor requests the Board for an official interpretation of a statutory or regulatory provision. The Board will then issue an official interpretation, and then decide whether to request public comment. If it does so, the interpretation is withdrawn while comments are received; otherwise, the official interpretation stands. Ford Motor Credit Co. v. Milhollin, 444 U. S. 555, 567, n. 10. For FC-1073, however, the Board never issued an official interpretation, but only a proposal, and immediately requested public comment.

The Court’s reliance on FC-1073 finds no support in our decision in Ford Motor Credit Co. v. Milhollin, supra. The Court there stated that “absent a clear expression, it becomes necessary to consider the implicit character of the statutory scheme.” Id., at 560 (emphasis added). In that case, the Court found no clear expression in the statute or regulation on the question whether the creditor had to disclose an acceleration clause on the face of the agreement, and therefore found it necessary and proper *230to defer to the views of the Federal Reserve Board staff in construing the statute. Ibid. Here, by contrast, the statute and definitional rule combine in an unequivocally clear expression on the disclosure issue.

Moreover, in Milhollin, the Court inferred a congressional preference for resolving interpretive issues by “uniform, administrative decision.” Id., at 568 (emphasis added). But FC-1073 hardly represents a uniform Board view of the statute. As quoted by the Court, the proposal concedes that a "technical reading of the security interest definition might cover a creditor’s interest in insurance proceeds and unearned insurance premiums,” but concludes that "it is our opinion that such incidental interests are not the type of interests meant to be covered by § 226.8 (b)(5).” Ante, at 212-213 (emphasis added).

What FC-1073 calls a “technical reading” of the Board definition of “security interest” in § 226.2 (gg) of Regulation Z is in fact the only permissible reading of that definition. The proposal letter effectively concedes that it is in conflict with the applicable official Board regulation, and nothing in Regulation Z supports the view in the proposal that 15 U. S. C. § 1638 (a) (10), which speaks of “any” security interest, was intended to exclude “incidental” interests. FC-1073 thus directly contravenes the higher administrative authority of an official regulation. The proposal, indeed, also conflicts with at least one other informal staff interpretation by the Board. In FRB Public Information Letter No. 377, CCH [1969-1974 Transfer Binder] Cons. Cred. Guide ¶30,555, the Board expressly told an inquiring creditor that he should disclose to the debtor that in the event of default the credit company could cancel the life insurance policy the debtor was to buy with the loan money, and could apply any premium refund to the balance of the loan. Contrary to the Court’s suggestion, ante, at 215-216, n. 12, Letter No. 377 does not rely on the notion that in that instance, as opposed to the present case, the credit was extended expressly to enable the consumer to buy insurance.

The explanation states: “This definition [of 'security interest’] is based on § 226.2 (gg) of the current regulation, but is much narrower. The revised definition lists a number of interests that have been considered security interests under the current regulation but no longer will be .. . .” 46 Fed. Reg. 20853 (1981) (emphasis added).

There are other reasons why Senator Gam’s statement merits little weight. First, the statement was written and inserted in the Congressional Record, rather than made on the floor of the Senate. Second, Senator Garn’s opinion is not reflected in the Report of the Committee, of which he was a member.

Indeed, even were it appropriate for the Court to proffer its own view about the practical necessity of a particular credit disclosure, the Court’s view is at least questionable. Disclosing an assignment of unearned insurance premiums might be of considerable interest to the credit-shopping consumer. See n. 3, supra. And far from creating an “informational overload,” such a disclosure could result in replacing convoluted assignment language, such as that on the back of the contract in this case, with a simple statement that “the buyer gives the creditor an interest in the vehicle and in all insurance charges,” such as the statement Ford, in response to the nationwide litigation over this issue, now includes on the face of its contracts.