Joyce Stewart v. Ford Motor Credit Company

MILLER, Judge:

This appeal is from the judgment of the district court dismissing plaintiff-appellant’s action upon the court’s approval of the Magistrate’s recommendation that the motion for summary judgment of defendant-appellee Ford Motor Credit Company (“FMCC”) be granted and plaintiff-appellant’s motion for summary judgment be denied. We affirm.

The action was brought under the Consumer Credit Protection Act (hereinafter “Act”), 15 U.S.C. §§ 1601 et seq,, as amended, to recover statutory damages plus court costs and attorney fees. The controversy grew out of appellant’s purchase of a used Buick automobile from Neal Pope Ford, Inc., of Atlanta, Georgia, under a Georgia Automobile Retail Installment Contract, dated September 9,1980. The contract provides, inter alia, as follows:

(13) PREPAYMENT REBATE: The Buyer may pay this contract in full at any time. If he does so, he will get a credit for the unearned part of the Finance Charge if it is $1.00 or more. This credit will be figured on the sum of the digits method.
(14) LATE CHARGES: ... The Creditor may accelerate the remaining payments and repossess the Vehicle as explained below, if there is any default.
(15) DEFAULT: If the Buyer fails to make any payment when it is due . .. the Creditor may do either or both of the following:
(a) ACCELERATION OF PAYMENTS: The Creditor may require the Buyer to pay at once all remaining payments. The Buyer will receive a prepayment rebate as explained above when he pays.[1]
(b) REPOSSESSION: ....

Appellant argues, first, that FMCC violated Regulation Z, 12 CFR 226.8(b)(7),2 *393of the Federal Reserve Board because FMCC’s policy on rebate of unearned interest (using the pro rata method) in the event of acceleration of payments due to default under the contract differed from that specified in the event of voluntary prepayment (using the sum of the digits method), quoting from Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 562, 100 S.Ct. 790, 795, 63 L.Ed.2d 22 (1980):

Section 226.8(b)(7), therefore, squares with the position of the Federal Reserve Board staff that specific disclosure of acceleration rebate policy is only necessary when that policy varies from the custom with respect to voluntary prepayment rebates. [Emphasis added.[3]

However, the meaning of “varies” was clarified by the Court later in Part III of its opinion (id. at 565 n.8,100 S.Ct. at 796 n.8), thus:

As we read the Staff Opinion and Letters, however, they are fundamentally consistent .... The staff’s position in each appears to be that separate disclosure of acceleration rebate practices is unnecessary when those practices parallel voluntary prepayment rebate policy. On the other hand, where acceleration rebates are less than voluntary prepayment rebates, acceleration policy must be separately explained under § 226.8(b)(4) and, perhaps as well, under § 226.8(b)(7). [Emphasis added.]

The rule requiring separate disclosure of acceleration rebate practices only when such rebates are less (not equal to or greater) than rebates under voluntary prepayment has been adopted by the Fifth Circuit. McDaniel v. Fulton National Bank of Atlanta, 5 Cir., 571 F.2d 948, 951 (1978) (en banc).4 This, of course, is “binding precedent” for the Eleventh Circuit.5 The court, in McDaniel, commented that the Federal Reserve Board Official Staff Interpretation (No. FC-0054) “is a practical one in a debatable area, is not plainly wrong, and should — if followed by the courts — produce uniformity in a matter where uniformity is very desirable.” Significantly, the Supreme Court in Milhollin, while citing McDaniel, manifested no intent to disturb the rule adopted by the Fifth Circuit in McDaniel.

Appellant’s second argument is that FMCC violated Regulation Z, 12 CFR *394226.6(c), of the Federal Reserve Board6 because FMCC’s contract disclosed that the method of rebating unearned interest was the same on acceleration due to default as on voluntary prepayment (viz., the sum of the digits method) when they were not the same, the pro rata method being used on acceleration. Appellant asserts that she was “entitled to know” that if she allowed her contract with FMCC to go into default, she would receive more unearned interest as a rebate than if she voluntarily prepaid the installments owing under the contract. There are two answers to this. First, the only disclosure required by the regulation in this case was that concerning rebate on voluntary prepayment, and no misinformation was provided by FMCC with respect to it. Any possible “confusion” of appellant would relate to rebate in the event of acceleration upon default which was not required to be disclosed. Thus, subsection (c) of the regulation is inapplicable to this case. Fox v. Heilig-Meyers Co., 681 F.2d 212 (4th Cir. 1982); see Gallois v. Commercial Securities Co., 661 F.2d 901 (5th Cir. 1981); Philbeck v. Timmers Chevrolet, Inc., 499 F.2d 971 (5th Cir. 1974). Second, to adopt appellant’s approach would tend to encourage defaults by buyers under installment contracts contrary to good business practices — a result that should not be imputed to the Act in the absence of a showing of clear Congressional intent. Such intent is absent here.7

In view of the foregoing, the judgment of the district court is AFFIRMED.8

. Although, as indicated above, a prepayment rebate credit of the unearned part of the finance charge is stated to be figured on the sum of the digits method, FMCC has a policy, in the event of acceleration due to default, of rebating by using the pro rata method, which results in a larger rebate than would be received under the sum of the digits method. It is clear that under Georgia law the rebate under acceleration of payments due to default will be no less than that figured by the sum of the digits method. Ga.Code Ann. 96-1004(c) and 96-1005 (effective March 20, 1980).

. Subsection (7) requires the following:

Identification of the method of computing any unearned portion of the finance charge in the event of prepayment in full of an obliga*393tion which includes precomputed finance charges and a statement of the amount or method of computation of any charge that may be deducted from the amount of any rebate of such unearned finance charge that will be credited to an obligation or refunded to the customer. If the credit contract does not provide for any rebate of unearned finance charges upon prepayment in full, this fact shall be disclosed.

Appellant recognizes that subsection (4) of 12 CFR 226.8(b) requires disclosure of the method of rebate on acceleration for default only when the rebate of unearned interest is less than that provided on voluntary prepayment, but emphasizes that the disclosure requirement under subsection (4) is not the same as that under subsection (7). Subsection (4) requires disclosure of “[t]he amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments.”

. The Court (id. at 563, 100 S.Ct. at 795) referred to—

the view of the Federal Reserve Board staff that the right of acceleration need not be disclosed, and that rebate practice under acceleration must be disclosed only if it differs from the creditor’s rebate policy with respect to voluntary prepayment. [Citing FRB Official Staff Interpretation No. FC-0054, 12 CFR Part 226 Appendix, p. 650 (1981); FRB Public Information Letter No. 851 (1974), (1974-1977 Transfer Binder) CCH Consumer Credit Guide Par. 31,173; FRB Public Information Letter No. 1208 (1977), id., Par. 31,647; FRB Public Information Letter No. 1324 (1978), 5 CCH Consumer Credit Guide Par. 31,827.]

. In a subsequent rehearing en banc (576 F.2d 1156, 1157 (1978)), the Fifth Circuit stated:

But if the creditor possesses under his contract the right to retain more unearned interest in the event of accelerated payment pursuant to default than in that of voluntary prepayment ... then the existence of that right in him must be disclosed — and this entirely without regard to whether or how he exercises that right in the event.

. Bonner v. City of Prichard, Alabama, 661 F.2d 1206 (1981). We note that the Supreme Court of Georgia has recently taken the same approach. Ford Motor Credit Company v. Mells, 249 Ga. 106, 290 S.E.2d 271 (1982).

. Subsection (c) provides, inter alia:

Additional information. At the creditor’s . . . option, additional information or explanations may be supplied with any disclosure required by this part, but none shall be stated ... so as to mislead or confuse the customer

. The dissenting opinion speculates that, if appellant prevails, FMCC “would have to change its procedure and defaults by buyers would no longer be encouraged,” but this simply overlooks the requirements of Georgia law, note 1, supra, and the competitive market in the credit industry.

. Appellant’s argument that FMCC “failed to disclose the credit extender clearly” was rejected below and has not been renewed on appeal.