specially concurring:
Bare reference to the Rule of 78’s by name in a loan contract fails to disclose a key aspect of the agreement to the borrower and thus imposes a hidden charge. I also submit that, in view of the volatility of interest rates, borrowers need to be alerted to the full impact of their prepayment decisions. I feel compelled, however, to concur in the conclusion reached by the majority only because I doubt the availability of any legal remedy to the plaintiff in this case.
The plaintiff maintains that the failure to explain the method of computing the unearned finance charge violated the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act). The majority concludes that section 10(b) of the Consumer Fraud Act, which provides that “transactions specifically authorized by laws .administered by any regulatory body or officer acting under statutory authority of *** the United States” (Ill. Rev. Stat. 1985, ch. 1211/2, par. 270(b)(1)) are not subject to the Act, exempts from our scrutiny the failure to make greater disclosure to the plaintiff.
Whether or not this is correct, I feel it is impossible for other reasons to conclude on the record and briefs before us that the plaintiff has a cause of action under the Consumer Fraud Act. The plaintiff’s complaint does not specify which section of the Consumer Fraud Act was violated by the failure to make greater disclosure of how the rule operates. The sweeping language of section 2 of the Act (Ill. Rev. Stat. 1985, ch. 1211/2, par. 262), which prohibits material omissions in the conduct of commerce, appears broad enough to encompass the failure to make adequate explanation of loan terms. To give section 2 such a meaning, however, would seem to render superfluous other sections of the Act which incorporate statutes regulating disclosures in loan contracts. For instance, “An Act in relation to the rate of interest ***” (Ill. Rev. Stat. 1985, ch. 17, par. 6401 et seq.) (Interest Act) contains express provisions concerning disclosures. Section 2E of the Consumer Fraud Act (Ill. Rev. Stat. 1985, ch. 121V2, par. 262E) makes it unlawful under the Act to commit (as determined in a judicial proceeding) three or more violations of the Interest Act or other acts regulating credit in a single calendar year. Section 2F of the Consumer Fraud Act similarly provides a remedy under that act against a lender who has been proved in a judicial proceeding to have violated a loan statute if that violation was wilful and material. If section 2 of the Consumer Fraud Act reaches a single violation of the disclosures required by the Interest Act, I cannot see what meaning is left to the limitations in sections 2E and 2F of Consumer Fraud Act requiring judicially established multiple or wilful violations; the plaintiff has failed to explain this apparent inconsistency.
None of this is to say, as the majority seemingly does, that all borrowers aggrieved by inadequate disclosure of the Rule of 78’s are necessarily without legal recourse. Statutes like the Interest Act and the Consumer Installment Loan Act (Ill. Rev. Stat. 1985, ch. 17, par. 5401) mandate disclosure of the use of the Rule of 78’s. The Interest Act, for example, states that under certain circumstances the contract must provide “an identification of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan.” (Ill. Rev. Stat. 1985, ch. 17, par. 6410(f)(13); see also Ill. Rev. Stat. 1985, ch. 17, par. 5420(m).) The obstacle which defeats the plaintiff in this case is that she stands only on the Consumer Fraud Act. She does not allege violations of the disclosure requirements of the Interest Act or other Illinois loan statutes and consequently has not demonstrated their applicability.
The State disclosure provisions requiring “identification of the method” effectively track Federal Regulation Z. The State statutes also make clear that a lender who complies with the Federal Truth in Lending Act and regulations issued under that act complies with State law. (Ill. Rev. Stat. 1985, ch. 17, par. 6410(i); Ill. Rev. Stat. 1985, ch. 17, par. 5420.) From these facts, the majority divines a “consistent policy” against commanding greater disclosure under Illinois law than is required under the Truth in Lending Act. (114 Ill. 2d at 17.) The difficulty I have with this conclusion is that the Federal Reserve Board’s staff interpretation, no matter how persuasive, is not itself a part of Truth in Lending Act or Regulation Z (114 Ill. 2d at 17-18; Bright v. Ball Memorial Hospital Association (7th Cir. 1980), 616 F.2d 328; Continental Oil Co. v. Burns (D. Del. 1970), 317 F. Supp. 194). Compliance with the interpretation, as opposed to the Truth in Lending Act or Regulation Z, does not therefore assure compliance with Illinois disclosure provisions. The Illinois courts are free to interpret our State disclosure laws more expansively than the Federal interpretation.
Of course, in construing State laws we would naturally consider the Board’s interpretation of an analogous Federal regulation. Although its reading is instructive, I believe the Board, like other human agencies, may be mistaken on occasion. Administrative decisions may also be influenced by the “natural affinity *** which in time develops between the regulator and the regulated.” (Sierra Club v. Morton (1972), 405 U.S. 727, 745-46, 31 L. Ed. 2d 636, 649, 92 S. Ct. 1361, 1371 (Douglas, J., dissenting).) As judges we have the advantage of being further removed from the everyday intricacies of regulating the credit industry, and may therefore bring a fresher perspective to the problem. I would decline to follow the Board in interpreting our similarly worded State loan-disclosure laws.
In arriving at its interpretation of Regulation Z, the Board apparently failed to consider any options for disclosing the Rule of 78’s other than the polar extremes of either merely naming the rule or providing a precise mathematical explanation of its operation. The vice-chairman of the Board explained that “the alternative [to naming the rule] would seem to require a lengthy and complicated mathematical statement which would have the added disadvantage of further complicating the disclosure statement and detracting from other disclosures.” (Bone v. Hibernia Bank (9th Cir. 1974), 493 F.2d 135, 140; see also 12 C.F.R. sec. 226.818(c).) This analysis is both superficial and unimaginative. A mathematical statement of the operation of the rule would mean as little to judges and lawyers as to other borrowers; on the other hand, identifying the rule merely by name conveys nothing to most borrowers, and in fact would not even put them on notice to inquire because it appears entirely innocuous. A more sensible approach would be a statement informing the borrower that because the refund on prepayment would be figured according to the Rule of 78’s, the time when prepayment was made could affect the ultimate cost of the credit. (See Drennan v. Security Pacific National Bank (1981), 28 Cal. 3d 764, 780, 621 P.2d 1318, 1327, 170 Cal. Rptr. 904, 914.) Advising the borrower that the method of computation will affect his pocketbook does not overload him with incomprehensible information, but simply raises a red flag to alert him to inquire if he is concerned about the cost of prepayment.
While this plaintiff’s allegations do not appear to entitle her to a remedy, I concur specially to underline the fact that the decision in this case may not be the last word in this State on the proper disclosure of the effect of the Rule of 78’s.