District Court (Tenn.) Says Irregular Payment Schedule Disclosure for Purchase of a Vehicle Violated TILA

In Warford v. Memphis City Emples. Credit Union, No. 2:19-cv-02403-JPM-cgc, 2020 U.S. Dist. LEXIS 150173 (W.D. Tenn. Aug. 19, 2020), Judge McCalla found that a credit union’s disclosures of an irregular payment schedule for purchase of a vehicle violated TILA.  The facts were as follows:

The following facts are undisputed for purposes of summary judgment. On or about December 27, 2018, Plaintiff Hazel Warford entered into a Loan Security Agreement with Defendant Memphis City Employees Credit Union to finance the purchase of a 2006 Audi A4 automobile. (Defendant’s Statement of Undisputed Facts (“Def. SOF”), ECF No. 28 at PageID 175; Security Agreement, ECF No. 1-1.) Plaintiff purchased the vehicle for her own personal, family, and household use. (Def. SOF, ECF No. 28 at PageID 175-76.) The Agreement contains a TILA disclosure statement. (Id. at PageID 176.) The Agreement discloses an “annual percentage rate” of 13.69%, a “finance charge” of $2,370.43, an “amount financed” of $10,631.35, and a payment total of $13,623.16. ( [*3] Id.) The disclosure also includes a payment schedule, which provides for seventy-one payments of $190.00 and one payment of $133.16. (Id.) The payment schedule includes a section entitled “When Payments Are Due,” which indicates that payments are due “Bi-Weekly Skip Last Beginning 01/10/2019.” (Agreement, ECF No. 1-1 at PageID 9.) The schedule provides no other payment dates or payment information. The Agreement includes a maturity date of December 23, 2021. (ECF No. 15 at PageID 95.)

In a lengthy opinion, part of which is reproduced here, the District Court found that the disclosure of the irregular payment violated TILA.

Upon review, the Court finds that the payment schedule at issue does not comply with the requirements of § 1638(a)(6) or § 226.18(g) of Regulation Z. The payment schedule does not clearly and conspicuously provide the due date for the “irregular” payment set apart from the 71 bi-weekly payments provided by the payment schedule, as required by the TILA and Regulation Z. (See ECF No. 1-1 at PageID 9.) The Court agrees with the Middle District of [*16]  Tennessee’s reasoning in Boseman v. Prestige Auto Sales, Inc., which held that a failure to disclose a clear and discernible due date in a payment schedule violated the TILA. 2017 U.S. Dist. LEXIS 116962, 2017 WL 3172742, at *2-3. Regulation Z and § 1638(a)(6) require that a payment schedule containing an irregular payment set apart from a bi-weekly or bi-monthly payment schedule must clearly and conspicuously indicate the date on which that payment is due. See 15 U.S.C. § 1638(a)(6) (creditors must disclose the “number, amount, and due dates or periods of payments scheduled to repay the total of payments” (emphasis added)); see also 12 C.F.R. § Pt. 226, Supp. I, Subpt. C, cmt. n. 18(g)(4) (creditors must also “list all of the payment due dates,” so as to “enable a consumer to determine all of the payment due dates”). Although Regulation Z does not specify exactly how to disclose the date for irregular payments, the Court, construing the protections of the TILA and Regulation Z broadly in favor of the consumer, see Begala, 163 F.3d at 950, sees no reason why a payment schedule that provides for a payment set apart from a bi-weekly set of payments should not list its own, separate payment date.