The opinion of the court was delivered by: GASCH
Plaintiffs brought suit seeking a declaration that defendant Colonial Mortgage Corporation violated the Truth in Lending Act
and for damages under Section 1640 of the Act. This matter came on for consideration on cross-motions for summary judgment, the memoranda filed, and the hearing conducted pursuant thereto. The material facts, which are not in dispute, can be summarized as follows:
In June, 1970, nominal plaintiffs, Mr. and Mrs. Calvin Bissette, entered into an agreement with the Ardon Corporation for the purchase of a one-family house, contingent only upon their obtaining satisfactory financing. To obtain such financing, plaintiffs met with defendant Colonial Mortgage Corporation and after filing the necessary F.H.A. application, were informed by defendant on November 23, 1970, that F.H.A. approval had been obtained. The Bissettes entered into a pre-possession agreement and moved into their new home December 2, 1970. Closing took place December 23, 1970, and at that time defendant made what it acknowledges to be the required disclosures under the Act.
Plaintiffs contend that under the Truth in Lending Act and its implementing regulation, 12 C.F.R. § 226 et seq. (known and hereinafter cited as "Regulation Z"), disclosure of relevant credit information at closing is not timely, in that it is too late to meet the purpose of the Act, to enable those to whom credit is extended to have the opportunity intelligently to compare the various credit arrangements available to them. It is plaintiffs' position that a contract was "consummated" within the meaning of the Act November 23, 1970, when the defendant told them of F.H.A. approval and therefore, the relevant disclosures should have been made at that time. In the alternative, plaintiffs submit even absent an enforceable contract prior to closing, disclosure at closing is too late to be "meaningful" under the Act. The defendant contends "by the clear language of the statute, the disclosure rendered to the [plaintiffs] was timely."
There is no question that under § 1639(a) a lender must make Truth in Lending disclosures, nor does a conflict exist as to the information to be disclosed therein.
The sole issue presented for determination is when such disclosure must be made. As pertinent hereto, the Act provides:
Regulation Z, similarly, states that "such disclosures shall be made before the transaction is consummated."
Defendant advances four arguments to support its position that disclosure of Truth in Lending information at closing is timely under the Act. They will be discussed seriatim after an examination of the legislative history of the Act.
The Senate Report on Truth in Lending makes clear its purpose is "to provide a full disclosure of credit charges to the American consumer,"
to "permit consumers to compare the cost of credit among different creditors and to shop effectively for the best credit buy."
This intention is also manifest in Section 102 of the Act which states:
It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.8
From the sections quoted above and the other relevant portions of the legislative history of the Act,
this Court concludes that Congress intended to provide the consumer with the information necessary to "comparison shop" for credit. See, Ratner v. Chemical Bank New York Trust Co., 329 F. Supp. 270, 276 (S.D.N.Y. 1971).
In essence, defendant's first contention is that the language in the first subsection of § 1639(b), that disclosure "shall be made before the credit is extended", should be read to mean "any time" before credit is extended. Such an interpretation is in direct conflict with the essential purpose of this legislation in that disclosure made at a time too late to compare credit alternatives would thereby be acceptable. This Court cannot be persuaded that the Congress intended to provide consumers with vital information at a point in time too late for its effective use.
Defendant next finds support for its position that disclosure at closing is timely under the Act in the words of the last subsection of § 1639(b) that the requisite disclosure "may be made by disclosing the information in the note or other evidence of indebtedness to be signed by the obligor."
It is defendant's position that by allowing a lender to provide the necessary Truth in Lending information in the note evidencing the obligation, the statute permits the required disclosures to be made as late as when the debtor signs the note, i.e., at closing. Both logic and the relevant legislative history refute this contention. Clearly the language relied upon merely states how Truth in Lending information may be disclosed and says nothing whatsoever about when. Accordingly, the section-by-section summary in the House Report on the Act makes it clear that the intent of this section is to facilitate compliance by making disclosure possible in a single instrument, to a single obligor.
Unknown information estimate. If at the time disclosures must be made, an amount or other item of information required to be disclosed, or needed to determine a required disclosure, is unknown or not available to the creditor, and the creditor has made a reasonable effort to ascertain it, the creditor may use an estimated amount or an approximation of the information, provided the estimate or approximation is clearly identified as such, is reasonable, is based on the best information available to the creditor, and is not used for the ...