Ford Motor Credit Co. v. Milhollin
444 U.S. 555 (1980)

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U.S. Supreme Court

Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980)

Ford Motor Credit Co. v. Milhollin

No. 78-1487

Argued December 4, 1979

Decided February 20, 1980 *

444 U.S. 555

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

Respondents financed their purchases of automobiles through standard retail installment contracts that were assigned to petitioner finance company. Each contract provided that respondents were to pay a precomputed finance charge, and, as required by the Truth in Lending Act (TILA) and implementing Federal Reserve Board (FRB) Regulation Z, the front page of each contract disclosed and explained certain features of the contract, including a disclosure that the buyer could prepay his obligations under the contract in full at any time prior to maturity of the final installment and that, if he did so, he would receive a rebate of the unearned portion of the finance charge. The face of the contract also stated that temporary default on a particular installment would result in a delinquency charge, but no mention was made of a clause in the contract giving the creditor a right to accelerate payment of the entire debt upon the buyer's default. Respondents thereafter brought separate suits in District Court, alleging, inter alia, that petitioner finance company had violated TILA and Regulation Z by failing to disclose on the front page of the contract that the creditor retained the right to accelerate payment of the debt. The District Court, in two of the suits, held that facial disclosure of the acceleration clauses was mandated by the provisions of TILA, 15 U.S.C. §§ 1638(a)(9), 1639(a) (7), that compel publication of "default, delinquency, or similar charges payable in the event of late payments." On a consolidated appeal, the Court of Appeals agreed that TILA imposes a general acceleration clause disclosure requirement, but rather than holding that acceleration is a default charge, the Court of Appeals based its decision on the principle that, under Regulation Z, the creditor must disclose whether a rebate of unearned interest will be made upon acceleration, and also must disclose the method by which the amount of unearned interest will be computed if the debt is accelerated. In so

Page 444 U. S. 556

holding, the court rejected the FRB staff's contrary interpretation of the pertinent statutory and regulatory provisions that specific disclosure of an acceleration rebate policy is only necessary when that policy varies from the custom with respect to voluntary prepayment rebates.

Held: TILA does not mandate a general rule of disclosure for acceleration clause. Pp. 444 U. S. 559-570.

(a) The issue of acceleration disclosure is not governed by clear expression in the statute or regulations. An acceleration clause cannot be equated with a "default, delinquency, or similar charg[e]," subject to disclosure under §§ 1638(a)(9) and 1639(a)(7) and Regulation Z, and the prepayment rebate disclosure requirement of Regulation Z also fails to afford direct support for an invariable specific acceleration disclosure rule. Pp. 444 U. S. 559-562.

(b) In the absence of an express statutory mandate that acceleration procedures be invariably disclosed, a high degree of deference to the FRB staff's consistent administrative interpretation that the statute and regulations impose no such uniform requirement is warranted. Although the staff might have decided that acceleration rebates are so analytically distinct from identical voluntary prepayment rebates as to warrant separate disclosure, it was reasonable to conclude, alternatively, that ordinary consumers would be concerned chiefly about differing financial consequences. Pp. 444 U. S. 562-570.

588 F.2d 753, reversed and remanded.

BRENNAN, J., delivered the opinion for a unanimous Court. BLACKMUN, J., filed a concurring opinion, in which BURGER, C.J., joined, post, p. 444 U. S. 570.

Page 444 U. S. 557

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The issue for decision in this case is whether the Truth in Lending Act (TILA), 82 Stat. 146, as amended, 15 U.S.C. § 1601 et seq., requires that the existence of an acceleration clause always be disclosed on the face of a credit agreement. The Federal Reserve Board staff has consistently construed the statute and regulations as imposing no such uniform requirement. Because we believe that a high degree of deference to this administrative interpretation is warranted, we hold that TILA does not mandate a general rule of disclosure for acceleration clauses.

I

The several respondents in this case purchased automobiles from various dealers, financing their purchases through standard retail installment contracts that were assigned to petitioner Ford Motor Credit Co. (FMCC), a finance company. Each contract provided that respondents were to pay a precomputed finance charge. As required by TILA and Federal Reserve Board Regulation Z, which implements the Act, the front page of each contract disclosed and explained certain features of the agreement. See 15 U.S.C. § 1631; 12 CFR § 226.6(a) (1979). Among these disclosures was a paragraph informing the buyer that he

"may prepay his obligations under this contract in full at any time prior to maturity of the final instalment hereunder, and, if he does so, shall receive a rebate of the unearned portion of the Finance Charge computed under the sum of the digits method. . . ."

The face of the contract also stated that temporary default on a particular installment would result in a predetermined

Page 444 U. S. 558

delinquency charge. Not mentioned on the disclosure page was a clause in the body of the contract giving the creditor a right to accelerate payment of the entire debt upon the buyer's default. [Footnote 1]

Respondents subsequently commenced four separate suits against FMCC in the United States District Court for the District of Oregon, alleging, inter alia, that FMCC had violated TILA and Regulation Z by failing to disclose on the front page of the contract that the creditor retained the right to accelerate payment of the debt. [Footnote 2] In two of the suits, [Footnote 3] the District Court held that facial disclosure of the acceleration clauses was mandated by the provision of TILA that compels publication of "default, delinquency, or similar charges payable in the event of late payments," 15 U.S.C. §§ 1638(a)(9), 1639(a)(7). App. 30-31, 37, 69-71. Respondents in the other two actions prevailed on different grounds. [Footnote 4] All four cases were consolidated on appeal to the Ninth Circuit.

The Court of Appeals agreed with the District Court that TILA imposes a general acceleration clause disclosure requirement. [Footnote 5] Rather than resting on the District Court's holding that acceleration is a default charge, however, the Court of Appeals based its decision on the narrower principle that, under Regulation Z,

"[t]he creditor must disclose whether a rebate of unearned interest will be made upon acceleration

Page 444 U. S. 559

and also disclose the method by which the amount of unearned interest will be computed if the debt is accelerated."

588 F.2d 753, 757 (1978), quoting St. Germain v. Bank of Hawaii, 573 F.2d 572, 577 (CA9 1977). See 12 CFR § 226.8(b)(7) (1979). Implicit in the conclusion of the Court of Appeals -- and explicit in its preceding St. Germain decision -- was the rejection of a contrary administrative interpretation of the pertinent statutory and regulatory provisions. In adopting its particular approach, the Court of Appeals mapped a path through the disclosure thicket that diverges from the routes traveled by the Courts of Appeals for several other Circuits. [Footnote 6] We granted certiorari, 442 U.S. 940 (1979), to resolve the conflict. We reverse.

II

The Truth in Lending Act has the broad purpose of promoting "the informed use of credit" by assuring "meaningful disclosure of credit terms" to consumers. 15 U.S.C. § 1601. Because of their complexity and variety, however, credit transactions defy exhaustive regulation by a single statute. Congress therefore delegated expansive authority to

Page 444 U. S. 560

the Federal Reserve Board to elaborate and expand the legal framework governing commerce in credit. 15 U.S.C. § 1604; Mourning v. Family Publications Service, Inc.,411 U. S. 356 (1973). The Board executed its responsibility by promulgating Regulation Z, 12 CFR Part 226 (1979), which at least partly fills the statutory gaps. Even Regulation Z, however, cannot speak explicitly to every credit disclosure issue. At the threshold, therefore, interpretation of TILA and Regulation Z demands an examination of their express language; absent a clear expression, it becomes necessary to consider the implicit character of the statutory scheme. For the reasons following, we conclude that the issue of acceleration disclosure is not governed by clear expression in the statute or regulation, and that it is appropriate to defer to the Federal Reserve Board and staff in determining what resolution of that issue is implied by the truth in lending enactments.

Respondents have advanced two theories to buttress their claim that the Act and regulation expressly mandate disclosure of acceleration clauses. In the District Court, they contended that acceleration clauses were comprehended by the general statutory prescription that a creditor shall disclose "default, delinquency, or similar charges payable in the event of late payments," 15 U.S.C. §§ 1638(a)(9), 1639(a) (7), and were included within the provision of Regulation Z requiring disclosure of the "amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments," 12 CFR § 226.8(b)(4) (1979). Before this Court, respondents follow the Court of Appeals in arguing that 12 CFR § 226.8(b)(7) may be the source of an obligation to disclose procedures governing the rebate of unearned finance charges that accrue under acceleration. That section commands

"[i]dentification of the method of computing any unearned portion of the finance charge in the event of prepayment in full of an obligation which includes precomputed

Page 444 U. S. 561

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."

A fair reading of the pertinent provisions does not sustain respondents' contention that acceleration clauses are within their terms.

An acceleration clause cannot be equated with a "default, delinquency, or similar charg[e]," subject to disclosure under 15 U.S.C. §§ 1638(a)(9), 1639(a)(7), and 12 CFR § 226.8(b)(4). The prerogative of acceleration affords the creditor a mechanism for collecting the outstanding portion of a debt on which there has been a partial default. In itself, acceleration entails no monetary penalty, although a creditor may independently impose such a penalty, for example, by failing to rebate unearned finance charges. A "default, delinquency, or similar charg[e]," on the other hand, self-evidently refers to a specific assessable sum. Thus, within the trade, delinquency charges are understood to be "the compensation a creditor receives on a precomputed contract for the debtor's delay in making timely instalment payments," 1 CCH Consumer Credit Guide

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