Mirabal v. General Motors Acceptance Corp.

537 F.2d 871

• Court: Court of Appeals for the Seventh Circuit
• Decided: March 26, 1976
• Docket: Nos. 75-1048 to 75-1050
• Status: Published

Opinions

SPRECHER, Circuit Judge.

This appeal primarily concerns interpretations of certain provisions of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and regulations promulgated thereunder by the Federal Reserve Board, 12 C.F.R. § 226.1 et seq. (Regulation Z).

I

The plaintiffs in this action, John and Sharon Mirabal, bought a new 1971 Buick Skylark from one of the defendants, Ed Murphy Buick-Opel, Inc., in July of 1971. The cash price for the car including service, accessories and taxes totalled $4,497.65. The Mirabais financed their purchase through General Motors Acceptance Corporation (GMAC), the other defendant to this action.¹ The Mirabais made a down payment of $2,296.65 including $600.00 in trade for their 1964 Rambler. The retail installment contract which the defendants provided the Mirabais required that they buy $259.00 of physical damage insurance for a total amount financed after deduction of the down payment of $2,460.00. A $511.80 finance charge was imposed on this and the total deferred payment price of $2,971.80 was to be paid in 36 monthly installments of $82.55 each. The installment contract disclosed the annual percentage rate on this transaction as 11.08 percent and contained a voluminous quantity of detailed requirements on its back, including provisions detailing the seller’s rights upon default.

About one week after the transaction was consummated, GMAC sent a letter to the plaintiffs informing them that the annual percentage rate disclosed in the transaction had been understated by 1.75 percent and stating that the contract be corrected to provide for an annual percentage rate of 12.83 percent. The plaintiffs denied that they received any such letter. The trial court made no finding of fact on this issue.

In late 1971, the Mirabais filed this action charging numerous violations of the Truth in Lending Act, the Illinois Motor Vehicle Retail Installment Sales Act, Ill.Rev.Stat., ch. 121V2, § 561 et seq. (1967) and the Illinois Sales Finance Agency Act, Ill.Rev. Stat., ch. I21V2, § 401 et seq. (1967) in connection with the transaction. The district court in a trial without a jury found that the defendants had violated the Truth in Lending Act in a number of ways, and had also violated both Illinois acts.

The district court found seven specific violations of Truth in Lending requirements in the transaction. For each violation of the Truth in Lending Act the court assessed damages of $1,000 against the defendants. Along with the damages under both Illinois acts, the plaintiffs won a judgment of more than $8,000. From this judgment, the defendants appealed and the plaintiffs cross-appealed.

II

The Truth in Lending Act, enacted in 1968, was designed to provide the consumer with the information needed to compare the cost of different types of consumer credit and to enable the consumer to make the best informed decision in regard to his use of credit. The Act focused not on regulating consumer credit, but on requiring uniform disclosure of credit terms. To accomplish this, the Act required creditors to make certain disclosures of the terms and conditions of credit before consummating any transaction. Among the most important of these disclosures, the Act required disclosure of the dollar cost of credit as a finance charge and the relative cost of credit as an annual percentage rate. The disclosure requirements were to be enforced two ways, through administrative regulation and through private suits for civil penalties for violation of these requirements.

In 1974, Congress passed what it termed “largely technical” amendments to the Truth in Lending Act.² Some of these amendments, as shall be seen later in this opinion, affect this suit. The amendments were enacted between the lower court judgment in the case and this appeal. A preliminary question which we face concerns whether these amendments are applicable in deciding this appeal.

Congress obviously wanted the amendments applicable to all suits pending in the courts whether on appeal or otherwise. Congress provided that certain provisions of the amendments, including all those provisions relevant to the present suit, “shall apply in determining the liability of any person under . . the Truth in Lending Act, unless prior to the date of enactment of this Act [Oct. 28,1974] such liability has been determined by final judgment of a court of competent jurisdiction and no' further review of such judgment may be had by appeal or otherwise.” Pub.L. No. 93-495, § 408(e), 88 Stat. 1518 (Oct. 28, 1974). However, the plaintiffs claim that such an application in this case would be unconstitutional.

Although the law in this area is not particularly clear,³ what appears to this court dispositive of our question is the treatment of trial court judgments under the Fair Labor Standards Act with respect to the Portal to Portal Act, 29 U.S.C. §§ 251 et seq. This latter act was passed to bar enormous claims pending in the courts for overtime pay under what Congress believed to be an erroneous construction of the Fair Labor Standards Act. Although the effect of this act was to divest in the appellate courts many judgments for overtime wages already obtained in the trial courts, no court held this result impermissible.⁴ The Supreme Court twice remanded labor cases to the district court for consideration in light of the Portal to Portal Act, after having in one already issued an opinion and in the other denied certiorari. See 149 Madison Avenue Corp. v. Asselta, 331 U.S. 795, 67 S.Ct. 1178, 91 L.Ed. 1432 (1947); Alaska Juneau Gold Mining Co. v. Robertson, 331 U.S. 793, 67 S.Ct. 1314, 91 L.Ed. 1839 (1947).⁵ In the courts of appeals judgments for overtime wages which had been rendered in the trial courts prior to passage of the act were reversed on numerous occasions. E. g., McCloskey & Co. v. Eckart, 164 F.2d 257 (5th Cir. 1947). For a full list of these cases see 3 A.L.R.2d 1097, 1162 (annotation on the Portal to Portal Act). In one of the most lucid opinions on the question, a district court held that reversal on appeal because of subsequent legislation was constitutional:

Rights under the Fair Labor Standards Act came into existence only by virtue of an act of Congress. These rights did not exist at common law, nor were they established by the Constitution. Therefore, since these rights were created by the Congress, they may be taken away in whole or in part, or altered, by Congress which established them at any time before they have ripened into final judgment [meaning a judgment upon which no further appeal can be taken].

Ferrer v. Waterman S.S. Corp., 76 F.Supp. 601, 603 (D.P.R.1948).

This reasoning seems persuasive in the present situation. Civil actions under the Truth in Lending Act are rights created by Congress. Congress can repeal, amend or modify these rights in any way it sees fit. Under the reasoning that what Congress giveth, Congress can taketh away, we hold that the amendments must be applied in deciding this appeal.

Ill

The facts are not in question in regard to the plaintiffs’ major claim concerning a disclosure error under the Truth in Lending Act. The annual percentage rate disclosed in the contract was 11.08 percent. As all parties agree, this understated by 1.75 percent the annual percentage rate properly applicable to the finance charge, amount financed, and term of the Mirabais’ contract. Thus, the defendants disclosed an erroneous annual percentage rate.⁶

The defendants contend that the error resulted from a bona fide mistake and claim exemption from liability under 15 U.S.C. § 1640(c).⁷ This section provides:

A creditor may not be held liable in any action brought under this section for violation of this part if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

Thus, we must determine whether the defendants have met the burden of section 1640(c).⁸

Under that provision, the creditors must prove first, that the error was an unintentional, bona fide error and second, that they maintained procedures reasonably adapted to avoid any such error. The first part of the test is met. Even the plaintiffs admit that the error was unintentional and that the defendants had no motive to understate the annual percentage rate. Clearly, the defendants’ good faith is not in question.

In regard to the second part of the test, we will take the defendants’ contentions on brief before this court as true. The defendants laid out their procedures in this manner:

Defendant dealer had specially trained office personnel to assist salesmen in determining annual percentage rates for instalment contracts. Those office personnel had been trained in the preparation of Truth in Lending disclosure statements at educational meetings that defendant GMAC held with each GM dealer before the Act went into effect. At these meetings, GMAC used a chart easel presentation to explain full disclosure, the new type of contracts, the establishment of rates, and how to arrive at rates. GMAC held classes at the premises of every one of the 48 GM dealers in the area in June 1969 to prepare the dealers to work under the Act. In addition, GMAC sent to all General Motors dealers materials and a form of contract designed to aid compliance under the Truth in Lending Act. These materials included rate charts and tables which were less awkward to use than those provided by the Federal Reserve Board. GMAC prepared these materials after extensive consultation with the Federal Reserve Board and Federal Trade Commission. A manual sent by GMAC to all GM dealers emphasized the need for the accurate statement of annual percentage rates:

These terms [including annual percentage rate] have been called the “common denominators” of consumer credit. If comparison shopping for credit terms is to become a feature of the consumer credit business, federal authorities believe that these two disclosures will make it possible regardless of the type of credit extended. The federal effort is to make such disclosures clearly visible in every consumer transaction.

The defendants concluded by suggesting that the error in the disclosure statement arose in copying numbers from an interest conversion table.⁹

These efforts, as outlined by the defendants, are impressive. Clearly, they indicate that the defendants established procedures designed to correctly calculate the figures required. However, this does not answer the question. We must decide whether this showing meets the requirements of § 1640(c), whether the defendants have shown that they maintained procedures reasonably adapted to avoid bona fide errors.

Congress had no intention of having the consumer bear the burden of a creditor’s negligence. As was noted in the Senate hearings on the Act, the philosophy behind its passage was not “let the buyer beware” but “let the seller make full disclosure.”¹⁰ In a similar vein, the fifth circuit has noted that the policy in the area of consumer credit has shifted from one of caveat emptor to one of caveat vendor.11 Moreover, as courts have noted on numerous occasions, the Act should be interpreted liberally in favor of the consumer to effectuate its broad remedial purpose.¹² With this in mind we can examine the provision.

As we have already noted, the provision for our purposes has basically two requirements, that the error be a bona fide error and that the creditor maintain procedures reasonably adapted to avoid such errors. A bona fide error is an error made in the course of a good faith attempt at compliance.¹³ The statute says that these errors are the precise errors which must be avoided. Therefore, the statute requires a higher burden than merely good faith compliance. In other words, Congress required more than just the maintenance of procedures which were designed to provide proper disclosure calculations. Rather, it required procedures designed to avoid and prevent the errors which might slip through procedures aimed at good faith compliance. This means that the procedures which Congress had in mind were to contain an extra preventative step, a safety catch or a rechecking mechanism. Congress left the exact nature of the preventative mechanism undefined. It is clear, however, that Congress required more than just a showing that a well-trained and careful clerk made a mistake. On the other hand, a showing that the first well-trained clerk’s figuring was checked by a second well-trained clerk or that one clerk made the calculations on an adding machine and then checked this by looking up the figures on a table would satisfy Congress’ requirements. We save for future determination what procedures, other than rechecking, might also satisfy this requirement.¹⁴

Congress required not only that procedures designed to avoid bona fide errors be established by creditors if they seek exemption under this section but also, that these procedures be maintained. This means that the creditor must show that the proper procedures were followed time in and time out. As we noted in an earlier opinion, the exemption was provided to avoid imposing “strict liability” for unavoidable clerical errors upon creditors. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161, 1167 (7th Cir. 1974). In the face of a showing that procedures containing a rechecking mechanism or other preventative device existed and were maintained consistently by a creditor, a court could conclude that whatever error occurred was unavoidable and that the congressional policy of requiring creditors to do everything reasonably possible to avoid disclosure errors was fulfilled.

In the present case the defendants made neither of these showings. Their procedures, although probably designed to provide correct disclosures, did not contain any type of preventative mechanism for catching disclosure errors. Moreover, the defendants did not show that these procedures were maintained consistently. Indeed, in the present instance the defendants do not seem to know what procedures were followed in generating the figures for the Mirabais’ contract.¹⁵ Therefore, since the defendants did not meet the burden of establishing their right to an exemption under section 1640(c), they are liable for the inaccurate disclosure of the annual percentage rate in the Mirabais’ contract.¹⁶

IV

We now turn to three questions concerning whether multiple civil penalties may be assessed on inaccurate disclosures arising from one credit transaction.

A

First, plaintiffs press us to find other errors in the disclosure statement as did the trial court and they urge that for each failure to disclose they are entitled to a separate statutory penalty as the court below allowed. Thus, they seek multiple recovery under the Act for multiple errors committed in the disclosure statement.

The recent amendments to the Act, however, foreclose the possibility of multiple recovery for multiple errors in the disclosure statement. The amendments provide in part (15 U.S.C. § 1640(g)):

The multiple failure to disclose to any person any information required under this part to be disclosed in connection with a single account under an open end consumer credit plan, other single consumer credit sale, consumer loan, or other extension of consumer credit, shall entitle the person to a single recovery under this section but continued failure to disclose after a recovery has been granted shall give rise to rights to- additional recoveries.

This clearly bars multiple recoveries for multiple failures to disclose.¹⁷

Practical considerations obviously motivated Congress to adopt this view. The penalty provisions of the Act were designed as an enforcement mechanism, not as a source of windfall gains for obligors. If an obligor is successful in an action against a creditor, he will recover twice the finance charge imposed up to $1,000 free and clear, as his costs, and attorney’s fees will also be recovered. Any actual damages may be recovered on top of this award. 15 U.S.C. § 1640(a)(1). Furthermore, if multiple recoveries were granted for multiple disclosure errors, how would a court determine the number of disclosure errors committed? For instance, if a disclosure statement were omitted entirely, a court would have no way of computing the number of errors made in such a total failure. If twice the finance charge were equal to or greater than $1,000, the award could range anywhere from $1,000 (for the one failure of omitting the disclosure statement) to $50,000 or more (for failure to follow every rule and regulation which the court could find applicable to the transaction). Such a result would be highly undesirable. For the reasons noted, it is clear that multiple failures to disclose in any one transaction do not give rise to multiple recoveries. Therefore, the plaintiffs’ claim of other disclosure errors need not be considered.

B

Next, the plaintiffs urge that each defendant should be held separately liable under the Act and that the plaintiffs’ recovery should be doubled as a result. The wording of the Act appears to support the plaintiffs’ claim. The civil liability provision provides in relevant part that “any creditor who fails to comply with any requirement [of the Act] with respect to any person is liable to such person — [for twice the finance charge up to $1,000 plus attorney’s fees].” 15 U.S.C. § 1640(a) (emphasis added). The legislative history uses similar “any creditor" language.

In most consumer credit transactions in which there are two creditors, one has sold the other the consumer credit contract in question. This is the situation in the present case. Thus, only one of the creditors is receiving the benefit of the finance charge, and in effect only one is providing the credit. Furthermore, as in the present situation where the dealer was following procedures established by the finance agency (GMAC), it would seem harsh to impose separate penalties on both creditors for basically a single failure on their part. The statutory language “any creditors” is not dispositive on this point, as it could refer to the fact that Congress intended liability for disclosure violations to reach each and every creditor rather than just the creditor who held the credit contract or the one who made it. And thus, it need not imply that the joint creditors are separately liable under the Act. Moreover, any holding that the creditors here are separately liable would require only a change of dealings to avoid. Instead of GMAC buying the contract from the dealer, GMAC would have its own agents on the dealer’s premises to arrange the extension of credit and would by this means exclude the dealer as a creditor. This result seems pointless. Since holding creditors separately liable on a single consumer credit transaction appears inconsistent with the general purposes of the Act and mandated by neither the statutory language nor practical considerations, we find the plaintiffs’ pleas for such an extension of liability unconvincing. The creditors in this transaction, having acted jointly, are jointly liable under the Act.¹⁸

C

Finally, the plaintiffs urge that since they were each obligors in the transaction, they should each be allowed to recover a separate penalty. The statutory language supports such a construction. Section 1640(a), as amended, reads as follows:

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part or part D of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—

(1) any actual damage sustained by such person as a result of the failure;

(2) (A) in the case of an individual action twice the amount of any finance charge in connection with the transaction, except that the liability under this sub-paragraph shall not be less than $100 nor greater than $1,000; .

(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. (Emphasis added.)

This appears to indicate that Congress felt that the duty of the creditor ran to each obligor involved in a loan transaction and that for a failure to fulfill this duty each obligor could sue and recover.¹⁹

Some courts have found separate recoveries by joint obligors barred by the section dealing with general disclosure requirements, 15 U.S.C. § 1631. E. g., St. Marie v. Southland Mobile Homes, Inc., 376 F.Supp.

996 (E.D.La.1974). This section reads in part:

(a) Each creditor shall disclose clearly and conspicuously, in accordance with the regulations of the Board, to each person to whom consumer credit is extended, the information required under this . chapter.

(b) If there is more than one obligor, a creditor need not furnish a statement of information required under this chapter to more than one of them.

These courts have equated “statement of information” with the general requirement to disclose. From this, they have concluded that since subparagraph (b) requires only one statement be given to joint obligors, the creditor has failed to disclose (and hence is liable) only to the obligor to whom the statement is given.

We have recently answered these contentions in Allen v. Beneficial Finance Co. of Gary, 531 F.2d 797, 805-806 (7th Cir. 1976). There we said:

The flaw in this reasoning is twofold. First, the reasoning assumes that Congress intended that subparagraph (b) limit the general disclosure requirement of subparagraph (a). There is little to support this assumption. Congress could have assumed that even though a creditor need provide only one disclosure statement, he would disclose to all obligors the information required. Certainly, multiple obligors are expected to look at and rely upon the one statement given.²⁰

Secondly, even if the creditor need only disclose to one of multiple obligors, this does not limit the right of other obligors to recover if disclosure to the one has been faulty. Congress could have expected all obligors to be protected by proper disclosure to only one in that the one who received disclosure would certainly take the best credit terms available. Faulty disclosure, however, would destroy this protection. Certainly, the other obligors would be as harmed as the one who received the faulty disclosure.

Congress appears to have included sub-paragraph (b) merely to facilitate compliance with the Act. As the House Report states:

In order to reduce needless paperwork, disclosure need only be made to one obligor. For example, if two people (e. g. a husband and wife) are the obligors, only one copy of the contract with the required disclosure information would need to be furnished.

H.R.Rep. No. 1040, 90th Cong., 1st Sess. (1967) (to accompany H.R. 11601), 1968 U.S.Code Cong. & Admin.News, pp. 1962, 1984.²¹

Above all, however, the wording of subparagraph (b) provides the best clue to Congress’ intent. Congress did not say disclosure need only be given to one of multiple obligors. Nor did it say that recovery may only be had by one. It said a “statement of information” need only be furnished to one of multiple obligors. From all this we can conclude that Congress by including subparagraph (b) meant only to reduce the burden of paperwork on the creditor, and did not mean to foreclose any right of recovery by a joint obligor.

No other provision in any way implies a limitation on the right of joint obligors to recover separately under the Act. The language of the civil liability section is clear:

“Any creditor who fails to comply [with this Act] with respect to any person is liable to such person in an amount equal to the sum of” actual damages, the lesser of twice the finance charge or $1,000, and attorney’s fees. Without more convincing evidence that Congress intended some other result, the command of such language cannot be ignored. The creditors in this action have failed to give proper disclosures to both John and Sharon Mirabal. Thus, they are liable to both, separately, for the statutory penalty of $1,000.

Practical considerations support this result. First, as noted in Rivers v. Southern Discount Company Atlanta II, 4 CCH Consumer Credit Guide, ¶ 98,796 at 88,450 (N.D.Ga.1973), the creditor by requiring two signatories on a loan, gains additional security in the form of a joint obligor. Thus, it seems appropriate that his obligations under the Act and the punishment for failure to live up to these obligations should be commensurate with this greater security acquired. Furthermore, a holding that joint obligors could recover only one penalty would create problems in administering the Act. For instance, if one obligor sued would he be allowed the full penalty or only half of it? If granted the full penalty, could the other obligor sue the winner for his half? Which obligor could sue, only the one who received the disclosure statement? How could a court determine as between husband and wife joint obligors which of the two had received the disclosure statement? Congress, in the statute, provided no answers for these questions and so we can assume that it did not expect these problems to arise.

V

As a final matter, we must decide whether the defendants have violated the two state acts regulating consumer automobile financing, the Illinois Sales Finance Agency Act, Ill.Rev.Stat. ch. 121V2, §§ 401 et seq., and the Illinois Motor Vehicle Retail Installment Sales Act, Ill.Rev.Stat. ch. 121V2, §§ 561 et seq. The court below found the defendants had both violated the Installment Sales Act, and that defendant GMAC had violated the Sales Finance Agency Act.

The Motor Vehicle Installment Sales Act provides that “no person who violates this Act . . . may recover any finance charge . . . .” Ill.Rev.Stat. ch. I21V2, § 584(b). The plaintiffs contend that the defendants violated the Act in two major ways, first by failing to state the correct annual percentage rate and second, by failing to include all “default, delinquency or similar charges” in the contract.

We have already noted that the understatement in the annual percentage rate was the result of a bona fide error. The penalty provision of the statute, section 584(b), provides an exception for bona fide errors. It states:

No person who violates this Act, except as a result of an accident or bona fide error of computation, may recover any finance charge .

There are no other requirements to meet this exception, and thus, the defendants cannot be held liable under Illinois law for the error in disclosing the annual percentage rate.

The plaintiffs’ second contention, that not all “default, delinquency, and similar charges” are disclosed in the contract “clearly, conspicuously and in meaningful sequence” as required in section 565(12) of the Illinois Act is disposed of by the Federal Reserve Board regulations. The State of Illinois has adopted these regulations to conform its interpretation of its act to the interpretation given to the very similar Truth in Lending Act.²² In interpreting 15 U.S.C. § 1638(a)(9), which requires “default, delinquency, or similar charges payable in the event of late payments” to be disclosed in a consumer credit transaction, the Board in the regulations has not provided much clarification of the statutory language. See 12 C.F.R. § 226.8(b)(4). In later interpretations rendered upon this regulation, however, the Board has clarified its position. The Board views the statute as requiring the disclosure of only those charges which become automatically due and payable in the event of a late payment.²³ In the present transaction the only charge that fits this description is the automatic late payment penalty of “5% of the unpaid installment or $5 whichever is less.” The charges of which the plaintiffs complain and which are not included in the disclosure statement — such as charges for attorney’s fees, costs of repossession and sale of repossessed property — are all imposed at the creditor’s election and thus are not automatic. These charges, therefore, need not be included in the disclosure statement.²⁴ Thus, under Illinois law these charges need not be disclosed in compliance with the Motor Vehicle Retail Installment Sales Act, and no violation has occurred.

The Illinois Sales Finance Agency Act provides for penal damages in the amount of one-fourth of the principal amount of the loan for violations of that act. Ill.Rev.Stat. ch. 121V2, § 416. These damages are applicable at the discretion of the court, and the trial court allowed plaintiffs to recover the full 25 percent on top of other damages awarded.

The trial court found that GMAC had purchased a retail installment contract “which on its face violated the Illinois Motor Vehicle Retail Installment Sales Act” because the contract disclosed an incorrect annual percentage rate. Although the trial court made no reference to the specific sections of the Sales Finance Agency Act which the purchase of the contract violated, it must have meant to refer to Section 8.4 of the Act, Ill.Rev.Stat. ch. 121V2, § 408.4. This section provides:

Except for honest mistake, purchase of any retail contract, retail charge agreement, or evidence of indebtedness thereunder, which on its face violates this Act, the Retail Installment Sales Act or the Motor Vehicle Retail Installment Sales Act [violates this Act].

However, as we have already noted, the mistake here was an honest error and it was made by GMAC’s agent, the dealer. Furthermore, the trial court did not find that the mistake was patent or obvious as the statute requires. Clearly, the mistake was not obvious as GMAC only found it after having received the contract by refiguring the percentage rate. No other provision of the Act appears applicable. Therefore, GMAC is not liable under the Illinois Sales Finance Agency Act.

The judgment for the plaintiffs is affirmed as modified by reducing the amount of the judgment to $2,000.00 plus costs and attorney’s fees and the cause is remanded for further proceedings.

1 . The Mirabais had no direct dealings with GMAC. In its findings of fact the district court found that GMAC arranged for the extension of credit in requiring the dealer to follow GMAC’s procedure and forms in approving credit for the Mirabais. However, under the technical meaning of the Act, the dealer “arranged for the extension of credit” and GMAC extended the credit to the Mirabais. See 15 U.S.C. § 1602(f) explained at 12 C.F.R. § 226.2(f). This latter section reads in part as follows:

“Arrange for the extension of credit” means to provide or offer to provide consumer credit which is or will be extended by another person under a business or other relationship pursuant to which the person arranging such credit receives or will receive a fee, compensation, or other consideration for such service or has knowledge of the credit terms and participates in the preparation of the contract documents required in connection with the extension of credit.

The Act, 15 U.S.C. § 1602(f), provides that those who “regularly extend, or arrange for the extension of, credit” are creditors. Therefore, both GMAC and the dealer are creditors under the Act.

2 . For instance the amendments were spoken of in this manner in the congressional debates during their consideration. See e. g., 119 Cong. Rec. 25398 (1973) (remarks of Senator Spark-man).

3 . The plaintiffs in this action contend that any application of these amendments to actions which have reached final judgment in a trial court is unconstitutional. They support their position by citing a number of cases including McCullough v. Virginia, 172 U.S. 102, 19 S.Ct. 134, 43 L.Ed. 382 (1898) and Hodges v. Snyder, 261 U.S. 600, 43 S.Ct. 435, 67 L.Ed. 819 (1923). In McCullough, the Court held that the repeal of a statute under which a judgment had been obtained between trial of the action and appeal did not affect the validity of the judgment. It wrote, “It is not within the power of a legislature to take away rights which have been once vested by a judgment.” 172 U.S. at 123, 19 S.Ct. at 142, 43 L.Ed. at 390. In Hodges the Court refined this position slightly, writing:

It is true that . . . the private rights of parties which have been vested by the judgment of a court cannot be taken away by subsequent legislation, but must be thereafter enforced by the court regardless of such legislation. . . . This rule, however, . . . does not apply to a suit brought for the enforcement of a public right, which, even after it has been established by the judgment of the court, may be annulled by subsequent legislation and should not be thereafter enforced. 261 U.S. at 603, 43 S.Ct. at 436, 67 L.Ed. at 822.

This distinction, however, although never overruled, does not appear to have current vitality, as the latest restatement of it occurred in the Hodges case.

The most recent pronouncement on the question appears in Thorpe v. Housing Authority, 393 U.S. 267, 282, 89 S.Ct. 518, 528, 21 L.Ed.2d 474, 484 (1969), where the Court wrote:

The general rule ... is that an appellate court must apply the law in effect at the time it renders its decision.

This, however, does not appear particularly dis-positive of our question as it neither overruled the Hodges distinction, nor did the case itself concern a predominantly private judgment. Thus, it is not clear whether the Hodges distinction remains viable law, nor what exactly the Hodges case means by a private judgment.

4 -The only type judgment not affected by the Portal to Portal Act was a judgment that had been entered before the effective date of the Act and upon which no appeal had been timely taken. See Kemp v. Day & Zimmerman, 239 Iowa 829, 33 N.W.2d 569 (1948).

5 . However, the Supreme Court never addressed the question of the effect that these actions allowing basically “private” judgments to be overturned by subsequent legislation had on the Hodges distinction and the inviolability of private judgments.

6 . Although the trial court made a finding that “the defendants did not make use of proper charts or tables to determine the annual percentage rate,” because they used “GMAC charts or tables to determine the annual percentage rate . . . rather than Federal Reserve Regulation Z Annual Percentage Rate Tables,” this does not dispose of the issue. By this finding the trial court seems to have indicated that it felt that the only charts and tables properly used were those devised by the Federal Reserve Board. Nothing in the statute or regulations, however, requires a creditor to use any specific charts or tables. Regulation Z, 12 C.F.R. § 226.5(c), provides that any charts and tables can be used so long as they conform to the requirements of the regulation including being devised so that they permit determination of the annual percentage rate to the nearest one-quarter of one percent. No one contends that GMAC’s tables were not so devised. Moreover, it is also permissible to use no tables at all, but to independently calculate the rate.

7 . The defendant dealer followed procedures prescribed by the defendant GMAC in complying with the disclosure requirements of the Truth in Lending Act. The trial court found this to be the case in its findings of fact and GMAC does not dispute this on appeal. The dealer, of course, must accept responsibility for these procedures since it was a creditor under the Act and since it performed them. GMAC must also accept responsibility for the procedures since the dealer was acting under its direction in complying with the Act.

8 . The section does not require proof as to exactly what happened with regard to the error in the transaction in question. This, however, does not mean as the defendants seem to suggest that the plaintiffs must prove exactly what happened either. The defendants contended in their reply brief that the “plaintiffs submitted no evidence . . . that the defendants failed to use proper charts and tables.” They went on to assert that “no witness identified what particular chart or table was used in preparing the instant Contract.” They blandly concluded by suggesting that the “plaintiffs . . . had the burden of proof on the issue.”

Nothing could be further from the truth. The statute, 15 U.S.C. § 1640(c), specifically requires the creditor to show by a preponderance of the evidence that he maintained procedures that were reasonably adapted to avoid errors. This means that the creditor has the burden of proof not only to show that the procedures existed, but also to show that they were in effect and consistently followed during the time in question. It bodes ill for the defendants that they can assert in their brief that “[t]he witnesses were not sure which particular chart was used. But they were sure that some chart had been used.” Certainjy, as noted above, the witnesses do not have to testify to or remember the particular events in question. However, they must testify that during the period in which the transaction took place, they always used particular tables, or they always followed certain procedures which included reference to particular tables or particular computations. In other words, if the defendants were to meet this burden of proof, their witnesses should have been able to testify that during the period in question they always followed a certain procedure which included taking the annual rate from a certain chart, and thus that that chart must have been used.

9 . The defendants point out that on the proper table the correct percentage rate 12.83 percent is just one column above the percentage rate disclosed, 11.08 percent. Thus, they suggest that going across this table to find the correct rate, the slip of only a single line could have resulted in the error.

10 . Statement of Leslie V. Dis, Acting Ex. Dir. of the President’s Commission on Consumer Interests, Hearings on S. 5 Before the Subcommittee on Financial Institutions of the Senate Comm, on Banking and Currency, 90th Cong., 1st Sess., 104 (1967). See also Chief Justice Burger’s statement to the same effect in Mourning v. Family Publications Service, Inc., 411 U.S. 356, 377, 93 S.Ct. 1652, 1664, 36 L.Ed.2d 318, 334 (1973).

11 . In Thomas v. Meyers-Dickson Furniture Co., 479 F.2d 740, 748 (5th Cir. 1973), the fifth circuit wrote:

The result we reach today is consistent with the statute’s goal of creating a system of “private attorney generals” who will be able to aid the effective enforcement of the Act. Section 1640 is intended to allow aggrieved consumers to participate in policing the Act, and its language should be construed liberally in light of its broadly remedial purpose. . . . The domain of consumer credit with its allied commercial practices is no longer in the laissez faire era of caveat emptor. That doctrine is increasingly relegated to its proper place as a historical relic without modem application. The regulatory scheme forcefully expounds an emerging ethic of “caveat vendor,” and we will not strain to avoid giving effect to the Federal Consumer Credit Protection Act (italics in original).

12 . Sellers v. Woolman, 510 F.2d 119, 122 (5th Cir. 1975); Eby v. Reb Realty, Inc., 495 F.2d 646, 650 (9th Cir. 1974); Thomas v. Meyers-Dickson Furniture Co., 479 F.2d 740, 748 (5th Cir. 1973); N.C. Freed Co. v. Board of Governors of The Federal Reserve System, 473 F.2d 1210, 1214 (2d Cir. 1973); Gardner & North Roofing and Siding Corp. v. Board of Governors of The Federal Reserve System, 150 U.S.App.D.C. 329, 464 F.2d 838, 841 (1972).

13 . Clearly, an error could not be made in good faith when no good faith attempt to comply with the statute was made. Thus, when no procedures are set up to provide correct disclosure calculations, or when untrained employees are left to calculate disclosure figures, errors made do not even rise to the level of bona fide errors.

14 . The defendant admits on brief that the error “would [not] be obvious when it occurred.” Certainly, if this is true, and it is true whenever the rates differ by only small amounts, rechecking is the only way to avoid mistakes. Even the most highly trained person makes mistakes. The only way to catch such mistakes is by rechecking, in some way, the computation. This is not a great burden on a creditor, as checking a chart takes only seconds and doing the computations on an adding machine cannot take more than a minute.

It is clear from this case that rechecking does bring errors to light. GMAC when it received the contract recalculated the annual percentage rate and immediately found the error.

15 . See footnote 8, supra.

16 . The opinion of Judge Moore suggests that the defendants avoided liability for the incorrect annual percentage rate by correcting it within 15 days of finding the error. Even assuming that the defendants did properly notify the plaintiffs to correct the error, although the plaintiffs deny this and the trial court made no finding of fact on the subject, the defendants still did not meet the requirements of 15 U.S.C. § 1640(b), the section which provides for the exemption. The section reads:

A creditor has no liability under this section if within fifteen days after discovering an error, and prior to the institution of an action under this section or the receipt of written notice of the error, the creditor notifies the person concerned of the error and makes whatever adjustments in the appropriate account are necessary to insure that the person will not be required to pay a finance charge in excess of the amount or percentage rate actually disclosed.

Judge Moore suggests that because GMAC sent a letter to the obligors regarding the understatement of the rate and stated that the rate should be raised to 12.83 percent to make the contract correct, GMAC has complied with the requirements of the section; Unfortunately, this is not how the section operates. Section 1640(b) lays the burden of an error on the creditors. To comply with the section the creditor must make adjustments in the account so that the obligor pays a finance charge which is neither higher than the amount of the finance charge in the contract, nor higher than the finance charge which would be applicable to the annual percentage rate disclosed in the contract. Thus, if the creditor makes a mistake, he must bear the burden of the mistake and adjust whatever terms necessary downward so that all the terms of the contract correspond.

This is the plain meaning of the section. Congress did not say that if the creditor “corrected his error” within 15 days he would avoid liability. Congress told the creditors to make “whatever adjustments in the appropriate account are necessary to insure that the person will not be required to pay a finance charge in excess of the amount or percentage rate actually disclosed.”

In this case, if the creditors had complied with the section, they would have adjusted the finance charge and monthly payments downward a total $69.38 (as determined by the district court) so that the finance charge would correspond with the annual percentage rate actually disclosed of 11.08 percent.

17 . This particular amendment does not appear to have changed the law with regard to multiple recoveries for multiple errors in the disclosure statement, but only emphasized the fact that multiple recoveries were unwarranted. Certainly, strong policy considerations were present for denying multiple recoveries under the prior law. Primarily, however, the legislative history did not warrant imposition of multiple penalties. The House Report on the Truth in Lending Bill states:

Any creditor failing to disclose required information would be subject to a civil suit with ... a maximum penalty not to exceed $1,000 on any individual credit transaction.

H.R.Rep. No. 1040, 90th Cong., 1st Sess. (1967) (to accompany H.R. 11601), 1968 U.S.Code Cong. & Admin.News, pp. 1962, 1976.

18 . Accord, Starks v. Orleans Motors, Inc., 372 F.Supp. 928 (E.D.La.), affirmed, 500 F.2d 1182 (5th Cir. 1974) (unreported order). However, in a situation where two creditors each made separate and independent disclosure errors in one transaction, the result might be different. We do not face that situation here. Cf. Ljepya v. M.L.S.C. Properties, 353 F.Supp. 866 (N.D.Cal.1973).

19 . The legislative history appears to run counter to this notion. The House Report to the Act states:

Any creditor failing to disclose required information would be subject to a civil suit with a penalty equal to twice the finance change, with a minimum penalty of $100 and a maximum penalty not to exceed $1,000 on any individual credit transaction.

H.R.Rep. No. 1040, 90th Cong., 1st Sess. (1967) (to accompany H.R. 11601), 1968 U.S.Code Cong. & Admin.News, pp. 1962, 1976. However, this passage appears in a general description of the penalty provisions of the bill. It was not directed at determining whether joint obligors could recover separately.

20 . The court in Rivers v. Southern Discount Company Atlanta II, 4 CCH Consumer Credit Guide H 98,796 at 88,450 (N.D.Ga.1973), wrote:

The Act contemplates, in this Court’s opinion, that each borrower is entitled to know the cost of his or her credit prior to signing. Though the Act does require that the creditor furnish only one correct copy of the disclosure statement to one borrower, it is contemplated that all borrowers will be able to view that document if they wish in order to glean the required information. If that one copy is incorrect, as in the case at Bar, then each borrower is deceived and each suffers damage.

21 . Because this description of subparagraph (b) is set out in the Report under “Methods of Disclosure” instead of a section on disclosure requirements, the emphasis must be placed on the idea of facilitating compliance by reducing paperwork as opposed to reducing disclosure requirements.

22 . The regulations promulgated by the Department of Financial Institutions of the State of Illinois pursuant to the Illinois Interest Act, Ill.Rev.Stat. ch. 74, § 4b provide in part:

Sec. 1. Definitions and interpretations. For the purpose of these Rules and Regulations all interpretations, definitions and Rules of Construction as appearing in the various Illinois Statutes and Federal Acts, Regulations and Releases, applicable hereto, shall be followed. Where a specific Rule, interpretation or definition in a particular area as contained in an Illinois Statute or Regulation is inconsistent with that of a comparable Federal Act, Regulation or interpretation, the Federal Act, Regulation or interpretation shall apply and the Illinois Act, Regulation or interpretation shall be disregarded. Where the State Statute, Rule, interpretation or definition is not required by Federal Act or Regulation, the State Statute Rule, interpretation, definition or terminology shall be followed as an additional requirement.

Sec. 2. * * *

All Regulations and interpretations presently in force and effect and as may hereafter be promulgated by the Board of Governors with regard to the CONSUMER CREDIT PROTECTION ACT, including amendments, modifications and revocations are hereby adopted as the interpretation, Rules and Regulations of this Department to the extent whereby the same are not an assumption of Federal authority.

For full text of these regulations see 2 CCH Consumer Credit Guide fl 6621-22 at 20,951 (Illinois).

23 . Two interpretation letters issued by the Board have made this view clear. In a letter of April 10, 1972, No. 591, the Board wrote:

[Y]ou questioned whether attorney’s fees and other foreclosure costs constitute charges for which disclosures must be made under § 226.8(b)(4) of Regulation Z.

It is staff’s opinion that the thrust of the late payment, delinquency, or default disclosure required under § 226.8(b)(4) relates basically to the types of charges which a creditor may assess automatically, without other conditions, when a late payment, delinquency, or default occurs. However, if the charge is not automatic, but is based on the employment of the services of an attorney to effect collection or consists of other fees and charges payable in conjunction with foreclosure proceedings, such charges would not fall in the normal realm of charges to be disclosed under § 226.8(b)(4). The charges described in your letter appear to be based upon taking foreclosure action and employing the services of an attorney. Consequently, it would not appear that such charges need to be disclosed under § 226.8(b)(4).

This excerpt of the letter is printed in the CCH Consumer Credit Guide at fl 30,834 (transfer binder).

A similar view was expressed in an earlier letter of March 19, 1970, No. 290, which read in part:

You further inquire as to whether or not Section 226.8(b)(4) of the Regulation requires the creditor to inform the customer that he may be obligated to pay court costs and attorney’s fees in the event a suit is instituted upon default. It has been our position that if the imposition of attorney’s fees was automatic, that is, if, for example, 10% attorney’s fees become immediately due and collectible by virtue of default, that would constitute a default or delinquency charge which must be disclosed under Section 226.8(b). If, however, the imposition of attorney’s fees were not automatic after default, but were conditioned upon employment of the services of an attorney to effect collection, the right to impose such fees under such circumstances did not constitute a default or delinquency charge and, therefore, was not a required disclosure.

For more complete text see CCH Consumer Credit Guide fl 30,528 (transfer binder).

This court, by accepting the Board’s interpretation of the statute, does not wish to give its particular approval to such interpretation. However, as the Supreme Court noted in Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369, 93 S.Ct. 1652, 1660, 36 L.Ed.2d 318, 329 (1973), when commenting upon the Board’s rulemaking power under the Truth in Lending Act, “the validity of a regulation promulgated thereunder will be sustained so long as it is ‘reasonably related to the purposes of the enabling legislation.’ ” The interpretation is not so unlikely that we could say that it is not reasonably related, and so we “defer to the informed experience and judgment of the agency to whom Congress delegated appropriate authority.” Id. at 372, 93 S.Ct. at 1662, 36 L.Ed.2d at 331.

24 . A further ground for denying recovery under the Illinois Act lies in the fact that the act only requires that disclosure of these charges be made in the contract, not in any special disclosure statement. The charges for attorney’s fees, and repossession and sale costs are all included on the back of the contract (/. e., within the contract, but outside the disclosure statement).