The opinion of the court was delivered by: CURTIN
This case concerns the validity of a General Motors Acceptance Corporation ["GMAC"] car loan agreement. It is in federal court because plaintiff claims the GMAC standardized contract form violates the federal Truth In Lending Act [hereinafter "TILA"]. 15 U.S.C. § 1640(3). Although this is not a class action, the case is significant because the penalties under the New York Motor Vehicle Installment Sales Act, for willfully violating the TILA, include voiding any credit service, delinquency, collection or refinancing charges. New York Personal Property Law, § 302(5)(1); 307(2).
The case arises from a loan contract signed on February 23, 1979. The contract was signed by Edward J. Luczak, in connection with his purchase of a 1975 Chevy Nova for $2,889.00 from Moore Buick GMC Sales, which is located in Buffalo, New York. The loan contract was subsequently negotiated to GMAC, which had supplied the original contract form. Plaintiff now sues for a declaration that the contract violates TILA, for $1,000 in statutory damages assessed against each defendant, and for an order enjoining defendants from attempting to collect any credit service charge, delinquency or collection charge. The case is before the court on defendants' motion to dismiss and plaintiff's cross motion for summary judgment.
The TILA, 15 U.S.C. § 1638(a)(10), requires that a creditor provide
[a] description of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates.
The Federal Reserve Board, pursuant to 15 U.S.C. § 1604, issued "Regulation Z," 12 CFR § 226.2(gg), in which it interpreted the statutory term "security interest" as meaning
any interest in property which secures payment or performance of an obligation. The terms include, but are not limited to, security interests under the Uniform Commercial Code, real property mortgages, deeds of trust, and other consensual or confessed liens....
Regulation Z further requires disclosure of the security interest on the same side of the page as the space for the customer's signature. 12 CFR § 226.8(a), (b).
The instant contract is printed on two sides of a single sheet. The signature block is on the front side of the sheet.
On the reverse side of the instant GMAC contract form, the following passage appears:
Return of Premium. If an insurance company returns a premium included in this contract to you, you may purchase similar insurance for me. If you don't purchase similar insurance or insurance to protect your interest only, you will apply the returned premium with the unearned finance charge to my final instalments. You'll notify me of what you do.
There is no mention of this potential returned premium being held by creditor on the front side of the contract although there is a statement disclosing a ...