Appeal from a decision of the District Court for the District of Connecticut, Cabranes, J., granting the plaintiffs summary judgment, and awarding them statutory damages and attorney's fees, in an action alleging violations of federal and state truth-in-lending laws. Judgment reversed, award of attorney's fees vacated, and case remanded with directions to dismiss the complaint. Judge Newman concurs in separate opinion.
Lumbard, Newman, and Pratt, Circuit Judges.
G. Fox & Co. (G. Fox), a department store chain, appeals from orders of the District Court for the District of Connecticut, Cabranes, J., granting Mr. and Mrs. David Gambardella summary judgment, and awarding them statutory damages of $100 and attorney's fees of $6,222, in their action against G. Fox alleging violations of federal and state truth-in-lending laws. The Gambardellas, Connecticut residents, have an open-end credit account with G. Fox. The Gambardellas allege that the monthly account statements G. Fox sent them between September 23, 1980 and September 22, 1981 violated the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., and coordinate Connecticut statutes, Conn. Gen. Stat. §§ 36-393 et seq., in numerous respects. Judge Cabranes, on September 20, 1982, granted the Gambardellas summary judgment on two alleged violations, thus finding it unnecessary to rule upon four additional claims. We believe that G. Fox's account statements complied with applicable laws both in those points ruled upon by Judge Cabranes and those not ruled upon. We therefore reverse the judgment, vacate the award of attorney's fees, and remand with directions to dismiss the complaint.
Congress has authorized the Federal Reserve Board (FRB) to exempt from compliance with TILA, and with the implementing regulations promulgated by the FRB, 12 C.F.R. §§ 226.1 et seq. (Regulation Z), "any class of credit transactions within any State" that the FRB determines to be subject to enforceable state law requirements "substantially similar" to federal disclosure requirements. 15 U.S.C. § 1633. Accordingly, the FRB in 1970 exempted from compliance with TILA and Regulation Z most classes of credit transactions in Connecticut, including open end credit accounts. 12 C.F.R. § 226.55(e). Under the exemption the federal disclosure requirements applicable to Connecticut credit transactions are those imposed by Connecticut's Truth-in-Lending Act, Conn. Gen. Stat. §§ 36-393 et seq., and implementing regulations promulgated by Connecticut's Banking Commissioner, except to the extent that state law requires disclosures not required by federal law. 12 C.F.R. § 226.12(c)(2). See Ives v. W.T. Grant Co., 522 F.2d 749, 753 (2d Cir. 1975); Grey v. European Health Spas, Inc., 428 F. Supp. 841, 843 n.1 (D. Conn. 1977). Since Connecticut law is the law applicable to the Gambardellas' claims, primary citation in this opinion will be made to Connecticut statutes and regulations, and parallel citations, in parentheses, will be made to the corresponding provisions of federal law. The federal and state laws are, however, substantially identical, and are directed toward the same goals, and thus judicial and administrative interpretations of TILA and Regulation Z are relevant here. See Bizier v. Globe Fin. Servs., Inc., 654 F.2d 1, 2 (1st Cir. 1981).
In 1980 Congress substantially amended TILA by enacting the Truth in Lending Simplification and Reform Act (TILSRA), passed as Title VI of the Depository Institutions Deregulation and Monetary Control Act of 1980, Pub. L. No. 96-221, § 601, 94 Stat. 168 (1980). Because G. Fox issued all of the challenged account statements prior to TILSRA's effective date of October 1, 1982,*fn1 this case must be decided under TILA, Regulation Z, and Connecticut law as they stood prior to TILSRA's enactment.
1. Amount of Payment Necessary to Avoid Additional Finance Charges.
G. Fox imposes a monthly finance charge upon the average daily balance in its customers' accounts. The finance charge is assessed at a rate of 1.25% upon the sum of the customer's daily balances during the monthly billing cycle divided by the number of days in the cycle. No finance charge is assessed, however, if the customer's balance at the start of the billing cycle is $3 or less. G. Fox informs customers of its finance charge policy with disclosures on both the front and the reverse of its account statements.*fn2 The front advises customers: "TO AVOID ADDITIONAL FINANCE CHARGES PAY THE NEW BALANCE IN FULL BY THE PAYMENT DUE DATE"; the reverse, however, discloses that "No FINANCE CHARGE is assessed in any billing period in which the 'Previous Balance ' . . . . is $3 or less." The terms "new balance" and "previous balance" are defined by regulation. "New balance" is the account balance at the start, of a billing cycle. § 36-395-6(b)(1)(i),(ix), (§ 226.7(b)(1)(i),(ix)). Because the balances in an account at the close of a given billing cycle, and at the start of the immediately succeeding cycle, are the same, a customer's "new balance" at the close of a cycle is carried into the next billing cycle as his "previous balance." When this relationship between "new balance" and "previous balance" is kept in mind, a contradiction between G. Fox's two disclosures becomes apparent. The front states without qualification that the "new balance" disclosed on the periodic statement must be paid in full to avoid additional finance charges in the subsequent billing period. The reverse, however, reveals that additional finance charges will not be assessed, even if no payment is made, if the "new balance" is $3 or less.*fn3 The Gambardellas claim, and the district judge ruled, that this contradiction violates Connecticut regulations governing the disclosure of information in periodic statements.*fn4 We disagree.
Creditors who maintain open-end credit accounts must, at the close of each billing cycle, provide their customers with account statements disclosing the information specified in Conn. Bank. Reg § 36-395-6(b)(1), (§ 226.7(b)(1)). The required disclosures must be made "clearly, conspicuously, in meaningful sequence, . . . . and at the time and in the terminology prescribed." § 36-395-5(a), (§ 226.6(a)). The creditor may, if it chooses, include in its periodic statements additional information or explanations but such additional information may not be "stated, utilized or placed so as to mislead or confuse the customer or contradict, obscure or detract attention from the information required to be disclosed." § 36-395-5(b), (§ 226.6(c)). The district judge did not determine whether § 36-395-6(b)(1) requires disclosure of the amount of payment necessary to avoid additional finance charges. Instead, the judge ruled that the contradiction between G. Fox's statements rendered them "unclear and misleading," and placed them in violation of the regulations, regardless of whether disclosure was required or voluntary. We believe the judge should have determined, before making his ruling, whether § 36-395-6(b)(1) required G. Fox to disclose the information at issue. As § 36-395-5(a)&(b) establish different standards of review for required and additional disclosures, analysis of the Gambardellas' claim would have been facilitated by such a determination. We conclude that the amount of payment necessary to avoid additional finance charges is an additional, and not a required, disclosure.
Our analysis necessarily begins with the express language of the statute and regulations. See Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 560, 63 L. Ed. 2d 22, 100 S. Ct. 790 (1980). Section 36-404(b)(9) & (10) of the Connecticut General Statutes (15 U.S.C. § 1637(b)(9) & (10)), specifies the information creditors must reveal about additional finance charges. The statute is implemented in Conn. Bank. Reg. § 36-395-6(b)(1)(ix), (12 C.F.R. § 226.7(b)(1)(ix)) ("Section 9"), which requires disclosure of:
the closing date of the billing cycle and the outstanding balance in the account on that date, using the term "new balance", . . . . accompanied by the statement of the date by which, or the period, if any, within which, payment must be made to avoid additional finance charges, except that the creditor may, at his option, and without disclosure, impose no such additional finance charges if payment is received after such date or termination of such period.
Although this language clearly requires creditors to disclose (1) the closing date of the billing cycle, (2) the "new balance," and (3) the payment due date, neither it, nor any other provision of the state or federal regulations, expressly requires disclosure of the amount of payment necessary to avoid additional finance charges.
The absence of an express disclosure requirement in the regulations is significant, although not conclusive, evidence that disclosure is not required. Regulation Z "cannot speak explicitly to every credit disclosure issue," Milhollin, 444 U.S. at 560, and courts therefore must be prepared, in appropriate cases, to infer from the statutory and regulatory schemes, and from TILA's underlying policies, disclosure requirements beyond those expressly stated in the regulations.
The regulatory scheme strongly suggests that disclosure of the amount of payment necessary to avoid finance charges is not required. Particular regard must be paid § 36-395-6(b)(1)(v), (§ 226.7(b)(1)(v)), ("Section 5"), which requires creditors to disclose certain information about the methods used to compute finance charges. Section 5 requires disclosure of "each periodic rate . . . . that may be used to compute the finance charge, whether or not applied during the billing cycle, and the range of balances to which it is applicable," but provides that "if a creditor does not impose a finance charge when the outstanding balance is less than a certain amount, the creditor is not required to disclose that fact or the balance below which no such charge will be imposed." The balance at or below which finance charges are not imposed is, of course, equivalent to the maximum balance which need not be paid to avoid additional finance charges. Section 5 thus expressly authorizes creditors to withhold, for purposes of the disclosure it requires, the information the Gambardellas claim is implicitly covered by Section 9.
Sections 5 and 9 are in part directed toward different goals. Customers can use the interest rates disclosed under Section 5 to check the accuracy of finance charges already assessed. In contrast, disclosure of closing and payment dates, and of the account "new balance," under Section 9 helps customers to avoid new finance charges, and not to review past charges. The Gambardellas claim that this distinction establishes the irrelevancy of Section 5 to the proper interpretation of Section 9. They argue that Section 9 is intended to reveal the information consumers need to avoid additional finance charges, and that the regulation's goal will be thwarted if Sections 5 and 9 are interpreted in tandem. We do not agree. Whatever policies lie behind Section 9, the very existence of the Section 5 exemption reveals that the FRB was aware, when it drafted the regulations, that some creditors do not impose finance charges upon small balances. We therefore must presume that the FRB's failure expressly to require disclosure in Section 9 reflects informed choice, and not oversight. Indeed, since Section 5 includes a proviso expressly exempting from disclosure information otherwise covered by the clear language of the regulation, and since Section 9, giving the language its ordinary meaning, does not require disclosure of the information exempted from Section 5, we conclude that the FRB did not intend to require disclosure.*fn5
The policy behind TILA supports our interpretation of the regulations. Congress intended TILA to facilitate the informed use of credit by consumers, to protect consumers against inaccurate and unfair credit billing practices, and to enhance competition between credit extenders. See 15 U.S.C. § 1601. To these ends TILA requires creditors to disclose the information specified in the Act and Regulation Z. However, the "meaningful" disclosure TILA requires, Milhollin, 444 U.S. at 568, should not be equated with complete disclosure of all credit terms of potential use to consumers. Instead, TILA requires the FRB to strike "a balance between 'competing considerations of complete disclosure . . . . and the need to avoid . . . . [informational overload]. '" Id., quoting S. Rep. No. 73, 96th Cong., 2d Sess. 3 (1979). The FRB could reasonably have determined, when drafting Regulation Z, that required disclosure of the amount of payment necessary to avoid additional finance charges would create more confusion than benefits. The potential for confusion becomes apparent when one considers the statement G. Fox would have to make to satisfy the Gambardellas. The statement the Gambardellas challenge, "TO AVOID ADDITIONAL FINANCE CHARGES PAY THE NEW BALANCE IN FULL BY THE PAYMENT DUE DATE," though generally accurate, is misleading to consumers who have "new balances" of $3 or less. Those consumers need not make any payment to avoid additional finance charges. G. Fox could correct the inconsistency by stating: "To avoid additional FINANCE CHARGES pay the New Balance in full whenever the New Balance is more than $3." This latter statement, however, undoubtedly would cause many consumers to believe that payment of all but $3 of the "new balance" would eliminate finance charges in the subsequent billing period. Such is not the case.*fn6 Complete front-side disclosure would benefit only those few persons with new balances between $0 and $3. Beyond the deference we must give the regulations, we cannot say the FRB erred in declining to require disclosure of potentially confusing information that is of slight interest to a few consumers, and of importance to none.*fn7 Cf. Pittman v. Money Mart, Inc., 636 F.2d 993, 995-96 (5th Cir. 1981) (Full disclosure of creditor's late charge policy not required where disclosure would unduly complicate statements provided to consumers).
Because the amount of payment necessary to avoid additional finance charges is not a required disclosure, G. Fox's reverse-side statement, " No FINANCE CHARGE is assessed in any billing period in which the 'Previous Balance ' . . . . is $3 or less," must be treated as an additional disclosure reviewable under § 36-395-5(b), (§ 226.6(c)). As an additional disclosure, the statement is a violation if it has been "stated, utilized or placed so as to mislead or confuse the customer or contradict, obscure or detract attention from the information required to be disclosed." This regulation states first that the creditor may not "mislead or confuse the customer." Second, it states that the additional disclosure may not "contradict, obscure or detract attention from" information required to be disclosed. Addressing the second prohibition first, it is readily apparent that G. Fox's reverse-side statement does not "contradict, obscure or detract attention from" any required disclosure. Section 9, (§ 36-395-6(b)(1)(ix)), supra, requires disclosure of only (1) the closing date, (2) the new balance, and (3) the payment due date. An additional disclosure of the circumstances in which additional finance charges are not assessed cannot impair the customer's understanding of the dates and balances disclosed under Section 9. Further, we believe that the first part of § 36-395-5(b) proscribes only presentations of additional information that mislead or confuse the consumer in his understanding of information required to be disclosed. Accord, Stewart v. Ford Motor Credit Co., 685 F.2d 391, 394 (11th Cir. 1982); Fox v. Heilig-Meyers Co., 681 F.2d 212, 214 (4th Cir. 1982).*fn8 The focus of TILA is upon the clear and conspicuous disclosure of information specified by statute and regulation. Section 36-395-5(b) should not be read to depart from the Act's basic pattern by authorizing courts to premise liability upon an unclear presentation of optional information.*fn9 G. Fox's reverse-side statement certainly does not violate the regulation under our interpretation. Even if the statement confuses consumers about the payment necessary to avoid finance charges (and we doubt that it does), it could not possibly confuse or mislead anyone about the information G. Fox discloses under Section 9. Since, then, the only possible confusion relates to an additional, and not to a required, disclosure, no violation has occurred.*fn10
2. Notice of Reverse-Side Disclosures.
A creditor may, if it chooses, place certain required disclosures upon the reverse of its periodic statements. 12 C.F.R. § 226.7(c), (§ 36-395-6(c)). If a creditor exercises this option, as G. Fox has done, it must disclose that fact to consumers. Section 226.7(c)(4), (§ 36-395-6(c)(4)), provides:
If the creditor exercises any of the options [for reverse-side disclosure] provided for under this paragraph, the face of the periodic statement shall contain one of the following notices, as applicable: " NOTICE: See reverse side for important information" . . . .
Section 226.7(c)(4), as it appears in the Code of Federal Regulations, sets the word "NOTICE" apart from the remainder of the required notice by printing it in bold, italicized capitals. The remainder of the notice, in contrast, is not italicized and, with the exception of the capitalized "S" in "See," is printed in lower case. G. Fox printed the § 226.7(c)(4) notice on the face of its periodic statements as follows: "NOTICE: SEE REVERSE SIDE FOR IMPORTANT INFORMATION". G. Fox thus printed the words used in § 226.7(c)(4), but printed them in a different style. Not only did G. Fox fail to italicize "NOTICE," it printed the words following the colon in upper rather than lower case. The Gambardellas claim, and the district judge agreed, that the variance between G. Fox's print style and that found in § 226.7(c)(4) violated TILA.*fn11 The district judge concluded that the use of the imperative word "shall" in § 226.7(c)(4), together with the differentiation in print style between the required notice and the remainder of the regulation, indicates that "a creditor must print the required notice as it appears in the regulation, including its peculiar print and type characteristics." We disagree.
Several factors indicate that § 226.7(c)(4) does not impose print style requirements. First, the FRB apparently states such requirements expressly when it intends to impose them. A different provision of Regulation Z, § 226.6(a), provides:
Where the terms "finance charge" and "annual percentage rate" are required to be used, they shall be printed more conspicuously than other terminology required by this part and all numerical amounts and percentages shall be stated in figures and shall be printed in not less than the equivalent of 10 point type,.075 inch computer type, or elite size typewritten numerals. . . .
(emphasis supplied). Section 226.7(c)(4) contains no language similar to that emphasized above. Where an administrative agency has "carefully employed a term in one place and excluded it in another," the "usual canons of statutory construction" counsel that the term not be implied where excluded. Marshall v. Western Union Tel. Co., 621 F.2d 1246, 1251 (3rd Cir. 1980). The FRB's use of express print style requirements in § 226.6(a), and its omission of such terms from § 226.7(c)(4), thus suggests that the district judge misread § 226.7(c)(4). Second, neither Regulation Z nor the Connecticut regulations have themselves consistently used the print style the Gambardellas claim is mandatory. The FRB promulgated Regulation Z in 1969. The required notice, as then stated, and as first codified in § 226.7(c)(3) in 1970, was printed as "NOTICE: See reverse side for important information." The FRB added italics in 1976 without explanation. The Connecticut regulations, between 1969 and 1979, printed the required notice as it first appeared in Regulation Z. See § 36-395-6(c)(3) (1970). Connecticut did not, between 1976 and 1979, add to § 36-395-6(c)(3) the italics the FRB added to § 226.7(c)(4) in 1976. Beginning in 1979, and continuing thereafter throughout the time period relevant to this case, Connecticut printed the required notice as: "Notice: see reverse side for important information." See § 36-395-6(c)(4) (1979). The Connecticut regulation, so printed, differed from the federal in failing both to capitalize the "s" in "see," and to capitalize and italicize "Notice." States granted exemptions under 15 U.S.C. § 1633 must insure that creditors "make required disclosures and deliver required notices in form, content, and terminology as prescribed" in Regulation Z. § 226.50(c)(2)(iii) (emphasis supplied). Accordingly, if § 226.7(c)(4) requires creditors to print the notice provision in a specific form, Connecticut should have italicized "NOTICE" after 1976, and should not have amended its regulation in 1979 to create further distinctions between it and § 226.7(c)(4). Although Connecticut's failure to track the federal regulation could be accidental, the FRB's failure in 1976 to explain why it italicized "NOTICE" suggests that it also did not view a change in print style as a substantive amendment. Lastly, the FRB in 1969 issued a pamphlet entitled "What You Ought to Know About Federal Reserve Regulation Z -- Truth in Lending Consumer Credit Cost Disclosure." The FRB intended the pamphlet to help creditors ...