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April 29, 2003


The opinion of the court was delivered by: Jeffrey T. Miller, United States District Judge


Plaintiffs Malinee and Ritnarone Virachack have filed this class action on behalf of themselves and others similarly situated alleging violations of the Federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., by the defendant automobile dealer Bob Baker Ford. The parties have filed cross-motions for summary judgment.*fn1 The dispositive issue before the court is whether a car dealership must disclose to the consumer a withheld manufacturer's rebate which is available to cash and credit purchasers but unavailable to consumers who receive a promotional annual percentage rate of interest ("APR"). Pursuant to Local Rule 7.1(d)(1), the court finds these motions appropriate for decision without oral argument.


The essential relevant facts are undisputed.*fn2 In November 2001, plaintiffs*fn3 entered into a Retail Installment Sales Contract and purchased a new Ford Explorer for a stated price of roughly $20,000 (excluding tax, license, dock fees, etc.) at a stated APR of 0.9%. Under this stated APR, defendant disclosed to plaintiffs that they incurred a total finance charge of approximately $417.

In order to receive the 0.9% APR, plaintiffs were required to agree to the assignment of the contract to Ford Motor Credit Company ("FMCC"). At the time of the execution of the contract, both plaintiffs and defendant intended that the contract be assigned to FMCC, and it is undisputed defendant did not inform plaintiffs that they would have received a $2,000 rebate from Ford Motor Company ("Ford") had they paid cash for the Explorer. Plaintiffs could not receive both the rebate and the 0.9% APR. Plaintiffs, however, could have received the manufacturer's $2,000 rebate and independently financed the purchase of the vehicle had they not received the promotional 0.9% APR.

In summary, defendant made the following TILA disclosures:

(1) APR — 0.9%

(2) FINANCE CHARGE — $417.47

(3) AMOUNT FINANCED — $22,615.53

(4) TOTAL OF PAYMENTS — $23,032.80

(5) TOTAL SALE PRICE — $27,335.94 (includes down payment of approximately $4,000)

A court may grant summary judgment when there are no genuine issues of material fact and the party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Arpin v. Santa Clara Valley Transp. Agengy, 261 F.3d 912, 919 (9th Cir. 2001). Additionally, summary adjudication is appropriate on discrete claims where no genuine issues of material fact exist as to that claim. Fed.R.Civ.P. 56(a). Neither party raises any genuine issue of material fact making summary judgment on the claimed violation of TILA appropriate in this case. Congress enacted TILA based on the findings that free-market competition and the economy would be strengthened through the informed use of credit which, in turn, "results from an awareness of the cost thereof by consumers." 15 U.S.C. § 1601(a). Congress explicitly set forth the purpose of TILA in the Act:

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, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.
Id.; see also Mourning v. Family Pubs. Service, Inc., 411 U.S. 356, 364-65 (1973) (TILA intended to prevent creditors from obscuring the cost of credit to consumers). As the Supreme Court has explained, "[m]eaningful disclosure does not mean more disclosure. Rather, it describes a balance between `competing considerations of complete disclosure and the need to avoid information overload.'" Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 568 (1980) (quoting S.Rep. 96-73, p. 3 (1979)) (emphasis in original). In other words, the evaluation of a credit transaction should focus on "the economic substance of the transaction." Williams v. Chartwell Financial Services, Inc., 204 F.3d 748, 753 (7th Cir. 2000). Furthermore, due to the inherent complexity in striking a meaningful balance, Congress granted the Federal Reserve Board ("FRB") "expansive authority . . . to elaborate and expand the legal framework governing commerce in credit." Ford Motor Credit Co., 444 U.S. at 560. Consequently, "traditional acquiescence in administrative expertise is particularly apt under TILA, because the Federal Reserve Board has played a pivotal role in setting the statutory machinery in motion." Id. at 566 (citations omitted) (holding courts must defer to Federal Reserve Board staff opinions construing TILA or the underlying regulations unless such opinions are "demonstrably irrational").

In this case, the parties dispute whether TILA requires a car dealership to disclose a manufacturer's rebate that is unavailable to credit consumers buying at a promotional APR but available to cash consumers and credit consumers who receive an APR other than the promotional rate. More specifically, the issue is whether the forgone rebate is a "finance charge" under TILA, i.e., a charge imposed incident to the extension of credit, due to the fact that the rebate is withheld from credit consumers who receive the ...

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