Aleman v. Ellington Auto Sales & Financing LLC
The Truth In Lending Act does not require that the terms of a separate transaction to pay back a note be included in the retail installment sales contract for the purchase of a motor vehicle. In February 2010, the plaintiffs were interested in the purchase of a 1999 Mercury Cougar. The plaintiffs only had $1,000, and the auto dealer required a $1,700 downpayment. The defendants offered to finance $700, and the plaintiffs paid $1,000 in cash. The plaintiffs signed a note to pay back the $700 and also a retail installment sales contract for the purchase of the motor vehicle. The plaintiffs agreed to pay $50 per week for 14 weeks, to pay back the $700. The truth-in-lending disclosure described the downpayment as $1,700. The payment schedule for the retail installment sales contract did not include the payment of $50 per week for 14 weeks. The loans had different payment schedules and interest rates. The plaintiffs sued and alleged that the defendants violated the Truth In Lending Act, in part because the retail installment sales contract described the downpayment as $1,700 and did not disclose that $700 was financed. "At issue," wrote the court, "is whether . . . TILA required the terms of the Note and the [retail installment sales contract] to be disclosed in the same document." The court found that although part of the plaintiffs' downpayment was in the form of a $700 note, the plaintiffs paid the full downpayment at the time that the sale closed. Regulation Z and its commentary, which interpret the Truth In Lending Act, permitted the defendants to disclose the terms of the $700 transaction separately from the terms of the retail installment sales contract. Regulation Z and its commentary provide, "The separate financing of a downpayment in a credit sale transaction may, but need not be, disclosed as [two] transactions." The court found that the defendants were not required to make disclosures concerning the $700 note and the retail installment sales contract in a single document. The plaintiffs failed to prove the defendants violated the Truth In Lending Act, and the court granted the defendants' motion for partial summary judgment.