I have a bit of this and a bit of that this month. I want to share with you some fan mail I received, note the death and accomplishments of Senator William Proxmire and muse over a recent release from the Federal Reserve Board.
The Mail Bag. When you write articles, you occasionally get some feedback from your readers. Here is a missive I received, just before Christmas, from a devoted fan in response to last month’s article in which I made reference to a “shyster lawyer”:
I am often called upon to advise my many dealer contacts about insurance matters. In doing so, I try to present myself as a scrupulous practitioner of the law. I believe I am viewed by them as a highly ethical and honest attorney. I truly believe not one of them would refer to me as their “friendly, local shyster.” It isn’t bad enough that the general public perceives lawyers as “shysters,” but to hear a lawyer call other lawyers “shysters” does a serious disservice to those of us who have to combat that image every day. Obviously, you consider yourself a shyster and therefore I must conclude you are both unethical and unscrupulous in your day-to-day practice of the law. I think it is sad you have assumed the role of the “friendly, local shyster” to your clients.
I am often called upon to advise my many dealer contacts about insurance matters. In doing so, I try to present myself as a scrupulous practitioner of the law. I believe I am viewed by them as a highly ethical and honest attorney. I truly believe not one of them would refer to me as their “friendly, local shyster.” It isn’t bad enough that the general public perceives lawyers as “shysters,” but to hear a lawyer call other lawyers “shysters” does a serious disservice to those of us who have to combat that image every day. Obviously, you consider yourself a shyster and therefore I must conclude you are both unethical and unscrupulous in your day-to-day practice of the law. I think it is sad you have assumed the role of the “friendly, local shyster” to your clients.
Whenever I read one of your future articles I will do so with the suspicion you are promoting skullduggery among your readers.
Well! I guess he told me!
I e-mailed him back and told him that I hoped Santa would bring him a sense of humor. You guys go out and do some of that skullduggery stuff, OK?
Senator William Proxmire.
Some readers may be old enough to remember a time when there was no Federal Truth in Lending Act. If you were in this business in the mid-sixties, you didn’t have to worry about any federal laws that required the disclosure of finance charges, interest rates and other terms of credit.
That changed in the late sixties, when Wisconsin Senator William Proxmire successfully pushed for the enactment of TILA. He later championed other consumer protection measures, including the Fair Credit Reporting Act, which my partner Anne Fortney credits with giving U.S. citizens a bargain on credit rates compared to the rest of the world. In addition, I have little doubt that his efforts on behalf of consumers inspired consumer advocates to press for a variety of state law measures for which he doesn’t get credit. I’m a fellow of the American College of Consumer Financial Services Lawyers, and last year the ACCFSL awarded Senator Proxmire its Lifetime Achievement Award for his many contributions to the protection of consumers.
The Senator died in mid-December. He changed the face of consumer credit in America forever, benefiting consumers and providing a framework for all creditors to compete fairly for business. We should thank him for all he has done for us as consumers and as businesspeople.
The Truth in Lending Act.
When the Truth in Lending Act was passed, Congress was concentrating on protecting ordinary citizens engaging in consumer credit transactions. The general consensus among the lawmakers was that business credit to individuals, credit extended to corporations and partnerships and credit extended to the well-to-do were not in need of regulation. Congress’ answer to the carve-out of credit extended to the well-to-do was to limit the application of TILA (in other than residential credit) to transactions in which the amount financed exceeded $25,000. But Congress didn’t provide that the $25,000 cap would be adjusted for inflation.
Oops.
In the car world, there were precious few cars that cost anywhere near $25,000 in 1968. I recall buying a brand new 1964 Ford Falcon for $1,964 (clever, huh), and paying under $1,800 for a new 1967 VW Beetle. I can’t recall what a Mercedes-Benz went for, but I’ll bet you could buy one for $5,000 or so. It’s probably safe to say that in 1968, and the years immediately following, nearly 100 percent of car credit transactions were subject to TILA.
All of this came to mind a couple of weeks back when the Federal Reserve Board released a batch of credit statistics showing that the average amount financed in car credit transactions was just a few hundred dollars shy of the $25,000 mark. Now, I have taken statistics courses, and I know the difference between an average and a median, but it still looks like some significant percentage of car deals – some percentage a bit under 50 percent – are no longer covered by TILA.
What is the practical implication of this bit of trivia, you ask? Well, it shouldn’t change the way you do business, that’s for sure. You should go right on using those contracts containing TILA disclosures, even when those disclosures aren’t required.
Why? For starters, it’s hard enough for dealers to get this compliance stuff right without having two sets of documents, one for TILA deals and one for non-TILA deals. Many states have disclosure requirements too, and most retail installment sales contracts are set up to combine many of the required state disclosures with the federal itemization of amount financed, the federally-required payment schedule and federally-required disclosures. And some states, like California, require as a matter of STATE law that creditors make federal TILA disclosures even when federal law does not require them.
It is helpful in defending TILA cases against dealerships to keep the $25,000 figure in mind. The fact that the amount financed in a transaction exceeds $25,000 should be a complete defense to a TILA claim.
That’s it for this month. Keep those cards, letters and hate mail coming.
Vol 3, Issue 2
