Webb Ford, Inc. v. Ind. Dep't of Fin. Institutions

133 N.E.3d 136

WEBB FORD, INC., Appellant-Petitioner,

v.INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS, Appellee-Respondent

Court of Appeals Case No. 18A-PL-2675

Court of Appeals of Indiana.

Filed August 19, 2019

Attorneys for Appellant: Ronald C. Smith, Joel T. Nagle, Stoll Keenon Ogden PLLC, Indianapolis, Indiana

Attorneys for Appellee: Thomas W. Dinwiddie, Allison Wells Gritton, Wooden McLaughlin LLP, Indianapolis, Indiana

Attorneys for Amicus Curiae the Indiana Bankers Association: Libby Yin Goodknight, Brett J. Ashton, Krieg DeVault LLP, Indianapolis, Indiana

Vaidik, Chief Judge.

Case Summary

[1] This case concerns two provisions of the Indiana Uniform Consumer Credit Code (IUCCC): one that requires sellers to disclose finance charges to credit customers, Indiana Code section 24-4.5-2-301, and one that allows sellers to impose certain charges on credit customers "in addition to" finance charges, Indiana Code section 24-4.5-2-202. For a period of time, Webb Ford, a car dealership in Highland, imposed a finance charge on credit customers but did not disclose it as such. The Indiana Department of Financial Institutions (DFI) initiated an enforcement action against Webb Ford, but it did not treat the charge as an undisclosed finance charge, i.e., a violation of the disclosure statute. Instead, DFI treated it as an "impermissible additional charge," i.e., a violation of the additional-charges statute. Webb Ford argues that a finance charge does not cease being a finance charge merely because it is not disclosed as such. We agree with Webb Ford. Accordingly, we remand this matter to DFI for further proceedings under the disclosure statute.

Facts and Procedural History

[2] DFI regulates and supervises financial-services providers, including those who provide motor-vehicle financing. DFI administers the IUCCC, Indiana Code article 24-4.5. See Ind. Code § 24-4.5-1-201 (setting forth the purposes and policies of the IUCCC). Among other provisions, the IUCCC incorporates federal law regarding what sellers must disclose to buyers in consumer credit sales:

The seller shall disclose to the buyer to whom credit is extended with respect to a consumer credit sale ... the information required by the Consumer Credit Protection Act ( 15 U.S.C. 1601 et seq. ).

Ind. Code § 24-4.5-2-301(2) ("the disclosure statute").

[3] The Truth in Lending Act (TILA) is contained in Title I of the Consumer Credit Protection Act. Congress passed TILA "to promote consumers' ‘informed use of credit’ by requiring ‘meaningful disclosure of credit terms,’ 15 U.S.C. § 1601(a), and granted the Board [of Governors of the Federal Reserve System] the authority to issue regulations to achieve TILA's purposes, § 1604(a)." Chase Bank USA, N.A. v. McCoy , 562 U.S. 195, 198, 131 S.Ct. 871, 178 L.Ed.2d 716 (2011). Pursuant to this authority, the Board promulgated Regulation Z. Id. Regulation Z requires creditors to make disclosures "clearly and conspicuously in writing, in a form that the consumer can keep." 12 C.F.R. § 1026.17. Required written disclosures include: (1) the "amount financed"; (2) an "itemization of amount financed"; (3) the "finance charge"; and (4) the "annual percentage rate." 12 C.F.R. § 1026.18(b) - (e) ; see also 15 U.S.C. § 1638(a). "Finance charge" is defined as follows:

The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

12 C.F.R. § 1026.4(a) ; see also 15 U.S.C. § 1605(a).¹ It is a violation of the IUCCC to "fail to make disclosures as required by" TILA and Regulation Z. Ind. Code § 24-4.5-6-107.5(g).

[4] In 2007, the Indiana Bureau of Motor Vehicles (BMV) began a pilot program that allowed car dealerships to offer registration and titling services at the time of the sale, thereby saving customers a trip to the BMV. Appellant's App. Vol. III p. 128. The BMV allowed dealerships to charge customers a convenience fee for this service.²

[5] Thereafter, Webb Ford began charging a $25.00 convenience fee to its credit customers for electronic titling with the BMV through a third party, Computerized Vehicle Registration (CVR). Webb Ford charged the $25.00 convenience fee in addition to a $15.00 fee that went to the BMV. Appellant's App. Vol. III p. 127. Webb Ford required its credit customers to use electronic filing because the lenders to whom Webb Ford assigned the retail installment contracts required the dealership to show the assignee's name on the title before they would accept the contract. Id. at 119, 127. Webb Ford, however, did not require its cash customers to use this service but rather gave them the option. Approximately 40% of Webb Ford's cash customers opted to use electronic filing and pay the $25.00 convenience fee. The remaining 60% went to the BMV themselves, thereby avoiding the fee altogether.

[6] For several days in December 2015 and January 2016, DFI conducted a routine examination of Webb Ford's records for compliance with the IUCCC, including TILA and Regulation Z. In February 2016, DFI issued a Consumer Credit Examination Report. Appellant's App. Vol. II pp. 29-36. In this examination report, DFI identified "[o]ne violation" from a transaction on July 27, 2015, where Webb Ford did not properly disclose the $25.00 convenience fee on the retail installment contract. Id. at 32. According to DFI, Webb Ford should have disclosed the $25.00 convenience fee in the "Finance Charge" box, as the fee was only mandatory for credit customers and therefore was "a condition of the extension of credit." Id. Although Webb Ford did not provide the retail installment contract from that July 27, 2015 transaction, it did provide another one from the same time period. According to this retail installment contract, Webb Ford disclosed the $25.00 convenience fee (referred to as a "Filing Fee" on the contract) in the "Itemization of Amount Financed" and "Amount Financed" boxes, not in the "Finance Charge" box:³

Appellant's Supp. App. Vol. II p. 2.⁴ As a result of finding this violation, DFI ordered Webb Ford to conduct a "file search" to "identify and refund all instances where [the $25.00 convenience fee was] assessed on consumer credit sales since December 30, 2013."⁵ Appellant's App. Vol. II p. 32.

[7] Thereafter, Webb Ford and DFI tried to resolve the matter informally. Webb Ford told DFI that by April 2016, it had discontinued its practice of "including the convenience fee in the Amount Financed" box and had started charging "both credit and cash customers alike the convenience fee charge, which removed it from the disclosure requirements of TILA." Id. at 41.

[8] When Webb Ford and DFI could not resolve the matter informally, DFI issued a Notice of Charges, Order to Cease and Desist, and Make Restitution in November 2016. DFI did not charge Webb Ford with violating the disclosure statute for not disclosing the $25.00 convenience fee in the "Finance Charge" box, as one might have expected it to do. Rather, DFI charged Webb Ford with violating a different part of the IUCCC, Indiana Code section 24-4.5-2-202 ("the additional-charges statute"), for assessing "impermissible additional charges" in the form of the $25.00 convenience fee. Id. at 56, 57. The additional-charges statute provides, in pertinent part:

In addition to the [finance] charge permitted by this chapter, a seller may contract for and receive any of the following additional charges in connection with a consumer credit sale:

(a) Official fees and taxes.

(b) Charges for insurance as described in subsection (2).

(c) Notwithstanding provisions of the Consumer Credit Protection Act ( 15 U.S.C. 1601 et seq. ) concerning disclosure, charges for other benefits, including insurance, conferred on the consumer, if the benefits are of value to the consumer and if the charges are reasonable in relation to the benefits, and are excluded as permissible additional charges from the credit service charge. With respect to any additional charge not specifically provided for in this section, to be a permitted charge under this subsection the seller must submit a written explanation of the charge to the department indicating how the charge would be assessed and the value or benefit to the consumer. Supporting documents may be required by the department. The department shall determine whether the charge would be of benefit to the consumer and is reasonable in relation to the benefits.

(d) A charge not to exceed twenty-five dollars ($25) for each returned payment by a bank or other depository institution of a dishonored check, electronic funds transfer, negotiable order of withdrawal, or share draft issued by the consumer.

(e) Annual participation fees assessed in connection with a revolving charge account....

(f) A charge not to exceed twenty-five dollars ($25) for a skip-a-payment service ....

(g) A charge not to exceed ten dollars ($10) for an optional expedited payment service ....

(h) A charge for a GAP agreement, subject to subsection (4).

Ind. Code § 24-4.5-2-202(1). According to DFI, because Webb Ford did not "treat the $25.00 [convenience fee] as a part of the" finance charge, it "attempt[ed] to treat the fee as an additional charge," but such a fee was not authorized pursuant to the additional-charges statute. Appellant's App. Vol. II p. 32. Accordingly, DFI ordered Webb Ford to (1) "Cease and Desist charging a mandatory $25 electronic vehicle registration fee[ ] to credit customers only when such fees are not also charged to cash customers" and (2) "search its files from December 30, 2013 to the present to identify and to refund all impermissible additional charges that were assessed to consumer credit buyers but not to cash buyers." Id. at 58.

[9] Webb Ford sought review of DFI's order, and DFI appointed an administrative law...