Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980)

Ford Motor Credit Co. v. Milhollin

No. 78-1487

Argued December 4, 1979
Decided February 20, 1980 *
444 U.S. 555

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

Respondents financed their purchases of automobiles through standard retail installment contracts that were assigned to petitioner finance company. Each contract provided that respondents were to pay a precomputed finance charge, and, as required by the Truth in Lending Act (TILA) and implementing Federal Reserve Board (FRB) Regulation Z, the front page of each contract disclosed and explained certain features of the contract, including a disclosure that the buyer could prepay his obligations under the contract in full at any time prior to maturity of the final installment and that, if he did so, he would receive a rebate of the unearned portion of the finance charge. The face of the contract also stated that temporary default on a particular installment would result in a delinquency charge, but no mention was made of a clause in the contract giving the creditor a right to accelerate payment of the entire debt upon the buyer’s default. Respondents thereafter brought separate suits in District Court, alleging, inter alia, that petitioner finance company had violated TILA and Regulation Z by failing to disclose on the front page of the contract that the creditor retained the right to accelerate payment of the debt. The District Court, in two of the suits, held that facial disclosure of the acceleration clauses was mandated by the provisions of TILA, 15 U.S.C. §§ 1638(a)(9), 1639(a) (7), that compel publication of "default, delinquency, or similar charges payable in the event of late payments." On a consolidated appeal, the Court of Appeals agreed that TILA imposes a general acceleration clause disclosure requirement, but rather than holding that acceleration is a default charge, the Court of Appeals based its decision on the principle that, under Regulation Z, the creditor must disclose whether a rebate of unearned interest will be made upon acceleration, and also must disclose the method by which the amount of unearned interest will be computed if the debt is accelerated. In so holding, the court rejected the FRB staff’s contrary interpretation of the pertinent statutory and regulatory provisions that specific disclosure of an acceleration rebate policy is only necessary when that policy varies from the custom with respect to voluntary prepayment rebates.

Held: TILA does not mandate a general rule of disclosure for acceleration clause. Pp. 559-570.

(a) The issue of acceleration disclosure is not governed by clear expression in the statute or regulations. An acceleration clause cannot be equated with a "default, delinquency, or similar charg[e]," subject to disclosure under §§ 1638(a)(9) and 1639(a)(7) and Regulation Z, and the prepayment rebate disclosure requirement of Regulation Z also fails to afford direct support for an invariable specific acceleration disclosure rule. Pp. 559-562.

(b) In the absence of an express statutory mandate that acceleration procedures be invariably disclosed, a high degree of deference to the FRB staff’s consistent administrative interpretation that the statute and regulations impose no such uniform requirement is warranted. Although the staff might have decided that acceleration rebates are so analytically distinct from identical voluntary prepayment rebates as to warrant separate disclosure, it was reasonable to conclude, alternatively, that ordinary consumers would be concerned chiefly about differing financial consequences. Pp. 562-570.

588 F.2d 753, reversed and remanded.

BRENNAN, J., delivered the opinion for a unanimous Court. BLACKMUN, J., filed a concurring opinion, in which BURGER, C.J., joined, post, p. 570.