In Aleman v. Ellington Auto Sales & Financing, LLC, 2012 WL 3611212 (D.Conn. 2012), Judge Underhill found that a downpayment on a car evidence by a note was not a deferred down-payment under TILA, but rather was permitted under Reg. Z’s allowance of a creditor to disclose the terms of the Note separately from the disclosures pertaining to the RISC.  The facts were as follows:

On February 25, 2010, the Alemans executed a retail purchase order to buy a 1999 Mercury Cougar from the defendants. At that time, the Alemans only had $1,000 available for a down payment on the vehicle. Ellington required a down payment of $1,700 in order for the Alemans to purchase the vehicle. Ellington offered to finance the $700 difference between the money available to the Alemans at the time of pur-chase and the $1,700 down payment it required. Thereafter, on February 25, the Alemans paid Ellington $1,000 in cash. ¶  On March 2, 2010, the Alemans and Ellington entered into a Retail Installment Sale Contract (“RISC”) for the sale of the vehicle. The Alemans and Ellington also entered into a separate installment note pertaining to a $700 loan that obligated the Alemans to make fourteen weekly payments of $50, beginning on March 10, 2010. ¶ The Truth in Lending disclosures in the RISC listed the down payment amount as $1,700. That amount included the $700 payable under the Note as part of the down payment. The disclosures did not include the $700 payable under the Note as part of the “Amount Financed.” The payment schedule on the RISC did not include the fourteen weekly installment payments of $50 payable under the Note. ¶  The Note charged zero interest. The due date of the final payment on the Note was June 16, 2010. The Alemans’ second payment under the RISC was due on or before March 17, 2010. ¶ Over the course of the fourteen-week payment period under the Note, the Alemans made each pay-ment due. The Alemans did not pay the total $700 balance of the Note on or prior to March 17, 2010. ¶ At no time following the purchase did the Ale-mans raise any questions with Ellington or Autoflow about the amount of payments due or the payment schedule. The amount of the Finance Charge on the RISC was $2,580.88.

Judge Underhill found no fault with the financing of the down-payment:

At the outset, it is important to define the context of the discussion. There are two different ways a down payment can be paid. First, the buyer can provide the full down payment at the time the sale closes. Second, the buyer can provide less than the full down payment at the time the sales closes, and agree to provide the rest at a later date. The second scenario involves a deferred down payment. ¶  The issue turns on whether a formal, documented loan of a portion of the down payment falls in the first category or the second category. I conclude that it falls in the first category, because no portion of the down payment was deferred. The Alemans provided the full down payment to the seller at the time of closing; some of the down payment was in cash, and some of it was in the form of the Note, but all of it was provided to the seller. The fact that the full down payment was provided would seem obvious if the lender of the down payment had been a third party. In such a situation, the Alemans undoubtedly would have paid all of the down payment at closing; the fact that they had done so by taking out a loan for a portion of the down payment would be irrelevant. The fact that the lenders in this case were the sellers does not change that analysis. The full amount of the down payment was provided to the seller at the closing of the sale, albeit partially in the form of a documented loan. A deferred down payment, in contrast, involves a seller agreeing to accept some or all of the down payment at a date after the closing and without the formality of a note. ¶  The regulations interpreting and implementing the TILA are known as “Regulation Z.” The Federal Reserve Board’s Official Staff Commentary FN1 on Regulation Z allow the defendants to disclose the terms of the Note separately from the disclosures pertaining to the RISC: Creditors have flexibility in handling credit extensions that may be viewed as multiple transactions. For example: The separate financing of a downpayment in a credit sale transaction may, but need not, be disclosed as 2 transactions (a credit sale and a separate transaction for the financing of the downpayment.).  12 C.F.R. Pt. 226, Supp. I, Subpt. C, § 17(c)(1) cmt. 16. ¶  The Alemans argue that Comment 16 does not apply to this case, because the credit extensions at issue cannot “be viewed as multiple transactions.” The Alemans note that “Ellington was the seller and the creditor, and the [ ] Payments were part of the pur-chase price of the Vehicle financed under the RISC.” Pl.’s Partial Mot. for Summ. J. at 10. ¶  In response, the defendants cite Rendler v. Corus Bank, 272 F.3d 992 (7th Cir.2001). In that case, the plaintiffs had received two mortgages when purchasing one piece of property. “The first loan was a closed-end transaction in the form of a fully amortizing note for eighty percent of the property’s value, and the second loan was a home equity line of credit.” Id. at 994. Each loan had its own separate disclosure statement. Id. at 995. The Court held that the separa-tion of the two disclosure statements did not violate the TILA. Id. at 998–99. In so holding, the Court determined that the loans at issue constituted “multiple transactions,” and noted that the “TILA antici-pates situations where two parties will conduct multiple transactions necessitating multiple disclosures to achieve one goal.” Id. at 997. In attempting to distinguish Rendler, the Alemans note that the two loans at issue in that case had substantial differences. That is also true here, however; the two loans have different repayment schedules and interest rates. ¶  The Alemans next claim that the loans at issue in this case cannot be treated as “multiple transactions” because the defendants engaged in “loan splitting.” “Loan-splitting has been described as a situation where a debtor wants, requests and expects to get a single loan consummated in a single transaction, but the lender instead documents and makes disclosures for the loan as if it were two separate transactions.” Banks v. Wells Fargo Bank, N.A., Civ. Action No. 09–4948, 2011 WL 5555728, at * 10 n. 21 (E.D.Pa. Aug.17, 2011) (internal citations and quotation marks omitted). ¶  A lender does not engage in loan splitting when it structures a transaction “as two separate loans pro-vided the borrower’s expectations are not frustrated.” Devine v. America’s Wholesale Lender, Civ. Action No. 07–3272, 2008 WL 4367489, at *2 (E.D.Pa. Sept.25,
2008). In Devine, the Court determined that there was no evidence of loan splitting, even though the plaintiffs had initially requested a single loan. The Court noted that there was no evidence that the plaintiffs were told their request for a single loan had been approved, and there was evidence that the defendants had made a counteroffer of two loans. Id. at *3. ¶  There is similarly no indication that loan splitting occurred here. Although the Alemans may have originally set out to buy a car with one loan, when they learned that the required down payment was more than they could afford, they made the decision to enter into two loans rather than wait until they had the money necessary to pay the down payment. There is no indication that the defendants surreptitiously divided what the Alemans’ intended to be one loan into two, or that the Alemans did not expect to receive two loans. ¶  The very text of Comment 16 indicates that this was the kind of “multiple transaction” its drafters envisioned. Comment 16 provides that “a credit sale and a separate transaction for the financing of the downpayment” may be treated as two transactions. That is what happened in this case. Given that these transactions also had different interest rates and repayment schedules, I have no difficulty concluding that they “may be viewed as multiple transactions” pursuant to Comment 16.