In Garl v. Genesee Valley Auto Mall, 2018 WL 994318, at *1 (E.D.Mich., 2018), Judge Cox granted in part and denied partial summary judgment for a car dealer who was alleged to have violated TILA in connection with the disclosure of GAP and back-dating a contract.   Plaintiffs alleged that Defendant violated the Truth in Lending Act (TILA) during the transaction in two ways. First, by failing include the cost of GAP coverage in the finance charge listed on the retail installment sales contract. Second, by improperly backdating a revised sales contract, thereby overstating the finance charge by $11.94.  The Court denied the motion as to Plaintiffs’ first claim because a material question of fact existed as to whether the GAP insurance was compulsory, in which case it should have been included in the finance charge. But the Court granted the motion as to Plaintiffs’ second claim because the finance charge was properly calculated from the date the first contract was signed and consummated.  As to the GAP contract, the Court explained:
“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.” 12 C.F.R. § 226.4(a). Charges for insurance and debt cancellation coverage, such as GAP insurance, may be excluded from the finance charge if: (1) “The insurance coverage is not required by the creditor, and this fact is disclosed in writing.”; (2) “The premium for the initial term of insurance coverage is disclosed in writing.”; and (3) “The consumer signs or initials an affirmative written request for the insurance after reviewing” specified disclosures. 12 C.F.R. § 226.4(d)(1).  To begin with the obvious, GAP insurance is a charge payable directly by the consumer. Thus, Defendant had to include it in the finance charge if it was imposed as a condition of extending credit to Plaintiffs to purchase the vehicle. Whether it was is the crux of the dispute. Plaintiffs maintain that their purchase of the GAP insurance was compulsory; O’Keefe told them it was required. Defendants contend that the insurance was voluntary; several documents in the contract, which Plaintiffs signed or initialed, explicitly state that GAP insurance is voluntary and not required to obtain credit. . .  The Federal Reserve Board has instructed that whether insurance is required or optional is a factual question and that an inquiry into the circumstances is “not foreclosed by the presence of a customer’s signature on an insurance authorization.” In re Cruz, 441 B.R. 23, 32 (Bankr. E.D. Penn. 2004), quoting Federal Reserve Board Staff Letter of December 20, 1997, No. 1270, Consumer Credit Guide (CCH) ¶ 31, 756. Thus, “courts that have addressed this issue have held that a contract does not provide conclusive proof of insurance being optional if a creditor represented otherwise that insurance was required.” Beltran v. USA Auto Inc., 2015 WL 12672084 at * 2 (D. Ariz. 2015) (citing cases); Robinson v. Carport Sales & Leasing, Inc., 2015 WL 224655 at * 3 (M.D. Fla. 2015) (citing cases). Defendant does not grapple with these cases and has not provided any persuasive reason why the Court should not defer to the Federal Reserve Board and take the same approach.  This approach provides Plaintiffs with an avenue to prove that the GAP insurance was compulsory, despite their signatures on a contract stating otherwise. To prove this, they must show that “(1) the lender affirmatively represented, by words or by conduct, that insurance was in fact required; and (2) as a result of the lender’s actions, [they] purchased insurance coverage that it is likely that [they] would not have otherwise purchased.” Cruz, 441 B.R. at 33.  Viewing the evidence in the light most favorable to Plaintiffs, material questions of fact exist as to both of these elements. Plaintiffs testified that O’Keefe told them that GAP insurance was required and that they would not have purchased the insurance if it had not been required. In other words, a reasonable jury could conclude, based on this testimony, that Plaintiffs’ purchase of GAP insurance was compulsory. And if the GAP insurance was required, then Defendant erroneously failed to include it in the finance charge, thereby violating § 1638(a). Although the provisions in the contract stating that the GAP insurance was optional may be powerful evidence that no TILA violation occurred, the Federal Reserve Board has instructed that these provisions are not conclusive. Thus, they cannot justify summary judgment here and the Court shall deny Defendant’s motion as to Count One.
The District Court found no TILA violation, however, with regard to backdating of the contract.
To comply with the TILA, Defendant had to provide Plaintiffs with the proper disclosures, including an accurate finance charge amount, before their transaction was consummated. Defendant did so; listing the finance charge of $1,940.59 in the loan documents that Plaintiffs signed on January 26. By signing the documents, Plaintiffs consummated the transaction; they became obligated to pay at that time. See id. And because the transaction was consummated on January 26, it was appropriate (and consistent with the TILA) for Defendant to calculate the finance charge using that day as the start date. That Plaintiffs signed a second contract seven days later does not alter this conclusion. The second version only made cosmetic changes to the contract by changing “AC” to “Acadia” and altering some typeface. All of the other terms of the agreement, including Plaintiffs’ financial obligations and the date of the first payment, remained the same. Because the revised contract did not alter a single obligation that Plaintiffs had under the initial contract, the revisions did not change the date of consummation. See Chapman v. JPMorgan Chase Bank, N.A., 651 F. App’x 508, 512 (6th Cir. 2016) (holding that because the alleged existence of a true creditor did not change the plaintiffs’ obligations under the agreement, it did not change the date of consummation). In fact, the revised contract could not have changed the consummation date because Plaintiffs did not incur a new obligation to pay when they signed the contract.  Indeed, Defendant’s conduct was consistent with the central goal of the TILA: “to provide meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him.” Bragg v. Bill Heard Chevrolet, Inc., 374 F.3d 1060, 1068 (11th Cir. 2004), quoting 15 U.S.C. § 1601(a). Understandably, for disclosures to be “meaningful,” they must be accurately made before the transaction is consummated. See 12 C.F.R. § 226.17(b). That occurred here. Nothing in the second contract, which did not change a single financial term, impaired Plaintiffs’ ability to make an informed decision regarding their credit. See § 1601(a). Thus, this is not a scenario in which the TILA’s protections are required.  Finally, this conclusion is not altered by Plaintiffs’ principal case, Rucker v. Sheehy Alexandria, Inc., 228 F. Supp. 2d 711, 717 (E.D. Va. 2002). Although Plaintiffs characterize it as “factually identical” to their case, they ignore key distinguishing facts. In Rucker, like here, the plaintiff signed a retail installment sales contract and then signed a second one ten days later. Id. at 713-14. She then sued under the TILA after the dealership backdated the second contract. Id. at 715. But this is where the similarities end. In Rucker, unlike here, the first agreement was null and void when the second agreement was signed. Id. at 713. And the second agreement considerably altered the financial terms, including the amount financed, the finance charge, and the annual percentage rate. Id. at 714. In those circumstances, the court sensibly held that the plaintiff did not become obligated on the credit transaction until the day she signed the second agreement, thereby making that the date when the transaction was consummated. Id. at 716. Not so here; Plaintiffs’ first agreement was never nullified and their second agreement did not alter any of the initially agreed upon financial terms. Thus, unlike in Rucker, Plaintiffs’ consummation date remained unchanged.  In sum, because Plaintiffs’ agreement was consummated on January 26, the second retail sales installment contract properly calculated the finance charge by using that day as the start date. Thus, it appropriately included the paltry $11.94 with which Plaintiffs take issue. Therefore, because a reasonable jury could not conclude that Defendant violated the TILA on this basis, the Court shall grant Defendant’s Motion for Summary Judgment on Count Two.