Louis R. Vallies, individually and on behalf of all similarly situated vehicle buyers v. Sky Bank, an Ohio Bank licensed to do business in the Commonwealth of Pennsylvania…

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 05-1002
___________
LOUIS R. VALLIES, individually
and on behalf of all similarly
situated vehicle buyers,
Appellant
v.
SKY BANK, an Ohio Bank licensed
to do business in the
Commonwealth of Pennsylvania
___________
APPEAL FROM THE UNITED STATES
DISTRICT COURT FOR THE WESTERN
DISTRICT OF PENNSYLVANIA
(D.C. No. 01-cv-01438)
District Judge: The Honorable David S. Cercone
___________
ARGUED OCTOBER 19, 2005

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BEFORE: SMITH, STAPLETON,
and NYGAARD, Circuit Judges.
(Filed: January 5, 2006)
___________
Michael P. Malakoff, Esq.
Erin M. Brady, Esq. (ARGUED)
Malakoff, Doyle & Finberg
The Frick Building, Suite 200
Pittsburgh, PA 15219
Counsel for Appellant
Martin C. Bryce, Jr., Esq. (ARGUED)
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Counsel for Appellee
___________
OPINION OF THE COURT
___________
NYGAARD, Circuit Judge.
At issue in this appeal is whether the Truth in Lending
Act requires all pertinent credit information be disclosed by a

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single creditor, or whether the requirements of the TILA can be
satisfied if some of the required credit information is disclosed
by a third party. More specifically, we address the question of
whether a creditor violated the provisions of the TILA when it
excluded certain debt cancellation fees from the calculation of
the finance charge without disclosing the amount of the fees and
that the debt cancellation coverage was voluntary, despite the
fact that the disclosures were ultimately made by a non-creditor
third party.
Appellant Louis Vallies brought a class action on behalf
of consumers who obtained loans from Appellee Sky Bank to
finance purchase of motor vehicles. Vallies asserted a number
of claims, and, after voluntarily dismissing some, the District
Court granted Sky Bank’s motion to dismiss for failure to state
a claim. Vallies argues that the District Court erred by granting
the motion dismissing his claim that Sky Bank failed to comply

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1. It appears from the record that there exists some
confusion over Fitts’ exact relationship with Sky Bank.
However, we believe, and Sky Bank conceded as much during
oral argument, that there was never any explicit agreement or
implicit assumption that Fitts would act as Sky Bank’s agent for
the purposes of the loan. Indeed, at oral argument Sky Bank
(continued...)
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with the provision of the TILA. We agree with Vallies and hold
that under the relevant sections at issue, the TILA does not
permit a creditor to delegate its disclosure responsibility but
requires all pertinent disclosures to be made by a single creditor.
Accordingly, we will reverse the judgment of the District Court.
I.
Vallies obtained a loan from Sky Bank to purchase a
truck from Phil Fitts Ford. Fitts, a licensed motor vehicle
dealer, arranged the loan between Sky Bank and Vallies. Fitts
was not Sky Bank’s agent and at all relevant times acted
independently.1 It is undisputed that the loan entered into

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1. (...continued)
maintained that it was the only creditor and that Fitts was not
Sky Bank’s agent. Sky Bank’s contention that Vallies
“conceded” that Fitts was Sky Bank’s agent because in its
pleadings it claimed that Fitts was a “loan intermediary” of Sky
Bank is unpersuasive.
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between Vallies and Sky Bank financed, in part, a $395.00
charge for Guaranteed Auto Protection (“GAP”), a form of debt
cancellation coverage, that was not incorporated into Sky
Bank’s calculation of the total finance charge. It is likewise
undisputed that the agreement specifying the terms of the loan
did not individually itemize the GAP premium but combined the
premium with a fee for service contract itemized as “To
National Auto.” On the same day as he signed the loan
agreement with Sky Bank, Vallies signed a separate form
entitled “GAP Waiver Agreement” that contained the correct
cost of the GAP premium and the required TILA disclosures
concerning the exclusion of the GAP premium from finance

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charges. This separate GAP Waiver form was not incorporated
into Sky Bank’s loan and Sky Bank was not a party to the GAP
Waiver agreement. Instead, the agreement was signed only by
Vallies and Fitts.
II.
We have plenary review over a district court’s grant of a
motion to dismiss for failure to state a claim and we review the
District Court’s decision de novo, applying the same legal
standard as the trial court to the same record. Lum v. Bank of
America, 361 F.3d 217, 223 (3d Cir. 2004); Omnipoint
Commc’ns Enters., L.P. v. Newtown Twp., 219 F.3d 240, 242
(3d Cir. 2000). A motion to dismiss pursuant to Federal Rule
12(b)(6) should be granted only if, “accepting as true the facts
alleged and all reasonable inferences that can be drawn
therefrom” there is no reasonable reading upon which the

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plaintiff may be entitled to relief. Colburn v. Upper Darby
Twp., 838 F.2d 663, 665-66 (3d Cir. 1988).
III.
Vallies challenges the District Court’s opinion holding
that Sky Bank did not violate the TILA. In its opinion, the
District Court conceded that Sky Bank failed to make the GAP
disclosures, but held that Sky Bank did not violate the TILA
because it could “perceive no substantive difference arising
from the fact that disclosures were made on a DNA [third-party]
form, rather than on Sky Bank letterhead.” In essence then,
because the consumer ultimately received the correct disclosure
information, Sky Bank did not shirk its disclosure
responsibilities and no TILA violation had occurred.
Alternatively, the District Court relied on the fact that certain
provisions of the TILA allow for separate disclosures to

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conclude that under the TILA a single creditor is not required to
make all relevant disclosures. In so concluding, the District
Court noted that under 12 C.F.R. § 226.17(a), the GAP
insurance disclosures “may be made together with or separately
from other required disclosures.” As earlier noted and for the
following reasons, we will reverse the District Court’s
judgment.
IV.
The Truth in Lending Act was enacted in order “to
assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various
credit terms available to him and avoid the uninformed use of
credit, and to protect the consumer against inaccurate and unfair
credit billing and credit card practices.” Rossman v. Fleet Bank
(R.I.) Nat’l Ass’n, 280 F.3d 384, 389 (3d Cir. 2002) (quoting 15
U.S.C. § 1601). The regulations reflect Congress’ considered

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deliberation of the best way to ensure protection for and
meaningful disclosure to consumers of credit terms and
information. Moreover, the requirements of the TILA exist to
protect the consumer at the outset of the relationship, in order to
even the often slanted credit and lending playing field.
It is well-settled that where unambiguous, the plain
language of a statute or regulation controls. With respect to
general disclosure requirements, the TILA regulations provide
that “[t]he creditor shall make the disclosures...clearly and
conspicuously in writing, in a form that the consumer may
keep.” 12 C.F.R. § 226.17. Then, in describing the content of
the disclosures, the TILA requires that “[f]or each transaction,
the creditor shall disclose the following information...” 12
C.F.R. § 226.18. The TILA also defines a creditor as “[a]
person (A) who regularly extends consumer credit that is subject
to a finance charge or is payable by written agreement ... and (B)

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to whom the obligation is initially payable, either on the face of
the note or contract, or by agreement when there is no note or
contract.” 12 C.F.R. §226(a)(17). On its face, then, this
language clearly vests the duty of disclosure on the, and only
the, actual creditor and not on any third party to the credit
transaction.
Sky Bank does not contest the meaning of this language,
but instead argues that the TILA regulation requiring disclosure
of voluntary debt cancellation fees, including a GAP waiver,
“contains no requirement that the disclosure be in the creditor’s
name.” This assertion is superficially true, as 12 C.F.R. §
226.4(d)(3)(i) states only that these charges or premiums may be
excluded from the finance charge if, inter alia, “the debt
cancellation agreement or coverage is not required by the
creditor, and this fact is disclosed in writing.” § 226.4(d)(3)(i).
But this language, fairly taken with the earlier provisions and the

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goals of the TILA generally, leads us to conclude that the
creditor, and the creditor alone, is required to disclose this, and
any other, required information. This is so because those
provisions of the TILA and its regulations that do address who
must make disclosures explicitly and plainly direct the creditor
to make all disclosures. See 15 U.S.C. § 1638(a) (“the creditor
shall disclose each of the following items”); 15 U.S.C. § 1631(b)
(“[i]f a transaction involves one creditor ... , such creditor ...
shall make the disclosures”); 12 C.F.R. § 226.17(a) (“[t]he
creditor shall make the disclosures”). Particularly relevant to
the present dispute is that the regulations specifically provide
that “the creditor shall disclose ... [t]he items required by §
226.4(d) in order to exclude certain insurance premiums and
debt cancellation fees from the finance charge.” 12 C.F.R. §
226.18(n). The logical and plain import here is that if a piece
of information is indeed a required disclosure, as the voluntary

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debt cancellation fee is, then its disclosure must be made by the
creditor.
In concluding that there was no violation, the District
Court failed to recognize that Vallies’ claim is not premised on
the fact that he ultimately received the required disclosures.
Rather, it is that Sky Bank, who acted as Vallies’ only creditor,
failed to disclose the required information itself, instead relying
on an independent third party. This reliance, and Sky Bank’s
requisite failure to disclose the information itself, represents a
violation of the clear language and meaning of the TILA
requirement that all disclosures be made by a single creditor.
Sky Bank relies on Rivera v. Grossinger Autoplex, Inc.,
274 F.3d 1118 (7th Cir. 2001) to bolster the District Court’s
opinion that the TILA does not require all disclosures to be
made by a single creditor. They argue that under Rivera, so
long as a separate addendum for GAP coverage is disclosed, the

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requirements of the TILA will be satisfied, thereby absolving
Sky Bank of any possible violation. Although Sky Bank is
certainly correct that an addendum for GAP coverage can satisfy
the TILA requirements for the disclosure of information,
nothing in Rivera or the TILA permits the creditor to shift its
responsibility to disclose the GAP addendum to anyone other
than the creditor. This is due, of course, to the fact that in
Rivera, both the GAP addendum and the other TILA
requirement were disclosed to the consumer by a single creditor
- the creditor was in full compliance. Thus, while a separate
disclosure may, in certain situations, be acceptable under the
TILA, this fact does nothing to annul the plain language
requirement that all disclosures be made by the actual creditor,
and not some third party. Furthermore, there is only one closed-
end credit situation, under the TILA, where an actual creditor
may delegate his responsibility to disclose information: if a

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credit plan involves more than one creditor, 12 C.F.R. §
226.17(d) allows creditors to agree among themselves which
creditor must comply with the TILA disclosure requirements.
§ 226.5(d). Although this provision does allow creditors to
delegate their disclosure responsibilities, it does so for the sole
purpose of allowing a single creditor to disclose all the
information. We therefore again emphasize that the plain
language and purpose of the TILA is to ensure that the
responsibility to make disclosures is placed solely with the
actual creditor or, in cases where there may be multiple actual
creditors, a single creditor.
We note once more that Vallies’ claim is not that he
failed to receive any of the required information, or that the
GAP waiver could not be disclosed separately. Instead, the
basis of his claim, with which we agree, is that the TILA places
a clear and affirmative duty on the actual creditor itself to

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disclose any and all required information pertaining to GAP
coverage and that where the creditor fails to disclose this
information, it has violated TILA regardless of the ultimate
receipt of information.
Moreover, our conclusion that the TILA requires a single
creditor to make disclosures is neither hypertechnical nor overly
formalistic. The creditor need only follow the law: where more
than one distinct party is allowed to make disclosures, the
likelihood that conflicting or confusing information will be
disclosed dramatically increases. Indeed, the single-creditor
requirement exists in order to prevent exactly the type of
behavior exhibited by Sky Bank. Here, the disclosure made by
Sky Bank and those made by Fitts are inconsistent and
confusing in material ways. For instance, the Fitts Gap Waiver
agreement makes clear that Vallies paid $395.00 for GAP
insurance while the Sky Bank agreement fails to note that

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Vallies paid anything to Fitts or even that Vallies obtained GAP
insurance. This difference materially changes the legal
obligations between the parties since the Sky Bank agreement
contains no mention of the purchase of GAP insurance or the
fact that Sky Bank did indeed finance Vallies’ purchase of the
GAP insurance.
The single-creditor requirement represents an
understanding that when one creditor is required to make all
disclosures, those disclosures will likely be more consistent,
ordered and clear to the consumer. Although Vallies did
ultimately receive all the required information, the information
he received from Sky Bank differed in both its form and its
substance from the information he received from Fitts, in
violation of the clear language of the TILA requirements.
Nowhere in the TILA statute or its implementing regulations
does it declare that a creditor may avoid the requirements as

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long as the consumer somehow gets the information. To allow
this would defeat the plain language meaning of the statute. The
primacy of the regulations, therefore, do not simply exist to
elevate form over function. Rather, they exist in their form to
best protect consumers.
Because the District Court erroneously concluded that the
TILA does not require a single creditor to make all required
disclosures relating to debt cancellation fees we reverse the
grant of summary judgment in favor of Sky Bank and remand
for further proceedings in accordance with this opinion.

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