Legal Bulletins

A troubling court decision has come home to roost for Maryland creditors. Maryland creditors should review their TILA forms and procedures.

In 2000, Polk v. Crown Auto, Inc., 221 F.3d 691 (4th Cir. Va. 2000), addressed whether a creditor must make Truth in Lending Act disclosures in writing and in a form the consumer can keep before loan "consummation" (basically, before the loan documents are signed) or whether the disclosures may be made in some form before consummation and the consumer may later receive the disclosures in a form that the consumer can keep. For example, the documents are prepared, the consumer is given the documents to review before signing them, the consumer signs them, and then the consumer's copy is delivered.

The Polk court said that TILA requires creditors to make disclosures in a form the consumer can keepbefore the consumer signs the loan documents. The creditor violated TILA when it did not give the buyer a copy of the retail installment sale contract, which included the TILA disclosures, until after the contract was signed.

The correctness of this decision can be debated. However, it has been the law for creditors in the 4th Circuit, which includes Maryland, North Carolina, South Carolina, Virginia, and West Virginia, since 2000.

In October 2001, a class action lawsuit was filed against the Frederick, Maryland, office of CitiFinancial, Inc., because CitiFinancial allegedly does not give borrowers any disclosures until the loan agreement is signed. Unspecified damages are claimed.

We anticipate additional challenges. Creditors should review their Truth in Lending Act disclosure practices to determine whether TILA disclosures are delivered to the consumer before the consumer signs loan or credit sale documents. If not, changes to forms and procedures should be considered