Full opinion text
DECISION PENCE, District Judge. Plaintiff seeks to recover statutory damages and costs of litigation, including reasonable attorney’s fees, alleging violations of the Truth-in-Lending provision of the Federal Consumer Credit Protection Act (Act), 15 U.S.C.A. §§ 1601-1641, and Federal Reserve Regulation Z (Regulation Z), 12 C.F.R. 226, arising from the assignment of a retail installment contract to defendant Bank of Hawaii (Bank) pursuant to the purchase of an automobile by plaintiff. Jurisdiction is conferred on this court by 15 U.S.C.A. § 1640(e). On the uncontroverted facts set forth below, plaintiff has moved for summary judgment, defendant has cross-moved for summary judgment, and upon oral argument and submission of closing briefs by both parties, the following issues raised at various stages of these proceedings require resolution: (1) Was Bank liable under the Act for the automobile dealer’s omission of the annual percentage rate from plaintiff’s copy of the retail installment contract? (2) Was the security interest retained by Bank as a result of the assignment of the retail installment contract adequately described or identified and disclosed in accordance with the Act? (3) Were the finance charge and annual percentage rate disclosed more conspicuously than other disclosure entries in accordance with the Act? (4) Was defendant’s reservation of the right to accelerate full payment of the obligation upon default by the plaintiff a required disclosure, and, if so, was this provision adequately disclosed in conformance with the disclosure requirements of the Act? (5) Was defendant’s disclosure of the finance charge without further description or itemization a violation of the disclosure requirements of the Act? (6) Was defendant’s inclusion of a title transfer fee and certificate of ownership and certificate of registration replacement fee in the total cash price a violation of the Act in that such fees should have either been disclosed as “other fees” or itemized as part of the finance charge? (7) Was the absence of an “unpaid balance” itemized entry in the disclosure entries on the face of the retail installment contract a violation of the disclosure provisions of the Act? FACTS On November 23, 1974, plaintiff Chuck St. Germain executed a retail installment contract (contract) with Windward Volkswagen, Inc., for purchase of a 1970 Volkswagen. Plaintiff’s copy of the contract labeled “Buyer’s Copy” had no entry under item 9 of the Statement of Charges, opposite the entry “Annual Percentage Rate _%.” On the “Original-Bank’s Copy” of the contract this blank was filled in with the handwritten figures “18.15”, and was received by defendant Bank in that form. On the face of the contract, paragraph 5, headed “Security Interest”, states that defendant Bank retains title to the property, previously described at the head of the contract and thereafter described as “property”, and has a security interest therein until payment in full of the contract obligation. The description of the car includes year, make, model, body type, serial number, and license number. Item 9 of the Statement of Charges of the contract is titled “Finance Charge at Annual Percentage Rate” with all words except “at” in bolder relief and larger print than appears in the other items of the Statement of Charges. In paragraph 10 on the reverse of the contract, a bold-type heading “Seller’s Rights and Remedies” appears. The paragraph states that upon default by the buyer or the occurrence of other events leading seller to believe that payment or performance is impaired, at seller’s option the full amount due will be immediately due and payable. The paragraph further enumerates seller’s rights upon default as those accruing under the provisions of Chapter 476, H.R.S., the retail installment sales act of Hawaii. Reference is also made to remedies under the Uniform Commercial Code to the extent that there is no conflict with Chapter 476. The “TOTAL CASH PRICE”, item 1 of the Statement of Charges in the contract, includes a one dollar motor vehicle transfer fee imposed on the transferee by H.R.S. §§ 286-51 and 286-52. Two additional one dollar fees were charged plaintiff by the dealer for replacement of previously lost or defaced motor vehicle legal ownership and registration certificates, respectively, such charges being provided for in H.R.S. § 286-55. This court takes judicial notice of the fact that the motor vehicle transfer fee, supra, includes the issuance of a new certificate of ownership and certificate of registration to the transferee complying with the statute. The two one dollar fees, supra, were charged by the dealer in this transaction to obtain the certificates of ownership and registration which would subsequently be required to effect transfer of title under §§ 286-51 and 286-52. The finance charge under item 9 of the Statement of Charges in the contract has a single entry of $313.40. Items 4 through 8 of the Statement of Charges in the contract appear as follows: 4. TOTAL DOWN PAYMENT $ 250.00 5. UNPAID BALANCE OF CASH PRICE £1567.00 6. INSURANCE-Total from Insurance Statement £ O 7. TITLE TRANSFER AND/OR RECORDING FEES £ Included 8. AMOUNT FINANCED (Total items 5 through 7) £1567.00 Below a' heading “ASSIGNMENT AND GUARANTY OF CONTRACT” on the reverse of the “Original-Bank’s Copy” of the contract is the date November 23,1974, and signature of an agent of Windward Volkswagen, Inc., assigning the contract to defendant Bank. The signature of Chuck St. Germain appears on the face of the contract below all entries described above as being on the face of the contract. Plaintiff commenced this action on May 15, 1975. PRELIMINARY DISCUSSION In view of the strict civil liability imposed on creditors by the Act, it is appropriate to delineate here the sources of law and interpretation available to creditor in his determination of what he is required to disclose under the Act. These sources include the Act itself, Regulation Z promulgated by the Federal Reserve Board, formal interpretations appended to Regulation Z and number-coded to the appropriate section of the Regulation, 12 C.F.R. 226.201-226.1002, FRB and Federal Trade Commission staff opinion letters, and the case decisions of the district and circuit courts. Because of this awesome, confusing and sometimes conflicting mass of “authority”, this court has attempted to set forth hereinafter in almost hyper-detail an analysis of the “sources of law and interpretation”, in hope that the creditor may find some relief therein. Regulation Z The validity of Regulation Z as a proper exercise of the Federal Reserve Board’s statutory authority was upheld in Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369, 93 S.Ct. 1652,1660, 36 L.Ed.2d 318, 329 (1973): Where the empowering provision of a statute states simply that the agency may “make . . . such rules and regulations as may be necessary to carry out the provisions of this Act,” we have held that the validity of a regulation promulgated thereunder will be sustained so long as it is “reasonably related to the purposes of the enabling legislation.” Consistent with this holding, after finding that 15 U.S.C.A. § 1604 of the Act constituted a broad grant of rulemaking authority as to defining classifications of transactions necessary to carry out the objectives of the Act, the Court accepted the remedial measure chosen by the Board in Regulation Z: We have consistently held that where reasonable minds may differ as to which of several remedial measures should be chosen, courts should defer to the informed experience and judgment of the agency to whom Congress delegated appropriate authority. 411 U.S. at 371-72, 93 S.Ct. at 1662, 36 L.Ed.2d at 331. Weight of Agency Interpretation of Regulations The weight to be given agency interpretation of its administrative regulations is set forth in Bowles v. Seminole Rock Co., 325 U.S. 410, 413-14, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700, 1702 (1945): Since this involves an interpretation of an administrative regulation a court must necessarily look to the administrative construction of the regulation if the meaning of the words is in doubt. . [T]he ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation. The legality of the result reached by this process, of course, is quite a different matter. (Emphasis added.) That greater weight should be given to an agency’s interpretation of its administrative regulations than to an agency’s interpretation of a statute is reflected in Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792,13 L.Ed.2d 616 (1964). Udall was more concerned with the problem of administrative agency interpretation of a statute than agency interpretation of administrative regulations promulgated pursuant to an enabling statute. However, Udall established its own spectrum of deferential weight. After acknowledging that great deference should be shown the interpretation given the statute by the officers or agency charged with its administration, the Court went on to say: When the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order. 380 U.S. at 16, 85 S.Ct. at 801, 13 L.Ed.2d at 625. Good Faith Compliance and Staff Opinion Letters The recent enactment of subsection (f) to 15 U.S.C.A. § 1640 provides a “good faith compliance” defense, in the event of the amendment, rescission, or judicial or other authority invalidation of a rule, regulation, or interpretation of the Federal Reserve Board, prospectively from the act of attempted compliance. When the defendant in Ives v. W. T. Grant Co., 522 F.2d 749, CCH Consumer Credit Guide ¶ 98,561 (2d Cir. 1975), sought to include in “rule, regulation, or interpretation” Board staff letters or pamphlets, the court relied upon the following drafting committee report as repudiating that inclusion: The Truth in Lending Act is highly technical and the Committee does not believe a creditor should be forced to choose between the Board’s construction of the Act and the creditor’s own assessment of how a court may interpret the Act. Accordingly, the Committee recommends an amendment to Truth in Lending requested by the Board which would relieve a creditor of any civil liability under Truth in Lending for any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Board. In order to confer immunity from civil liability, the rule, regulation, or interpretation thereof must be approved by the Board itself and not merely by the staff of the Board. The court in Ives went on to find defendant’s reliance on staff letters and pamphlets legally insufficient under the new subsection (f) because defendant could not show reliance on any “rule, regulation, or interpretation” of the Board which had subsequently been held invalid. This court cannot agree wholly with that conclusion, for it elevates form over substance, the substance being that the staff opinion letters are clearly the only manageable vehicle by which the Board may respond to the mass of inquiries from creditors or prospective creditors regarding compliance with the Act’s rules, regulations, and interpretations. The continued issuance of these letters even after the enactment of subsection (f) would seem to indicate that the Board still considers them to be a viable and Board-approved vehicle for interpretation of Regulation Z. The publishing of these letters, with tacit Board approval, in such services as CCH Consumer Credit Guide provides them national distribution and the alert researcher would certainly maintain vigilance on their publication therein. The Board’s approval of staff opinion letters was manifested in its annual report to Congress for the year 1974 in which the Board noted that Bone and Phiibeck (supra, note 1) had “upheld the validity of the Board’s regulations or informal staff opinion letters.” In this context, Ives would only carry authoritative weight on the issue of reliance under the circumstance that a staff opinion letter had subsequently been found invalid, with a consequent question of whether a defendant would have a good faith reliance defense thereon. Certainly Ives would have no bearing on the great deference to be accorded agency interpretation of an administrative regulation so long as the interpretation met the test of consistent and not clearly erroneous construance or explanation. Staff opinion letters also carry value as forerunners of anticipated formal Board interpretations when the subject addressed extends beyond the evaluation of a particular disclosure statement which is the subject of inquiry. For example, staff opinion letter No. 682 of April 25, 1973, dealt with the proper form of disclosure of the finance charge when that charge is comprised of add-on interest only. Formal Board interpretation § 226.820 of November 21, 1975, adopted the view of letter 682 and expanded it to provide for the method of disclosure of the finance charge when any type of single charge comprised the finance charge. As above indicated, in dealing with the issues herein, then, this court will confer great deference upon the formal interpretations of the Federal Reserve Board. The Board staff opinion letters which point to a reasonable and not inconsistent interpretation of the regulations and show no inconsistency in the event a number of letters deal with the same subject will also be accorded such deference. ISSUE I LIABILITY OF A SUBSEQUENT ASSIGNEE Plaintiff in his motion for summary judgment has expressly withheld his contention that the blank annual percentage rate in the buyer’s copy of the retail installment contract can be attributed to defendant in view of defendant’s answer to the complaint in which defendant attaches as an exhibit “Original-Bank’s Copy” of the contract. Defendant, nevertheless, in his cross-motion for summary judgment revives the issue and moves for summary judgment thereon. Accepting plaintiff’s allegation that the annual percentage rate was in fact not inserted in the blank provided for in his copy of the contract, this court nevertheless finds for defendant. Defendant has submitted affidavits from bank employees handling the contract upon receipt from the assignor showing that the blank for the annual percentage rate had been previously filled in with the handwritten figures “18.15” when received by the bank employees. Two provisions in the Act address themselves specifically to the matter of the liability of a subsequent assignee of the original creditor. 15 U.S.C.A. § 1641 addresses the effect of written acknowledgement of receipt by a person to whom a statement is required to be given by the Act: Except as provided in section 1635(c) of this title and except in the case of actions brought under section 1640(d) of this title, in any action or proceeding by or against any subsequent assignee of the original creditor without knowledge to the contrary by the assignee when he acquires the obligation, written acknowledgement of receipt by a person to whom a statement is required to be given pursuant to this subchapter shall be conclusive proof of the delivery thereof and, unless the violation is apparent on the face of the statement, of compliance with this part. Plaintiff here does not dispute the lack of knowledge of defendant with respect to the absence of the figures on his copy of the contract, and defendant’s affidavits disclaim any prior instances of such deletion which may have served to put defendant’s employees on constructive notice of such activity by the creditor. Absent showing to the contrary, plaintiff’s written acknowledgement is conclusive proof of compliance with the Act as to defendant. Part A., General Provisions of the Act further absolves defendant from liability under a recent amendment which added § 115 to Part A: Except as otherwise specifically provided in this title, any civil action for a violation of this title which may be brought against the original creditor in any credit transaction may be maintained against any subsequent assignee of the original creditor where the violation from which the alleged liability arose is apparent on the face of the instrument assigned unless the assignment is involuntary. Defendant clearly falls within the purview of this provision, is not included in any cited exceptions to either provision, supra, and is therefore not liable to the plaintiff. Defendant’s motion is GRANTED as to this issue. ISSUE II ADEQUATE IDENTIFICATION, DESCRIPTION, AND DISCLOSURE OF SECURITY INTEREST Plaintiff alleges in his amended complaint that defendant failed to adequately describe or identify the type of security interest retained by defendant. Defendant moves for summary judgment in his cross-motion. 15 U.S.C.A. § 1638(a) provides as follows: (a) In connection with each consumer credit sale not under an open end credit plan, the creditor shall disclose each of the following items which is applicable: (10) A description of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates. With respect to the property in the instant case, Regulation Z does not appreciably elaborate on the provision of the Act: (5) A description or identification of the type of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates 12 C.F.R. § 226.8(b)(5). Placement of this disclosure is governed by 12 C.F.R. § 226.8(a) of Regulation Z: (a) . . . All of the disclosures shall be made together on either (1) The note or other instrument evidencing the obligation on the same side of the page and above or adjacent to the place for the customer’s signature; or (2) One side of a separate statement which identifies the transaction. The facts in the instant case absolve the defendant of any violation under the above provisions. The property is identified in detail as set forth in the statement of facts, supra. The provision purporting to create a security interest in the described property is positioned on the same side of the contract and above the customer’s signature. The security interest provision is as follows: 5. SECURITY INTEREST. To secure the payment and performance of all Buyer’s obligations hereunder, Seller has retained title to the Property and has a security interest therein and in all accessories therefor and special or auxiliary equipment used in connection therewith, or in substitution, in whole or in part, for any thereof, and proceeds until all amounts due hereunder are fully paid. Retention of title until all amounts due under the contract are paid is a clear, unequivocal description of the type of security interest held by the creditor and subsequent assignee in the instant case as a matter of law. Summary judgment is GRANTED defendant as to this issue. ISSUE III DISCLOSURE OF FINANCE CHARGE AND ANNUAL PERCENTAGE RATE MORE CONSPICUOUSLY THAN OTHER ENTRIES Plaintiff moves for summary judgment alleging inadequate disclosure of the finance charge and annual percentage rate in that these entries were not disclosed more conspicuously than other entries in the Statement of Charges of the contract in violation of the Act. 12 C.F.R. § 226.6(a) provides as follows: (a) Disclosures: general rule . [WJhere the terms “finance charge” and “annual percentage rate” are required to be used, they shall be printed more conspicuously than other terminology required by this part and all numerical amounts and percentages shall be stated in figures and shall be printed in not less than the equivalent of 10 point type, .075 inch computer type, or elite size typewritten numerals, or shall be legibly handwritten. Defendant contends, and rightly so, that simple view of the disclosure statement of the contract shows that in the Statement of Charges of the contract the terms in issue are printed in bolder relief and larger type than the other terminology required to be disclosed. The handwritten amount of the finance charge and annual percentage rate is legible. Plaintiff’s motion as to this issue is without merit and is DENIED. ISSUE IV DISCLOSURE OF ACCELERATION UPON DEFAULT PROVISION Plaintiff moves for summary judgment on the ground that defendant did not properly disclose a right to accelerate the entire amount due and payable under the provisions of the contract upon default of the debtor. Incorporating plaintiff’s claim as set forth in the amended complaint, the violation allegedly derives from that provision of Regulation Z which requires the disclosure of the “amount, or method of computing the amount, of any default payable in the event of late payments.” (Plaintiff’s quote.) 15 U.S.C.A. § 1638 provides for required disclosures by the creditor in sales not under open end credit plans. The pertinent portion of that section states: (a) . . . the creditor shall disclose each of the following items which is applicable: ... (9) The default, delinquency, or similar charges payable in the event of late payments. Another provision of the Act, 15 U.S.C.A. § 1634, not cited by either plaintiff or defendant, was also the subject of a subsection of Regulation Z. Section 1634 provides: If information disclosed in accordance with this part is subsequently rendered inaccurate as the result of any act, occurrence, or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this part. From the general regulatory power conferred by the Act, and construing the above provisions, the FRB promulgated the following subsections of Regulation Z. In 12 C.F.R. § 226.8(b), referring to specific disclosures in credit other than open end: . (b) In any transaction subject to this section, the following items, as applicable, shall be disclosed: . (4) The amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments. . (6) A description of any penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal of the obligation (such as a real estate mortgage) with an explanation of the method of computation of such penalty and the conditions under which it may be imposed . (7) Identification of the method of computing any unearned portion of the finance charge in the event of prepayment in full of an obligation which includes precomputed finance charges and a statement of the amount or method of computation of any charge that may be deducted from the amount of any rebate of such unearned finance charge that will be credited to an obligation or refunded to the customer. If the credit contract does not provide for any rebate of unearned finance charges upon prepayment in full, this fact shall be disclosed. In 12 C.F.R. § 226.6(g), with accompanying explanatory footnote specifying general disclosure requirements: . (g) Effect of subsequent occurrence. If information disclosed in accordance with this part is subsequently rendered inaccurate as the result of any act, occurrence, or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this part. The Board has elaborated upon and explained §§ 226.8(b)(6) and (7) in interpretation 12 C.F.R. § 226.818 (Refund of unearned finance charge; prepayment penalty). The Board in this interpretation distinguished the transactions to which § 226.-8(b)(6) and (7) apply. Subsection (6) applies to transactions in which the finance charge is computed from time to time by application of a rate to the unpaid principal balance, noting that the prepayment penalties required to be disclosed under this section principally arise in connection with prepayment of real estate mortgages. Subsection (7) is designed to encompass the disclosures necessary with regard to the prepayment of an obligation involving precomputed finance charges which are included in the face amount of the obligation. The Board commented: [Although in a precomputed obligation the finance charge rebate to a customer may be less when calculated according to the “Rule of 78’s,” “sum of the digits,” or other method than if calculated by the actuarial method, such difference does not constitute a penalty charge for prepayment that must be described pursuant to § 226.8(b)(6). 12 C.F.R. § 226.818. The initial case development of the classification of an acceleration clause under the Act is found in Garza v. Chicago Health Clubs, Inc., 347 F.Supp. 955 (N.D.Ill.1972). To plaintiff’s contention that a clause providing for acceleration of the entire balance under the contract upon default should be characterized as a “prepayment” under § 226.8(b)(7), the court ironically countered that the ordinary meaning of “prepayment” does not include acceleration upon default, citing as further support that § 226.8(b)(4) deals separately with “charges payable in the event of late payments,” the court extracting this portion of the subsection from the complete subsection (4) quoted supra. The court then applied judicial decision interpretations to the word “charges”, establishing a definition of “pecuniary burden or expense” and “expenses which have been incurred or disbursements made, in connection with a contract.” Citing 15 U.S.C.A. § 1601 (entitled “Congressional findings and declaration of purpose”) as that provision of the Act substantiating disclosure of the acceleration clause as a “charge”, then, since the purpose of the statute and regulations was to inform consumers of credit costs and terms so they can effectively choose between sources of credit, the court found for plaintiff debtor. A court in Washington Motor Sales v. Ferreira, 131 N.J.Super. 328, 329 A.2d 599 (1974) held contra. There, plaintiff creditor’s acceleration provision on the reverse of the contract provided that as a consequence of default, “seller may declare the unpaid balance of the contract immediately due and payable.” 329 A.2d at 601. Held: “Nowhere in the above quoted statute is there any required disclosure of a potential assignee or an acceleration clause. . An acceleration clause does not fall within the category of additional charges, for the debtor full well knows at the commencement of the contract the full amount of the sums for which he is responsible.” Id. at 602, 603. (Citing Garza contra.) Providing general language consistent with Garza, though distinguishable as an open end credit transaction and thereby subject to § 226.7 of Regulation Z, Hall v. Sheraton Galleries of Atlanta & General Electric Corporation of Georgia, CCH Consumer Credit Guide ¶ 98,737, Civ. No. 19159 (N.D.Ga. March 21, 1974), characterized both acceleration upon default clauses and collection of attorney’s fees: [WJhatever their labels, they are charges which may be imposed against the borrowing of credit, and therefore must be disclosed pursuant to Regulation Z, 226.7(a)(6) [the conditions under which any other charges may be imposed, and the method by which they will be determined]. (Order entered June 4, 1974.) CCH ¶ 98737 at 88,336. Cited by CCH Consumer Credit Guide during this period were recommendations of bankruptcy judges sitting as special masters in Truth-in-Lending cases in Georgia. Pollock v. Avco Financial Services, CCH Consumer Credit Guide ¶ 98,766 (N.D.Ga. July 1, 1974), incorporated both the definition of “charges” and the Garza construction of the declaration of purpose section of the Act in holding that a right of acceleration must be disclosed pursuant to § 226.-8(b)(4) in order that consumers could more readily compare various credit terms available to them. The state of flux of and hence relative decisional weight to be accorded such masters’ recommendations awaiting review, approval, and adoption by the district courts is exemplified by Pollock's having been remanded on September 3,1974, for reconsideration in light of other decisions, and thereafter dismissed by stipulation on September 5, 1974. Pugh v. American Tractor Trailer Training, Inc., summarized at CCH Consumer Credit Guide ¶ 98827, Civil No. 14,109 (D.C. Conn. April 10, 1974), provided an additional rationale for the finding that an acceleration clause optional upon default must be disclosed by holding that nowhere in the acceleration statement was a borrower informed that a late payment may result in an effectively increased cost for the credit extended, in that the finance charge was not required to be reduced to correspond with the credit period as shortened by acceleration. Two additional distinguishing elements raised by the creditor were discounted in Meyers v. Clearview Dodge Sales, Inc., 384 F.Supp. 722 (E.D.La.1974). Debtor’s default was first typified as a “subsequent occurrence” under § 226.6(g) of Regulation Z. (This point is discussed infra.) Alternatively, the creditors argued that acceleration does not constitute a “charge” under § 226.8(b)(4) because Louisiana law provided for rebate of unearned interest in the event of acceleration, resulting in no increase of the consumer’s total obligation and, ergo, no “charge.” Citing all cases, supra, the court concluded that acceleration of the balance of the debt, whether or not Louisiana law rebated unearned interest, resulted in a considerable immediate pecuniary burden (emphasis added) for one attempting to avoid foreclosure. Ostensibly drawing on Garza’s construction of the declaration of purpose section of the Act, the court concurred with Garza that the Act intended to require the disclosure of exactly this type of credit information. Here, relying on the distinction rejected in Meyers, viz., that an underlying state law effecting the rebate of unearned interest upon acceleration on default permits nondisclosure of such a clause, defendant urges that subsequent authority has upheld that distinction. Defendant’s acceleration upon default provision appears on the reverse of the contract in pertinent part as follows: 10. SELLER’S RIGHTS AND REMEDIES. If Buyer defaults in complying with any of the terms or provisions hereof, . . the full amount hereof shall at Seller’s option be immediately due and payable and Seller shall have the rights and remedies of the holder of a retail installment contract under Chapter 476, Hawaii Revised Statutes .... Relying on the reference to remedies available to seller under Chapter 476, H.R.S. (Hawaii retail installment sales act), defendant contends that § 476-21 thereunder provides for rebate of unearned interest upon acceleration on default as follows: § 476-21 Credit upon anticipation of payments. Notwithstanding the provisions of any retail installment contract to the contrary, any buyer, upon five days’ prior notice to the holder, may satisfy in full at any time before maturity the debt of any retail installment contract and in so satisfying the debt shall receive a refund credit thereon for such anticipation of payments, if the finance charge has been paid in advance. This court can in no way expand the provisions for notice and prepayment in full by buyer to include defendant’s interpretation, absent legislative history or court holdings to that effect. However, under § 478-4, H.R.S., other provisions of H.R.S. are made applicable to defendant by the following language: . [A]ny bank may charge . interest, ... at the same rates and in the same amounts as permitted by law in the case of loans made by industrial loan companies licensed under chapter 408, if in relation to the contract such bank shall be in compliance with sections 408-15 and 408-17 applicable to licensees under chapter 408. Section 408-15(f), H.R.S., provides in part as follows: . (f) Refunds; prepayment. On a contract ... on which interest has been collected in advance, and . on which judgment is then obtained before maturity, the industrial loan company involved shall refund to the borrower an account of unearned discount or interest an amount computed, on that portion of the principal amount which has not yet matured, at the same rate of . interest as was charged at the time the contract was made, for the term of the contract remaining . . . after the date of the judgment; . This court finds that this provision constitutes statutory provision for the acceleration on default rebate of unearned interest which defendant claims. In Georgia, special masters issued a considerable number of opinions from September 5, 1974 through November 4, 1974, subject to adoption and approval of the District Courts. During this period, two special master opinions were submitted and published by CCH which eventually resulted in partial reversal and the purported establishment in Georgia of the leading cases (from three consistent opinions) on the issue of proper disclosure of acceleration on default. The special master in Barksdale v. People’s Financial Corporation of Alpharetta, 393 F.Supp. 112, CCH Consumer Credit Guide ¶ 98742, appearing in periodic report letter of October 8, 1974, (N.D.Ga.1974), aligned closely with Garza in reasoning that if a creditor has a right to assess a charge automatically, without other conditions, that right must be disclosed as a charge under Regulation Z. He held that the right of acceleration is a “charge” as a matter of law and must be disclosed pursuant to § 226.8(b)(4). In McDaniel v. Fulton National Bank of Atlanta, 395 F.Supp. 422, CCH Consumer Credit Guide ¶ 98,683, published in periodic report letter of January 14, 1975 (N.D.Ga. 1974), the special master sought to overrule and distinguish previous cases on a number of theories. He concluded: (1) previous decisions’ reference to § 102 (declaration of purpose section of the Act) as the authority for requiring disclosure of acceleration clauses because of their meaningfulness to consumers was improper; (2) the consequences of default, including repossession, remedies under UCC Article IX, deficiency judgment, and acceleration of debt leading thereto were not credit disclosures which Congress specified; (3) there must be an “addition” after default to the amount of payments otherwise due to require disclosure; (4) acceleration upon default is a contractual remedy; (5) under any circumstances, debtor is charged only for actual earned portions of the finance charge upon acceleration because of applicable Georgia law providing for automatic rebate of unearned interest. The district court on December 18,1974, approved the special master’s findings to the extent that acceleration on default in the state of Georgia cannot constitute a “charge” because of the statutory provision for rebate of unearned interest upon acceleration on default. The court cited as additional authority, arising following the special master’s opinion, Grant v. Imperial Motors, summarized in CCH Consumer Credit Guide ¶ 98,620, Civil No. 3146 (S.D.Ga. December 4, 1974), in which the acceleration upon default provision involved rebate of unearned charges by the terms of the agreement rather than impliedly relying upon Georgia law. Grant commented that acceleration was more in the nature of a remedy of the creditor rather than a charge imposed on the debtor, but retreated from that view to the extent of stating that the result would be different if no unearned charges were rebated. The following spectrum of special master recommendations were also submitted: Wiggs v. BMA Investment Co., summarized at CCH Consumer Credit Guide ¶ 98,676, published in periodic report letter of January 28, 1975 (N.D.Ga.1974) (acceleration clause in installment loan agreement is a contractual right and not a charge that must be disclosed under the Act); Houston Jr. v. Atlanta Federal Savings and Loan Association, summarized at CCH Consumer Credit Guide ¶ 98,687 under periodic report letter of January 14, 1975, (N.D.Ga. September 24, 1974) (reliance on general provisions of § 102 is not proper; if Act had intended right of acceleration to be disclosed, it would have so provided; a reasonable interpretation of “charge” would not include a future right which could not be determined until such time as requisite default or delinquency in payment occurred); Hamlet v. Beneficial Finance Co., CCH Consumer Credit Guide ¶ 98,646, published in periodic report letter of March 11, 1975, Civil No. C74-821A (N.D.Ga. November 4, 1974) (under state law, an acceleration could not result in the collection of any more interest than the lender was entitled to for the time the loan was outstanding; there could thus be no delinquency charge upon acceleration, and so there was no charge to disclose). Interspersed with these decisions and recommendations came the publishing of Federal Reserve Board Letter No. 851 of October 22, 1974, excerpted in CCH Consumer Credit Guide ¶ 31,173 at 66525, published in periodic report letter of January 14, 1975: For the purposes of Truth in Lending disclosures, this staff views an acceleration of payments as essentially a prepayment of the contract obligation. As such, the disclosure provisions of § 226.8(b)(7) which require the creditor to identify the method of rebating any unearned portion of the finance charge or to disclose that no rebate would be made, apply. If the creditor rebates under one method for acceleration and another for voluntary prepayment, both methods would need to be identified under § 226.-8(b)(7). Failure to disclose the method of rebate or nonrebate would be a violation of the Truth in Lending Act. If, under the acceleration provision, a rebate is made by the creditor in accordance with the disclosure of the rebate provisions of § 226.8(b)(7), we believe that there is no additional “charge” for late payments made by the customer and therefore no need to disclose under the provisions of § 226.8(b)(4). On the other hand, if upon acceleration of the unpaid remainder of the total of payments, the creditor does not rebate unearned finance charges in accordance with the rebate provisions disclosed in § 226.8(b)(7), any amounts retained beyond those which would have been rebated under the disclosed rebate provisions represent a “charge” which should be disclosed under § 226.8(b)(4). On its face the letter contains one clear inconsistency! In the first paragraph cited, supra, the Director indicates that if two different methods are used for rebate under acceleration and voluntary prepayment, respectively, both methods would need to be identified. However, in the second paragraph, he requires disclosure only for “charges” arising if the method of rebate upon acceleration involves retention of funds “beyond” those rebated under the voluntary prepayment method. Therefore, if the rebate under the method used upon acceleration equals or exceeds the rebate under the method used for voluntary prepayment, by the second paragraph, there need be no disclosure. Arguably, the application of Interpretation 226.818 to letter 851 also tends to undermine the conclusion of the letter. § 226.818 would find no penalty charge requiring disclosure in a precomputed finance charge transaction in which the method of rebate of unearned interest upon prepayment did not produce the same rate of or amount of rebate as would be realized under the actuarial method. This position could be used to support the proposition that so long as rebate of unearned interest is made upon acceleration upon default whatever the method employed, disclosure would not be required, the only exception being in those circumstances in which no rebate of unearned interest is made, which circumstance in the instance of prepayment of the obligation must be disclosed under 226.8(b)(7). The impact of this inconsistency and the general conclusion of letter 851 is discussed, infra. From these cases and recommendations arising prior to the instant transaction, some of which were published after the date of the transaction, defendant faced a milieu of competing considerations and rationales. From Garza, Hail, Pugh and Meyers evolved the argument and authority against defendant’s contention of the validity of non-disclosure by reason of statutory rebate of unearned interest. Counterbalancing this line of authority was Washington Motor, discussed supra. Special master recommendations ran the gamut from Barksdale’s reiteration of the Garza reasoning, through McDaniel’s and Hamlet’s exculpation by operation of state rebate law, to Wiggs’ acceleration as a remedy, not a charge, and Houston’s finding no provision for acceleration disclosure in the Act. Woods v. Beneficial Finance Co. of Eugene, 395 F.Supp. 9 (D.Ore.1975), inaugurated the new year by refusing to deal in the semantical distinctions of Garza and its progeny as to equation of acceleration with “charge” when there is in fact no additional total financial cost imposed, but found persuasive the “immediate pecuniary burden” rationale of Meyers. The court held that the creditor need not disclose a right of acceleration as an additional “charge” as such, but that the right of acceleration is an obvious concern to a borrower within the “meaningful disclosure” language of the declaration of purpose section of the Act, and consequently the creditor must disclose and fully explain any right of acceleration in order to comply therewith. 395 F.Supp. at 16. The Oregon court thereby refused to burden itself with applying or at least construing the specific disclosure provisions of the Act and Regulation Z. Instead, the court invoked the general provisions of the declaration of purpose of the Act as the criteria and authority compelling the disclosure of the right of acceleration. The district court opinions in Barksdale, 393 F.Supp. 112 (N.D.Ga.1975), Barrett v. Vernie Jones Ford, Inc., 395 F.Supp. 904 (N.D.Ga.1975) (reconsidered May 8, 1975), and McDaniel, 395 F.Supp. 422 (N.D.Ga. 1974) (Supplemental Opinion May 13, 1975), comprise a triumvirate of cases in that judicial district so interrelated by citation and reference back as to be best considered together. The special master recommendations in Barksdale and McDaniel have been discussed, supra. Barksdale differs in fact situation in that the acceleration clause provides that “all of said note and all installments of principal and earned finance charge then unpaid are immediately due and payable.” 393 F.Supp. at 114 (emphasis added). Citing the McDaniel December 18, 1974 opinion portion and Grant as authority, in refusing to adopt its special master’s recommendations, the court held that the McDaniel language: an acceleration of the loan by the creditor here would not obligate plaintiff [debtor] to pay any additional charge that did not appear on the face of the disclosure sheet was the conclusive result of the application of Georgia law directing rebate of unearned interest upon acceleration. The court concluded as a matter of law there is no violation of § 226.8(b)(4) from the fact that the defendant’s contractual acceleration remedy in the event of default was not set forth on the front of the disclosure statement. As will be seen in the analysis of McDaniel, infra, the court made a decision-saving footnote: Indeed, notwithstanding the Georgia law as to what portion of the face value of an installment note may be accelerated for default, the option in this case is expressly limited to the “principal and earned finance charge than unpaid.” Without this footnote, which is cited as the holding in Barksdale by Barrett and McDaniel’s May Supplemental Opinion, infra, the reversal of McDaniel’s December opinion by the Supplemental Opinion would have rendered the Barksdale decision without authority in its primary reliance on the impact of Georgia unearned interest rebate law as to acceleration on default clauses. Barrett next weighed the developing Supplemental Opinion of McDaniel. The acceleration clause in Barrett, as in McDaniel, gave seller the option to declare all unpaid installments immediately due without providing for rebate of unearned interest. Barrett found that FRB letter 851 was applicable in that the acceleration clause did not provide for unearned interest rebate and that disclosure under § 226-8(b)(4) was required. To defendant’s contention that the transaction in the case was pre-letter 851, the court alternatively found that the diminution of the period over which the finance charge would be spread constituted a “charge” which is passed on to the consumer as a result of default, and hence required disclosure, citing Garza and the since reversed district court decision in Johnson v. McCrackin-Sturman Ford, Inc., 381 F.Supp. 153 (W.D.Penn.1974). Barrett then overruled the December McDaniel opinion by discounting the impact of state law as a “silent provision” to the disclosure requirements under the Act, relying as did Garza, et a 1, on the declaration of purpose general provision to conclude: . [Irrespective óf how this acceleration clause might fare if an attempt was made to enforce it in the state courts, the Truth in Lending Act and its implementing regulation, 12 C.F.R. § 226.8(b)(4), require that an acceleration clause be properly disclosed when, as here, by its terms it authorizes the creditor to demand immediate payment of future installments including unearned interest and finance charges upon default. 395 F.Supp. at 909. On motion for reconsideration, Barrett further clarified the inapplicability of Georgia law by commenting, “under neither [Georgia] Act will the Georgia court ‘read into’ a silent acceleration clause a provision rebating all unearned interest.” Ibid. The court instead described the operation of Georgia law as compelling rebate of unearned interest, and possibly any finance charge, delinquency or collection charges on the contract if, upon tender for judgment in the state courts, the application of the acceleration provision in the contract at the time judgment was sought resulted in a usurious rate of interest. The court hypothesized that under certain factual situations, acceleration could be obtained, unearned interest could be withheld from rebate, but the usury standards of Georgia law would not be violated. The Truth in Lending Act, however, would require disclosure where there was withholding of any unearned interest. Ignoring the impact of Georgia law, then, the court reemphasized, “Thus the crucial inquiry is what charges has the lender asserted a right to collect under the terms of his note, not what will be the outcome of an attempt to enforce these charges in the state courts.” Id. at 911. Extending that conclusion, the court indicated that the disclosure of a clearly usurious 50 percent interest rate would not contain a Truth in Lending violation if that interest rate was clearly disclosed. There followed the McDaniel Supplemental Opinion of May 13,1975. 395 F.Supp. at 424. In response to Barrett, McDaniel altered its conclusion by stating, “if acceleration does not create an additional charge, and if the creditor does not assert- the right to accelerate the note as to create a potential additional charge through the acceleration of unearned interest, there is no violation of the Truth in Lending Act.” Id. at 425-426. The court then held that the note in question contained an additional charge to the extent that acceleration effectively increased the true annual rate of interest of the note, which increase had not been disclosed at the inception of the transaction. Again relying on the declaration of purpose section of the Act, the court found there is a requirement of disclosure of all charges which the lender asserts a right to collect at the time credit is extended whether or not it is finally determined that he can utilize the enforcement mechanisms of the state courts to collect the charge. In the most recent acceleration case in Georgia, Morris v. First National Bank of Atlanta, Civ. C74-1494A (N.D.Ga. November 7, 1975), rejected without analysis the special master’s argument supporting the imposition of § 226.6(g) as controlling and also the master’s analysis of the development of the Act in Congressional hearings and conclusion that Congress recognized the prevailing state statutory provisions providing for individual installment late payment charges and specifically provided for disclosure of same in 15 U.S.C.A. § 1638(a)(9). Instead, the court held Barrett, Barksdale, McDaniel, Meyers, et a 1 as controlling. The Third Circuit reversed the district court in Johnson v. McCrackin-Sturman Ford, Inc., supra, 527 F.2d 257, CCH Consumer Credit Guide ¶ 98,499 (3d Cir. December 16, 1975), holding as urged by defendants in the instant case that a state statutory provision for rebate of unearned interest upon acceleration was considered incorporated into the provisions of applicable contracts, that the net effect of the operation of such a statute would be to impose no additional charge upon a debtor on acceleration upon default, and that therefore no disclosure of an acceleration provision operating under such a state law would be required by the Act. The court criticized Garza and the lower court for considering the term “charges” apart from the language which modified it in § 226.8(b)(4) on the premise that those courts employed a method of analysis which is inconsistent with well established principles of statutory interpretation and further ignored the generally established meaning in the commercial credit field of default and delinquency charges as those specific pecuniary sums that are assessed against the borrower solely because of his failure to make his payments in a timely manner, and which are extensively enacted in state statutes providing for the payment of specific monetary sums, in addition to the amounts already due under the loan, that are imposed because of late payment of an installment or installments. The operation of Pennsylvania’s statutory rebate was held by established principles to be incorporated into the contract acceleration provisions, thus placing these provisions within the purview of letter 851 in that no disclosure under § 226.-8(b)(4) was required in the absence of an “additional charge.” In an opinion issued upon motion to reconsider, Judge Wong in Kessler v. Associates Financial Services Company of Hawaii, Inc., 405 F.Supp. 122 (D.Haw.1975), applied a standard of reasonableness to defendant’s actions in light of the Act, regulations, interpretations, and case law in existence at the time of the transaction. The court found that Garza was the only case handed down by the courts and cited by parties in the case, and that Garza’s requirement of disclosure arose implicitly from a particular interpretation of Regulation Z, § 226.-8(b)(4). Since Garza had not dealt with a fact situation in which state law required refund of unearned interest upon acceleration, defendant could not be held to that particular interpretation of § 226.8(b)(4). The court envisioned lenders attempting to protect themselves by adequate disclosure in conjuring every possible ramification of interpretations, producing disclosure statements which both differed from lender to lender and contained an excessive and confusing number of provisions. After holding for defendant lender under the above analysis, Kessler went on to indicate that under the weight of the Georgia case opinions, and particularly invoking the declaration of purpose provisions of the Act, prospective application of the decision would call for disclosure of an acceleration clause which does not contain therein a provision for rebate of unearned interest. The weight of the Johnson decision would of course, but for the holding of this court, have accorded prospective authority to Kessler. This court, however, is compelled to find that the prospective effect of the instant case, as well as the holding herein, must rest on the misplaced and overreaching application of the declaration of purpose provision of the Act as originally applied by Garza and subsequently followed virtually unanimously by case decisions, as well as the failure of the courts to invoke and apply § 226.6(g) in conjunction with consideration of the interpretation of § 226.8(b)(4) and § 226.8(b)(7) by the staff of the Federal Reserve Board in opinion letter 851. With regard to the application of 15 U.S.C.A § 1601, the special master in McDaniel provided excellent and compelling analysis: However, § 102 [15 U.S.C.A. § 1601] should not, of itself, be used by the courts to find violation of the Act where the Act otherwise fails to set out a specific requirement for creditor compliance. It is § 129 of the Act [15 U.S.C.A. § 1639] that specifies the disclosures applicable in ordinary loans such as that involved in the instant case. It is § 129, rather than § 102, where a disclosure violation must be lodged. The specific provisions of the Act and Regulations regarding disclosure requirements should be complied with precisely by creditors to provide the correct credit information and uniformity in terminology which Congress mandated. But the stringent disclosure requirements of § 129 should not be enlarged beyond the specific terms of the Act and Federal Reserve Board regulations simply to conform to some judicial notion as to the congressional purpose and intent which may be revealed in § 102. The test is not what a court may consider more beneficial, informative, and understandable to the borrower than the specific requirements of the Act and Regulations. That is the province of the legislative branch. The test to be applied in determining whether a violation exists is whether there has been compliance with the specific requirements of the Act and the Regulations of the Federal Reserve Board promulgated under broad powers in the light of commercial realities. (Footnotes omitted.) 4 CCH Consumer Credit Guide ¶ 98,683 at 88,259. (The lengths to which § 1601, to the expressed exclusion of the remainder of the Act and Regulation Z, has been invoked to justify disclosures concluded to have been required under the Act is most amply demonstrated in Woods, supra.) Application of § 102 in Kessler, citing the general provisions as to meaningful disclosure of credit terms to void the consumer’s uninformed use of credit, carried with it an equally compelling rebuttal against such an application, when considering the impact of case decisions: . [LJenders would be put to the task of conjuring up the various requirements that a regulation may be interpreted to require and would be compelled to include on the disclosure statement all such possibly required disclosures. Thus, disclosure statements would differ from lender to lender, which would defeat the ease of comparing credit terms — the essential purpose of the Act. Moreover, if it were the rule that the lender was liable for all subsequent requirements that the courts read into imprecise Truth-in-Lending regulations, lenders, in order to protect themselves, would disclose all the terms contained in the promissory note. As a result, the disclosure statement and the note would become identical. Hence, another essential policy of the Truth-in-Lending Act — the disclosure for the purpose of easy reference of only certain critical terms and provisions of the loan— would be defeated by the confusing and obfuscating inclusion of every term and provision. No more forceful arguments could be made that creditors should be held only to the specific provisions of the Act, Regulation Z thereunder, formal interpretations, and appropriate consideration of staff opinion letters issued thereto. The invocation of § 102 having been found improper to justify imposition of disclosure requirements, for plaintiff’s claim thereon to be upheld, acceleration upon default must either be incorporated under § 226.8(b)(4) as a “similar charge” or, by board opinion letter 851, into § 226.8(b)(7) interpreted as essentially a prepayment of the obligation. Neither of these approaches, however, gives any weight or credence to § 226.6(g) and the explanatory footnote appended thereto. Meyers discounts the effect of § 226.6(g) as rendering § 226.8(b)(4) a nullity, reasoning that all delinquency-type charges are contingent upon such post-disclosure acts, namely, the failure to make timely payments. The special master in Morris (subsequently reversed by the district court) provides an alternative and more persuasive argument on the interrelationship of 226.-8(b)(4) and 226.6(g). 4 CCH Consumer Credit Guide ¶ 98,568 at 88,071-78. The master first discusses at length the development of the provisions of § 226.8(b)(4) as being a logical inclusion in the Act in view of statutory operation of such automatic late payment charges imposed on each late installment in the applicable state retail installment contract acts. The master then returns to the argument that a reserved right to accelerate late payments on default is the same logical category as the creditor’s rights of repossession, foreclosure, and sale on default. He finds further distinction in the Board’s use of “similar charges” in § 226.8(b)(4) as indicating that Congress intended to require disclosure of all charges which are directly attributable to the act of making “late payments”, that is, charges commonly considered as default or delinquency charges in the consumer financing industry. The CCH Consumer Credit Guide discussion of the relationship between delinquency charges and acceleration on default is submitted by the master (1 CCH at 4083-84): [Compiled from a general background of existing state Truth-in-Lending laws] ¶ 4230. Delinquency charges. Delinquency charges — like deferral charges— are the compensation a creditor receives on a precomputed contract for the debt- or’s delay in making timely installment payments. ¶ 4231. Consumer credit sales. Because a precomputed contract is the only one prepared on the assumption that the debtor will make all payments when due, the creditor is left without any income for a period where payment is delayed. In lieu of accelerating the maturity of the entire obligation, the creditor may make an appropriate charge just for the delay on the particular installment. (Emphasis added.) Johnson approached § 226.6(g) language and also flirted with distinguishing acceleration from prepayment of the obligation to unconsciously refute letter 851 by stating: “Except that a specified event in the condition precedent to its exercise, a creditor’s right of acceleration is, in essence, akin to the borrower’s right of prepayment.” 527 F.2d 257, at 264, CCH ¶ 98,499 at 87,964. The crowning example of ignoring § 226.-6(g) is found in the following characterization by Barrett of the fact situation in that case: Here the creditor has included an acceleration clause in his note which has the effect upon the occurrence of certain contingent future events of obligating the borrower to pay a finance charge in excess of the percentage rate actually disclosed. 395 F.Supp. at 911. While summarizing 226.6(g) with near precision, the court failed to recognize the applicability of the provision. If § 226.8(b)(4) is read as applying to disclosures of automatic late installment payment penalties exclusively without inclusion of the court-added acceleration clause interpretation, then the reading together of the two regulatory provisions refutes Meyers 'nullifying construction. As it was unconsciously refuted in Garza (347 F.Supp. at 959) in 1972, this court, too, finds the FRB’s one-sentence conclusion in letter 851, viz., that acceleration is essentially a prepayment of the obligation under § 226.-8(b)(7), to be clearly erroneous in view of the express