Vallies v. Sky Bank

Vallies purchased a truck from Phil Fitts Ford. The dealership arranged financing for Vallies through Sky Bank. Guaranteed Auto Protection (GAP) insurance was purchased and financed in the transaction. Sky Bank failed to include this in the total finance charge and failed to itemize the premium, but combined it with a service contract fee.

The same day as the loan documents were executed for the purchase, Vallies signed a "GAP Waiver Agreement" form provided by the dealership. This form correctly disclosed the cost of the GAP insurance and the required TILA disclosures pertaining to the charge.

At issue is whether the dealership could make this disclosure for Sky Bank, as the dealership was not an agent for the bank. While the District Court held it could, the Court of Appeals for the Third Circuit reversed the judgement.

The Court of Appeals maintains that TILA does not permit a creditor to delegate disclosure responsibilities to another and that the disclosures needed to have been made by Sky Bank. The Act (and the regulation that implements it) is clear in that it states at 12 C.F.R. § 226.17 that “[t]he creditor shall make the disclosures...clearly and conspicuously in writing, in a form that the consumer may keep." And at 12 C.F.R. § 226.18 it states “[f]or each transaction, the creditor shall disclose the following information...” Duties required by "the creditor" are referred to several times in the Act. It was determined that the creditor, and the creditor alone, has the disclosure responsibility.

The fact that what was originally disclosed was confusing and incorrect was a moot point. Also inconsequential was the fact that Vallies eventually received the correct disclosures. The issue at hand was who made the disclosures as required by law. It was not the creditor, and this meant that the disclosures were improperly made. A lender must rely on the dealership when transactions such as these are entered into. But each party has certain obligations which may not be imposed on another.