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Financial Services Law Insights and Observations

Indiana Court of Appeals reverses state regulator’s finance charge action

Courts State Issues State Regulators TILA Disclosures Finance Charge


On August 19, the Court of Appeals of Indiana reversed the Indiana Department of Financial Institutions (Department) finding that a car dealership charged an “impermissible additional charge” in violation of the state’s additional-charges statute when the dealership improperly disclosed a finance charge to its consumers. According to the opinion, the dealership charged, in addition to a third party titling fee, a $25.00 convenience fee to its credit customers for electronic titling through the third party. The service was required for credit customers but was optional for cash customers. After conducting a routine examination, the Department identified one violation from a transaction in July 2015, where the dealership did not disclose the convenience fee in the “finance charge” box of the disclosures, noting “the fee was only mandatory for credit customers and therefore was ‘a condition of the extension of credit.’” The dealership provided a contract from the same time period, showing it disclosed the fee in the “Itemization of Amount Financed” and “Amount Financed” boxes, not in the “Finance Charge” box. The Department charged the dealership with violating the state’s additional-charges statute, “for assessing ‘impermissible additional charges’ in the form of the $25.00 convenience fee,” as opposed to a charge for violating the state’s disclosure statute.

On review, the Court of Appeals concluded the charge was a finance charge because it was mandatory for the dealership’s credit customers but not its cash customers, and noted a finance charge cannot also be an additional charge. The Department argued it made no practical difference which violation it alleged, because the remedies under both statutes are the same, while the dealership noted a disclosure violation would entitle it to raise certain defenses under TILA. The appellate court did not address this issue, but nonetheless concluded “a finance charge doesn’t become an ‘impermissible additional charge’ when it’s not disclosed in the ‘Finance Charge’ box,” and remanded the case back to the Department for proceedings under the disclosure statute.