## Facts

- Ball Memorial Hospital Association, a nonprofit Indiana hospital, billed patients for services and sought payment at discharge.
- Inpatients were asked to sign an “Initial Credit Disclosure Statement and Consent to Treatment” stating the balance was due at discharge and describing installment payments as available if necessary, including a 3/4% monthly charge on balances unpaid for more than 30 days.
- A hospital patient guide similarly stated accounts were payable at discharge but that patients unable to pay could contact the credit manager to arrange payments based on ability to pay.
- The hospital used a billing and collection sequence for delinquent accounts, including escalating reminders and, for some inpatients, a coupon book tied to monthly billing statements.
- Kathy Bright (inpatient) signed the disclosure statement, later discussed an informal payment plan, and did not make payments.
- Susan Barber (outpatient) received services and bills but did not sign the inpatient disclosure form; her unpaid account was eventually referred to a collection agency.
- The hospital imposed additional charges on delinquent accounts; it characterized those charges as late-payment charges rather than finance charges.
- Bright and Barber filed a putative class action under the Truth in Lending Act (TILA), alleging the hospital failed to provide required disclosures related to the delinquency charges.

## Issues

1. Whether the hospital’s dealings with Bright and Barber constituted TILA-regulated “credit” transactions requiring disclosures under TILA and Regulation Z.
2. Whether the hospital’s percentage and flat-fee charges on delinquent accounts were “finance charges” (as opposed to excluded late-payment or default charges) that would trigger TILA’s disclosure regime.

## Decision

- The Seventh Circuit affirmed judgment for the hospital, but on grounds different from the district court’s conclusion that the hospital was not a TILA “creditor.”
- The court held that no TILA-covered credit transaction was consummated with Bright or Barber because the relevant interactions were post-default collection/workout activity rather than an agreed right to defer payment.
- Because there was no consummated credit transaction with these plaintiffs, TILA disclosure obligations did not arise as to their accounts.

## Legal Principles

- “Credit” under TILA requires a right, granted by the creditor, to defer payment of a debt; mere nonpayment followed by collection efforts does not itself create a credit transaction.
- Charges imposed for actual unanticipated late payment, delinquency, or default may be excluded from the definition of “finance charge” under TILA and Regulation Z.
- Informal, post-default workout discussions on an already due obligation, without formation of a new distinct credit agreement, do not necessarily constitute a new TILA credit transaction.
- Administrative interpretations of TILA and Regulation Z by the Federal Reserve Board, while not binding, are entitled to substantial judicial deference.

## Conclusion

The Seventh Circuit concluded that the hospital’s billing practices and assessment of delinquency charges, as applied to Bright and Barber, reflected collection activity and informal post-default arrangements rather than consummated extensions of credit; therefore, TILA disclosures were not required and judgment for the hospital was affirmed.


Bright v. Ball Mem'l Hosp. Ass'n, 616 F.2d 328 (7th Cir. 1980)