## Facts

- First Acadiana Bank required every consumer automobile-loan borrower, beginning October 1, 1982, to use a bank-approved attorney to prepare a chattel mortgage on the vehicle.
- Attorneys set fees ranging from $55 to $151 per loan.
- In about two-thirds of the loans, the bank financed the attorney fee by including it in the amount financed (loan principal).
- When the fee was financed, the bank did not include it in the disclosed “finance charge” and did not include it in the APR calculation, though it was separately itemized and included in the amount financed.
- If included in the finance charge, the APR would have been approximately 0.5 to 10 percentage points higher in individual loans.
- After an FDIC compliance examination (1984) found violations, the bank refused to change its practice.
- An ALJ ruled against the bank; the FDIC Board adopted the decision and issued a final order requiring the bank to (i) cease and desist from excluding the fees from the finance charge and (ii) identify affected loans since October 1, 1982 and reimburse borrowers for the understatement.

## Issues

1. Whether mandatory, lender-imposed attorney fees for preparing chattel mortgages, when financed as part of the credit transaction, must be included in the TILA “finance charge” and APR.
2. Whether the fees qualified for exclusion from the finance charge as charges payable in a comparable cash transaction or as excludable document-preparation/security-instrument fees under Regulation Z.
3. Whether the FDIC’s interpretation and remedial order (including reimbursement) were lawful and within the agency’s authority.

## Decision

- The Fifth Circuit affirmed the FDIC’s final order.
- The court held that the bank’s lender-required attorney fees, when financed, were charges imposed as a condition of obtaining credit and therefore belonged in the finance charge and APR absent a valid exclusion.
- The court accepted the FDIC’s interpretation of TILA and Regulation Z as reasonable and gave it substantial deference.
- The court upheld the FDIC’s cease-and-desist and borrower-reimbursement remedies as within the FDIC’s enforcement authority.

## Legal Principles

- Under TILA and Regulation Z, a “finance charge” broadly includes charges paid directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or condition of the extension of credit, unless a specific exclusion applies.
- A lender cannot exclude a mandatory, credit-conditioned charge from the finance charge and APR merely by placing it in the amount financed and separately itemizing it.
- Exclusions tied to charges payable in a comparable cash transaction, and related regulatory exclusions, are construed narrowly when the charge is linked to the lender’s credit program and borrower eligibility for credit.
- Courts may defer to a banking regulator’s reasonable interpretation of TILA and its implementing regulations in the context of administrative enforcement.
- Banking regulators may order corrective relief, including reimbursement, to address materially understated finance charges and APR disclosures.

## Conclusion

The court sustained the FDIC’s determination that First Acadiana Bank violated TILA by financing and requiring attorney fees as a condition of auto loans while excluding those fees from the finance charge and APR, and it upheld the FDIC’s order requiring corrected practices and reimbursement to affected borrowers.


First Acadiana Bank v. Fed. Deposit Ins. Corp., 833 F.2d 548 (5th Cir. 1987)