## Facts

- Roger Gonzalez bought a used 1972 Ford Pinto from Schmerler Ford, a retail automobile dealer.
- The transaction used two documents: one dated October 1, 1973, and another dated October 3, 1973.
- The October 1 document stated a purchase price of $2,255, showed a $10 payment made that day, and stated the remaining $2,245 would be paid on October 3—appearing on its face to be a “cash” transaction with a lump-sum payment due shortly after.
- Gonzalez claimed the October 1 signing reflected a commitment to buy conditioned on obtaining financing through the dealer, not a real plan to pay the full balance in cash on October 3.
- According to Gonzalez, he discussed financing on October 1 and sought low monthly payments, expecting Schmerler Ford to arrange third-party credit.
- On October 3, the parties executed an installment sales contract reflecting a cash down payment, a trade-in allowance, and the credit disclosures required by the Truth in Lending Act (TILA) and Regulation Z.
- Schmerler Ford regularly assisted customers in obtaining financing, including through Ford Motor Credit Corporation.
- Gonzalez sued, alleging Schmerler Ford violated TILA and Regulation Z by failing to provide required credit disclosures at the time the transaction was effectively made.

## Issues

1. Whether the October 1, 1973 document and surrounding circumstances created a consummated consumer credit sale, even though the installment contract was signed on October 3.
2. Whether Schmerler Ford qualified as a covered creditor/arranger of credit under Regulation Z based on its regular practice of arranging third-party financing.
3. Whether providing TILA/Regulation Z disclosures only in the October 3 installment contract was untimely if the credit transaction was consummated on October 1.

## Decision

- The court found that the October 1 transaction was not a true cash sale; financing was part of what the parties contemplated when Gonzalez committed to purchase the car.
- The court determined Schmerler Ford regularly arranged consumer credit and therefore fell within Regulation Z’s coverage for purposes of TILA disclosure duties.
- The court held that the transaction was “consummated” on October 1 because a contractual relationship had been created at that time, even though performance and final paperwork occurred later.
- Because required disclosures were not provided on October 1, Schmerler Ford violated TILA and Regulation Z; disclosures given on October 3 were too late.

## Legal Principles

- In a consumer credit sale, TILA requires disclosure of specified credit terms before credit is extended. 15 U.S.C. § 1638(b).
- Regulation Z requires that disclosures be made before the transaction is consummated. 12 C.F.R. § 226.8(a).
- For Regulation Z timing, “consummation” occurs when a contractual relationship is created between the customer and the creditor, regardless of when either party performs. 12 C.F.R. § 226.2(cc).
- A seller that regularly arranges third-party financing for consumers can be treated as a covered party required to provide TILA/Regulation Z disclosures in connection with the credit sale.
- Courts look to the substance of the parties’ agreement; a form that appears to describe a cash deal will not delay disclosure duties when the buyer’s commitment is made in the context of arranging credit.

## Conclusion

Because the buyer’s commitment on October 1 was made with financing as part of the contemplated deal and Schmerler Ford regularly arranged such financing, the court treated the sale as a consummated consumer credit transaction on October 1 and held that TILA and Regulation Z required disclosures then; providing disclosures only when the installment contract was signed on October 3 was untimely and established liability.


Gonzalez v. Schmerler Ford, 397 F. Supp. 323 (1975)