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HOT TOPICS
2015 GNYADA Membership Directory
110
A dealer inMichigan sold a vehicle to a consumer and committed a litany of violations
in doing so. Plaintiff consumer was not given a review copy of the RISC disclosing the
finance charge prior to the time of sale. She didn’t take delivery because the dealer was
going to install a GPS device. When she returned to pick up the vehicle and a copy of the RISC,
she was told the price she was being charged for the vehicle included a $570 bank fee based on her credit rating.
It also included an extended warranty the Plaintiff did not want. When she called the warranty company to
cancel, the warranty company indicated it had not received any paperwork from the dealer. She never received
a refund. She made her first payment to the creditor-assignee, CAC, but when she went to make her second
payment a CAC representative informed her that the dealer had canceled the contract. The dealer claimed she
had not provided all the required documentation and told her to return the car or it would be repossessed.
Plaintiff didn’t return the car, and the dealer repossessed it and then sold it to a third party without informing
the plaintiff.
The Court ruled that the dealer had violated Truth in Lending by failing to disclose a hidden finance charge – the
bank fee based on the consumer’s credit risk. It awarded plaintiff $1,000 in statutory damages.
The Court next awarded the consumer her requested $2,000 in punitive damages against the dealer for the
dealer’s failure to send an adverse action notice under ECOA when it canceled the contract. ECOA allows for the
recovery in individual actions of up to $10,000 in punitive damages for a violation of ECOA with a limit on class
action punitive damage liability of the lesser of $500,000 or 1% of the creditor’s net worth.
The Court also treated the dealer’s repossession of the vehicle as a conversion (theft) of property because the
consumer had never signed a spot agreement entitling the dealer to cancel the contract and the consumer
was not in default of the RISC when the vehicle was repossessed. Under Michigan law, a plaintiff is entitled to
treble damages for conversion. Valuing the vehicle at $8,000, the Court awarded treble damages in the sum
of $24,000.
Finally the Court awarded the plaintiff damages under the UCC because the dealer sold the car without giving
the plaintiff notice of its intended disposition or a description of her potential deficiency liability. The Court
calculated these damages in the sum of $2,778.20, this being the amount of the time-price differential plus
10% of the cash price of $8,000.
The Court also awarded the plaintiff $3,600 in attorney’s fees and $377 in court costs. The total amount of the
judgment entered against the dealer totaled $34,555.20, this for an $8,000 vehicle sale.
Recent Litigation Involving Payoffs of Trade-In Vehicles – A number of class actions have been filed against
dealers relating to practices concerning payoff amounts listed in RISCs being incorrectly stated to the detriment
of the customer. Typically, a dealer will obtain from the trade-in lender an automated 10-day or 15-day payoff
amount. That amount may be included in the amount financed portion of the RISC and the RISC will typically
provide it is only an estimate and the dealer is agreeing to pay the amount shown to the lender. The dealer does
not make any statement that the figure is accurate.
If the dealer pays off the trade-in on the day it accepts the vehicle, the trade-in lender will refund the customer
unearned finance charge from the 10-day quote. The problem arises when a dealer waits a number of days—
maybe as many as 10 or 15—to pay off the lien. The class actions charge that in such event, the consumer is