A Michigan consumer had a sordid story to tell the Court. Count the compliance violations and then read on to see how real life compliance violations can cost you in a big way.
The plaintiff signed a RISC to purchase a used vehicle for $8,000, but the dealer did not give her a copy of the RISC either before or at the time of the sale. She didn’t take delivery because the dealer kept the car to install a GPS device. When she called five days later to inquire about the status of the transaction, the dealer told her that the price she was charged included a bank fee of $570 based on her credit risk.
Some time later, she received a copy of the contract, unclear when or how. She noticed that it included a charge for an extended warranty that she did not want. She called the warranty company cancelling it but the warranty company never received any paperwork from the dealer. Plaintiff never received a credit for the cancelled warranty coverage.
The RISC indicated the contract was assigned to Credit Acceptance Corp. (“CAC”) and plaintiff made her first payment to them. When she went to make her second payment, CAC told her they would no longer accept payments as the dealer had cancelled the contract. When she spoke to the dealer, she was told that financing had not been approved and she had to return the car or it would be repossessed. She didn’t return the car and the dealer repossessed it almost seven months to the day from when she signed the original RISC. The dealer then sold the car without giving any notice to the plaintiff.
She sued and the dealer failed to answer the complaint. The Clerk entered a default and plaintiff moved for a default judgment. In granting her a default judgment, the Court found the following compliance violations and awarded damages in the indicated amounts (how many did you find?):
- Truth-in-Lending – The Court found that the dealer had violated TILA by failing to disclose in the RISC a hidden finance charge—the $570 fee based on plaintiff’s credit risk—that would not have been charged in a comparable cash sale. The Court awarded $1,000 statutory damages for the nondisclosure.
- ECOA – The Court ruled that the dealer violated ECOA by failing to send an adverse action notice when it cancelled the plaintiff’s contract. Pointing out that ECOA permits a punitive damage award of up to $10,000, the Court award plaintiff $2,000 in punitive damages against the dealer for not sending the adverse action notice.
- Conversion – Claiming that the dealer repossessed the vehicle when plaintiff was not in default, failed to return it and then sold it to another buyer, plaintiff sought treble damages under Michigan’s statutory conversion law. The Court agreed this constituted conversion and awarded her three times the $8,000 price of the car, for a total of $24,000.
- UCC Article 9 – Article 9 of the UCC requires a secured creditor who takes possession of collateral securing financing to give notice of the intended disposition and provide a description of the borrower’s deficiency liability. The Court found that the dealer had failed to give any notices concerning the disposition of the vehicle. The Court again awarded statutory damages in the full amount of the time-price differential plus 10% of the $8,000 cash price, for a total award $3,578.20
- Attorney’s Fees and Costs – TILA, ECOA, and the Michigan conversion statute all allow for a recovery of plaintiff’s attorney’s fees. Based on her attorney working 14.4 hours at $250 per hour, the Court awarded attorney’s fees in the sum of $3,600 plus $377 for the lawsuit filing and service fee.
Totaled up, the Court entered judgment for the Plaintiff against the dealer in the amount of $34,555.20, this on an $8,000 vehicle sale. How many of these compliance violations did you catch? The numbers show how being compliant can help your bottom line. It only takes a few bad deals and a few litigious customers to seek damages even in relatively small amounts individually that when totaled up can make a real difference. At least it did for this dealer.
Williams v. Delamar Car Co., 2011 U.S. Dist. LEXIS 51074 (W.D. Michigan May 12, 2011).
thecomplianceguide.com is intended for information purposes only and does not constitute the giving of legal or compliance advice to any person or entity. Because of the general nature of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on your particular situations and circumstances.