Car Dealers – Page 2

Adverse Action: What it means, Why it matters. (VIDEO) Alabama Consumer Credit Attorney Judson E Crump

December 12, 2014 by Attorney Judson E Crump Leave a Comment

Whenever you Apply for Credit or any sort of Installment Loan, you are supposed to receive a written notice from the creditor telling you if you were approved, denied, or given a counter-offer. This is more important than you think. Here’s why.

There’s this thing called the Adverse Action Notice. It’s a letter that anyone who receives a consumer credit application must send to the applicant if they do anything but approve their application on the terms requested. Here’s what they look like:

This one complies with FCRA and ECOA - it tells the applicant that he doesn't have enough credit history to get approved for the loan he wanted. — This one complies with FCRA and ECOA – it tells the applicant that he doesn’t have enough credit history to get approved for the loan he wanted.

This letter was sent to a client who had no idea that she'd ever applied for a loan with Cap One. She went with another finance company because the car dealer didn't tell her about Cap One's offer. — This letter was sent to a client who had no idea that she’d ever applied for a loan with Cap One. She went with another finance company because the car dealer didn’t tell her about Cap One’s offer.

Both the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act require adverse action notices, but the same letter can serve both purposes, and the ECOA requirements are more important.

Just like the name says, the Equal Credit Opportunity Act was originally intended to prevent credit discrimination by forcing creditors to tell people the real reason why they were denied a loan or offered a 12% interest rate when everybody else got a 7% interest rate. It’s really hard to discriminate against divorcees or blacks if you’re not allowed to just deny without an explanation. It still does this, though I like to think that our society has progressed beyond the point of people being mistreated solely because of their color, sex, religion, or whatever.

But the Adverse Action Notice has two very important functions that Congress probably didn’t foresee back in 1974.

1. It alerts you to problems with your credit report. Because the adverse action notice has to tell you why you were denied, (i.e. “You have too much debt already.”), it can alert you to credit problems that you didn’t know you had. For instance, if you get a denial letter that says your auto loan application was denied because you had “Too many recent inquiries,” and you know for a fact that you haven’t applied for any sort of credit in 2 years, then you know that something is wrong, and you’ve been alerted to a possible identity theft issue that you need to take care of ASAP.

2. It warns you of fraud by potential creditors and salespeople. This happens most often in the context of auto sales, but it can just as easily happen with mortgage lending (where there are much bigger consequences). How? I’ll use an example to show you why. You go to a car dealer shopping for a car. You pick one or two models you’re interested in and you offer a $3,000 down payment and you ask to finance the remaining $18,000 at 8% APR over 48 months. You fill out a credit application and you hand it to the dealer. He uploads it to his computer system and submits the loan to potential finance companies.

What’s supposed to happen next is this: he sends your application to a four potential lenders, and they respond. Whichever one gives you the best deal gets the contract. You get the car. The dealer sells a car. The finance company gets a new customer paying them 8% APR for their loan.

But what can (and sometimes does) happen is this: three lenders reply, two of them offer you financing at 9%, and the other offers you financing at 12%, but is willing to finance a bunch of junk charges like a $1800 service contract that cost the dealer $600 and pay the dealer a bonus $500 for sending you their way. The dealer then tells you that you’ve been approved for 12%, and that’s all they can do. You believe him and you take the deal.

30 days later, you get two letters from finance companies you never heard of, announcing that they got your applications, but only offered you 9%, and that they haven’t heard from you since then. You think WTH? I signed up for 12% when I could have gotten 9%? So now you know you’ve been screwed. That’s what is supposed to happen. Now you can do something about it. Like calling a lawyer in Alabama who can help you take action to defend your rights.

Car Repossessed After a Spot Delivery Sale went Wrong? A few Defenses – Alabama Consumer Fraud Attorney Judson E. Crump

December 3, 2014 by Attorney Judson E Crump 1 Comment

Spot Delivery Sales are Often Illegal. But even when they’re not, you still have rights.

If you have credit problems in your past, then there is a chance you have been subject to a spot delivery auto sale scheme. Spot Delivery? What is spot delivery? A spot delivery is a certain type of car deal where the buyer enters into a tentative or conditional sales agreement to buy a specific vehicle on agreed upon terms, but subject to final approval by a third-party finance company.

Basically, here’s how they work:

You find a car you like and negotiate the terms of purchase with the dealer.
You sign a conditional sales agreement – the condition being that if the dealer cannot find financing for the transaction, the deal is off.
The dealer sends your credit application to several finance companies, hoping one of them will buy it.
If one of them accepts your contract, then the deal is final and you’re good.
If none of them accept your contract, the dealer will do one of two things: either a) they’ll try to rewrite the contract on worse terms to get a lender to accept it (like, maybe they wouldn’t approve you at 18% but they’ll approve you at 22%), or b) the deal is cancelled.
If the deal is cancelled, then the entire contract is void. You have to return the vehicle in good condition; they have to give you all your money back and give you your trade in (or the exact trade-in value) back. They cannot deduct from your down payment except for a reasonable charge for the miles you put on the vehicle. Which should never be more than a couple hundred bucks.
If they try to rewrite your contract, you need to know why, and you need to be sure that the contract had an enforceable spot delivery clause. I recommend contacting an experienced consumer protection lawyer to review such a deal.

Seems simple, right? Not really, and the more complex a deal is, the more opportunities there are for fraud. Particularly in car sales. So here are a few things to watch out for:

EVERY FINANCE COMPANY AND DEALERSHIP WHO DENIES YOU CREDIT MUST PROVIDE YOU A WRITTEN NOTICE OF DENIAL WITHIN 30 DAYS OF RECEIVING YOUR APPLICATION. THE NOTICE MUST TELL YOU WHY YOU WERE DENIED. If you didn’t get a notice within 30 days of them receiving your application, they are violating the Equal Credit Opportunity Act, and you need to talk to a lawyer about that.
Even if you applied for the loan in person, they still have to give you a written notice of their decision.
If they don’t approve you FOR THE PRICE, FINANCE CHARGES, AND INTEREST RATE you requested, then it’s a counteroffer and they have to send you the notice telling you why they didn’t grant the credit you asked for. Unless you accept their counter. If you go with another lender, then they still have to tell you why.
The Spot Delivery Agreement (it may be called a “bailment agreement”) should be clear and conspicuous and part of the sales contract. If it’s on a separate piece of paper, you should have an attorney review them.
If they take the vehicle back, they have to give you your down payment and trade-in back. If they’ve sold your trade-in, make sure that they properly acquired title and that they give you a check for the full amount of the contract trade-in value.
If they repossess the vehicle, they have to let you get your property out of the vehicle. They can’t keep your stuff.
If they repossess the vehicle, they cannot hold you liable for any deficiency balance on the contract (because there was no contract, remember!).

It is possible for a Bailment Agreement/Spot Delivery sale to be done in a manner that is 100% legal. But they usually aren’t. If you think that something was done wrong, you need to talk to an attorney ASAP.

The Lone Justice Ruling for the People: Scalia? – Alabama Consumer Credit Attorney Judson E. Crump

November 11, 2014 by Attorney Judson E Crump Leave a Comment

Koons Buick Pontiac GMC v. Nigh – 543 U.S. 50 (2004). Proof that Judges aren’t just partisans.

The U.S. Supreme Court now has 5 “Republicans” and 4 “Democrats.” Since I get my knowledge of the world from the TV Channels or internet news sites that disagree with me the least, I know this to mean that if an abortion case goes before the Court, 5 justices will rule against abortion and 4 will vote for it. And that in a suit between a large, moneyed corporation and an individual seeking to exercise his federal rights, there will be 5 votes for the corporation and 4 votes for the human.

No, that isn’t how it works. A great example is the 2004 case of Koons Buick Pontiac GMC v. Nigh.

Bradley Nigh bought a car from Koons Buick. Unfortunately for everyone involved, the dealer inflated the sales price of the vehicle with a bogus charge for a “Silencer,” whatever that is. Nigh found a lawyer who had heard of the Truth in Lending Act, and sued the dealer in Virginia federal Court. The jury returned a verdict that the dealer had violated the Truth in Lending Act, and therefore the plaintiff was entitled to a statutory damage award of twice the finance charge, which ended up being about $25,000. It was a high interest loan.

First, a note on statutory damages. These are a lot like punitive damages, in that they’re authorized to penalize a violation of the law. But unlike punitive damages, they are typically limited to a small amount of money. The Fair Debt Collection Practices Act, for instance, has statutory penalty of $1,000. This means that if a debt collector or collection firm violates that statute, then even if the plaintiff can only show $10 of actual loss, they can get an award of $1010, because of the statutory penalty. This provides an incentive to follow the law, since we can’t put corporations in jail.

The Truth in Lending Act (or, TILA, as we call it), has a “sliding scale” statutory penalty, which is twice the finance charge, but with a cap depending on the nature of the transaction. Prior to the 1990s, TILA had a $1,000 cap on statutory damages in car loan cases. But in 1995, Congress amended TILA to add a higher $2,000 cap for real estate loans. However, the way they rewrote the statute that year deleted the reference to a $1,000 cap on auto loans, and only left that cap on the subsection referring to auto leases.

Go and read TILA right now. 15 U.S.C. 1640. It’s as plain as day. The statute contains no specific limit on statutory damages for car loans.

But Koons’ lawyers thought that despite the clear language, they should get off the hook because it was Congress’ mistake to delete the $1,000 limit. Yes, the statute no longer stated that the $1,000 limit applied, but since there was no evidence that Congress meant to change that part of the law, the Court should implement Congress’ intent, and not the language of the statute.

Naturally, Nigh’s lawyer disagreed. What Congress writes is the law. If they make an error, they can fix it by enacting an amendment to the legislation. Who are the courts to overturn clear and unambiguous statements whenever the Court thinks it “doesn’t look right?”

To me this case was a shockingly easy one. The statute says what the statute says. That should be the end of it. But 8 of the Supremes disagreed, saying that the car dealers get a freebie on this one because they thought Congress made an accidental error.

Who was the lone dissenter? Antonin Scalia. Not a guy known for his sympathy for the poor and the ripped off. But there he is, dissenting to uphold a $24,000 statutory damages verdict for the plaintiff, while the 4 “liberals” were playing at judicial corporate welfare.

A Microcosm of the Congressional Dysfunction Created by Industry Lobbyists – Two Letters to the CFPB

October 22, 2014 by Attorney Judson E Crump 1 Comment

Last year, the Consumer Financial Protection Bureau decided to finally get around to regulating sketchy car dealers and other non-bank arrangers of consumer financing.

Why? Because as everyone who deals with auto dealers and their financing partners knows, car dealers very often conceal important facts from the people they deal with. In this particular case, the CFPB was concerned with the way that dealers will hike up interest rates or other finance charges for borrowers who seem unsophisticated or ignorant, and lie about it. Here’s a great and common example: you go to a dealership and find a car you like. You’ve run your credit before, so you believe that you can be approved for about $18,000 of financing at 12% APR. After hours at the dealership going through paperwork and waiting while they make phone calls and work on computers, they present you with paperwork. But to your surprise, the price is $19,000 and the APR is 18%. You say “That seems a bit high!”

“That was all the bank would approve. We checked with 6 different finance companies, and that was the best deal we could find you.”

Of course, this is a lie. The truth is that they are trying to direct you to the finance company that provides the best deal for them – the one that will pay them the most for the contract. And since they pay more for contracts with higher rates relative to the creditworthiness of the buyer, they’re steering you to possibly the worst deal of the 6 companies, and they could have found you a 13% APR.

There is nothing illegal about making a profit. There is nothing wrong with not telling a buyer how much they paid for the car they’re selling you. That’s part of the deal. But there is something wrong with lying to people. When they say: “This is the best deal we could find” that should be the truth. If they want to profit, they should do it like the rest of us by buying things at a low value and selling them at a high value. So the CFPB wants to require them to be more honest.

Naturally, they don’t want to be more honest because that means they’ll be forced to – GASP! – give people fair deals! So they called their lobbyists in Washington and had them pester our Congressional representatives to try and stop the CFPB from helping out working folks. What happened?

13 House Democrats signed a letter demanding that the CFPB provide copies of all data used in determining that sketchy car dealers were lying to people about getting kickbacks from finance companies. Here is their letter:

Page 1. Even though their tone is nice, they still should be ashamed for obstructing a long-overdue effort to provide working people some relief from dishonest car dealers.

Page 2. There are 13 signatures in all.

By contrast, here are the letters from the Republicans.

Note how the CFPB's proposal to forbid dealers from concealing the amount of kickbacks they're getting from finance companies is characterized as "restricting consumer choice." This is how your party gets a reputation for hating poor people. — Page 1. Note how the CFPB’s proposal to forbid dealers from concealing the amount of kickbacks they’re getting from finance companies is characterized as “restricting consumer choice.”

Obviously, the Republican response was more pro-business and anti-consumer. No surprise there. And the way the Republican letter linguistically distorted the facts by using words like “control” and “restricting consumer choice” indicates that the letterw as probably written directly by the auto dealer lobbyists, not the Representatives themselves. That shows you just how much these 35 particular Congressmen are deeply in the pockets of the industry.

But the Democrat response is just as bad. Why? Because it shouldn’t have been written in the first place. There’s a reason only 6.5% of House Democrats signed on. Republicans make no secret of favoring businesses over people. It’s their raison d’etre.

Whose side are they on?

How to read Truth in Lending Act disclosures for an Auto Loan. – Alabama Consumer Credit Attorney Judson E Crump

March 28, 2014 by Attorney Judson E Crump 2 Comments

I’ve written before about how the federal Truth in Lending Act is basically useless in helping people make wise financial decisions. But don’t take that to mean that I don’t like TILA. I like it just fine. It helps my clients fight back against collection lawsuits and mortgage fraud. It makes me money. But it is only useful in certain circumstances – particularly, when there is a charge that should have been disclosed as a finance charge but wasn’t.

So how do you know if you have a Truth in Lending violation? First, I’ll go right out and say there’s a 99.99% chance that the math calculations are correct. These things are done by computers and personally, I’ve never seen one that was just plain off. Unlike car dealers and mortgage brokers, computers are inherently honest. So the false statements you’re looking for are not in the numbers, but in the inputs that generate the numbers.

TILA requires any charge that is ‘incidental to the extension of credit” to be disclosed as a finance charge. In other words, any penny that you pay that you wouldn’t be paying if you were buying the same thing with cash is a finance charge, and has to be disclosed as such. So if you’re paying a “doc fee” that is $100 higher than a “doc fee” that was charged to your friend who bought from the same dealership a week ago, then that is a $100 finance charge that they have to add to the disclosure.

So here is what you do. We’ll use the standard auto loan contract as an example.

First, look at the numbers and make sure they’re right. They probably are, but it doesn’t hurt to check.

Then, move on to the area where 90% of all TILA violations occur: the “Itemization of the amount financed.” Here is where the dealer (or lender or mortgage company or whatever) explains how they arrived at their finance charge.

1. The sale price: is it right? Is it what you agreed on or is it different.

NOTE: IF THE CASH PRICE GOES UP AFTER THEY CHECK YOUR CREDIT, YOU NEED TO CALL A LAWYER. That’s a dead giveaway for a hidden finance charge and you need to sue them within a year of signing the paperwork.’

2. Down Payment/Trade-In: Is it what you agreed on?

3. Items paid to others on your behalf: Did the money actually go to those people? If you have negative equity on a previous car loan, is the balance correct?

4. Government & Recording Fees. Make sure they’re accurate. Sometimes they’ll overcharge, particularly if you’re out of state.

5. Doc Fees. Is it more than the limit in your state? In Alabama, there is no limit on doc fees, and they are a major source of profit for car dealers. Just what the hell is a doc fee anyway? It’s basically a dealer profit markup. It allows them to say “we got the car from the manufacturer for the same price we’re selling it to you!” But because they are just “cheese” for the dealers, they are easy to abuse. A smart dealership has a pre-printed doc fee on every single contract. Because if a doc fee is higher for you when you buy in credit than it is for the average cash buyer, that is a finance charge! If your doc fee is more than $600, you should check it out.

6. Service Contracts, GAP Insurance, and Credit Insurance. These are all ripoffs, by the way. Especially credit insurance and GAP insurance. The good thing about them is that they can never be required for the purchase of a vehicle. If a car salesman tells you that your price will be higher if you don’t get insurance or some other crap, then he is lying and breaking the law. The contract you sign with them, in fact, is required to say that you’re not required to buy them and that they are completely OPTIONAL. Don’t let them make you sign it. If you sign it, you’re stuck with a bad product and you’ve basically given away $2,000 to the dealer. If you see them included in your loan paperwork, ask them to rewrite the loan paperwork and delete that bullshit. If they refuse to do so or say they can’t pull out your phone and record the statement so we can sue them later.

So What do you do if you find a Truth in Lending Act violation? TILA violations entitle you to sue the dealer for actual damages, statutory damages of $1,000, plus attorney’s fees. The statute of limitations is only 1 year, so you better review your contract as soon as you can to uncover any disclosures. I cannot speak for any other TILA lawyers, but I charge $50 to review auto loan contracts and credit that amount back to clients who hire me to file lawsuits for TILA violations. I take these cases on a contingency fee basis, meaning that I pay the costs of litigation and only collect a fee if we win money. Usually, you end up in arbitration, which is worse if you have a good story of really dishonest and abusive dealing, but it doesn’t mean you automatically lose.

If you do have a case, you need to hire a lawyer because the statute gives you attorney’s fees anyway. If you’re going pro se, you can’t claim that class of damages from the dealer so they’ll offer you less to settle. But if you do decide to go it alone, be sure to read the Truth in Lending Act and Reg. Z. 12 CFR 1024.