June 2016 – The CARLAWYER©

By Thomas B. Hudson and Nicole Frush Munro

We’re back, passing on what we’ve recently learned about legal developments in the auto sales, finance and lease world. This month, we feature developments from the Consumer Financial Protection Bureau and the Federal Trade Commission, as well as our “Case of the Month.” Remember – we aren’t reporting every recent legal development, only those we think might be particularly important or interesting to industry.

Why do we include items from other states? We want to show you new legal developments and trends. Also, another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state.

Note that this column does not offer legal advice. Always check with your own lawyer to learn how what we report might apply to you, or if you have questions.

This Month’s CARLAWYER© Compliance Tip

Signed up for the CFPB’s complaint portal yet?  You need to be monitoring complaints from all sources, and the CFPB offers one more source for determining whether your customers are unhappy with you.  And taking care of complaints is one of the most effective ways of staying out of the regulators’ crosshairs.  What, exactly, are you waiting for?

Federal Developments

Speaking of complaints, on May 24, the CFPB released its monthly complaint report, which highlights trends in the complaint data the Bureau receives through its Consumer Complaint Database. The report includes complaint data specific to certain companies, overall complaint volume and complaint volume by state, and other trends in the data. Each month, the report spotlights complaints about a particular issue and complaints from a particular geographic location. The latest report focuses on complaints related to credit reporting and highlights complaints from consumers residing in New Mexico.

Are You Involved in Title Lending?  On May 18, the CFPB released a report on the title loan business. The CFPB’s report demonstrated that 20% of borrowers who obtain a single-payment auto title loan have their car or truck seized by their lender when they default. Evidently, that means that 80% of these borrowers managed to get past their dire financial problems without having their cars seized, but that narrative doesn’t advance the CFPB’s agenda.  According to the CFPB’s research, lenders renewed more than 80% of these loans on the due date because borrowers could not otherwise repay the loan. The report examined nearly 3.5 million anonymized, single-payment auto title loan records from nonbank lenders from 2010 through 2013. The CFPB concluded from its study that these auto title loans have issues similar to payday loans, including high rates of consumer reborrowing, which can trigger high costs in fees and interest.

Warranty Rule Changes on the Way.  On May 18, the FTC proposed to amend the rules governing Disclosure of Written Consumer Product Warranty Terms and Conditions (“Disclosure Rule”) and Pre-Sale Availability of Written Warranty Terms (“Pre-Sale Availability Rule”) to implement the E-Warranty Act, which allows for the use of websites to disseminate warranty terms to consumers in some circumstances. The Disclosure Rule specifies the aspects of warranty coverage that must be disclosed in written warranties, as well as the exact language that must be used for certain disclosures with respect to state law regarding the duration of implied warranties and the availability of consequential or incidental damages. Under the Disclosure Rule, warranty information must be disclosed in simple, easily understandable, and concise language in a single document. The warrantor must disclose any limitations on the duration of implied warranties on the face of the warranty, as mandated by the Magnuson-Moss Warranty Act. The FTC proposes to revise the Disclosure Rule to specify that disclosures mandated to appear ‘on the face’ of a warranty posted on an Internet website or displayed electronically must be placed close to the text of the warranty terms begins. The Pre-Sale Availability Rule details the methods by which warrantors and sellers must provide warranty terms to consumers prior to sale of the warranted item. The FTC proposes to revise the Pre-Sale Availability Rule to allow warrantors to post warranty terms on websites if they also provide a non-Internet method for consumers to obtain the warranty terms and satisfy certain other conditions. Comments on the proposed rule are due by June 17.

Are You Up To Speed on Your Credit Reporting Responsibilities?  On May 9, the FTC announced a $72,000 settlement with Credit Protection Association, a debt collection agency, resolving allegations that the company violated the Fair Credit Reporting Act by failing to have adequate policies and procedures in place to handle consumer disputes of information the company provided to credit reporting agencies and by failing to adequately inform consumers about the outcomes of its investigations about disputed information. In addition to the civil penalty, the company will be required to adopt new procedures that comply with the requirements of the FCRA’s Furnisher Rule. The FTC also released a blog post discussing its settlement with Credit Protection, noting that the case offers compliance guidance for other companies covered by the Furnisher Rule.

Adios, Arbitration Agreements in Credit Contracts.  On May 5, the CFPB issued a proposed rule limiting mandatory arbitration clauses in a wide variety of contracts. The CFPB is seeking comment on a proposal to prohibit companies from using class action waivers in pre-dispute mandatory arbitration clauses with consumers. Companies would still be able to include arbitration clauses in their contracts, but for contracts subject to the proposal, the clauses would have to say explicitly that they cannot be used to stop consumers from being part of a class action in court. The proposal provides the specific language that companies must use. The proposal also requires companies using pre-dispute arbitration agreements to submit to the CFPB claims, awards, and certain related materials filed in arbitration cases to allow the Bureau to monitor  arbitrations to ensure that the process is fair for consumers. Comments on the proposed rule are due by August 22.

Case of the Month

Dealership’s Inflation of “Cash Price” to Compensate for Trade-In Over-Allowance Did Not Violate TILA: A consumer agreed to buy a new car from a dealership for $31,322. The manufacturer’s suggested retail price for the car was $24,150. The dealership subtracted $3,500 from the $31,322 price for the car that the consumer traded in as part of a promotion in which the dealership agreed to provide a $3,500 discount for any trade-in, regardless of the trade-in’s actual value, which in the consumer’s case was close to $0. In cases where the dealership gives the $3,500 discount, the buyer agrees not to negotiate the sale price, and the dealership adds $3,500 to the sale price.

The consumer sued the dealership for violating the federal Truth in Lending Act and the Connecticut Unfair Trade Practices Act. The federal trial court granted the dealership’s motion for summary judgment. The consumer claimed that the dealership violated TILA by failing to accurately itemize the amount financed and failing to accurately disclose the finance charge in the retail installment contract she signed.

Both arguments were based on the fact that the dealership inflated the cash price of the car the consumer bought to compensate for the trade-in discount it gave her for a car with almost no value.

First, the court found that the dealership accurately disclosed the finance charge. The consumer claimed that the increase in the sale price of the car to compensate for the trade-in discount constituted an undisclosed finance charge. The court disagreed, noting that because the dealership increased the sales prices of its cars to offset the trade-in allowances in both cash and credit transactions, the increase did not amount to a finance charge.

Second, the court found that the dealership accurately itemized the amount financed. The court noted that although the consumer agreed to a bad bargain, the itemization of amount financed represented a true and accurate description of the terms to which she agreed. After the court dismissed the consumer’s federal claims, it declined to exercise jurisdiction over her state law claims.

Just because the court found for the dealer on the Truth in Lending claim doesn’t mean the dealer is home free.  The court didn’t rule on the buyer’s state law unfair trade practice claims, leaving the buyer free to bring those claims in state court.  Note that we have seen these “$X dollars for anything you can push, pull, drive or drag” ad campaigns successfully attacked in other cases – you should avoid these sorts of advertisements.    See Morales v. Barberino Brothers, Inc., 2016 U.S. Dist. LEXIS 59726 (D. Conn. May 5, 2016).

So there’s this month’s roundup!  Stay legal, and we’ll see you next month.

___

Tom (thudson@hudco.com) and Nikki (nmunro@hudco.com) are partners in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2016, all rights reserved. Single publication rights only, to the Association. (6/16). HC# 4851-4777-3234.

South Carolina Revises Motor Vehicle Closing Fee Statute

South Carolina Revises Motor Vehicle Closing Fee Statute and Imposes July 3, 2016 Re-Filing Deadline for Dealers

On June 2, 2016, the South Carolina legislature ratified HB 4548, which amends the South Carolina Consumer Protection Code’s motor vehicle closing fee statute. The new statute gives the South Carolina Department of Consumer Affairs (the “Department”) express authority to determine whether a motor vehicle dealer’s closing fee is reasonable. Fees of $225 or less are automatically deemed reasonable. Fees above $225 must be submitted to the Department for evaluation under the criteria set forth in the statute. Note that dealers are still required to provide written notice to the Department annually of the maximum closing fee the dealer intends to charge, include the closing fee in the advertised price of the vehicle, and display the closing fee in a conspicuous location in the dealership.

The new requirements became effective June 3, 2016. However, dealers that have already made their annual closing fee filing with the Department have until July 3, 2016, to refile their maximum closing fee in accordance with the new statute. On June 6, 2016, the Department released a memo stating that it is in the process of revising its closing fee forms. The revised forms will be available on the Department’s website by this Friday, June 10.

2016 SC HB 4548

SC Department of Consumer Affairs Memorandum

 

Thomas B. Hudson, Esq.
Editor in Chief, CARLAW
CounselorLibrary.com LLC
Direct Dial: 410-865-5411
Toll Free: 877-464-8326 ext.5411
Fax: 410-684-2001
E-Mail: thudson@hudco.com

Who’s behind your compliance?

May 2016 – The CARLAWYER©

By Thomas B. Hudson and Nicole Frush Munro

Nikki’s Orioles and Tom’s Nationals are looking pretty strong this year.  An I-95 World Series, maybe?  Unfortunately, we aren’t at a game.  We’ve traded in our cracker jacks, peanuts, and a 7thinning stretch for article writing on compliance issues.  Here, we’ll again pass on what we’ve recently learned about legal developments in the auto sales, finance and lease world. This month, we feature developments from the Consumer Financial Protection Bureau and the Federal Trade Commission, as well as recaps of some of the auto sale and financing lawsuits we follow each month. Remember – we aren’t reporting every recent legal development, only those we think might be particularly important or interesting to industry.

Why do we include items from other states? We want to show you new legal developments and trends. Also, another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state.

Note that this column does not offer legal advice. Always check with your own lawyer to learn how what we report might apply to you, or if you have questions.

This Month’s CARLAWYER© Compliance Tip

We picked up a lot of online chatter this month about dealers who prepare and have the buyer sign two retail installment sales contracts for a deal so that if the finance companies reject the first one, the dealer can have a substitute ready to re-submit without going through that pesky re-contracting process.  That practice is bad for so many reasons that we won’t try to elaborate.  If your dealership does this, stop immediately until you have vetted your practices with a knowledgeable attorney.

Federal Developments

FTC Targets VW Ads.  On March 29, the FTC charged that Volkswagen Group of America, Inc. deceived consumers with an advertising campaign promoting its supposedly “clean diesel” VWs and Audis, which, the FTC has alleged, Volkswagen fitted with illegal emission defeat devices designed to mask high emissions during government emission tests. The FTC is seeking a court order requiring VGA to compensate consumers who bought or leased affected VWs between late 2008 and late 2015, and an injunction to prevent the company engaging in such acts again.

And Not Just VW’s Ads.  On April 18, the FTC issued an enforcement policy statement on deceptively formatted advertisements, including advertising and promotional messages integrated into and presented as non-commercial content.  The statement lists principles of general applicability on which the FTC will rely in determining whether an ad format is deceptive, in violation of Section 5 of the FTC Act.  The statement summarizes the principles underlying the FTC’s enforcement actions, advisory opinions, and other guidance addressing various forms of deceptively formatted ads.  The FTC will find an ad deceptive if it misleads reasonable consumers as to its nature or source, and such misleading impression is likely to affect consumers’ decisions or conduct regarding the advertised product or the ad.   Hint – check out your website!

As We Bid a Fond Farewell to Arbitration . . . The CFPB held a field hearing on arbitration in Albuquerque, New Mexico on May 5.  The hearing featured remarks from CFPB Director Richard Cordray, and testimony from consumer groups, industry representatives, and members of the public. As expected, the CFPB used the hearing to launch a proposed rule banning class waivers in contracts for consumer financial services that contain mandatory, pre-dispute arbitration clauses.

CFPB Targets Debt Collectors.  On April 25, the CFPB announced that it obtained consent orders against Pressler & Pressler, LLP, a debt collection law firm, and New Century Financial Services, Inc., a debt buyer, for unfair and deceptive collection practices, in violation of the Fair Debt Collection Practices Act and the Dodd-Frank Act.  Specifically, the CFPB alleged that the defendants filed collection lawsuits against consumers without sufficiently verifying the validity of the debts, did not properly respond to consumer disputes of the debts, and relied on an automated claim-preparation system and non-attorney support staff to determine which consumers to sue.  The orders require the firm to pay a penalty of $1 million and New Century to pay a penalty of $1.5 million to the Bureau’s Civil Penalty Fund.

Litigation

TILA Claim Not Mooted by Tender of Check Equal to Plaintiffs’ Claimed Damages that Plaintiffs Returned: Car buyers sued the dealership where they bought their car, alleging violations of the federal Truth in Lending Act and the Maryland Consumer Protection Act, as well as fraud. The dealership sent them a cashier’s check equal to the sum of their down payment plus interest. The plaintiffs declined to accept the check. The dealership moved to dismiss for lack of subject-matter jurisdiction, arguing that its payment to the buyers mooted their TILA claim and eliminated the court’s subject-matter jurisdiction. The court found that the unconditional tender equal to the buyers’ claimed damages provided the buyers complete relief under TILA. However, because the buyers returned the check, the court could not find that the payment mooted the TILA claim. Accordingly, the court denied the motion to dismiss, but stated that if the dealership reissues an unconditional cashier’s check equal to the amount of the down payment plus interest, it may re-file its motion, and the court will then dismiss the TILA and MCPA claims as moot. The court noted that the tender would not, however, moot the plaintiffs’ fraud claim. See Price v. Berman’s Automotive Inc., 2016 U.S. Dist. LEXIS 35807 (D. Md. March 21, 2016).

Dealership Liable to Used Car Buyers and Finance Company after Failing to Repair Problems Buyers Experienced within 60 Days after Purchase: Used car buyers noticed problems with their car immediately after purchase. Learning that the car had experienced a front-end collision that was causing the car’s mechanical problems, the buyers sought to revoke acceptance of the car. When the seller ignored their request, the buyers sued for violations of New York General Business Law Sections 349 and 198-b and the Magnuson-Moss Warranty Act and sued the assignee of their retail installment sale contract under the FTC Holder Rule. The assignee settled the buyers’ claim and filed a cross-claim against the seller for breach of contract. The buyers and the assignee moved for a default judgment. A magistrate judge granted both motions. The magistrate found that the buyers did not establish a claim for violation of Section 349, which prohibits deceptive acts or practices in the conduct of business, because they did not prove that the seller’s actions had a broader impact on consumers at large. The magistrate found that the buyers established a breach of warranty claim under Section 198 but not under the MMWA, which requires an amount-in-controversy of at least $50,000 that the buyers did not satisfy. The magistrate also found that the assignee proved its breach of contract claim against the seller for failure to defend and indemnify under its Dealer Agreement. See Chin v. Planet Motor Cars, Inc., 2016 U.S. Dist. LEXIS 47372 (E.D.N.Y. April 5, 2016).

Motor Home Seller Not Prevented from Disclaiming Warranties Where Service Contract It Sold Buyer Required it to Perform Only Diagnostic Services: A mobile home buyer signed a purchase agreement in which the seller stated that it disclaimed all warranties. The buyer bought a third-party service contract from the seller to cover the motor home. The service contract required the buyer to take the home to the seller to diagnose an issue, but allowed her to seek repairs from any repair facility. The buyer discovered defects in the motor home and asked the seller to make the required repairs. The buyer alleged that the repairs were inadequate, that the motor home had developed additional defects, and that the motor home was unsafe and unfit for use. The buyer sued the seller for breaching the warranty of merchantability, and the seller moved to dismiss. The federal trial court granted the motion. The buyer argued that the Magnuson-Moss Warranty Act prevented the seller from disclaiming the implied warranty of merchantability. The MMWA precludes warranty disclaimers if the seller “enters into” a service contract with a buyer within 90 days of the purchase. The buyer cited a 1991 case in which a dealer was found to be an agent for a service contract company to argue that the seller entered into a service contract with her. However, the court distinguished that case, explaining that the buyer was required to obtain repairs from that dealer, but in the present case, the buyer was required to bring the motor home to the seller for diagnosis but could obtain repairs anywhere. As a result, the seller could not be considered an agent of the service contract company and, therefore, did not enter into the contract with the buyer. As such, the seller was not prevented from disclaiming the warranty of merchantability. See Coyne v. Crossville BNRV Sales, LLC, 2016 U.S. Dist. LEXIS 40160 (E.D. Tenn. March 28, 2016).

So there’s this month’s roundup!  Stay legal, and we’ll see you next month.

__

Tom (thudson@hudco.com) and Nikki (nmunro@hudco.com) are partners in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to theF&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2016, all rights reserved. Single publication rights only, to the Association. (5/16). HC# 4830-2565-6113.

NC SERVICE CONTRACT TAX UPDATE

FNI logo

 

North Carolina Dealers and Auto Finance Providers,

 

Many of you may be aware of the confusing bulletins being circulated in the industry regarding changes to the North Carolina Vehicle Service Contract Tax.  The bulletins and emails have led some to believe that the vehicle service contract tax is being repealed effective March 1, 2016.

 

Based on the NC Department of Revenue’s bulletin of Feburary 11 and latest clarification issued February 19, it is FNI’s opinion that for most used car dealer service contract programs, and especially those most common in the independent dealer market, the 2014 tax will continue, and no changes should be made to your tax collecting and remitting process.  

 

The legislation responsible for the confusion may act as a partial repeal of the 2014 tax, but only for vehicle service contracts that “COVER THE ENTIRE CAR” – and according to NC DOR, that means exclusionary coverage, rather than the kind of stated component contracts most common in the used car industry. The February 19 bulletin makes it clear that contracts that cover just “components” or “systems” but not the entire car are still subject to the tax. 

 

The national vehicle service contract industry association (SCIC) is still working with NC DOR for further clarification – under the current interpretation, dealers and finance companies will have to determine which contracts are subject to tax and which are not, and the very loose definition provided by DOR creates uncertainty for making those determinations, and creates a high risk of improperly assessing or neglecting the tax. The SCIC reports that new legislation is expected in NC this year to provide further clarification as well.

December 2015 – The CARLAWYER©

By Thomas B. Hudson and Nicole Frush Munro

Hello again!  This month, we feature developments from the Consumer Financial Protection Bureau and the Federal Trade Commission we thought might interest those in the auto sales, finance or leasing business.  We also recap some of the auto sale and financing lawsuits we follow each month.  Remember – we aren’t reporting every recent legal development, only those we think might be particularly important or interesting to industry.

Why do we include items from other states?  We want to show you new legal developments and trends.  Also, another state’s laws might be a lot like your state’s laws.  If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state.

Note that this column does not offer legal advice.  Always check with your own lawyer to learn how what we report might apply to you, or if you have questions.

This Month’s CARLAWYER© Compliance Tip

Did you know that the federal disclosure rules are very specific about how dealers handle “deferred down payments” (also called “pickup payments”)?  Many dealers who accept deferred down payments do so by using so-called “side notes” or postdated checks.  These arrangements usually don’t comply with the federal rules, raise other unpleasant legal issues and leave dealers on the hook for class action liability risks.  If your lawyer hasn’t blessed your pickup payment disclosures and practices, tack that chore onto the end of your to-do list.

Federal Developments

Reforming the CFPB?  On November 18, the U.S. House of Representatives approved H.R. 1737, titled the “Reforming CFPB Indirect Auto Finance Act,” by a vote of 332-96.  The bill, supported by all 244 Republicans and 88 of the 184 Democrats voting, nullifies CFPB Bulletin 2013-02, dealing with dealer participation, and requires the CFPB to satisfy certain procedural steps before issuing future guidance related to indirect auto financing.

House Committee Fires a Shot Over the CFPB’s Bow.  On November 24, the U.S. House Financial Services Committee chaired by Rep. Jeb Hensarling of Texas, released a report titled, “Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending.”  The 54-page report is a broadside attack on the Bureau’s attempt to regulate auto financing practices of dealers exempt from its jurisdiction.

No Change in TILA and CLA Coverage Amounts.  Many dealers are unaware that the federal disclosure laws don’t apply to some of their transactions.  On November 25, the CFPB and the FRB announced that they are not adjusting the dollar thresholds under the Truth in Lending Act and the Consumer Leasing Act for exempt consumer credit and lease transactions. The Dodd-Frank Act provides that the dollar amount thresholds for TILA and the CLA must be adjusted annually by any annual percentage increase in the consumer price index. Because the consumer price index showed a decrease as of June 1, 2015, there will be no 2016 adjustment. Therefore, the protections of TILA and the CLA generally will apply to consumer credit transactions (other than private education loans and loans secured by real property, such as mortgages) and consumer leases of $54,600 or less in 2016 – the same thresholds for 2015.

The FTC Asks for “Holder Rule” Comments.  On November 25, the FTC announced that it is seeking public comment on the efficiency, costs, benefits, and impact of the Holder Rule, which protects the rights of consumers who make a purchase using credit obtained through a merchant.  The Rule, formally called the “Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses,” protects consumers when merchants, such as car dealers, sell consumers’ credit contracts to banks, finance companies or others. Specifically, it preserves a consumer’s right to assert the same legal claims and defenses he or she would have against the seller who originally provided the credit against anyone who buys the credit contract. Under the Rule, a consumer can cite a seller’s misconduct to defend against a creditor’s lawsuit for money owed under the contract, or to seek a refund of money paid under the contract.

Litigation

Arbitration Agreement Included in English Version, but not Spanish Version, of Sales Contract is Unenforceable:  When a buyer bought a car, the negotiations occurred primarily in Spanish.  The buyer signed a conditional sales contract and security agreement.  The dealership gave him copies of the contract in English and Spanish.  The English version included an arbitration provision, but the Spanish version did not.  The dealership also gave him a copy of a GAP contract in English, but not in Spanish.  The buyer sued the assignee of the contract based on the failure to provide a Spanish translation of the GAP contract.  The assignee moved to compel arbitration.  The buyer argued that there was no agreement to arbitrate because the Spanish version of the contract did not include an arbitration provision and the words “arbitration” or “alternative dispute resolution” never came up during negotiations.  The trial court denied the assignee’s motion to compel arbitration.  The California Court of Appeal affirmed.  The appellate court reasoned that by providing the buyer a translation that did not even reference arbitration, the dealership deprived him of a reasonable opportunity to learn the character and essential terms of the arbitration agreement he signed.  See Ramos v. Westlake Services LLC, 2015 Cal. App. Unpub. LEXIS 7839 (Cal. App. October 30, 2015).

Defendant Required to Pay Damages for Failing to Return Car after Dealer Rescinded Sale to Protected Individual:  A protected individual who was not legally able to contract bought a car from a dealership.  The individual’s wife and conservator instructed him to return the car, which he did a few days after the purchase, although he later reclaimed the car.  After receiving a bill for the monthly car payment, the wife informed the dealership of her status as conservator and of her husband’s inability to contract.  The dealership rescinded the contract and demanded return of the car by May 15.  The car was finally returned in December, with 12,000 miles on it.  The dealership sued the wife for unjust enrichment for the car’s depreciation and her unjust retention and use of the car, and the trial court awarded damages to the dealership.  The Court of Appeals of Michigan affirmed.  The wife argued that her retention of the vehicle was not unjust under the circumstances and that the dealership acted with unclean hands by selling the car to a protected individual.  The appellate court found that even though the dealership was at fault for selling the vehicle, it remediated that problem.  As a result, the wife was not justified in refusing to return the car or make payment after the dealership rescinded the sale.  Furthermore, the appellate court found that to the extent the dealership acted with unclean hands, it did so only until it rescinded the contract.  Because the trial court only awarded damages for the period after the dealership rescinded the contract, the appellate court found that the wife did not have a claim that the dealership acted with unclean hands during that period.  See In re Nickel (Suburban Toyota, LLC v. Nickel), 2015 Mich. App. LEXIS 2045 (Mich. App. November 3, 2015).

Closing Fee Charged by SC Dealers Must be Directly Related to Expenses Incurred in Closing Vehicle Sale:  A car buyer filed a class action against a dealership for violating the South Carolina Dealers Act by charging its customers closing fees that were not calculated to reimburse the dealership for actual closing costs.  A jury found for the buyer in the amount of $1,445,786, representing the closing fees the dealership collected from customers during the 4-year period preceding the filing of the suit.  In post-trial rulings, the trial court denied the dealership’s motions to overturn or reduce the jury’s verdict, granted the buyer’s motion to double the actual damages award, as required by the Dealers Act, and to award attorneys’ fees and costs, and denied the buyer’s motion for prejudgment interest.  The Supreme Court of South Carolina affirmed.  The dealership argued that its compliance with the state’s Closing Fee Statute by paying an annual registration fee to the Department of Consumer Affairs, including the closing fee in the advertised price of the vehicle, disclosing the fee on the sales contract, and displaying the fee in a conspicuous place in the dealership absolved it of liability.  The high court disagreed, noting that the dealership’s procedural compliance with the statute merely enabled it to charge a closing fee but did not absolve it from its responsibility to accurately assess the amount of the fee it charged.  Moreover, the high court found that a dealership that decides to charge a closing fee “must account for the costs that comprise this fee” – costs that are “directly related to the expenses incurred in closing the sale of a motor vehicle.”  In addition, the high court determined that the buyer’s voluntary payment of a $299 closing fee did not bar her from asserting her claim where the court determined that she lacked full knowledge of the costs that went into the determination of the amount of the fee.  See Freeman v. J.L.H. Investments, LP, 2015 S.C. LEXIS 367 (S.D. November 4, 2015).

So there’s this month’s roundup!   Stay legal, and we’ll see you next month.

___

Tom (thudson@hudco.com) and Nikki (nmunro@hudco.com) are partners in the law firm of Hudson Cook, LLP.  Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers.  He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry.  Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com.  Copyright CounselorLibrary.com 2015, all rights reserved.  Single publication rights only, to the Association. (11/15). HC# 4813-2078-0842.