2017 Compliance Guide Case Study: Credit Apps, Reports, and Contracts

A dealer sold a vehicle to a consumer under a RISC (Retail Installment Sales Contract) and allegedly committed numerous violations in connection with the sale and financing.

For example, the plaintiff was not given a review copy of the RISC disclosing the finance charge prior to the time of sale; and 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 bank fee based on her credit rating. The RISC also included an extended warranty the plaintiff did not request.

When the plaintiff called the warranty company to cancel, the warranty company indicated it had not received any paperwork from the dealer. The plaintiff never received a refund. The plaintiff made her first payment to the creditor-assignee, but when she went to make her second payment a representative informed her that the dealer had canceled the contract. The dealer claimed the plaintiff 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, the dealer repossessed it, and then sold it to a third party without informing the plaintiff.


The court ruled that, among other things, the dealer had violated the Truth in Lending Act by failing to disclose a hidden finance charge — the bank fee based on the consumer’s credit risk. It awarded plaintiff the following:

  1. Statutory damages.
  2. Punitive damages against the dealer for the dealer’s failure to send an adverse action notice under ECOA.
  3. Treble damages. The court 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.
  4. Damages under the Uniform Commercial Code (UCC) because the dealer sold the car without giving the plaintiff notice of her potential deficiency liability.
  5. Attorney’s fees and court costs.

Since the late 1960s, federal law has restricted the use of credit reports and required creditors to notify consumers of credit decisions and describe credit terms in finance contracts. Learn more about federal laws, regulations, and case studies concerning credit applications, credit reports and contracts in the 2017 Compliance Guide. 

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