District Court (Mich.) Says Car Dealer Violated TILA’s Presentation Requirement

In Todd v. Midwest Motors Sales & Service, Inc., 2016 WL 6155690, at *5 (W.D.Mich., 2016), Judge Holmes Bell denied summary judgment to a car dealer under TILA.  The facts were as follows.

On February 27, 2016, Plaintiff visited Defendant Midwest Motors to purchase a vehicle. He selected a 2013 Kia Optima, and agreed to purchase it by trading in his 2002 Jeep Liberty, making a downpayment of $1,000, and then paying off the remainder of the purchase price in monthly installments at an interest rate of 6.25%. Before signing the sales contract, he and his mother submitted a credit application to Kalsee Credit Union (“Kalsee”). As a condition for approval by Kalsee, Plaintiff and his mother were required to apply for a new account with Kalsee, and they did so. Plaintiff’s credit application was initially approved.  Plaintiff signed the sales contract, made the downpayment, signed an application to transfer title to the Kia from Midwest to himself, transferred the license plate from his Jeep to the Kia Optima, turned over the Jeep to Midwest, and then left the dealership with his new vehicle. After Plaintiff left the dealership, Defendants attempted to finalize Kalsee’s approval, but Kalsee declined to provide financing. Defendants then attempted to recover the Kia from Plaintiff.    The following facts are alleged in the complaint or stated in Plaintiff’s affidavit. Before Plaintiff left the dealership, he did not receive copies of any of the documents that he signed. Instead, Defendants gave him a Post-it note with the VIN number for the Kia, which he used to obtain insurance. Approximately one week after the sale, someone from Midwest showed up at Plaintiff’s residence and asked his mother to sign a new sales agreement. She refused to do so. A week later, Defendant Rittenhouse allegedly contacted Plaintiff and told him to bring the Kia back to Midwest because his “credit had been denied.” Defendants allegedly claimed that the sales contract contained a condition requiring Plaintiff to qualify for financing. Plaintiff refused their request. Defendants Rittenhouse and Miller then threatened to call the police and to “prosecute” Plaintiff and his mother as “credit criminals,” telling Plaintiff that he would never receive the title to the Kia, and that he and his mother’s credit history would be damaged because Defendants were not going to pay off the loan on the Jeep.Again, Plaintiff refused. He allegedly told Defendants that he wanted them to honor the sales contract that he had signed.   Not to be thwarted, Defendants made good on their threats by calling the police and reporting that Defendant had stolen the Kia. But the police contacted Plaintiff and declined to take further action. At that point, Defendants decided to take the matter into their own hands. According to an investigation report by the Michigan Secretary of State, two Midwest employees went to Plaintiff’s residence, entered the Kia using a spare key, and drove it back to the dealership. Defendants did not return Plaintiff’s Jeep. Defendants sent two additional loan applications to Kalsee in Plaintiff’s name. They also submitted an application to the state for a “lost title” on the Kia. They did not make payments on the outstanding loan for Plaintiff’s Jeep, which was overdue at the time of the state investigation.

The Court found that these facts presented a TILA violation for not providing a copy of the disclosures in a form that the consumer could keep prior to consummation.

Count I of the complaint alleges that Defendant Midwest was required to disclose the amount of credit to which Plaintiff had actual use. Plaintiff claims that if the sales contract was conditioned upon Midwest’s sale of the agreement to a third party, then the credit disclosed to him was “illusory,” and Plaintiff never had “actual use” of it. (Compl. ¶ 71, ECF No. 1.) Plaintiff also contends that Midwest violated the TILA by failing to provide him with a copy of the retail installment sales contract.  The TILA requires creditors to disclose the cost of credit “before credit is extended.” 15 U.S.C. § 1638(b). Those disclosures include the identity of the creditor, the amount financed, the finance charge, the annual percentage rate, the total of payments, and the total sale price. 15 U.S.C. § 1638(a); 12 C.F.R. § 226.18. The implementing regulations further explain that the disclosures must “reflect the terms of the legal obligation of the parties,” 12 C.F.R. § 226.17(c)(1), and must be given before the “consumer becomes contractually obligated on a credit transaction,” 12 C.F.R. § 226.2(a)(13).  Defendants argue that the TILA does not apply because no credit transaction was actually consummated between Plaintiff and Kalsee. However, the relationship between Plaintiff and Kalsee is not the focus of Plaintiff’s complaint. Plaintiff alleges that a credit transaction was consummated between Plaintiff and Midwest. Thus, Defendants’ first argument is not relevant to this case.  Next, Defendants argue that Midwest did not violate the Act because the disclosures that it provided were accurate at the time that they were made. The retail installment sales contract discloses the annual percentage rate, the finance charge, the amount financed, the total of all payments to be made, the number of payments, the amount of the monthly payment, and the date when the first payment was due. (ECF No. 16-6, PageID.215.) Plaintiff has not identified any error in these disclosures. Instead, Plaintiff claims that the nature of the credit offered by Midwest was “illusory” if, in fact, it was conditioned upon approval by Kalsee. This claim depends upon an issue in dispute, i.e., whether Midwest was obligated to extend credit to Plaintiff when the sale became final, or whether any credit offered by Midwest was conditioned upon Kalsee’s approval. If Midwest was bound by the terms of an installment contract even though Kalsee declined to finance it, the credit offered by Midwest was not illusory. See Williams v. Delamar Car Co., No. 1:11-CV-26, 2011 WL 1811061, at *3 n.2 (W.D. Mich. May 12, 2011) (discussing a similar claim). Plaintiff deserves an opportunity to probe Defendants’ assertion that the sale was not finalized.  Moreover, Defendants have not addressed Plaintiff’s separate allegation that Defendants failed to give him a copy of the written disclosures. TILA requires creditors to provide a copy of the document containing the disclosures. See 12 C.F.R. § 226.17(a)(1) (requiring the creditor to make the disclosures “in a form that the consumer may keep”); see also Gillom v. Ralph Thayer Auto. Livonia, Inc., 444 F. Supp. 2d 763, 769 (E.D. Mich. 2006) (interpreting 12 C.F.R. § 226.12(a)(1) to require a dealer to not only show the disclosures to the purchaser, but also to provide a copy of the disclosures to the purchaser); Lozada v. Dale Baker Oldsmobile, Inc., 197 F.R.D. 321, 337-38 (W.D. Mich. 2000) (same) (citing cases). Consequently, summary judgment as to Count I will be denied.