In Limtiaco v. Auction, LLC, 2012 WL 4911726 (D.Nev. 2012), Judge Du found that a car dealer’s failure to sell a vehicle at market price constituted a hidden finance charge under TILA, even though the RISC did not finance any part of the purchase.

On July 24, 2010, Limtiaco entered into a Motor Vehicle Purchase Order and Federal Disclosure Statement (“Agreement”) with Auction Cars to purchase a 1992 GMC Yukon (“Vehicle”). (Dkt. no. 31, Ex. 1.) The Vehicle’s total cash selling price was $5952.85.FN2 (Id .) Limtiaco agreed to a $2500.00 down payment on July 24, 2010, $500.00 of which was deferred until August 9, 2010. (Id.) The remaining balance of $3452.85 was to be paid in 18 bi-weekly payments of $191.74 beginning on August 24, 2010. (Id.) The contract provided that there was no finance charge. (Id.)  Limtiaco made three additional payments: $300.00 on August 11, 2010, $200.00 on August 19, 2010, and $200.00 on September 14, 2010. (Dkt. no 31, Ex. 2 at 3.) Thereafter, Limtiaco failed to make a scheduled payment. On September 28 or 29, 2010, Auction Cars delivered to Limtiaco a Notice of Intention to Sell and Right to Redeem Repossessed Motor Vehicle (“Notice of Disposition”). (Dkt. no 31, Ex. 6.) The Notice of Disposition included the redemption address and phone number, redemption deadline, contract balance, late fee, repossession expense, total redemption amount, and Vehicle identification. (Id.) On November 2, 2010, Auction Cars sold the repossessed Vehicle for $4085.13 to a third party. (Dkt. no 31, Ex. 2 at 7.)

The District Court found that even though the RISC had no finance charge, the car dealer’s failure to sell a vehicle at market price could constitute a TILA violation for inclusion of a ‘hidden finance charge’:

A “hidden” finance charge may exist where the price charged is above true market value. For example, the Fifth Circuit held that, even though the contract states there was no finance charge, the difference of $325.28 between the “highest figure customarily charged in Alabama for similar merchandise during the relevant period” amounted to an undisclosed finance charge.   Killings v. Jeff’s Motors, Inc., 490 F.2d 865 (5th Cir.1974). To that end, the “buyer is required to prove by competent evidence the difference between the actual value of the item sold and the stated sale price.” Lawson v. Reeves, 537 So.2d 15 (Ala.1988).  ¶  Limtiaco offers Kelley Blue Book valuation of the car to show the actual value of the car was $3745.00. Limtiaco argues that the difference of $1250.00 between $4995.00 (charged for the Vehicle) and $3745.00 (Kelley Blue Book suggested retail value) amounts to a hidden finance charge. Auction Cars argues that Limtiaco does not account for the condition of the Vehicle or local demand for the Vehicle, which would support an upward departure from Kelley Blue Book value and an increase of the legitimate selling price of the Vehicle. ¶  The Court agrees that if there was any difference between true market value and the price charged for the used Vehicle, that difference should have been disclosed at the time of sale as a finance charge. However, Kelley Blue Book values only show suggested retail price and not “true market value” or the “highest figure customarily charged” for a similar vehicle in Nevada at the time of the sale. Thus, Limtiaco has introduced insufficient evidence as to the true market value of the Vehicle, and the amount of the finance charge, if any, cannot be determined at this time. As the factual resolution of the true market value of the Vehicle would change the outcome of this claim, summary judgment is improper.

The District Court also found that the Dealer’s post-repossession NOI violated Nevada law, and that Nevada law did not excuse errors in the disclosure requirements:

Here, the Notice of Disposition was deficient in relation to the fourth requirement of accounting under NRS § 104.9613, but the Notice of Disposition met the remaining requirements. First, the Notice of Disposi-tion described the debtor and secured party by ad-dressing Limtiaco by name and address and the stationary header. Second, the Notice of Disposition described the collateral by identifying the year, make, model, and VIN number of the Vehicle. Third, the Notice of Disposition stated the method of intended disposition as “repossession” and “intent to sell the repossessed vehicle.” However, as to the fourth requirement, the Notice of Disposition was insufficient because it failed to state “that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting.” Nothing in the Notice of Disposition can be construed to convey that information to the debtor. Fifth, the Notice of Disposition stated the time after which disposition was to be made by giving a “10/08/2010” expiration date. Therefore, the Notice of Disposition was deficient only as to the fourth requirement.  ¶  In addressing Auction Cars’ argument of material compliance and excusable error, the Court finds that the plain text of NRS § 104.9614(5) does not excuse any errors in subsection 1 required disclosures. Therefore, Auction Cars violated the required disclosures by failing to include any information that Limtiaco was entitled to an accounting of the unpaid indebtedness. The Court next turns its analysis to the calculation of damages.

Ed.:  Regarding mere complaints about the cost the vehicle and applicability of TILA to such ‘hidden finance charges’, Cf.  Ramirez v. National Co-op. Bank, 91 A.D.3d 204, 938 N.Y.S.2d 280 (2012) (“Contrary to NCB’s assertion, the plaintiff does not state a “paradigmatic TILA hidden finance charge claim” merely because he alleges that he was charged a grossly inflated price for the Escape. A hidden finance charge claim requires proof of a “causal connection” between the higher base price of the vehicle and the purchaser’s status as a credit customer. Diaz v. Paragon Motors of Woodside, Inc., 424 F.Supp.2d 519, 530 (E.D.N.Y.2006) (citation omitted); see Ringenback v. Crabtree–Cadillac Oldsmobile, Inc., 99 F.Supp.2d 199, 203 (D.Conn.2000) (in determining whether a plaintiff is charged a hidden finance charge, factors including cost to seller, profit from the sale, whether seller distinguishes between cash and credit prices, and percentage of seller’s cash and credit sales should be considered). In this case, the plaintiff does not allege and there is no evidence supporting a connection between the inflated price of the Escape and his status as a credit customer.”); Haynes v. Planet Automall, Inc. 276 F.R.D. 65 (E.D.N.Y. 2011) (“Yet, as the Court of Appeals for the Second Circuit instructed in a recent case where less affluent buyers of used cars on credit claimed the seller was “burying hidden finance charges in the prices that plaintiffs were charged,” their “bad bargain” could not support class certification; “TILA is a disclosure statute, not a fair pricing law.” Poulin v. Balise Auto Sales, Inc., 647 F.3d 36, 37–38 (2d Cir.2011).”); Jackson v. Telegraph Chrysler Jeep, Inc. 2009 WL 928224 (E.D.Mich. 2012) (“ In their complaint, the Plaintiffs maintain that the Agreement contained a “hidden finance charge” because the Defendants failed to disclose the market value of the 2004 Taurus, which presumably differed from the cash price the Defendants listed on the Agreement. .  . The Plaintiffs have not pointed to any TILA provisions or any other authorities to support this claim. Moreover, it does not appear that the “cash price,” which was listed on the Agreement by the Defendants, is contrary to any other TILA requirement.”); Hoffman v. Grossinger Motor Corp., 218 F.3d 680 (7th Cir. 2000);  (evidence that dealership charged subprime purchasers, i.e., purchasers with poor credit ratings, a higher price on average than it charged its other customers did not establish a hidden finance charge to credit customers, in violation of TILA, that would reflect finance company’s $400 holdback fee charged to car dealer as fee for financing purchase by high-risk borrowers); Frazee v. Seaview Toyota Pontiac, Inc., 695 F.Supp. 1406 (D.Conn.,1988) (“TILA is directed toward ensuring full credit disclosure. While Congress was concerned with the problem of hidden finance charges in enacting TILA, it did not contemplate providing a right of action whenever a consumer is dissatisfied with a purchase. See, e.g., Mourning, 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318. Plaintiff’s claim in this case is in essence a claim in warranty. The car purchased by plaintiff did not meet her expectations and now she claims it was not worth what she paid for it. It is not actionable under TILA. Any differential between the fair value of the car and its cash price is attributable to a bad bargain, or perhaps a violation of the bargain in the sale of the car, and not any hidden finance charges.”). But, a price over an advertised price might trigger TILA.  Diaz v. Paragon Motors of Woodside, Inc., 424 F.Supp.2d 519 (E.D.N.Y.,2006) (“An increase in the base price of an automobile that is not charged to a cash customer, but is charged to a credit customer, solely because he is a credit customer, triggers TILA’s disclosure requirements.” Cornist v. B.J.T. Auto Sales Inc., 272 F.3d 322, 327 (6th Cir.2001)(emphasis in original). “Thus, in order to prevail on her claim that [defendant car dealer] failed to disclose this hidden finance charge, [plaintiff] ‘must demonstrate a “causal connection” between the higher price and the extension of credit.’ ” Kilbourn v. Candy Ford-Mercury, Inc., 209 F.R.D. 121, 129 (W.D.Mich.2002)(quoting Cornist supra). In this case, the advertised price of the vehicle was $13,495 and Diaz eventually purchased the car for a base price of $16,590. . . The advertisement’s statement that the advertised price did not apply to sub-prime creditors establishes the base price for cash or prime purchasers. Furthermore, Paragon’s general manager testified that the advertised price was the price actually charged to both cash and to prime lender consumers. Although the mere fact that a subprime credit consumer paid more than an advertised price would not in and of itself indicate that his price included a finance charge, Kilbourn, 209 F.R.D. at 128, 130 (holding that an increase over the advertised price charged to a credit customer was not a finance charge where car dealership had “sold cars to cash customers for more than the advertised price and ha[d] sold cars to credit customers for less than the advertised price” because of the relative negotiating skills of the parties and where the salesmen did not know if a customer was paying cash or credit until after the negotiation), in this case the salesman knew that Diaz was a subprime credit customer when he established the price. Thus, any increase over the advertised was caused by the need to obtain credit and had to be disclosed under TILA.”)