In Mount v. Peruzzi of Langhorne LLC, No. 21-2166, 2021 U.S. Dist. LEXIS 157579, at *13-17 (E.D. Pa. Aug. 20, 2021), Judge Beetlestone allowed an ECOA claim to proceed, but not a TILA claim, for an automobile purchase spot-delivery situation gone wrong. The facts were as follows:
Plaintiff Michelle Mount, a dental assistant in Philadelphia, wanted to buy a new car. So, she called Defendant Peruzzi of Langhorne (“Peruzzi”), a Mitsubishi dealership, in May 2020 to see if they would approve her for financing. Peruzzi’s sales representative, Defendant Tammy LaRue, directed Mount to fill out Peruzzi’s online financing application. A few months later, on August 29, 2020, LaRue texted Mount to ask if she still needed a car, and, if so, could Mount get to Peruzzi that day. Mount did, and she could. When Mount arrived, LaRue told her that Ally Bank had approved her for financing. Mount signed the paperwork on the spot—a Retail Installment Sale Contract (the “RISC”) and a Buyer’s Order (the “BO”) for the purchase of a 2020 Mitsubishi Mirage for $34,069.84, reflecting an interest rate of 18%. Mount also traded in her 1998 Honda Civic for a $2,000 credit and made a $500 down payment. Under the RISC, Mount’s first installment payment was due September 28, 2020. She went home that day in a new Mitsubishi Mirage, under the impression that Peruzzi had arranged financing through Ally Bank. However, about two weeks later, the trouble started. On September 9, 2020, LaRue told Mount that the financing bank wanted to have a “welcome call.” A couple days later, LaRue texted Mount telling her: “You have to call them or they will mot [sic] take your loan and make you return your car dear.” At this time, Mount first learned that the financing bank was Santander, not Ally Bank, and that the RISC was, according to Defendants, contingent on third-party financing that she had not yet received. Even so, Mount completed the welcome call with Santander Bank. After another three days, LaRue texted Mount again, this time telling her that Santander couldn’t verify Mount’s employment status and would refuse the loan unless Mount’s boss called the bank to verify her employment. Mount’s employer called Santander the next day. Santander was apparently not satisfied because the call came from a cell phone rather than a business landline. Mount texted LaRue informing her that Mount’s employer uses her cell phone, rather than a landline, to conduct business. Mount attests that the employment information she provided Defendants was truthful, accurate, and verified, and that Defendants never told her that they believed it to be false. Still, one week after this exchange, on September 22, 2020, six days before Mount’s first installment payment was due under the contract, Defendants repossessed the car from Mount’s property, without warning and at 4:00 in the morning. When Mount requested the return of the $2,500 she had paid towards the Mitsubishi—in the form of her Honda Civic and $500 down payment—Defendants refused. Mount was therefore left without a car, incurred expenses for replacement transportation, suffered damage to her credit rating and reputation, and alleges that she suffered emotional distress, frustration, humiliation, and embarrassment.
The District Court allowed the ECOA claim to proceed.
Plaintiff States a Claim Under the Federal Equal Credit Opportunity Act
In Count III, Plaintiff alleges that Defendant Peruzzi violated the Equal Credit Opportunity Act (“ECOA”) by failing to give proper written notice of the reasons for which it revoked her financing and repossessed her car. “The ECOA requires a creditor to provide notice to an applicant when the creditor takes an ‘adverse action’ against the applicant . . . [including] an explanation for the creditor’s ‘adverse action.'” Scott v. Fred Beans Chevrolet of Limerick, Inc., 183 F. Supp.3d 691, 696 (E.D. Pa. 2016) (citing 15 U.S.C. § 1691(d)(1)-(2)). To sustain an ECOA claim, a plaintiff “must show that (1) [the defendant] is a creditor as defined by the ECOA, (2) [the defendant] took an adverse action against [the plaintiff], and (3) [the defendant] provided notice with insufficient explanation as to why it took the adverse action.” Id. Defendant concedes at this stage that “Peruzzi is perhaps a creditor as defined by the ECOA,” but disputes that Peruzzi took any adverse actions against Plaintiff. Under the ECOA, an adverse action “means a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested.” 15 U.S.C. § 1691(d)(6). Plaintiff alleges that she filled out Peruzzi’s online credit application in May 2020, and LaRue told her that she had been approved for financing through Ally Bank on August 29, 2020. Later, Peruzzi changed the terms of the credit arrangement by telling her that Santander, and not Ally, would be financing the purchase and asking Plaintiff to undergo an employment verification process not previously mentioned. Thereafter, Peruzzi revoked the credit offer by repossessing the Mitsubishi [*15] before Plaintiff began her installment payments. While Defendant contends that Peruzzi denied her credit because it could not verify her employment status, such a denial would still constitute an “adverse action” within the meaning of Section 1691(d)(6). At no point did Peruzzi provide Plaintiff with a written notice of the reasons for any adverse action, be it a revocation and/or change in credit terms (as Plaintiff alleges) or a denial (as Defendant characterizes it). See 15 U.S.C. § 1691(d)(2). Plaintiff has therefore adequately plead an ECOA violation and may proceed on this claim.
The District Court dismissed the TILA claim.
Plaintiff broadly asserts that Defendant Peruzzi violated the TILA and its implementing regulation, Federal Reserve Board Regulation Z, 12 C.F.R. part 226. Her theory is that Peruzzi violated the TILA by treating the sale in the RISC as conditional until it was assigned to a third-party bank. According to Plaintiff, this undisclosed conditional term effectively shortened the first payment period—because the deal was not final until the contract was assigned—and therefore made the disclosed Annual Percentage Rate in the RISC inaccurate. However, Plaintiff fails to connect this attenuated theory to any provision or requirement of the TILA and/or Regulation Z. Nor does she respond to Defendants’ Motion to Dismiss with any legal authority in support of her claim. On the other hand, this exact theory was rejected by the court in Singleton v. Jas Automotive LLC, 378 F. Supp. 3d 334 (E.D. Pa. 2019). The TILA requires a lender to make certain disclosures in a consumer credit transaction including, inter alia, “[t]he finance charge expressed as an ‘annual percentage rate[.]'” 15 U.S.C. § 1638(a)(4); see also 12 C.F.R. § 226.18(e) (providing that a creditor must disclose “[t]he annual percentage rate, using that term, and a brief description such as ‘the cost of your credit as a yearly rate.'”). In Singleton, the plaintiff argued that a car dealer failed to disclose in her RISC that the two car sales at issue “were conditional on the loans’ assignments, which, in turn, affected the [accuracy of the] annual percentage rates disclosed in the Installment Sale Contracts . . . .[]in violation of the TILA and Regulation Z[.]” Id. at 354. The court disagreed, concluding that “the Installment Sale Contracts, which Plaintiff signed, provide all requisite disclosures” required by the TILA. Id. at 355. To wit, the contracts disclosed the “Annual Percentage Rate” for each car, in bold type at top of the contract, and described this figure as “[t]he cost of your credit as a yearly rate.” Id. Moreover, the contracts disclosed that “[t]he Annual Percentage Rate may be negotiable with the Seller [JAS]. The Seller may assign this contract and retain its right to receive a part of the Finance Charge.” Id. Likewise here, Plaintiff’s RISC makes clear and conspicuous “Federal Truth in Lending Disclosures” at the top of the contract in bold type, including the annual percentage rate, finance charge, amount financed, and total payments. The RISC accurately describes the annual percentage rate as “[t]he cost of your credit as a yearly rate.” Plaintiff’s RISC also includes the exact same contract language as Singleton regarding the seller’s right to assign the contract. To the extent that Plaintiff alleges that the RISC should have included additional language stating that the transaction was contingent on third-party financing, she has pointed to no provision of the TILA or Regulation Z requiring such a disclosure. Having failed to plausibly alleges that any specific disclosure required by the TILA or Regulation Z is absent or inaccurate in her RISC, Plaintiff’s TILA claim will be dismissed.