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Unfair and Deceptive Acts and Practices: 7.2.3.1 Introduction

This subsection reviews dealer financing practices in the common situation in which the dealer originates the credit sale agreement and immediately assigns the obligation to a bank, finance company, or other creditor. It does not cover when the consumer goes directly to a lender for a loan and then uses the proceeds of the loan to purchase a vehicle.

Unfair and Deceptive Acts and Practices: 7.2.3.3 UDAP Challenges to Dealer Kickbacks

UDAP claims may be the most successful approach to challenging creditor kickbacks to dealers on the financing. Any oral misrepresentation by the dealer should be actionable. For example, any dealer representation that the dealer got the consumer the best rate possible or that the financer would not accept anything less than 16.5% is clearly false when the buy rate was in fact 14%. If a consumer asks the dealer whether the creditor will accept a lower interest rate, the dealer’s answer may also be deceptive.155

Unfair and Deceptive Acts and Practices: 7.3.1 The Turnover System

One of the most oppressive and potentially unfair and deceptive sales techniques that car dealerships employ is the “TO” or turnover system, in which a series of sales personnel are used to wear down a consumer. The first salesperson the consumer meets is a “liner” or “greeter” who qualifies the consumer—that is sizes up how vulnerable the consumer is and how much the dealer can take advantage of the consumer.

Unfair and Deceptive Acts and Practices: 7.3.2 Dealer’s Illegal Use of Consumer Credit Reports

A dealer’s illegal use of a consumer’s credit report may not only be a UDAP violation but also a violation of the federal Fair Credit Reporting Act (FCRA). The violation occurs when a car dealer pulls a consumer’s credit report almost as soon as the consumer walks into the showroom. The dealer requires the consumer’s driver license claiming that it needs to copy the license in order to allow the consumer to test drive a car, or that it will be used to enter a contest, or just as a precondition for meeting with a salesperson.

Unfair and Deceptive Acts and Practices: 7.3.4 Dealers Hiding Trade-Ins’ Negative Equity

In a surprising number of credit and lease transactions, the vehicle the consumer wishes to trade-in has negative equity. That is, the vehicle is worth less than the outstanding credit obligation on that vehicle, or the early termination of a lease on that vehicle will create a sizeable early termination charge. Thus, the consumer’s obligation will go up because of the trade-in, not down.

Unfair and Deceptive Acts and Practices: 7.3.11 Hired Guns, Tent Sales, and Other Short-Term Techniques

Used car dealers sometimes employ special sales techniques aimed at selling a number of cars quickly, by attempting to force consumers to act quickly to buy during this “once in a lifetime” event. Dealerships will often bring in outside groups to market these sales and sometimes to actually sell the cars as well.293 These hired guns are often referred to as liquidators or promotion specialists.

Unfair and Deceptive Acts and Practices: 7.4.6 Sale of Salvage and Flood-Damaged Cars and Undisclosed Body Damage

A large number of the used cars sold each year in this country were actually declared “total” losses because of wreck damage, were then rebuilt, and ultimately were resold to unsuspecting consumers. Millions more are sold that were in a serious wreck, but were never declared to be total losses. Each time a major flood hits an area, thousands of cars suffer flood damage, but many of these cars are resold to consumers unaware of that flood history.

Unfair and Deceptive Acts and Practices: 7.4.14.1 General

There has been an explosive growth of “buy-here, pay-here” (BHPH) dealerships. These used car dealers concentrate on those who perceive themselves as high credit risks who would have difficulty finding automobile financing elsewhere. Targeted-advertising offers financing for all comers, which is not difficult for the dealer because the price of the vehicle may be fantastically overpriced, and the dealer may demand a large down payment that exceeds the vehicle’s value.

Unfair and Deceptive Acts and Practices: 11.3 Retroactive Application of Statutory Provisions

A second timing issue is the extent to which a UDAP statutory provision applies to practices that occurred before the effective date of the statutory provision. In the 1970s, a major impediment to private UDAP actions was that UDAP statutes often did not exist at the time of the deceptive practices. Today the continual amending of UDAP statutes has led to a more common problem: which version of the legislation should be used—that in effect at the time of the challenged practice, or that in effect at the time the consumer brings the claim?

Unfair and Deceptive Acts and Practices: 11.4.2.1a.5 Traceability

Another one of Article III’s standing requirements is that the injury must be fairly traceable to the alleged deceptive practice.200 Traceability can be based on the defendant’s indirect control over the unfair or deceptive practice.201 Traceability is a relatively modest standard that does not require a showing of proximate causation, even if that would be required for proof of the claim on its merits.

Consumer Warranty Law: 7.3.8.3 Article III Constitutional Standing

Cases filed in federal court in which a defect has not yet caused a malfunction may also raise the question whether the plaintiff has suffered a concrete injury, as required for standing under Article III of the United States Constitution.288 Both tangible and intangible injuries can be concrete,289 but the injury must be “ ‘real and immediate,’ not ‘conjectural’ or ‘hypothetical.’ ”

Unfair and Deceptive Acts and Practices: 11.4.2.3 Injury Requirements Under California’s UDAP Statutes

Until 2004, one of California’s two UDAP statutes, the Unfair Competition Law, allowed suit for injunction, restitution, and other equitable remedies by “any person acting for the interests of itself, its members, or the general public.”218 A private plaintiff need not have been directly harmed by the defendant’s practices in order to bring suit.219 The court could order restitution to all injured individuals without the formality of class certification.220

Unfair and Deceptive Acts and Practices: 6.1 Introduction

The previous chapters discussed the coverage of UDAP statutes, the general approach to determining whether a practice is a UDAP violation, the meaning of the terms “deceptive,” “unfair,” and “unconscionable,” and the application of UDAP statutes to general practices such as bait-and-switch and deceptive billing. This chapter analyzes the application of UDAP statutes to the extension of credit, the collection of consumer debt, bank accounts, other payment methods, security interests, repossession, and foreclosure.

Unfair and Deceptive Acts and Practices: 6.3.3 Applying General UDAP Prohibitions to Improvident Extension of Credit

Even without a specific statutory prohibition, improvident extension of credit violates general UDAP principles of unfairness and deception.70 For example, a Connecticut appellate court held that it was an unfair practice under the state UDAP statute to lend at an arbitrarily high annual percentage rate while knowing that the borrower could not repay the loan unless it was refinanced by a second loan, and refusing to allow the borrower an opportunity to discuss or evaluate the terms of the second loan.71

Unfair and Deceptive Acts and Practices: 6.6.1 Misrepresentation of Credit Terms

Misrepresentation that a creditor offers easy credit terms is deceptive if the seller does not extend credit to persons below prevailing standards of creditworthiness, the down payment or repayment periods are less favorable than ordinary, the credit cost is higher than average, the seller’s mark-up on the underlying goods is higher than usual, or the seller has a more vigorous debt collection policy than usual.217

Unfair and Deceptive Acts and Practices: 3.2.7.3.9a Minnesota's private cause of action may extend to violations of other laws

By statute, Minnesota extends a private cause of action to any consumer who is injured by a violation of ten enumerated statutes plus other Minnesota laws “respecting unfair, discriminatory, and other unlawful practices in business, commerce, or trade.”76 The reference to “other unlawful practices” is a clear indication that violations of a wide range of other statutes may be privately actionable under this provision.