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Automobile Fraud: 10.13.1.2 Collecting from Debts Owed to the Dealer

Another way to collect a judgment against the dealer is to search local court records for suits the dealer has filed. If the dealer has won judgments against other people or companies, the payments on those judgments can be attached. This method of collecting a judgment has particular potential because the people the dealer has sued may be delighted to pay someone other than the dealer, so may be more cooperative than other garnishees.

Automobile Fraud: 10.13.1.3.1 Information from and payments owed by manufacturer

Manufacturers require franchised dealers to make periodic reports on their financial status. These reports can help locate assets. They are also a helpful way of verifying a claim by a dealer that it is on the brink of going out of business.

A manufacturer may also owe money to a franchised dealer, for example for advertising. The consumer can collect against this obligation by garnishing the manufacturer. Similarly, a bank or other financing entity that purchases installment contracts from the dealer may owe money to the dealer.

Automobile Fraud: 10.13.1.3.2 Dealer assets on the premises

Even low-end used car dealerships that do not have a prosperous appearance often have substantial assets. In particular, they often have substantial amounts of cash going through the dealership every month. On any given day, the dealership will have some cash on hand from customers who have paid for repairs or made car payments in person. The dealer may also have real estate, or personal property such as computers and office furniture, that is subject to execution. Even a leasehold interest in real estate may have value.

Automobile Fraud: 10.13.1.3.4 Information held by auction houses

When a dealer registers to attend an auction, it must fill out an online or paper form giving detailed information about its licensure and financial resources. Typically the form includes the identity of the dealer’s bank account, wire transfer information, Social Security or federal tax identification number, and licensure information, plus photographs of the dealer’s agents. Many auctions use the Auction Access registration form produced by Auto Tec, L.L.C.

Automobile Fraud: 10.13.1.3.5 Information from public agencies and lending institutions

Information filed with public agencies may also help uncover dealer assets. Agencies to check include the corporations division of the secretary of state’s office, the dealer licensing board, and any salesperson’s licensing agency. These agencies will not only have records relating to the dealership, but may also have records of the bank accounts on which checks for annual fees were drawn.

Automobile Fraud: 10.13.1.4 Collecting Against Manufacturers

If a manufacturer fails to pay a lemon laundering or other judgment, enforcing the judgment is easier if the consumer can find assets of the manufacturer in the jurisdiction. One possibility is to execute upon the debts that local dealers owe that manufacturer for vehicles shipped to them. If the dealer has floor plan financing through the manufacturer, the payment for the vehicles will be merely an accounting adjustment on the manufacturer’s books, without any money changing hands, so it is necessary to find a dealer that has floor plan financing through a local bank.

Automobile Fraud: 10.13.2 Effect of Defendant’s Appeal on Collection

When the defendant loses and then appeals the judgment, execution is generally stayed if the defendant posts a bond. If the defendant is in financially poor shape, the consumer’s attorney should be wary of the possibility that the defendant will file bankruptcy before the judgment can be affirmed and enforced.

Automobile Fraud: 10.13.4.1.2 Procedure for invoking bond

The procedure for invoking a bond differs significantly from state to state. In some states, the bond can be invoked only through an administrative proceeding with the motor vehicle department or similar state agency.758 The surety may have the right to intervene in an administrative bond forfeiture hearing.759

Automobile Fraud: 10.11.1.6 Dealing with Multiple Defendants and the Dealer’s Insurer

When multiple defendants are sued, amounts received in settlement with some defendants may be deducted from any court or jury award against a non-settling defendant.679 The consumer’s attorney should check the jurisdiction’s law carefully concerning the manner and form in which the settlement should be documented in order to minimize the effect on the non-settling defendants.

Automobile Fraud: 10.11.2.1 Prompt Payment

Sometimes defendants have delayed many months after agreeing to settle a case before making the actual payment. Insist that the settlement agreement specify a payment date, or provide that the settlement itself is contingent upon the defendants making payment within a certain time, and that the consumer will not sign the release until the payment actually arrives. Another variant is to provide that the consumer’s settlement offer can be accepted only by execution of the release and payment of the settlement amount by cashier’s check or certified funds.

Automobile Fraud: 10.11.2.2 Dealer’s or Consumer’s Subsequent Resale of Suspect Vehicle

When settling an automobile fraud claim that involves a dealer or manufacturer taking back a vehicle, it is wise to protect the consumer from claims that could arise if the dealer resells the defective vehicle. The settlement agreement should require the defendant to make full disclosure of the condition of the vehicle if it is resold. Some consumer attorneys insist on an indemnity clause that provides that the defendants must indemnify the consumer for damages, costs, and attorney fees in the event that a subsequent purchaser of the vehicle makes a claim against the consumer.

Automobile Fraud: 10.11.2.3 Protecting the Consumer’s Credit Report

An important element of a settlement is protection of the consumer’s credit record. The settlement agreement should provide that the defendant will take the steps necessary to ensure that adverse information about the loan is deleted from the consumer’s credit history at any consumer credit reporting agency (CRA). There are options about how to accomplish the deletion. The first option requires the creditor to withdraw the entire report of the disputed loan at the CRAs. The consumer’s credit report will then be altogether silent about the loan.

Automobile Fraud: 10.11.2.4 Confidentiality Agreements

Settling defendants often request that the settlement prohibit the parties from disclosing the terms of the settlement to anyone. A second, less extreme clause does not prohibit disclosure altogether, but prohibits publicity. Such clauses raise a host of concerns.692 They enable defendants to cover up massive wrongdoing, and create procedural obstacles if judicial enforcement of the settlement becomes necessary.

Automobile Fraud: 10.11.2.5 Other Terms and Clauses

If one of the defendants holds a note or installment contract signed by the consumer, the settlement agreement should require it to be returned to the consumer, marked paid or canceled. Otherwise, there is a danger that it will be treated as a continuing obligation and assigned to another entity, and the consumer will be dunned for payment or even sued.

Any release should be mutual, with each party releasing the other from the same scope of claims. If only the consumer signs the release, the consumer is vulnerable to suit by the defendant.

Automobile Fraud: 10.11.2.6 Court Costs and Financing Costs

Most settlement agreements deal with responsibility for court costs incurred to date, but in some jurisdictions the clerk’s office may charge additional court costs for entering the settlement order. Or the clerk’s office may prepare a final court cost bill months after the case has been closed. The settlement agreement should deal with unanticipated court cost bills. For example, a clause could provide that any court costs owed to the clerk over and above the deposit posted by the plaintiff at the beginning of the case will be paid by the defendant.