Used car dealership defrauded customer

Where the used car dealership concealed the terms of the financing relationship so it could acquire more money from a customer, it was liable for fraud. The customer was awarded $2,000 under the Truth in Lending Act, nearly $100,000 in punitive damages under the Equal Credit Opportunity Act and attorneys’ fees and costs.

Background

This matter arises from a dispute over financial improprieties that arose when plaintiff exchanged his existing vehicle for credit toward another partially financed vehicle sold by defendant Mega Auto Outlet. Plaintiff alleges that the defendant forged purchasing documents and then unlawfully sold a falsified credit report to a third-party assignee in connection with the parties’ transaction.

Plaintiff filed this lawsuit Aug. 21, 2020, pursuant to the Truth in Lending Act, or TILA, the Equal Credit Opportunity Act, the Virginia Consumer Protection Act, or VCPA and common law fraud. The clerk entered default Dec. 7, 2020.

Plaintiff filed a motion for default judgment Jan. 29, 2021. The court ordered objections to be filed by Feb. 22, 2021. No interested party filed a timely objection with the clerk’s office.

Report and recommendation

The court first finds that it has subject-matter and personal jurisdiction, that venue is appropriate and that service of process was proper.

Regarding plaintiff’s TILA claim, defendant was a creditor and was therefore required to disclose the material terms of the contract it entered into with plaintiff. Defendant, however, did not provide plaintiff with the required disclosures of the credit transaction he believed he had entered into or of the fraudulent transaction. Instead, the first TILA disclosures plaintiff saw were on the forged forms provided by Westlake Financial.

As a result, plaintiff believed he had entered into a contract requiring only 18 monthly payment of $338.41. The documents defendant provided to Westlake Financial, however, depict a contract consisting of 48 monthly payments of $399 and other terms of which plaintiff had no knowledge. As such, the undersigned finds that Plaintiff has a cognizable claim under the TILA. The undersigned also finds that defendant did not provide plaintiff with proper notice of an adverse action (when it substantially changed the terms) pursuant to the Equal Credit Opportunity Act.

Third, the undersigned finds that plaintiff has clearly and convincingly stated a fraud claim against defendant. Defendant falsely represented the terms of its agreement with plaintiff. Next, the terms defendant concealed were material and essential terms of the agreement at issue. And defendant misrepresented the deal intentionally and knowingly because it falsified buyers order forms by placing plaintiff’s unauthorized signature on them and refusing to furnish the forms to plaintiff. Defendant intended to mislead plaintiff so it could acquire more money from the deal and refused to provide plaintiff with the details of the arrangement when requested. Plaintiff relied on defendant’s false representations when he traded in his Nissan Frontier and contracted with defendant. Finally, as a result of defendant’s false representations, plaintiff has suffered actual damages including loss of time and inconvenience.

Plaintiff next contends he is entitled to default judgment under the VCPA. The Virginia Code is clear, however, that the VCPA does not apply to any aspect of a transaction authorized by state or federal law or regulated by the TILA. Accordingly, the undersigned recommends dismissing plaintiff’s VCPA claim.

Finally, the undersigned recommends that the court award plaintiff (1) $2,000 in statutory damages under the TILA; (2) $99,817.12 in punitive damages under the Equal Credit Opportunity Act and for his fraud claim and (3) reasonable attorneys’ fees and costs.

District court opinion

Concluding that “there is no clear error on the face of the record,” the court approves and adopts the report and recommendation in full.

Plaintiff’s motion for default judgment granted.

Martinez Garcia v. Mega Auto Outlet, Case No. 1:20-cv-945, March 16, 2021. EDVA at Alexandria (O’Grady). VLW 021-3-113. 16 pp.