- The Washington Times - Tuesday, November 30, 2004


Car buyers beware: The Supreme Court said yesterday that people misled about auto loans cannot use a federal law to receive significant damages.

When Congress passed the Truth in Lending Act 36 years ago, it decided to let consumers sue dishonest lenders for damages of $100 to $1,000.

The law has been revised several times since then, but the Supreme Court ruled 8-1 that the damage caps remain.

The case was watched closely by consumer groups because of its potentially sweeping impact. About 45 million cars are bought and sold in the United States each year. Many are financed through a bank or other lender.

Yesterday’s ruling also applies to other financed purchases, such as appliances and furniture, but not to homes.

The loser was Bradley Nigh, who said he was a victim of unscrupulous tactics by an Alexandria car dealer when he tried to buy a used car four years ago.

A jury ordered the dealer, formerly known as Koons Buick Pontiac GMC Inc., to pay Mr. Nigh more than $24,000 in damages. The high court said, however, that he was entitled to no more than $1,000 under the federal law.

“The lesson for consumers is you’ve got to be careful,” said Richard Rubin of Santa Fe, N.M., attorney for groups such as the National Association of Consumer Advocates. “Car dealers and other creditors who are stealing money from people are going to continue to steal because it’s profitable.”

He said $1,000 in 1968 is equal to about $186 in today’s dollars, and Congress should now reconsider the limit.

A ruling the other way could have led to claims for more than $1 billion in damages nationwide each year, auto dealers and banks said, with buyers having to pay higher rates as a result.

“The alternative would have opened the floodgates to a lot of litigation,” said Washington attorney Roy Englert Jr., who represents banking groups.

He said claims under the law often involve technical violations that cause no harm.

The federal lending act was intended to force details of loans into the open and allow consumers to better evaluate the cost of credit. People can still recover actual damages under the law, but they are not entitled to more than $1,000 just for proving a lender violated the law.

Justice Ruth Bader Ginsburg, author of the ruling, said that “less-than-meticulous drafting” of an amendment to the law caused confusion.

She said interpreting the statute to allow larger damages would lead to an absurd result because it would cap damages at $2,000 for larger credit deals such as mortgages, but allow unlimited damages for car loans.

In the only dissenting opinion, Justice Antonin Scalia argued that it wasn’t the court’s role to fix Congress’ mistakes in sloppily writing the statute.

Mr. Nigh’s experience began when the then-22-year-old put money down on a 1997 Chevrolet Blazer, signed a sales contract and drove it home the same day. The Fairfax man was told later he must put down an additional $2,000 to get a loan. Mr. Nigh tried to back out when the dealer called him back a third time and, Mr. Nigh claimed, threatened to have him arrested for auto theft if he did not sign a different contract.

Chief Justice William H. Rehnquist participated in the ruling, even though he is absent from the bench as he receives treatment for thyroid cancer.

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