A federal judge in Chicago has delayed a decision in a proposed class-action suit involving extended service contracts.
U.S. District Judge Blanche Manning said she will not decide whether to dismiss the suit against Credit Acceptance Corp. and North Avenue Auto Sales of Chicago until a federal appeals court rules on a key underlying legal issue in a separate case.
That unresolved issue centers on whether dealers violate the Truth in Lending Act when they fail to disclose that they are retaining part of the listed cost of an extended warranty or service contract.
In 1996, Dewayne Strong paid $895 for a Buyers Vehicle Protection Plan Inc. extended service contract when he bought a 1987 Ford Tempo from used-car dealer Nick Boulahanis, who does business as North Avenue Auto Sales.
The documentation he got from North Avenue stated that the $895 was part of the total cost of the car and financing. His retail installment sales contract was assigned to Credit Acceptance, a Michigan-based sales finance agency licensed in Illinois. Buyers Vehicle Protection Plan is a Credit Acceptance subsidiary, the suit contends.
Strong sued the finance company and dealership under the federal Truth in Lending Act, the Illinois consumer protection law and the Illinois sales finance agency law. The complaint, which asked for class-action status, alleged that Strong was not told the dealer would keep part of the fee paid for the extended service contract. Strong alleged that he would not have paid the full $895 if he had known the actual cost of the extended service contract was lower.
'Strong contends that the defendants failed to comply with Regulation Z requirements because they disclosed the amount paid for the extended service contract in a false and misleading manner and falsely stated that the entire amount was paid to BVPP when it should have been credited to the consumer's account with the creditor,' Manning said.
The defendants asked Manning to dismiss the suit.
Credit Acceptance's lawyer, John Scotellaro, said his client denies any legal violations. 'We've taken the position that anything that's disclosed on the face (of the documents) is all the creditor is responsible for looking for. We don't think they're entitled to any remedy.'
As for Buyers Vehicle Protection Plan, it is 'a separate corporation,' he said.
Manning declined to decide the dismissal motion, saying she is waiting for a 7th Circuit U.S. Court of Appeals ruling in another Illinois case. Resolution of the legal issues in that case will determine how the Truth in Lending Act is interpreted in the Strong case.
She also postponed a ruling on Strong's motion to certify the case as a class action.
Strong's lawyer, Louise Walsh of Chicago, said there are a number of similar suits pending in Illinois and other states against finance companies and dealers. She said Strong has settled with North Avenue Auto Sales for 'a couple of thousand dollars,' but the settlement has not been finalized.