Assignees of installment contracts for motor vehicles cannot be held liable for truth-in-lending violations that are not evident on the face of the documents, a federal appeals court in Atlanta has ruled.
The court unanimously upheld the dismissal of a suit accusing General Motors Acceptance Corp. of a Truth in Lending Act violation for alleged misrepresentation concerning allocation of a $1,195 extended warranty Paul and Peggy Ellis bought on their used Saturn.
In 1995, the Ellises purchased a 1993 Saturn SL2 from Royal Oldsmobile in Birmingham, Ala., and financed the car and the extended service contract through a retail installment contract.
The loan was assigned immediately to GMAC.
The couple sued GMAC, but not the dealership, in federal court in Alabama, claiming GMAC failed to disclose that most of the extended-warranty fee would go to the dealership.
The suit was filed as a class action but was thrown out without trial before a class was certified. The 11th Circuit Court of Ap-peals unanimously affirmed that ruling.
Initially, the three-judge panel rejected GMAC's argument that the one-year statute of limitations had run out on the Ellises' claim. The court held that consumers may sue after the one-year deadline as a matter of equity where the alleged truth-in-lending violation was fraudulently concealed from them.
Even so, the Ellises lost the case because the purported violation 'was not apparent on the face of the disclosure document,' Appeals Judge Rosemary Barkett said.
She added that a contradictory 1988 Federal Trade Commission regulation does not supersede the Truth-in-Lending Act.
Floyd Gaines, a Birmingham attorney for GMAC, said, 'There was no violation. We didn't admit anything at all.'
He called the decision consistent with rulings by appeals courts elsewhere in the country.
A lawyer for the Ellises, Andrea Bierstein of New York, said, 'It limits the rights consumers may think they have.'