Nissan Motor United States financing arm is engaged in an elaborate scheme in which it makes time payment loans to low-income buyers knowing it will repossess many of the cars and leave buyers stuck with huge bills in the process, a lawsuit alleges, according to the Los Angeles Times (LAT).
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The paper said the suit against Torrance, California-based Nissan Motor Acceptance Corporation also alleges that Nissan dealers benefit by buying the repossessed cars on the cheap at auctions, and then reselling them. These auctions are supposed to be open to the public under California law, according to the suit, but have been closed to all but Nissan dealers, the LAT added.
The LAT said the suit, which seeks class-action status, was filed last week in Los Angeles County Superior Court and lawyers bringing the suit say the case is a window into the shadowy world of vehicle repossession because, when cars are seized for nonpayment of loans, borrowers not only lose their cars and suffer damage to their credit ratings, they also are often held liable for “deficiencies” that reflect the depreciation of the car’s value and can leave the borrower saddled with thousands of dollars in additional payments.
The plaintiff in the Nissan lawsuit, Sonia Barrera, claims that’s what happened to her, the Los Angeles Times said.
The Los Angeles resident’s 2002 Nissan Sentra was repossessed less than a year after she purchased it, the suit says, and, shortly after her car was resold at auction, Barrera was told she still owed Nissan $US12,787 — the difference between the car’s $19,120 purchase price and the approximately $6,400 that Nissan Motor Acceptance received when the car was sold at auction, the paper said.
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By GlobalData“Sonia Barrera has a $13,000 bill for a car she no longer has,” Los Angeles lawyer Henry Bushkin reportedly said of his client, adding that even “if she could pay this, it would take her the rest of her life.”
According to the LAT, Barrera’s attorneys say her case is more than an isolated dispute between a car buyer and a finance lender.
The paper said the suit alleges Nissan makes loans to buyers with poor credit “to increase sales and profits for itself, shareholders and dealers through an unfair, commercially unreasonable and fraudulent repossession and sales scheme.”
Nissan was aware of the suit but hadn’t seen it, spokesman Kyle Bazemore told the LAT. “We are confident that we have complied with all codes and acts,” he reportedly said, adding: “We believe this is a frivolous suit.”
The Los Angeles Times said that California law requires that repossessed cars be sold at public auction to increase the number of bidders and, presumably, boost resale prices and that a higher resale price can reduce the amount of debt the original owner is stuck with because it can lower the deficiency judgment, which usually equals the original loan amount plus repossession costs, minus the consumer’s payments and the value recovered at auction.
The LAT said Barrera’s suit alleges that Nissan excludes the public from these sales to “favour its dealers with opportunities to purchase quality used Nissan cars well under market value and to create ‘sham’ deficiencies.”
According to the paper, Bushkin said he believed that at least 8,000 California borrowers — many of them low-income and Latino like Barrera — are facing artificially inflated deficiency payments as the result of Nissan’s alleged practice.
The Los Angeles Times said that, although Barrera is the only plaintiff in the case, her attorneys are asking that her lawsuit be given class-action status, allowing other Californians with similar complaints against Nissan to join.
The suit is seeking damages of $500 per incident, plus the elimination of the deficiency judgments against Barrera and other potential plaintiffs, and unspecified punitive damages, the LAT added.
The paper noted that Nissan Motor Acceptance recently settled a Tennessee lawsuit that alleged that the company charged huge markups — additional fees paid by customers to qualify for loans — to minority borrowers.
As part of that settlement, Nissan plans to offer no-markup loans based on good credit to African American and Latino borrowers, the report said.
According to the LAT, Barrera’s suit doesn’t address the loan markup issue but her attorneys note that she was charged more than $19,000 for a car with a sticker price of $14,000.
The attorneys told the Los Angeles Times that if her lawsuit is given class-action status, they would request information about the ethnic makeup of Nissan’s borrowers and potentially revise the suit to add discrimination claims.
