|What happens when your dealership’s F&I folks misrepresent a customer’s credit qualifications to a bank or sales finance company? We’ve pointed out before that such conduct could violate federal and state criminal laws, subjecting those who engage in such conduct to jail time and monetary fines.|
That’s bad enough, but as this case illustrates, such conduct can also expose the dealership to a civil lawsuit brought by the buyer. This case involves alleged violations of a Connecticut law that is very typical of laws in nearly all states, so even though your dealership might be located elsewhere, it’s worth a read.
Priscilla Farlow went to Barbarino Brothers, Inc. to buy a car and discussed financing options with the manager of the dealership. According to Farlow, she unknowingly signed a credit application that was filled out by the manager. On the application, the manager misrepresented her annual income as $78,000, when she actually earned an hourly wage of $11 ($22,880 annually).
Based on the information in the credit application, Wells Fargo Financial extended financing to Farlow, but eventually repossessed and sold the car when she missed her monthly payments. She was also responsible for the remaining deficiency after the sale of the car.
Later, Farlow sued Barbarino for violating the Connecticut Unfair Trade Practice Act (CUTPA) as a result of its misrepresentation on the credit application and alleged slander of credit. Barbarino moved to strike both counts.
The Connecticut Superior Court first denied the motion to strike the CUTPA claim, finding that Farlow alleged sufficient facts showing that Barbarino’s false misrepresentation of Farlow’s income on her credit application proximately caused harm to her. The court noted that without the misrepresentations, Wells Fargo would not have extended credit to her and, therefore, she would not have sustained the financial injury upon repossession. “Since the purpose of the credit application is to determine what amount an applicant can afford to pay and whether the applicant is a viable candidate for an extension of credit of the amount requested, the damages sustained by [Farlow] are a reasonably foreseeable result of a monthly payment that is grossly disproportionate to [her] overall monthly income.”
The court granted the motion to strike the slander of credit claim, however. Noting that slander of credit is not recognized as a cause of action in Connecticut, the court looked to other jurisdictions to determine whether Farlow pleaded sufficient facts to maintain such an action and found that she did not. Without recognizing a distinct cause of action for slander of credit, the court found that Farlow did not allege facts showing that Barbarino made a defamatory statement injuring her reputation to a third party.
If you are looking for a case to illustrate the dangers of misrepresenting your customers’ credit information to financing institutions, you’d be pressed to find a better example than this case. The law this dealership allegedly violated is a typical “unfair and deceptive acts and practices” law. Most states have such a law and the laws are particular favorites of plaintiffs’ lawyers. Why? Because they usually provide for a doubling or tripling of the plaintiff’s damages and provide for an award of the plaintiff’s attorney’s fees as well.
These can be serious, big dollar cases. It might be a good idea to spend a bit of time training your folks about the risks of the practices Barbarino was accused of using.
Farlow v. Barbarino Brothers, Inc., 2006 WL 3755219 (Conn. Super. December 1, 2006).
Auto retail veteran and F&I products expert Paul McCarthy has joined AUL Corp. as vice president of national sales.