Tyson v. John R Service Center Inc. et al

Filing 55

OPINION AND ORDER GRANTING PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT 44 . Signed by District Judge Judith E. Levy. (Bankston, T)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
SeTara Tyson,
Plaintiff,
v.

Case No. 13-cv-13490
Hon. Judith E. Levy
Mag. Judge Mona K. Majzoub

Sterling Rental, d/b/a Car Source,
et al.,
Defendants.
________________________________/
OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT [44]
This is a consumer credit case. Pending is plaintiff’s motion for
partial summary judgment. (Dkt. 44.)
I.

Background
On January 22, 2015, plaintiff filed a motion for partial summary

judgment on three claims: (1) violation of the Equal Credit Opportunity
Act (“ECOA”), 15 U.S.C. § 1691(d)(1), by virtue of defendants’ failure to
provide her an adverse action notice; (2) violation of the Michigan Motor
Vehicle Sales Finance Act (“MVSFA”), M.C.L. § 492.101 et seq.; and (3)

violation of the Michigan Credit Reform Act (“MCRA”), M.C.L. §
445.1851 et seq.
On August 10, 2013, defendant Car Source sold plaintiff a 2006
Chevrolet Cobalt. In the course of the sale, Car Source took a $1,248
down payment from plaintiff. The payment consisted of a $1,200 check
from the Family Independence Agency, and $48 of plaintiff’s money.
Car Source also created a retail installment contract so that plaintiff
could finance the remaining balance owed on the car. (Dkt. 44-9.) Car
Source, listed as “Creditor-Seller,” then assigned the contract to Credit
Acceptance Corporation (“CAC”), at which point CAC served as the
creditor.

However, Car Source fully controlled the terms of the

contract, including down payment, interest rate, and the monthly
payment owed. (Dkt. 44-12 at 2.)
On August 12, 2013, Car Source requested that plaintiff return to
its premises. When plaintiff did, Car Source gave her an invoice stating
that she owed it another $1,500 down payment. The additional down
payment was not referenced or included in the original contract. Car
Source informed plaintiff that she must either pay the additional money

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or face legal action. Plaintiff did not have the money, and Car Source
revoked the contract and kept the car.
Car Source did not issue an adverse action notice stating the
reasons for its decision to revoke its extension of credit to plaintiff. As a
matter of course, Car Source never issues adverse action notices. (Dkt.
44-2 at 87-88.) Car Source’s proffered rationale for the revocation of
plaintiff’s contract was that plaintiff submitted fraudulent information
to it in the course of the application process – namely, that her pay was
significantly higher than it actually was. In the past, when faced with
this situation, Car Source would usually either lower payments or
charge a higher interest rate to the buyer. (Id.)
II.

Legal Standard
Summary judgment is proper where “the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The Court may
not grant summary judgment if “the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.”

Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248. The Court “views the evidence,
all facts, and any inferences that may be drawn from the facts in the
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light most favorable to the nonmoving party.” Pure Tech Sys., Inc. v.
Mt. Hawley Ins. Co., 95 F. App'x 132, 135 (6th Cir. 2004) (citing
Skousen v. Brighton High Sch., 305 F.3d 520, 526 (6th Cir.2002)).
III.

Analysis

Plaintiff seeks summary judgment on three counts: (1) violation of
the ECOA, 15 U.S.C. § 1691(d)(1), because of defendants’ failure to
provide an adverse action notice; (2) violation of the Michigan Motor
Vehicle Sales Finance Act (“MVSFA”), M.C.L. § 492.101 et seq.; and (3)
violation of the Michigan Credit Reform Act (“MCRA”), M.C.L. §
445.1851 et seq.
A. Failure to Provide an Adverse Action Notice As Required by the
Equal Credit Opportunity Act
Under ECOA, 15 U.S.C. § 1691(d)(2)-(3), a “creditor” is required to
provide an adverse action notice in writing stating its specific reasons
for the action taken. An adverse action “means a denial or revocation of
credit, a change in the terms of an existing credit arrangement, or a
refusal to grant credit in substantially the amount or on substantially
the terms requested.” 15 U.S.C. § 1691(d)(6). The Act defines a creditor
as “any person who regularly extends, renews, or continues credit; any
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person who regularly arranges for the extension, renewal, or
continuation of credit; or any assignee of an original creditor who
participates in the decision to extend, renew, or continue credit.” 15
U.S.C. § 1691a(e).
Courts determining whether a car dealership is a “creditor” for the
purposes of ECOA have followed the analytic framework outlined in
Treadway v. Gateway Chevrolet Oldsmobile Inc., 362 F.3d 971 (7th Cir.
2004).

See, e.g., Gillom v. Ralph Thayer Auto. Livonia, Inc., 444 F.

Supp. 2d 763 (E.D. Mich. 2006); Fultz v. Lasco Ford, Inc., Case No. 06cv-11687, 2007 WL 3379684 (E.D. Mich. Nov. 13, 2007).
The Treadway court treated the definition of creditor under the
adverse action section of ECOA as one falling on a continuum, where,
“[a]t some point along the continuum, a party becomes a creditor for the
purposes of the notification requirements of the act.” Treadway, 362
F.3d at 980 (citing Bayard v. Behlmann Auto. Servs., Inc., 292 F. Supp.
2d 1181, 1186 (E.D. Mo. 2003). A dealership that refers an applicant to
a separate lender is a “creditor” under ECOA only for the purposes of
actions for discrimination and discouragement under 12 C.F.R. §

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202.4(a) and (b).

Treadway, 362 F.3d at 979 (internal citations

omitted).
Courts are to look at the full range of activities a dealership
engages in to determine whether the dealer participates in or makes the
decision to extend credit. Id. at 980. Courts may also look at whether
the dealership “participates in the credit decision by restructuring the
terms of the sale in order to meet the concerns of the creditor.” Id.
Such actions might include insisting on more money for a down
payment, requiring a cosigner, or lowering the price of the car in order
to lower the loan-to-value ratio. Id. Courts may also look at whether
the dealership “regularly set(s) the annual percentage rate (APR)
associated with the sale.” Id. This list of factors is not exhaustive, but
meeting them (among others) leads to the conclusion that a dealership
is a creditor for the purposes of ECOA’s notice requirements. Id. at 98081.
Defendants rely entirely on Fultz for their argument that
summary judgment is not warranted. In Fultz, a car dealership was
found not to be a creditor under the Treadway analysis because the
plaintiff failed to show that the dealership met “[t]he first and key
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factor . . . whether the dealership regularly decides not to send credit
applications to any lender without notice[.]” Fultz, 2007 WL 3379684,
at *4.

The Fultz court, however, did not look at the full range of

activities in which the dealership participated beyond the decision not
to send credit applications, presumably because the plaintiff did not
raise a question of fact as to the dealership’s full range of activities in
that case.
Here, Car Source sets every material term of its financing
agreements, including the down payment owed, the interest rate or
APR, and the monthly payment owed. (Dkt. 44-12 at 2.) The only role
CAC plays is servicing the installment contracts Car Source negotiates.
(Id. at 3.) Further, Car Source routinely restructures deals, including
changing the monthly payment owed, changing the APR on its
contracts, and, in this case, requesting an additional down payment.
The Treadway court explicitly described the “full range of activities” as
a “continuum” on which the accumulation of certain factors would at

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some point make a dealership a creditor under ECOA. Treadway, 362
F.3d at 980-81.1
The Treadway court held that a unilateral decision not to send a
credit application to a lender was, alone, likely enough to make a car
dealership a creditor for the purposes of ECOA’s notice requirements.
Id.

However, it also assessed a variety of other factors that also

demonstrated the dealership was a creditor for the purposes of ECOA’s
notice requirements.

Id.

Here, Car Source controls every single

element of the extension of credit, and may change the terms of the
credit agreement at will. The only thing Car Source does not do is
service the financing agreements it designs, because it assigns the
agreements to servicers such as CAC.
The relevant inquiry under Treadway is whether the dealership
either participates in the decision or actually makes the decision to
The only evidence defendants offer that contradicts these facts is the
affidavit of Rami Kamil, who was designated by Car Source for
deposition pursuant to a Fed. R. Civ. P. 30(b)(6) notice. (Dkt. 50-1 at
18-19.) In that affidavit, Kamil states that “Car Source never finances
automobiles.” (Id. at 18.) That single statement alone cannot create a
genuine issue of material fact when the alleged financier, CAC, stated
at deposition that Car Source determined every material element of the
financing agreement. Kamil’s statement does not contradict the CAC
representative’s testimony concerning the actual role Car Source plays
in structuring financing agreements with customers.
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extend credit. Car Source, at the very least, participates in the decision
to extend credit, because it determines the entirety of the credit offer
and restructures extensions of credit as it sees fit. Accordingly, Car
Source is a creditor for the purposes of ECOA’s notice requirements.
Car Source is required to issue an adverse action notice when it
engages in “a denial or revocation of credit, a change in the terms of an
existing credit arrangement, or a refusal to grant credit in substantially
the amount or on substantially the terms requested.”

15 U.S.C. §

1691(d)(2)-(3), (6). Here, Car Source revoked an offer of credit after
attempting to change the terms of an existing credit arrangement. Both
acts constitute adverse actions under ECOA.
Car Source admits that it never issues adverse action notices
pursuant to 15 U.S.C. § 1691(d)(2)-(3), and did not do so in this
circumstance.

(Dkt. 44-2 at 87-88.)

It is beyond question that Car

Source violated ECOA’s adverse action notice requirements.
As a result of this violation, plaintiff is entitled to actual and
punitive damages.

12 C.F.R. § 1002.16(b)(1).

Plaintiff’s actual

damages, as pled in her motion, are $1,248. The Court may also impose
punitive damages of up to $10,000 in an individual action. Id. The
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Court imposes $10,000 in punitive damages, both because of Car
Source’s flagrant violation of ECOA’s notice requirements and because
of Car Source’s wholesale abdication of its obligations under ECOA.
Plaintiff is also entitled to costs and reasonable attorney fees. Id.
Plaintiff also seeks an injunction against Car Source that would
prohibit Car Source from neglecting its duties under ECOA in the
future. However, ECOA only permits injunctive relief in the case of a
civil action brought by the Attorney General of the United States. 12
C.F.R. § 1002.16(b)(4).
B. Violation of the Motor Vehicle Sales Finance Act
The MVSFA requires that in the course of sale of an automobile,
“[a]n installment sale contract shall be in writing, and shall contain all
of the agreements between the buyer and the seller relating to the
installment sale of the motor vehicle sold, and shall be signed by both
the buyer and the seller.” M.C.L. § 492.112(a). The contract must also
contain “specific provisions concerning the buyer's liability for default
charges, repossession, and sale of the motor vehicle in case of default or
other breach of contract, and the seller's or holder's rights concerning
any collateral security.”

M.C.L. § 492.113(5).
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Further, “[a] licensee

under this act shall not charge, contract for, collect, or receive from the
buyer, directly or indirectly, any further or other amount for costs,
charges, examination, appraisal, service, brokerage, commission,
expense, interest, discount, fees, fines, penalties, or other thing of value
in connection with the retail sale of a motor vehicle under an
installment sale contract in excess of the cost of insurance premiums,
other costs, the finance charges, refinance charges, default charges,
recording and satisfaction fees, court costs, attorney's fees, and
expenses of retaking, repairing, and storing a repossessed motor vehicle
which are authorized by this act.” M.C.L. § 492.131(a).
Plaintiff contends that the additional $1,500 Car Source requested
constituted a prohibited charge under the MVSFA.

The additional

down payment was contained nowhere in the contract, and the only
written evidence of any obligation to make an extra down payment was
a single invoice generated two days after the sale of the car, on August
12, 2013. (Dkt. 44-10.) Accordingly, the $1,500 was a prohibited charge
under sections 113 and 131 of the MVSFA.
In the case of a prohibited charge under the MVSFA, “all the costs
and charges in connection with the contract, other than insurance, shall
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be void and unenforceable and any amounts paid by the buyer for such
costs and charges, other than insurance, shall be applied on the
principal of the contract.” M.C.L. § 492.131(d). It appears that, despite
this violation, plaintiff does not seek the MVSFA’s civil remedy, but
instead a remedy under the MCRA for the MVSFA violation. (Dkt. 44
at 21.)
The MCRA prohibits the imposition of any “excessive fee or
charge” by any “regulated lender” in Michigan. M.C.L. § 445.1856(4).
An “excessive fee or charge” “means a fee or charge that exceeds the
amount allowed in . . . any other applicable law or statute of this state.”
M.C.L. § 445.1852(f). A “regulated lender” includes “a licensee under . .
. the motor vehicle sales finance act.” M.C.L. § 445.1852(i).
It is clear that Car Source imposed an “excessive fee” under the
MVSFA, as the $1,500 it sought as an additional deposit was not
permitted under the MVSFA. Based on this violation, plaintiff asks for
“the remedy allowed for by the MCRA for the imposition of these
charges.”
The MCRA permits a variety of remedies for violation of the
statute.

See M.C.L. § 445.1861.

Plaintiff may obtain a declaratory
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judgment, enjoin a regulated lender from engaging in a method, act, or
practice that is a violation of the MCRA, recover $1,000.00 and actual
damages under a non-credit card arrangement, and recover reasonable
attorney fees and costs.

M.C.L. § 445.1861(1)(a)-(d).

The regulated

lender is also barred from recovering any interest or other charges in
connection with the extension of credit during which the violation
occurred. M.C.L. § 445.1861(2).
The Court, pursuant to the MCRA, awards plaintiff $1,000 in
statutory damages and no actual damages (as plaintiff has already
recovered those under her ECOA claim), along with reasonable attorney
fees and costs.

The Court also enjoins Car Source from imposing

additional down payment requirements not specifically disclosed in its
retail installment contracts, or any other contract serving a similar or
identical function as a retail installment contract, entered into with any
buyer of any vehicle. Car Source is further enjoined from imposing any
other additional fine, penalty, or charge in connection with a retail
installment contract unless that fine, penalty, or charge is specifically
disclosed in writing at the time of sale in accordance with the MVSFA
and MCRA.
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Finally, Car Source is prohibited from recovering any interest or
other charges in connection with its extension of credit to plaintiff for
the purchase of the 2006 Chevrolet Cobalt at issue in this case.
IV.

Conclusion

For the reasons set forth above, it is hereby ordered that:
Plaintiff’s motion for partial summary judgment (Dkt. 44) is
GRANTED;
Defendant is ORDERED to pay $11,000 in statutory damages and
$1,248 in actual damages for its violations of ECOA and the MCRA, as
well as reasonable attorney fees and costs related to those claims; and
Defendant

is

ENJOINED

from

violating

the

MCRA

and

PROHIBITED from recovering interest or other charges in relation to
the sale of the 2006 Chevrolet Cobalt at issue in this case, subject to the
terms stated in this opinion and order.
IT IS SO ORDERED.
Dated: March 18, 2015
Ann Arbor, Michigan

s/Judith E. Levy
JUDITH E. LEVY
United States District Judge

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CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served
upon counsel of record and any unrepresented parties via the Court’s
ECF System to their respective email or First Class U.S. mail addresses
disclosed on the Notice of Electronic Filing on March 18, 2015.

s/Felicia M. Moses
FELICIA M. MOSES
Case Manager

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