Banks and Third Parties – Dealers , Perhaps ? On January 24 , the OCC released supplemental procedures for examining national banks and federal savings associations ' risk management of third-party relationships . The new examination procedures supplement OCC Bulletin 2013-29 , " Third-Party Relationships : Risk Management Guidance ," issued in October 2013 .
Case of the Month
Car buyers brought a class action suit against several related dealerships , among others , for violating the Truth in Lending Act , Oregon ’ s Unlawful Trade Practices Act , and Oregon ’ s financial elder abuse statute , alleging that the defendants failed to comply with the disclosure requirements of TILA and the UTPA . Specifically , the plaintiffs alleged that the defendants obtained payments or “ kickbacks ” from third parties by negotiating higher interest rates for vehicle financing than the interest rates quoted by the financing entities and that the defendants failed to disclose these alleged payments and kickbacks . The plaintiffs also alleged that the defendants failed to disclose that they received payments from third parties for arranging the sale of “ extended service warranty contracts ”. The defendants moved to dismiss .
The federal trial court first denied the defendants ’ motion to dismiss certain TILA and UTPA claims as untimely . Next , with respect to the UTPA claims , the defendants argued that the plaintiffs could not show they suffered ascertainable loss as a result of the defendants ’ alleged misrepresentations or concealments or that the loss was caused by the alleged unlawful trade practice . The plaintiffs alleged that their ascertainable loss equaled the amount that the defendants received as “ kickbacks ” or retained as profit with respect to the vehicle financing and service contracts .
The court concluded that the plaintiffs ’ allegations did not support causation under the UTPA ; they failed to explain how the defendants ’ conduct caused them to suffer losses in an amount equal to the payments or kickbacks the defendants allegedly received . The plaintiffs did not allege how the vehicle transactions would have been different if the defendants had disclosed the alleged payments or kickbacks – for example , that they would have declined to purchase the vehicles or the service contracts or would have obtained more favorable financing .
The court provided the plaintiffs an opportunity to amend their complaint to clarify their losses and how those losses were caused by the defendants ’ conduct . Because the court found that the TILA claim was timely and that the plaintiffs could , depending on the proposed amendments , sufficiently allege a UTPA claim , the court denied the motion to dismiss the elder abuse claim .
Mendoza v . Lithia Motors , Inc ., 2017 U . S . Dist . LEXIS 4716 ( D . Or . January 11 , 2017 )
So there ’ s this month ’ s roundup ! Stay legal , and we ’ ll see you next month .
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Tom ( thudson @ hudco . com ) is Of Counsel and Nikki ( nmunro @ hudco . com ) is a partner in the law firm of Hudson Cook , LLP . Tom has written several books and is the publisher of Spot Delivery ®, a monthly legal newsletter for auto dealers . He is Editor in Chief of CARLAW ®, a monthly report of legal developments for the auto finance and leasing industry . Nikki is a contributing author to the F & I Legal Desk Book and frequently writes for Spot Delivery . For information , visit www . counselorlibrary . com . © CounselorLibrary . com 2016 , all rights reserved . Single publication rights only , to the Association . ( 3 / 17 ). HC # 4817-2570-4260