Houston Independent Automobile Dealers Association August Issue: Increasing Sales | Page 13

particular geographic location. The June report focuses on complaints related to vehicle financing and leases, installment loans, title loans, and pawn loans, and highlights complaints from consumers residing in Arkansas. The FTC Ups the Ante. The FTC announced on June 29 that it has approved final amendments to its rules that adjust the maximum civil penalty dollar amounts for violations of specific laws the FTC enforces, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The Act directs agencies to implement a “catch-up” inflation adjustment based on a prescribed formula. The maximum civil penalty amount, effective August 1, has increased from $16,000 to $40,000 for a number of violations. Case of the Month Security In terest Perfected More than 30 Days after Debtor Took Possession of Car and within 90 Days of Debtor's Bankruptcy Filing Avoided as Preferential Transfer: An individual and his company bought a car on December 29, 2014. The individual applied for a certificate of title on January 30, and the title, listing the lienholder, was issued on February 17. The individual and his wife filed a Chapter 7 bankruptcy petition on April 16, and the Chapter 7 trustee filed an adversary proceeding seeking to avoid the lien as a preferential transfer. The federal bankruptcy court granted judgment for the trustee. The court noted that the only element at issue in the case was whether the transfer of a security interest in the car was for or on account of an antecedent debt owed by the individual before the transfer was made. Section 547(e)(2)(A) of the Bankruptcy Code provides that if a transfer is perfected more than 30 days after the transfer takes effect between the transferor and the transferee, the transfer is deemed made at the time the transfer is perfected. The court found that the transfer was not perfected within 30 days of the date the individual signed the retail installment contract and took possession of the car and, therefore, the transfer of the security interest was on account of an antecedent debt. Finally, the court rejected the lienholder's argument that the "new value" defense applied. That defense provides an exception to the finding of a preferential transfer for a transfer that creates a security interest in property acquired by the debtor for new value if the security interest is perfected on or before 30 days after the debtor receives possession of the property. Because the security interest was perfected, at the earliest, 32 days after the individual took possession of the car, the court found that the defense did not apply. You can bet that the bank that bought the finance contract at issue in this case will be demanding that the dealer make good on the bank’s losses. See In re Resler (Reynard v. Bank of America, N.A.), 2016 Bankr. LEXIS 2187 (Bankr. D. Idaho June 3, 2016). So there’s this month’s roundup! Stay legal, and we’ll see you next month. ___ Tom ([email protected]) and Nikki ([email protected]) are partners 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. Copyright CounselorLibrary.com 2016, all rights reserved. Single publication rights only, to the Association. (7/16). HC# 4823-2513-7204.