Date:  March 20th, 2008
Sacramento, California

Greg Bastian and Robert Lucas of the Sacramento office have successfully defended a car dealer against allegations that the dealer committed fraudulent business practices that violated both the Consumer Remedies Legal Act and Automobile Sales Finance Act when the dealer assigned a retail installment sales contract to a bank at a different interest rate than set forth in the contract.

In the case, the plaintiff had purchased a used vehicle from the dealer, financing the entire purchase price. The dealer then assigned the contract to a bank at a lower interest rate with payment to the dealer on the assignment of a "dealer reserve" without informing plaintiff that the dealer was profiting from the assignment. In making the assignment, the dealer requested that the plaintiff execute a revised contract reflecting the new interest rate and rescind the old contract. The plaintiff, who became unhappy with the vehicle after the purchase, returned to the dealer and executed a document he claimed rescinded the original contract and then left the vehicle at the dealership refusing to sign the revised contract. The dealer then completed the assignment to the bank, which eventually repossessed the vehicle and sought the deficiency from the plaintiff. The plaintiff then sued the dealer on both his own behalf and on behalf of the general public arguing that the contract was rescinded, he had no obligation to revise his original contract, and that the dealer's actions in assigning the contract to the bank after rescission and obtaining payment in the form of an undisclosed dealer reserve constituted fraud and violations of both the Consumer Legal Remedies Act and the Automobile Sales Finance Act. The court disagreed, finding that the dealer had not engaged in a fraudulent business practice, was under no obligation to disclose the dealer reserve, and the original contract had not been rescinded.

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