June 15, 2021

Auto lender favored in Military Lending Act case

A U.S. district judge in Virginia sided with a subprime lender regarding a punitive class-action lawsuit that alleged it failed to comply with the Military Lending Act.

The case could have broader implications for the automotive finance space by deterring similar litigation, according to an attorney who specializes in automotive and personal property finance. Marci Kawski, partner at Husch Blackwell, said the decision is a victory for dealerships and auto finance companies.

“It’s a well-reasoned decision by a well-respected judge,” Kawski said. “This kind of transaction is not subject to the MLA, and this decision confirms that.”

Jerry Davidson, an active military member, brought a class action against United Auto Credit on the grounds it ran afoul of the act when Davidson financed a used GMC Acadia in 2018.

In the initial complaint, filed in April 2020, Davidson said the lender failed to provide proper MLA disclosures and credit-related costs at the time of origination, among other issues. Davidson was seeking statutory damages of $500 per violation for himself and affected class members, actual and punitive damages pursuant to the act.

United Auto’s motion to dismiss the lawsuit was granted May 19 by District Judge Leonie Brinkema on the grounds that based on the plain language of the act, the ancillary costs financed within the car deal were exempt.

“None of the three charges at issue in this action provide additional financing that is unrelated to the purchase of the motor vehicle; rather, they are inextricably tied to plaintiff’s purchase of the vehicle,” the judge said in court filings.

An appeal could be filed by June 18.