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U.S. Supreme Court limits damages in suits tied to car loans

November 23, 2010

Car buyers can get only limited damages when they are misled about automobile loans, Supreme Court justices ruled 8-1 on Nov. 30.

A Virginia man's suit alleged that he was a victim of unscrupulous tactics by a car dealership in Alexandria, Va. A jury had ordered Koons Buick Pontiac GMC Inc. to pay Bradley Nigh more than $24,000 in damages, but the high court said that he was entitled to no more than $1,000 under the federal Truth in Lending Act. A ruling the other way could have opened the door to more than $1 billion in annual damages nationwide, auto dealers and banks said. On the other side, consumer groups had maintained that $1,000 is not enough to deter shady dealers. About 45 million cars are bought and sold in the United States each year.

Justices used Nigh's case to clarify the 1968 federal lending act, which was intended to force details of loans into the open and enable consumers to better evaluate the cost of credit.

Justice Ruth Bader Ginsburg, author of the opinion, said from the bench that "less-than-meticulous drafting" of an amendment to the law caused confusion. She said interpreting the statute to allow larger damages would lead to an absurd result because it would cap damages at $2,000 for larger credit deals such as mortgages, but allow unlimited damages for car loans.

"There is scant indication Congress meant to change the well-established meaning," she wrote.

In the only dissenting opinion, Justice Antonin Scalia argued it wasn't the court's role to fix Congress' mistakes in sloppily writing the statute.

"The court should not fight the current structure of the statute merely to vindicate the suspicion that Congress actually made-but neglected to explain clearly-a different policy decision," Scalia wrote.
Nigh's experience began when the then-22-year-old put money down on a 1997 Chevrolet Blazer, signed a sales contract and drove it home the same day. Nigh was told later he must put down an additional $2,000 to get a loan.

Nigh tried to back out when the dealer called him back a third time and, Nigh claimed, threatened to have him arrested for auto theft if he did not sign a different contract.