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Weitz & Luxenberg and public-interest law firm Public Justice filed a class action lawsuit alleging that a major automobile manufacturer’s lending subsidiary charges unlawfully high interest rates for car loans in New York state.
The lawsuit alleges that the lending practices of Chrysler Capital LLC victimize low-income consumers in particular.
Named a co-defendant is B&Z Auto Enterprises LLC, which does business as Eastchester Chrysler Jeep Dodge in the Bronx. The class action was filed in U.S. District Court for the Southern District of New York.
W&L alleges that Chrysler Capital, with the willing participation of Chrysler dealerships like Eastchester Chrysler Jeep Dodge, boxes low-income consumers into abusively — and illegally — structured car loans.
The annualized interest-rate ceiling in New York is 16 percent. However, the class representative plaintiff in this class action lawsuit was charged an annual interest rate of nearly 24 percent on his auto loan.
Under New York’s usury law, lenders who charge above 16 percent annual interest are required to return to borrowers any amounts paid in excess of that interest-rate cap.
Additionally, to deter such activities by lenders, the consumer’s obligation to pay off the loan balance is forgiven. He or she then owns the car, free and clear.
Suit Could Shut Down Chrysler Capital’s Usurious Practices
The plaintiff is typical of those victimized by Chrysler Capital’s unconscionable lending practices.
Last year, the Bronx, New York, resident bought a used 2011 Dodge Durango from Eastchester Chrysler Jeep Dodge at a price of approximately $26,000. A person of modest means, his only option was to buy on credit.
However, Chrysler Capital offered him unconscionable take-it-or-leave-it terms. One of those terms was a usurious annual interest rate of 23.67 percent.
At that interest rate, the true total price paid for the $26,000 vehicle would have more than doubled to nearly $55,000 by the end of the loan in 2020 were Chrysler Capital’s lending practice allowed to continue.
Adding insult to injury, the vehicle in 2020 will be worth far less than $26,000 due to typical vehicle depreciation.
“Car buyers with low incomes, poor credit, or no credit history are vulnerable in these transactions because they have so few options for auto financing,” said Robin L. Greenwald, who heads W&L’s Environmental and Consumer Protection Unit.
“And because they have few options, they essentially have no bargaining power,” she continued. “And without bargaining power, low-income borrowers have little hope of getting a fair financing deal. For the most part, these consumers are at the whim and avarice of predatory lenders.”
Lawsuit Could Impact Lending Practices Nationwide
What W&L attorney Christopher Dalbey finds particularly troubling is that Chrysler Capital knows it has vulnerable, low-income consumers over a barrel when they come into a Chrysler dealership to buy a car.
“These consumers are individuals who have a desperate need of a vehicle to get to and from work and to take care of their family,” he said.
“Knowing the fundamental importance of automobiles in these consumers’ lives, Chrysler Capital takes advantage of them by imposing interest rates that are unreasonable, unfair and illegal under New York law.”
Although Chrysler Capital in New York is the target of this lawsuit, Ms. Greenwald indicated that the company’s usurious practices are likely employed at Chrysler-brand dealerships in other states and may well be used by other automakers’ financing arms as well.
Consequently, Mr. Dalbey believes this class action could have far-reaching impact on car loan lending practices nationwide.
“If we prevail, the automobile loan industry could be compelled to change its practices such that skirting the usury laws will no longer be possible,” he said.
In addition to violation of the New York usury law, the suit alleges that the defendants engaged in deceptive acts or practices, were unjustly enriched by their wrong doing, and acted unconscionably toward consumers at the bargaining table.
W&L is interested in hearing from consumers in New York and all other states if they have been financially harmed by these kinds of unconscionable car loan contracts.
If you believe you have paid or are paying usurious interest rates on a car loan, call W&L toll-free at 800-476-6070 to schedule an appointment to discuss your legal rights against the lender.