Suit Targets Nissan’s Repossession Practice
Nissan Motor Co.’s financing arm is engaged in an elaborate scheme in which it makes auto loans to low-income buyers knowing it will repossess many of the cars and leave buyers stuck with huge bills in the process, a lawsuit alleges.
The suit against Torrance-based Nissan Motor Acceptance Corp. also alleges that Nissan dealers benefit by buying the repossessed cars on the cheap at auctions, and then reselling them. These auctions are supposed to be open to the public under California law, according to the suit, but have been closed to all but Nissan dealers.
The suit, which seeks class-action status, was filed last week in Los Angeles County Superior Court.
Lawyers bringing the suit say the case is a window into the shadowy world of auto repossession. When cars are seized for nonpayment of loans, borrowers not only lose their cars and suffer damage to their credit ratings, they also are often held liable for “deficiencies” that reflect the depreciation of the car’s value. That can leave the borrower saddled with thousands of dollars in additional payments.
The plaintiff in the Nissan lawsuit, Sonia Barrera, claims that’s what happened to her.
The Los Angeles resident’s 2002 Nissan Sentra was repossessed less than a year after she purchased it, the suit says.
Shortly after her car was resold at auction, Barrera was told she still owed Nissan $12,787 -- the difference between the car’s $19,120 purchase price and the approximately $6,400 that Nissan Motor Acceptance received when the car was sold at auction.
“Sonia Barrera has a $13,000 bill for a car she no longer has,” Los Angeles lawyer Henry I. Bushkin said of his client. Even “if she could pay this, it would take her the rest of her life.”
Barrera’s attorneys say her case is more than an isolated dispute between a car buyer and an auto lender.
Nissan makes loans to buyers with poor credit “to increase sales and profits for itself, shareholders and dealers through an unfair, commercially unreasonable and fraudulent repossession and sales scheme,” the suit alleges.
Nissan was aware of the suit but hadn’t seen it, spokesman Kyle Bazemore said. “We are confident that we have complied with all codes and acts,” he said. “We believe this is a frivolous suit.”
California law requires that repossessed cars be sold at public auction to increase the number of bidders and, presumably, boost resale prices.
Many other states have similar requirements, said Jack Tracey, executive director of the National Auto Finance Assn. in Pittsburgh.
A higher resale price can reduce the amount of debt the original owner is stuck with because it can lower the deficiency judgment, which usually equals the original loan amount plus repossession costs, minus the consumer’s payments and the value recovered at auction.
Nissan excludes the public from these sales to “favor its dealers with opportunities to purchase quality used Nissan cars well under market value and to create ‘sham’ deficiencies,” Barrera’s suit alleges.
Bushkin said he believed that at least 8,000 California borrowers -- many of them low-income and Latino like Barrera -- are facing artificially inflated deficiency payments as the result of Nissan’s alleged practice.
Although Barrera is the only plaintiff in the case, her attorneys are asking that her lawsuit be given class-action status, allowing other Californians with similar complaints against Nissan to join.
The suit is seeking damages of $500 per incident, plus the elimination of the deficiency judgments against Barrera and other potential plaintiffs, and unspecified punitive damages.
Nissan Motor Acceptance recently settled a Tennessee lawsuit that alleged that the company charged huge markups -- additional fees paid by customers to qualify for loans -- to minority borrowers.
As part of that settlement, Nissan plans to offer no-markup loans based on good credit to African American and Latino borrowers.
Barrera’s suit doesn’t address the loan markup issue. However, her attorneys note that she was charged more than $19,000 for a car with a sticker price of $14,000.
The attorneys said that if her lawsuit is given class-action status, they would request information about the ethnic makeup of Nissan’s borrowers and potentially revise the suit to add discrimination claims.
