Gonzalez v. North Hudson Dodge, Inc.

A-1242-97T1 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: January 29, 1999

CONSUMER FRAUD ACT; RETAIL INSTALLMENT SALES; ASSIGNEE LIABILITY—Under the Retail Installment Sales Act, an assignee of consumer financing may be liable for its assignor’s failure to make proper financing disclosures.

A buyer bought a car from a dealer believing that with a discount, a trade in, a manufacturer’s rebate, and a down payment, he would be required to finance only $6,000 over two years. When he picked up the car, he signed a number of documents but later claimed that the salesperson never explained the documents he signed. A few days later, he received two envelopes, one containing a copy of the retail installment contract and the other containing a payment book. The payment book called for monthly payments over five years. The interest rate was far above the advertised interest rate. The buyer admitted that he signed the Retail Installment Contract, but denied that he received a copy from the salesperson when he signed it. The Federal Truth-in-Lending Act requires that a creditor disclose certain financial information before credit is extended. There was no question that the dealer did not comply with this law. The buyer sued both the dealer and the financing company. The lower court found the financing company liable, but the Appellate Division held that federal law makes a distinction between creditor liability and assignee liability for a violation of its provisions. Under regulations promulgated pursuant to the Act, the financing company is treated as an assignee even if the obligation, by its terms, is simultaneously assigned to it. Because the obligation was initially payable on its face to the dealer, the dealer, under federal law, was treated as the only creditor in a transaction. Consequently, under federal law, the finance company was relieved of the liability.

On the other hand, the New Jersey Retail Installment Sales Act also requires that a copy of the retail installment contract be furnished by a retail seller to a retail buyer at the time the buyer signs the contract. Such a contract is also designated as a “consumer note” under the New Jersey Act, and any subsequent holder of a consumer note is subject to all claims and defenses of a retail buyer against the retail seller arising out of the transaction. Thus, the Court held that whatever claim the retail buyer had against the dealer could be asserted against the finance company as a subsequent holder of the consumer note pursuant to New Jersey law.