WASHINGTON – Car buyers beware, the Supreme Court said Tuesday that people who are misled about auto loans cannot use a federal law to receive significant damages.
When Congress passed the Truth in Lending Act 36 years ago, it decided to let consumers sue dishonest lenders for damages of $100 to $1,000.
The law has been revised several times since then, but the Supreme Court ruled 8-1 that the damage caps remain.
About 45 million cars are bought and sold in the United States each year. Many are financed through a bank or other lender.
Tuesday’s ruling also applies to other financed purchases, such as appliances and furniture, but not to homes.
The loser was Bradley Nigh, who alleged he was a victim of unscrupulous tactics by a Virginia car dealer when he tried to buy a used car four years ago.
A jury ordered the dealer, formerly known as Koons Buick Pontiac GMC Inc., to pay Nigh more than $24,000 in damages. The high court said, however, that he was entitled to no more than $1,000 under the federal law.
“The lesson for consumers is you’ve got to be careful,” said Richard Rubin of Santa Fe, N.M., attorney for groups such as the National Association of Consumer Advocates. “Car dealers and other creditors who are stealing money from people are going to continue to steal because it’s profitable.”
A ruling the other way could have led to claims for more than $1 billion in damages nationwide each year, auto dealers and banks said, with buyers having to pay higher interest rates as a result.