Monday, November 23, 2009
C.A. Tosses Suit Over Late Fees on Installment Contracts
By STEVEN M. ELLIS, Staff Writer
This district’s Court of Appeal has ruled that Ford Motor Credit Company did not violate state law when it applied a customer’s payment under an installment sales contract to an earlier missed payment rather than the current month’s installment, triggering successive late fees.
Div. Three ruled Thursday that Robert Davis could not maintain a claim under California’s Unfair Competition Law because Ford’s billing practice did not violate state law prohibiting retailers from charging more than one late fee per delinquent installment.
Writing for the court, Presiding Justice Joan D. Klein also said that Davis could not show that Ford’s practice was “unfair” under the UCL because he reasonably could have avoided injury by making monthly payments on time as required under the contract.
Davis filed suit in 2006 alleging that Ford’s practice of applying “regular on-time installment payments against past due installments to trigger multiple late charges where there was only one late payment” was actionable under the UCL and the Consumer Legal Remedies Act as a violation of the Rees-Levering Motor Vehicle Sales and Finance Act.
The latter act allows retailers to impose a delinquency charge for late payments, but only once for any installment regardless of how long the installment remains in default.
Ford demurred, citing a contractual provision allowing application of payments to amounts owed “in any order we choose,” and Los Angeles Superior Court Judge Carolyn B. Kuhl ruled that the Rees-Levering Act did not preclude Ford’s conduct.
Davis appealed, but Klein agreed that Davis failed to show a violation that was actionable under the UCL, using as an example a hypothetical payment in April applied to cover a missed payment in March triggering two late fees.
“Under those circumstances, the consumer has not been charged more than one late fee for the missed March payment,” she said. “Rather, the first late fee is for the payment missed in March, and the second late fee represents the payment missed in April.”
Klein also opined that Davis could not show Ford’s billing practice was an unfair business practice within the meaning of the UCL given the Court of Appeal’s 2006 decision in Camacho v. Automobile Club of Southern California 142 Cal.App.4th 1394 tying the definition of “unfair” to Sec. 5 of the Federal Trade Commission Act.
Under the federal act, factors which define unfairness are a substantial consumer injury which is not outweighed by any countervailing benefits to consumers or competition, and which the consumer could not reasonably have avoided.
“Simply stated, Davis could have avoided the imposition of successive late fees for successive months by making his monthly payments timely, or within the 10-day grace period, in accordance with his obligations under the contract,” Klein wrote.
The justice also upheld Kuhl’s ruling denying Ford’s request for almost $30,000 in attorney fees.
The Rees-Levering Act allows attorney fees for “the prevailing party in any action on a contract or purchase order subject to the provisions of this chapter regardless of whether the action is instituted by the seller, holder or buyer.”
However, Klein said Ford could not recover “because the alleged Rees-Levering violation was merely a predicate to the UCL claims, and a prevailing defendant cannot recover attorney fees under the UCL.”
Justices H. Walter Croskey and Patti S. Kitching joined Klein in her opinion.
The case is Davis v. Ford Motor Credit Company, 09 S.O.S. 6593.
Copyright 2009, Metropolitan News Company