United Auto Credit Corp. Hit with Class Action Lawsuit Over Alleged Military Lending Act Violations

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United Car Sales Company, LLC has been named in a proposed class action that alleges the sub-prime lending corporation has failed to fulfill its obligations under the federal Military Lending Act before offering auto financing to members of the United States Military. 

The 19-page lawsuit explains that the Military Lending Act aims to protect servicemembers from predatory lending and unfair or abusive loan or credit sale transactions. Among other protections, the law mandates that creditors must provide potential military borrowers certain disclosures related to credit costs, including a statement on the Military Annual Percentage Rate—capped at 36 percent—and a clear rundown of payment obligations. Moreover, the law prohibits creditors such as the defendant, which does business as United Auto Credit Corporation, from requiring military borrowers, including those who’ve received auto loans, to submit to arbitration and waive legal rights to punitive damages. 

Further, creditors are required as a liability measure under the Military Lending Act to determine whether a potential borrower is considered a “covered borrower,” either through cross-referencing the Department of Defense’s MLA database or a consumer report from a nationwide credit reporting agency. The lawsuit alleges that despite this mandate, United Auto Credit Corporation has systematically failed to have in place policies and procedures to determine whether a potential borrower is subject to Military Lending Act protections, failing to make “even the most basic inquiry” as to whether an individual might be subject to the law during the loan application process.

More specifically, the plaintiff alleges United Auto Credit Corporation’s standard form retail purchase agreements and retail installment contracts require military personnel to submit to arbitration and waive certain damage rights. The defendant’s agreements and installment contracts further violate the law in that they fail to accurately disclose credit financing costs while misstating the Military Annual Percentage rate and interest rates for borrowers, the suit alleges.

According to the case, the plaintiff visited an auto dealer near where he’s stationed in Virginia and signed a standard United Auto Credit Corporation installment contract in order to receive financing in the amount of $14,698.24. The plaintiff alleges the company failed to properly categorize the costs that should be included in the Military Annual Percentage rate and instead lumped such into “amount financed.” Additionally, the defendant allegedly included a paragraph labeled “Arbitration Provision” into the contract as a means of handling any disputes that may arise.

“Upon information and belief, United has entered into thousands of installment contracts financing credit-related costs identical to Plaintiff’s Retail Installment Contract, which also include unlawful mandatory arbitration provisions and limitations on damages,” the lawsuit claims.