Compliance issues can spell big trouble for BHPH dealers, as Yates Brothers Motor Company in Fort Worth, Texas learned the hard way. Recently, the dealership lost an appeal, and the lawsuit in favor of a former customer still stands. Other BHPH dealerships across the US should take note, as this ruling could affect them in the future.
The problem started with a repossession. It’s a normal procedure in the BHPH industry, right? However, Yates Brothers Motor Company’s compliance issues during the process led them to a court battle that the dealership ultimately lost. A customer, Donna Watson, purchased a vehicle from Yates Brothers, and was informed that she was required to keep the vehicle insured. In April 2018, Yates Brothers claimed that Ms. Watson did not do so, and repossessed the vehicle. However, Ms. Johnson afterward provided proof that she did have insurance. Nonetheless, Yates Brothers demanded a $500 repossession charge and, when it was not paid, sold the vehicle to another customer.
It didn’t end there. In the lawsuit and trial that followed, it was also revealed that Yates Brothers failed to adequately record its procedures and accurately assess the situation as a whole. When the court was informed of the proof of insurance that had been provided, the dealership tried to claim a second, previously unmentioned reason for the repossession. It also came to light that the dealership had used a tow truck its employee had access to rather than using appropriate repossession procedures. Then, of course, there was the charge of $500 that the customer had already proved the dealer was not entitled to.
All of this added up to one big mess of compliance issues and the court, as a result, ruled against Yates Brothers Motor Company. Donna Watson was awarded $3,000 in actual damages, roughly $8,500 in other damages, and $87,000 to cover her attorney fees. The grand total was nearly $100,000. While that might not be enough to fully break the bank for many BHPH dealerships, it would certainly hurt, and, in the case of Yates Brothers Motor Company vs Watson, it could have been completely avoided.
This should serve as a warning to other BHPH dealerships. Compliance issues could lead to serious legal problems, especially now that BHPH customers have a precedent that might encourage legal action. It is vital that BHPH dealers understand compliance and ensure that there are no compliance issues in their operations. Otherwise, as Yates Brothers learned too late, a lawsuit could be eminent.
Sources: Case Law