Lithia Motors Class Action Lawsuit Alleges Unlawful Kickback Scheme

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Lithia Motors Inc. and others are facing a class action lawsuit in Oregon federal court alleging the defendants failed to inform consumers that they were eligible for a lower interest rate and that the company misrepresented the actual amount paid to third parties.

These alleged misrepresentations caused consumers to pay higher, marked-up amounts for their service contracts, the Lithia class action lawsuit claims.

The other defendants named in the Lithia Motors class action lawsuit include Lithia Financial Corporation, Salem-V LLC d/b/a Volkswagen of Salem and Lithia Medford Hon Inc. According to the Lithia Motors class action lawsuit, the entities operate as one single business enterprise.

“Defendants prey on consumers by failing to disclose and in fact misrepresenting the large profits they make when arranging financing and providing products from third parties,” the Lithia Motors class action lawsuit states. “They grossly overstate amounts paid to third parties, when the truth is they make an under-the-table profit. Kickbacks and skimmed fees plague each putative class member’s transaction.”

Plaintiffs Dawn Caveye and Gina and Dana Dalton bring claims on behalf of two groups: claims involving yield spread premiums and claims involving payments to third parties.

The yield spread premium claims involve allegations that the Lithia Motors defendants failed to disclose to consumers that they qualified for a lower interest rate. As a result, the consumers paid a higher, marked-up rate.

According to the Lithia Motors class action lawsuit, consumers who paid this higher interest rate suffered damages in the amount of the yield spread, or the difference between the higher interest rate offered by Lithia and the lower interest rate offered by the lender. The Lithia defendants reportedly received a kickback from the bank from these mark-ups.

The claims involving payments to third parties involve allegations that the Lithia defendants misrepresented the actual amount paid to a third party, and resulted in consumers paying higher, marked-up amounts for service contracts. The Lithia Motors class action lawsuit alleges the defendants pay a “bank fee” of more than $100 to the bank and receive a kickback from the transaction. Under Oregon law, these payments must be disclosed, the plaintiffs allege.

By filing the Lithia Motors class action lawsuit, the plaintiffs seek to represent a Class of consumers who (a) made a payment to a Lithia Motors entity pursuant to a Retail Installment Contract in which a Lithia entity received a kickback from a third party financing institution and/or (b) made a payment to a Lithia entity pursuant to a Retail Installment Contract in which a Lithia entity sold a service contract or made a payment of more than $100 to a third party and failed to itemize the payments to the third party.

The Lithia Motors class action lawsuit asserts violations of the Truth in Lending Act and the Oregon Unlawful Trade Practices Act. The plaintiffs are seeking actual damages, statutory damages, punitive damages, disgorgement of profits, injunctive relief, pre- and post-judgment interest, attorneys’ fees and costs, and any other relief deemed proper by the court.

The plaintiffs are represented by Bonner C. Walsh of Walsh LLC, Jack E. McGehee of McGehee Chang Barnes Landgraf and Young Walgenkim of Hanson & Walgenkim LLC.

The Lithia Motors Kickback Scheme Class Action Lawsuit is Dawn Caveye, et al. v. Lithia Motors Inc., et al., Case No. 6:17-cv-00674, in the U.S. District Court for the District of Oregon, Eugene Division.