Capital One sues Missouri dealership for misrepresenting consumer payments, vehicle features

A Missouri dealership repeatedly made major misrepresentations about cash down payments, sales taxes and vehicle features, according to a federal lawsuit filed by Capital One Auto Finance, which bought dozens of loans on such vehicles.

Capital One's suit, filed Dec. 21, accuses Coad Toyota, in Cape Girardeau, of fraud, negligent misrepresentation, breach of a dealer agreement and other claims in connection with financing of "at least 34" vehicles. It seeks $619,690 in compensatory damages, plus an unspecified amount of punitive damages.

Capital One "was damaged because it was induced into purchasing receivables it otherwise would not have purchased at all, or would not have purchased under the current terms" and "was further damaged because the vehicles, which are collateral for the receivables, are worth far less than what the dealership represented," the lender said in the suit.

The dealership had not yet filed a formal answer to the court complaint but in a statement to Automotive News, Tim Coad, an officer of the corporation, said, "This unfortunate matter was just recently brought to our attention. Absolutely none of the loans assumed by Capital One are or ever have been in jeopardy. Most importantly, we would like to assure everyone that at no time were customers ever adversely affected in any way."

Coad's statement continued, "We are working together with Capital One representatives to see that this matter is resolved expeditiously. We are confident this matter will be resolved quickly, and our good relations with Capital One will continue in the future."

In the suit, Capital One said Coad Toyota refused its demand to repurchase the receivables.

In all 34 instances, the dealership told Capital One that borrowers made cash down payments, even if they hadn't, or understated the amount of their cash down payment, the suit alleges. For example, the store told Capital One that the borrowers in one transaction put down $4,500 in cash when in reality they made only a $500 down payment.

It also alleges that the dealership vastly overstated the amount of sales tax included in the amount financed. In the most egregious differential listed in the complaint, Coad Toyota reported that the sale included $9,000 in sales tax but the Missouri Revenue Department estimated the correct amount at only $1,572.

Missouri sales tax was listed on some transactions in which out-of-state purchasers directly paid sales taxes out of their own pockets to their home states, the suit claimed.

Seven of the cited transactions involved power booking that the suit described as "a dealership's practice of misrepresenting the features and options described in a receivable to inflate the purported value of the vehicle and manipulate the risk analysis that a lender performs."

In one transaction, the store allegedly misrepresented that a vehicle had an Alpine stereo system, power sunroof and navigation system. Other questioned transactions involved alleged misrepresentations about towing/camper packages, fixed running boards, stereo systems, power seats and other options.

The complaint did not identify the vehicles, borrowers or dates of the transactions.

Capital One lawyer Joel Christensen, of St. Louis, declined to comment on the case. A Capital One spokeswoman did not respond to questions from Automotive News about the time frame of the transactions, how the lender discovered the alleged problems and whether it is still buying receivables from Coad Toyota.