A lawsuit filed against a Salt Lake used-car dealership alleges hundreds of people were ripped off by unenforceable contracts, excessive interest rates and reverse amortization on car loans.
Sione Vehikite and Kevin Shrives, both Salt Lake residents, last week filed the complaint in 3rd District Court against First Class Cars, located at 801 S. State.
The plaintiffs are asking the court to certify the complaint as a class-action suit, said Rex Huang, a Salt Lake attorney representing Vehikite and Shrives.
Specific to the allegations are that the plaintiffs and other buyers entered into financing arrangements with First Class Financial Inc., a dissolved Utah corporation. First Class Financial's registration expired in 1997, according to Christine Keyser, a spokeswoman for the Utah Department of Commerce.
"They have a two-year opportunity to renew, which they have not taken advantage of, so they can't reinstate. It's past their statutory deadline," Keyser said.
Keyser added that First Class Cars is a registered Utah corporation.
Yet because First Class Financial was a dissolved corporation at the time contracts were entered, Huang said, the contracts are void.
"As a result of entering into void contracts, plaintiffs are not required to pay the exorbitant interest rates charged to them and should have the option of either returning their vehicles, getting refunds or amounts paid less mileage or obtaining refunds of excessive interest paid on these void contracts," the suit said.
But Franklin Brussow, a Salt Lake attorney representing First Class Cars, said the dealership's contract clearly displays the creditor's name as "First Class Cars."
"What that lawsuit is trying to do is nitpick a breach of contract by these two people," Brussow said. "These people would be taking the bus if it wasn't for used-car dealers like these that will take a chance and sell these people an automobile. But you get a couple of people that breach a contract like these folks, and then they start screaming bloody murder of how they have been taken advantage of."
Brussow added Utah code does not contain any usury statutes, so the action over high interest rate loans is irrelevant.
And, he said, the class action request is nothing more than a ploy by the plaintiffs' attorney to get rich.
"He's trying to make a federal case out of this thing so he can put some money in his pocket," Brussow said. "Nobody screams bloody murder about that attorney making 30 percent to 50 percent contingency fees, because he is willing to take the risk, but here's a guy (First Class Cars) that finances people that nobody else will finance. Right away he's the bad guy."
Huang counters that he defended Vehikite and Shrives in a previous case brought by First Class Cars in which he captured little in fees.
"Vehikite paid me nothing in attorney's fees. I didn't charge him at all to defend in that case," Huang said. "I do this because what they do is horrible. I definitely don't do this to get rich.
"Frankly, I doubt First Class Cars has much money to pay a potential judgment. This is definitely not a case that is going to make any of these people rich or the attorneys. It's just helping some of the most disadvantaged and vulnerable people that have been abused by First Class in the judicial system."
In the suit, Vehikite alleges that in November 2001 he paid $1,000 as a down payment and signed a purchase contract at a 24.9 percent annual percentage rate through First Class Financial.
After driving the vehicle around the block, he didn't like the noise that the engine was making and returned the vehicle, according to court documents. The dealership told him that his deposit had already been taken to the bank and that he "was stuck with the truck and could not return it."
The vehicle was left at the dealership, and First Class Cars then sold the truck to another purchaser for $100 less than Vehikite's purchased price.
Shortly thereafter, First Class Cars turned Vehikite over to Knight Adjustment Bureau, a collection agency that subsequently filed suit against Vehikite for nearly $2,000 — the deficiency on the sale of the truck based upon the contract plus "storage" and "reconditioning" fees.
Jodi Monaco, a spokeswoman for the Utah Motor Vehicle Enforcement Division, said the issue is a civil matter and that the agency has not filed any charges against First Class Cars.
"Of course we're concerned any time a car dealership is doing business with the public," Monaco said. "We want to make sure they are doing business in a legal manner."
Eva Rees, supervisor of consumer credit and compliance for the Utah Department of Financial Institutions, said First Class Cars has not filed a consumer credit notification form, something required of those who lend money or collect consumer debts.
"We can tell them to stop lending," Rees said, "but we don't have any other enforcement power."
E-mail: danderton@desnews.com