Koons Buick Inc. v. Nigh

Koons Buick Inc. v. Nigh

The Truth in Lending Act (TILA), passed in 1968, was designed to protect consumers from unethical lenders. It ensured that disclosures were given to consumers before they signed off on any loans, and also gave them a grace period to back out of certain types of loans. Violations of this act were punishable by statutory damages of up to $1000 per violation. However, an unclear amendment to the law made it difficult to see whether the damages might in fact have been increased by the amendment. In Koons Buick Inc. v. Nigh, the Supreme Court decided whether the intent of Congress in the TILA amendment was to increase damage caps on violations of the type suffered by a vehicle owner, Bradley Nigh.

The Vehicle Purchase

Koons Buick Inc. v. Nigh began when Nigh went onto a car lot and found a used pickup truck that he wanted to purchase. Using his old vehicle as a trade-in, Nigh signed financing paperwork with the dealership, which promised to obtain financing for the vehicle. A few days later, after Nigh had already taken the truck home, Koons Buick called back with bad news: they had been unable to finance the car at the rate offered, and wanted Nigh to come back in and sign a contract with a bigger down payment.

Initially, Nigh was angry and asked for his trade-in back, wanting to simply cancel the purchase. The dealer lied to him, using a common car dealer scam, telling Nigh that his trade-in vehicle had already been sold and that he had no choice but to sign the new contract. A few days after that, the dealer called again, telling him he would need to sign yet another contract because they couldn't find a lender for the second one. The contract included charges for nearly $1000 for an alarm system that had not been installed or requested by Nigh.

The Lawsuit and Judgment

Upset, Nigh returned the truck to the dealer and filed a lawsuit under the terms of the Truth in Lending Act. Based on an amendment to TILA, Nigh asked the trial court for damages of twice the total finance charges for the truck, a total of just over $24,000. Koons Buick argued that the TILA amendment had actually only increased damages for particular types of loans, and that car loans or other loans secured with personal property, rather than real estate, were not eligible for the increased damage limits.

The district court agreed with Nigh, and awarded him the full amount he had requested. The appeals court affirmed the trial court's decision, so when Koons Buick appealed, the case went to the Supreme Court.

The Supreme Court's Decision

Upon examination of the legislative history of the Truth in Lending Act, the Supreme Court decided that the $1000 cap on statutory damages per offense should be the cap that applied to Nigh's case. The case was remanded back to the Sixth Circuit.

The reason for this decision was that the Supreme Court saw nothing in the legislative history of the amendment to TILA that would suggest that the legislators passing it intended for it to be used for auto loans or other loans secured by personal property.