AUTO LEASE EXTENSIONS AND INACCURATE CREDIT REPORTS
There are a number of credit reporting issues that can come out of auto leases including erroneous accounting information and inaccurate late payment data. However, the most problematic one that we have seen arises out of lease term extensions. Consumers that don’t want to bother with the hassle of lease turn in and getting a new car, frequently ask to extend their leases. Lessors are more than happy to extend, but only for a maximum of five months.
AUTO LEASE EXTENSION ACCOUNTING GETS COMPLICATED
The one thing that most consumers do not appreciate is that an auto leasing company can extend an auto lease for up to six months without new financial disclosures, but if it goes beyond that, the Consumer Leasing Act mandates all new disclosures. As a result, auto leases are generally only extended for five months (or less) so that they do not violate the statute. The other thing that consumers do not appreciate is that the accounting for lease extensions gets complicated since the original depreciation and finance costs have been satisfied and the new ones after the original lease term are significantly different. Thus, if the consumer wants to purchase the vehicle after four or five additional months, the purchase price has to drop from the original disclosure of the residual value (amount to purchase at the end of the lease). Beyond the lease end accounting issues, a far bigger problem occurs if the consumer does not return the vehicle after the end of the extension period. Even if you keep making the monthly lease payment and they accept them, what is going to happen next is nothing short of catastrophic.
END OF AUTO LEASE PROBLEMS:
We have had a couple of clients fall into that trap and it was shocking how the lessor handled it. Rather than demand the return of the vehicle and charge some additional fee for the late return, the lessor claimed that the consumer owed for the entire vehicle (like they bought it at the end of the lease term) and immediately charged the full value of the vehicle off as a bad debt. No demand, no notice, no chance to resolve: proceed immediately to charge off. The lessor then repossessed the vehicle. So, at that point the lessor had its vehicle back and still claimed that the consumer owed it the full value of the vehicle and defaulted on that obligation. Even after they finally sold the vehicle at auction, the lessor still reported that these consumers owed the full balance. These consumers called and spoke to anyone and everyone and the lessor to explain how crazy this was, but the lessor refused to correct the credit reporting. At that point they could either live with a massive charge-off and bad debt on their credit report or seek legal assistance.
STOPPING INACCURATE CREDIT REPORTING FOR AN AUTO LEASE
Once the consumer hired us, it still took a while to get the inaccurate credit report changed to reflect the proper credit reporting, but we helped the consumer by filing suit against the lessor and the credit reporting agencies for not correcting what was obviously inaccurate trade line data. On its face, these situations seem like an obvious error. After all, how could a lessor claim that a consumer owed an additional balance for a car that they never owned and purchased and that the lessor had taken back? BCPC was able to correct the inaccurate credit reporting and obtain a solution to the problem that was very welcomed by our client. So, the moral of the story is if you decide to extend a lease for a few months, make sure that you bring it back on time and do not risk this sort of credit reporting nightmare. If you have already fallen into this trap and the lessor has destroyed your credit, the only solution is to hire an experienced Fair Credit Reporting Act lawyer.
If you have an error on your credit report and need legal help getting it corrected contact the Virginia Credit report error lawyers at Blankingship & Christiano, P.C. (571) 207-8331 or fill out our contact form to discuss your case.