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§3.06 Vehicle Sales—Prohibited Terms and Acts

Lesson 3:
Vehicle Repairs, Sales, & Leases

A contract subject to the Rees-Levering Sales Act may not contain any of the following terms:

  • Certain prohibited finance charges.
  • Certain penalties, e.g.:
    • A delinquency charge for a default in payment for a period of less than 10 days or in an amount exceeding 5 percent of the delinquent installment. [CC §2982(k).]
    • A penalty for prepayment in full. [CC §2982(l).] If the buyer makes prepayment in full, the seller may compute the unearned finance charge to be refunded in several ways.
  • A waiver of the buyer’s rights, e.g.:
    • An agreement by the buyer not to assert claims or defenses arising out of the sale against the seller or the seller’s assignee. [CC §2983.7(a).]
    • A waiver of the right to sue for illegal acts done in collection or repossession. [CC §2983.7(c).]
    • Relieving the seller from liability for any legal remedies the buyer may have against the seller. [CC §2983.7(e).]
  • Other prohibited terms, e.g.:
    • The inclusion of title to or a lien on property (other than the motor vehicle; any replacement of the motor vehicle; or the proceeds of the vehicle insurance, credit insurance, or service contract) unless the seller assisted the buyer in obtaining a loan on security from a third party. [CC §2984.2.]
    • An acceleration of maturity of the debt absent default by the buyer. [CC §2983.3(a).]

A seller may not do any of the following acts:

  • Obtain the buyer’s signature to a contract with blank spaces to be filled in later. [CC §2981.9.]
  • Induce a contract by offering a rebate, discount, commission, or other consideration contingent on the happening of a future event, e.g., that the buyer make or assist in making a future sale. [CC §2982.1.]
  • Charge for the extension or deferment of a scheduled payment unless the agreement for the extension or deferment is in writing and signed by the parties. The seller, however, in an effort to collect a delinquent installment, may advise the buyer orally or in writing that the due date will be extended with no charge other than any applicable late charge provided for by the contract. [CC §2982.3(a).]
  • Fail to maintain for at least seven years or the length of the contract all relevant documents such as the conditional sales contract and the documents relied on to determine the buyer’s creditworthiness. [CC §2984.5(a).]
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