How can I rescind a lease of a car that I don't like and was leased without proper disclosures?
Although there is a common assumption made, there is no federal law giving buyers the right to cancel their new car purchase within three days of sale. Under the Federal Trade Commission's Cooling Off Rule, a consumer has until midnight of the third business day after a contract was signed to cancel either of the following:
* door-to-door sales contracts for more than $25, or
* a contract for more than $25 made anywhere other than the seller's normal place of business-for instance, at a sales presentation at a hotel or restaurant, outdoor exhibit, computer show or trade show (other than public car auctions and craft fairs).
Only these types of sales are covered.
The Consumer Leasing Act may provide some relief for you if you believe the proper disclosures were not made to you at the time you signed the lease.
You may wish to discuss the particular facts of your situation with a local attorney who is experienced in civil or consumer law.
The following is a summary of some of the relevant provisions:
Damages for disclosure and advertising violations. The Consumer Leasing Act (CLA) sets up certain disclosure requirements for consumer leases. The Act provides for relief of any disclosure violation. The relief includes:
•statutory damages, and
The same relief is available for certain advertising violations.
Other benefits of the CLA. In virtually all auto lease cases, the statutory damages are $1000. The CLA limits the consumer’s liability at early termination of the lease. There is a one-year statute of limitations but it does not begin to run until the lease terminates. Lessor’s compliance with the CLA usually is not very good. As a result, attorneys should check for CLA violations whenever the client has entered into a lease. The CLA applies to auto leases, but also to furniture and other consumer leases with a term of at least four months.
Early termination penalties. The most important use today of the CLA is to challenge excessive early termination penalties found in auto leases. The Act requires that such penalties be reasonable, and the inclusion of an unreasonable formula in the lease leads to statutory and actual damages, plus attorneys fees.
•The CLA does not apply to leases 4 months long or shorter. Rent-to-own (RTO) leases that are terminable at any time without penalty are not covered by the Act.
•The CLA does not apply to leases where the "total contractual obligation" exceeds $25,000. Real property is not covered.
•If the lease is really just a disguised credit sale, CLA does not apply, although the Truth-in-Lending Act would apply. This occurs where under the "lease", the consumer pays a sum that is substantially equivalent to the value of the property and services, and the consumer has the option to become the owner of the property at the end of the lease for "nominal" consideration.
•The CLA does not apply to leases for business purposes or any purpose other than one primarily for personal, family or household use.
•Timing and form of disclosures. Regulation M mandates disclosure of 15 different terms. They must be made prior to lease consummation on a dated written statement identifying the lessor and lessee, and a copy must be given to the lessee at that time. Illegible terms on the customer’s copy constitutes a disclosure violation. Disclosures must be clear, conspicuous and in meaningful sequence.
•Location of disclosures in relation to signature. The disclosures must be on one page only (can be both sides of one page) and above the place for the lessee’s signature. If both sides of one page are used, the consumer’s signature must appear at the bottom of the second side.
•Specific Required Disclosures. It is a violation of the CLA to omit one of the required disclosures, or to fail to meet any aspects of it. The lease must disclose:
A sufficient description of the property.
The total amount to be paid at lease consummation, identifying the purposes to which that payment is made, e.g., security deposit, trade-ins, registration fees, etc.
The schedule and amount of lease payments. This includes the number of payments, the amount of each payment, the due dates and the total of such periodic payments. The amount of each monthly payment and the total amount of the periodic payments must include all periodic payments, including those for taxes, maintenance and insurance charges.
The total amount payable during the entire lease term for official fees, registration, certificate of title, license fees or taxes. If this amount is not known, the lessor must use a good faith estimate.
Other charges not included in the periodic payments or included in the payments at consummation or elsewhere. E.g., "pick-up" charges, or a "processing" fee.
Insurance required in connection with the lease. This includes the types and amount of coverage and the cost to the consumer if provided by the lessor.
Express warranties made by the lessor or manufacturer with respect to the leased property. Typically, the lessor makes no warranties, and instead disclaims any warranties (disclaimers do not have to be disclosed). However, the manufacturer typically does make express warranties and the CLA requires their identification.
The party (usually the consumer) responsible for maintaining or servicing the property, with a brief statement of that responsibility. To the extent that the lessor imposes charges for excess wear and tear, the lessor must set out "reasonable" standards for excess wear and use. Excess mileage charges are arguably unreasonable.
Any security interest in connection with the lease, clearly identifying the collateral.
Penalties or other charges for delinquency, default or late payment, which must be "reasonable" in amount.
Whether or not the consumer has the option to purchase the leased property. If no option to purchase exists, the lease must say so. If there is an option to purchase, the disclosure must identify whether it exists at the end of the lease, or earlier, or both. If at the end, the purchase price must be disclosed. If before the end, the disclosure must identify when the option can be exercised and either the price or the method of determining the price.
The method of determining the amount of any penalty or charge for early termination and for default. The disclosed method must be "reasonable" and must be clearly disclosed. The disclosure must indicate the conditions under which the consumer can terminate early, and the method of calculating any penalty. When default triggers early termination, then default charges must be disclosed here as well. Many leases use complex formulas that require the consumer to perform numerous computations, which are very difficult to understand. Or, they may require the consumer to compute things like the initial capitalized cost, sticker price, or expected residual value, without disclosing these numbers. All these leases likely violate CLA.
Probably no disclosure requirement is as likely to be violated as the requirements of disclosure of early termination and default penalties. Many consumers would not enter into leases if they understood their liability at early termination. Actual damages may be the entire amount of the early termination penalty being sought.
The consumer’s liability, if any, at early termination or at the end of the lease, for the difference between the property’s estimated value and its realized value. Lessors frequently omit this disclosure, even though there is such liability.
The consumer's right to obtain a mutually binding appraisal of the car’s resale value, whenever the consumer's liability at early termination or at the end of the lease is based on the estimated value of the leased property.
Lastly, the effect on your credit score of cancelling or rescinding the lease would be too difficult to determine at this point. If the lessor of the vehicle reports to a credit agency that you defaulted on the agreement, it could affect your credit. You'd have to take the appriopriate steps to make notes about the particular situation on your record.