THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, January 24, 1995 TAG: 9501240259
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 69 lines
Used-car dealer Charlie Falk will change the way he repossesses customers' cars under a class-action settlement approved Monday by a federal judge.
Falk also will forgive $10.5 million in defaulted loans, and give some cash back to customers who say he cheated them in a massive ``churning'' scheme since 1989.
As Judge John A. MacKenzie signed the settlement in Norfolk's federal court, one customer in the audience sobbed, ``Yes! Yes! Yes!'' When the hearing ended, the woman dashed to the front of the courtroom and hugged her lawyer.
``We got what we wanted,'' said the customer, Laura Richards, one of four original plaintiffs against Falk. ``He's going to have to change the way he does business so this doesn't happen to anyone else, so the little man doesn't get knocked around.''
Another original plaintiff, Nora Chisolm, also left court happy.
``I think God answered my prayers. He's brought things out into the open that were done underhanded, the racketeering and all that,'' Chisolm said.
The customers' lead attorney, Kieron F. Quinn of Baltimore, said it is unlikely there will be another case like it in Hampton Roads or elsewhere. Such a scheme, Quinn said, requires a large-volume used-car dealer who can sell cars, make loans, repossess cars from defaulting customers, obtain court judgments against those customers, then resell the cars over and over.
``You don't run into very many Charlie Falks,'' Quinn said. ``There aren't that many massive used-car dealers around.''
Falk is the biggest used-car dealer in Hampton Roads, with 11 locations in the area. He caters mainly to people with little money and poor credit. He is best known for his TV ads in which a goat eats customers' credit reports.
About one-fourth of all Falk customers default on their loans, Falk's lawyer said in a 1993 court hearing. Falk sells more than 3,000 cars a year.
The lawsuit was filed in 1993 by four women in Norfolk and Portsmouth who bought cars from Falk, defaulted on loans, lost the cars to repossession, and were threatened with ``deficiency judgments'' in court.
A deficiency judgment is what a borrower owes after subtracting the value of the repossessed car from the defaulted loan. Lawyers said Falk put artificially low values on repossessed cars, then got artificially high deficiency judgments against customers.
Under the settlement, Falk will wipe out $10.5 million in deficiency judgments. Much of that debt was not collectible anyway - about $1 million was still on Falk's books, his lawyer said - but it is worth every penny to customers who have the debts on their credit records.
``Getting the judgments wiped out for thousands of people, that's the best part,'' Chisolm said.
Falk also agreed to give customers more notice on repossessions, and more value for cars that are repossessed. The agreement could become a model for other used-car dealers, lawyers said.
``It should end several years of disputes between Legal Aid and several dealers in the area over how cars should be appraised,'' said Falk's lead attorney, F. Whitten Peters of Washington. ``Our hope is this will substantially make life much easier for everybody.''
Falk also agreed to pay $400,000 in cash damages, but most of that will go to Quinn's law firm in Baltimore, which charges up to $250 an hour. Lawyers will get $265,000, including a small portion for Tidewater Legal Aid, which did most of the local work. Related court costs are $33,000.
Each of the four original plaintiffs will get $2,000 damages. About 1,228 customers will split the remaining $94,000, or about $76 each.
KEYWORDS: CLASS ACTION LAWSUIT SETTLEMENT CLASS ACTION SUIT by CNB