Consumer Leasing Act

Violations of the Consumer Leasing Act are often apparent from the lease itself. Common violations include:

1. Unreasonable Early Termination Formula. The calculation of the amount due on termination of the lease before its termination date is determined by the early termination formula set forth in the lease. Any unreasonable charges or penalties for early termination may violate this provision. Examples include the prohibition of terminating the lease, e.g., during the first year, the addition of amounts not charged at the end of the lease, an unreasonable result as a result of applying the formula, e.g., the application of the formula during the last few months of the lease results in a disproportionately larger amount due than when applied earlier in the lease.
2. Disclosure of Warranties. The lease must state all warranties available on the vehicle, not just the warranties extended by the lessor. Thus, the failure to state the manufacturer’s warranty violates the CLA.
3. Disclosure of Interest on Security Deposits. In recent decisions, it has been held that the lease must disclose whether interest on a security deposit will be paid and to whom. Many lessors do not disclose that interest is being earned on the security deposit and retained by the lessor. These cases do not require that the lessor must pay interest earned on the security deposit to the consumer, only that the practice is disclosed.
4. Failure to Follow the Early Termination Formula. The Seventh Circuit has recently held that the failure to apply the early termination formula as stated in the lease, even though the method applied was more advantageous to the consumer, violated the CLA.
5. Failure to Disclose the Trade-In or Downpayment. Failure of the lease to set forth the trade-in and/or any moneys paid to reduce the price of the lease violates the CLA. Sometimes dealers will to state the consumer’s trade-in or down payment of the lease. The CLA is thus violated.