District Court Rules that Consumer’s Claims Under Georgia’s Fair Business Practices Act Relating to Sale and Finance of Automobile are Preempted

The United States District Court for the Northern District of Georgia has recently ruled that a consumer cannot maintain a claim under the Georgia Fair Business Practices Act (GFBPA) where the claim arises out of a loan transaction that is subject to state and federal regulations. In Baughman v. Truist Bank, No. 123CV03199JPBJKL, 2023 WL 6940698 (N.D. Ga. Sept. 19, 2023), plaintiff purchased a vehicle by executing a retail installment sale contract, which was later assigned to Truist Bank. The contract provided that the dealer would obtain an aftermarket warranty on the vehicle and would also provide a powertrain warranty for one month or 1000 miles from the date of purchase, whichever came first. The contract also contained the standard FTC Holder Rule notice.

At some point after purchase, plaintiff experienced transmission issues with the vehicle. She attempted to make a claim under the aftermarket warranty the dealer was under an obligation to purchase; however, her claim was denied because the dealer had not purchased the warranty. The dealer also refused to honor the powertrain warranty. Plaintiff sued Truist Bank, alleging that Truist breached the contract when it failed to refund payments already made and refused to declare the contract void and unenforceable. Plaintiff also alleged that Truist violated the GFBPA by demanding payment and not conceding liability based on the dealer’s alleged breach of contract.

However, the district court held that plaintiff could not maintain a claim under the GFBPA because all of her claims were subject to both state and federal regulations. The court noted that the GFBPA does not apply to transactions that occur in regulated areas of activity, such as loan lending and servicing. The court also opined that the GFBPA was intended to have a restricted application, and it does not apply in regulated areas of activity because regulatory agencies have the expertise to provide protection in such areas. Thus, the court held that plaintiff’s GFBPA claims were preempted by regulations addressing the alleged conduct.

The court went on to state that the Holder Rule did not save plaintiff’s claims. Even though it allows a debtor to assert any claim or defense against a holder of consumer credit that it could assert against the seller, plaintiff could not assert a GFBPA claim against the seller because the claims were also preempted by regulations addressing the conduct. The court further added that even if the GFBPA was applicable, plaintiff’s allegations failed since she did not show an essential element of the claim—that she relied to her detriment on any misrepresentation by the defendant.

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