I recently took a LOT of heat from internet legal experts of lease hacker when I said it’s perfectly acceptable to backdate a contract (under certain circumstances)
To clarify the issue it 1) is perfectly legal and 2) not that uncommon. EDIT: Just because a dealer wants to back date a contract doesn’t mean they’re being dishonest. But if the terms don’t match up correctly it IS illegal
This will probably get deleted but I felt since the issue specifically involved lease contracts it was worth clarifying
" Despite common belief, backdating documents is not necessarily illegal. In fact, it has been permitted for so long that there is a Latin phrase, nunc pro tunc, describing backdated documents."
That is pretty general and states both cases where it can be legal and illegal. A quick google search of “is backdating a car lease illegal” turns up pretty concrete answers.
That’s a really interesting case actually for several reasons. The problem wasn’t with the backdating per se, it was with the incorrect apr listed in the contract caused by the new term period. The apr must be within 0.125 of what is listed or it runs afoul of truth in lending laws. Also, the dealership incorrectly added insurance into the sales price which was then taxed and paid at an apr of 21% on the sales tax. The total damages was $27 over the life of the 5 year 21% car loan but some hungry lawyers turned it into a class action. In any of the cases where back dating caused a legal problem it was because of a changed apr (due to contact length). So dealerships have to make sure the apr matches up and that they don’t tax things that shouldn’t be taxed when they’re being financed.
But moral of the story is backdating isn’t of itself illegal. As long as the terms match up…
That’s not my understanding of what I read. It was illegal because the customer had to pay interest from the backdated date. No lease contracts that I know of have 0% interest, so backdating a leasing contract appears to be illegal.
That hole is why I wouldn’t lease another Ford: their service department (really the whole place) is a dumpster fire of mismanagement. I couldn’t be less surprised that the only place they are popular is in the Plaintiff database column of Lexis-Nexus and Westlaw.
Agree with what you’re saying. Really interesting and as usual only the lawyers won (class got $50 each, total 75k divided among 1500 people, lawyers got 400k). But I had a zero percent car loan and in that instance it would have been OK. My current lease apr is about 0.1% (1/10th of a percent) so would still work on that lease. Interestingly, 15% of surveyed car dealers admitted to the backdating contracts. Did they find a way to get the apr to match up within 0.125? When the apr is down around 1 or 2% this is probably pretty easy. This guy had a car loan of 21% and insurance incorrectly added in and it still barely crossed the threshold.
Thanks for the article, found it really interesting
Edit: my napkin math shows on a 2% apr lease agreement you have about 3 weeks of backdating before you increase the apr to 2.125% on a 1 year lease. 3 year lease should give you more time but it’s too late for me to calculate that. Obviously that wiggle room is dramatically lowered as the apr goes up
First, The Truth in Lending Act is a floor for consumer lending protection not a ceiling. State laws differ on whether they provide other protections. Also different state/Federal Courts have varying views on backdating.
This case from E.D Va shows the court taking a very dim view of backdating although the APR change was more than .125%.
The Court ruled in plaintiffs favor without reaching a decision on VA consumer protection claim - claimant retained right to bring that claim in state court.
So yeah, maybe backdating contracts is ok sometimes depending on a complex set of circumstances (state law, APR, how buyer was informed of issue, when buyer was informed if issue) But it’s not a best practice and no large dealership group teaches their finance people to do it.
Holy cow did you see that case? 23% apr then they back dated the contract and changed the apr to 25% with a new lender on a 5 year note!! Wow hard to believe people let themselves get into such awful deals.
I agree back dating is not good policy (in most situations) but what I was blasted for was saying 1) it’s not necessarily illegal and 2) it’s not uncommon. They were very sure of themselves and pretty insulting while passing wrong info.
In the notes to the case above (ec99) the judge actually wrote it would have remained legal if they had disclosed the new, correct apr to the buyer:
[10] Sophisticated parties can choose monthly payment rates and schedules which reflect the imposition of an agreed upon retroactive interest rate, provided the disclosed APR is calculated according to the regulations. In this case, for example, the parties could have agreed that Rucker would be charged 24.95% interest beginning on April 3. However, to protect less sophisticated parties, the disclosure form must still disclose the properly calculated APR, here the 25.35% figure.
I read that footnote has providing a clear delineation between backdating between a business and consumer and two businesses. A consumer buying a car is almost never going to be a sophisticated party. A sophisticated party is most often a represented party. The Court is telling everyone that backdating is fine for complex business dealings drafted by lawyers but does intentionally choices to not extend that ruling to consumer sales.
So yeah it’s not technically illegal but backdating is a bad idea. I bought my Honda at this dealership. The Court may consider them a sophisticated party…but I don’t. The F&I person was dumb as a brick. His ability to understand English was iffy, no chance he could carefully comply with complex state and federal law.
I think you need to re-read the thread where people chimed in to tell you that you were wrong.
At least personally, I was explaining to you that you were wrong regarding any inference that a person can be forced to re-sign a contract, your interpretation of contract provisions, and the fact that legally, cancellation and rescission are two entirely different concepts.
I never addressed anything you said about back dating contracts, but I can tell you that if a contract came across my desk that was back dated, or I had reason to believe it was back dated, it would throw off major red flags.
The other people responding with legal backgrounds in that thread (@igdigergerbs@AP919@StingerTT@28firefighter) also did not address anything relating to back dating contracts.
I never once said she could be forced to sign anything. I did say she’d be better off just signing and paying the tax than hiring an attorney to fight over $10mo. I also said if she returns the car they will charge her the rent charge stipulated in the contract.
“Under the terms of the April 3 RISC, Rucker provided a $1,000 down payment and financed $13,576.68 at 22.95% APR over 5 years.”. She was financing WAY more than the car was worth. Decision doesn’t say what trim Civic it was but new, the highest MSRP for a 1998 Civic was ~17k. Best case scenario car was worth 12-13k. Much more likely she was buying a car that sold for 13k-14k brand new and was worth under 10k.
“Internet legal experts?” Seriously? How many damn times do I need to tell you I AM A FCKING LAWYER? (Not a "fcking" lawyer, but you get the idea.) Stop posting stuff all over the forum that isn’t true.
Aside from that, the legal advice (and I use that term loosely), you are falsely PROMULGATING (using the word you didn’t know how to define the other day) incorrect legal information and it can amount to the unauthorized practice of law.
PS – Are we allowed to actually type out the full word or do I have to redact it like I did above? I’m from NY, and it’s in my language a lot.
hole is why I wouldn’t lease another Ford: their service department (really the whole place) is a dumpster fire of mismanagement. I couldn’t be less surprised that the only place they are popular is in the Plaintiff database column of Lexis-Nexus and Westlaw. 
