Finance Charge Provisions of Kentucky's Motor Vehicle Retail Installment Sales Act are Back

On March 7th we alerted you to a controversial ruling by Franklin Circuit Judge Phillip J. Shepherd which declared the Kentucky Motor Vehicle Retail Installment Sales Act unconstitutional. Americredit Financial Services v. Tillman, No. 07-CI-196 (March 4, 2008). The ruling held that KRS 190.110, which imposes limitations on finance charges for motor vehicle retail installment sales, is too complicated for "people upon whom it is designed to operate or whom it affects [to] understand." Thus, the Court struck the statute as "void for vagueness," leaving lenders and finance companies in a quandary as to what limitations apply in its stead.

On the morning of March 19, Judge Shepherd heard a motion for reconsideration of his order and advised the parties and amici that he would consider the briefs and take the motion under advisement. On April 1st, perhaps with an eyebrow raised in amused acknowledgement of the date, Judge Shepherd signed an order granting default judgment to Americredit Financial Services and, more importantly, setting aside the dubious declaration of unconstitutionality and reviving the venerable statute. Also restored is the certainty with which purchasers of Kentucky automobile paper may again do business in the Commonwealth.