Case: Treadway v. Gateway Chev

Case: Treadway v. Gateway Chevrolet Oldsmobile Inc.

Facts: Gateway Chevrolet Oldsmobile (GCO), acar dealership, sent an unsolicited letter to Tonja Treadwaynotifying her that she was “pre-approved” for the financing topurchase a car. Gateway did not provide financing itself; instead,it arranged loans through banks or finance companies.

Treadway called the dealer to say that she was interested inpurchasing a used car. With her permission, Gateway obtained hercredit report. Based on this report, the dealer determined thatTreadway was not eligible for financing. This was not surprising,given that Gateway had purchased Treadway’s name from a list ofpeople who had recently filed for bankruptcy.

Instead of applying for a loan on behalf of Treadway, Gatewaytold her that it had found a bank that would finance hertransaction, but only if she purchased a new car and provided aco-signer. Treadway agreed to purchase a new car and came up withPearlie Smith, her godmother, to serve as a co-signer.

Concerned as it was with customer service, Gateway had an agentdeliver papers directly to smith’s house to be signed immediately.If Smith had read the papers before she signed them, she might haverealized that she had committed herself to be the sole purchaserand owner of the car. But she had no idea that she was the owneruntil she began receiving bills on the car loan. After Treadwaymade the first payment on behalf of smith, both women refused topay more – Smith because she did not want a new car; Treadwaybecause the car was not hers. The car was repossessed, but thefinancing company continued to demand payment.

It appears that Gateway was running a scam. The dealership wouldlure desperate prospects off the bankruptcy rolls and into theshowroom with promises of financing for a used car, and then sell anew car to their “co-signer”) who was, in fact, the sole signer).Instead of selling a used car to Treadway, Gateway sold a new carto Smith.

Treadway filed suit against Gateway, alleging that it hadviolated the ECOA by not notifying her that it had taken an adverseaction against her.

You Be the Judge: Did Gateway violate theECOA?

Question: Did Treadway ever file a loanapplication?

Question: Then how could she claim that she hadbeen denied credit?

Question: Did the court rule that Gateway haddiscriminated?


The Equal CreditOpportunity Act (ECOA) is intended to prohibit discrimination bycreditors in any aspect of granting credit to an individual. Thepurpose of the act’s is to prevent lenders from using race, colour,sex, religion, or other non-creditworthiness factors when assessinga loan application, creating terms of a loan, or any other aspectof a credit contracts.Judging from this we can saythat Gateway had violated ECOA as it was approaching Treadway forfinancing a used car knowing she had filed for bankruptcy , but wasnot selling the used car to her as they had initially claimed andconvinced her to find a co-signer and were selling a new car to thesaid co-signer.


  1. Treadway did not file aloan application as the papers were delivered to her godmotherPearlie Smith’s house directly by gateway who was to be her co-signatory.
  2. Treadway can claim the denial ofcredit as it was her whom the Gateway had approached for the saleof car initially and with her permission her credit -worthinessreport was sought by them , but the sale was actually made toPearlie Smith.
  3. The court ruled that Gateway wasdiscriminating as the dealership was luring desperate prospects ofthe bankruptcy rolls promising them to finance a used car but wasactually selling a new car to the co-signer.

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