About 3,000 customers of used-car dealer Charlie Falk will get $1,350 each -- a total of $4 million -- to settle a class-action lawsuit that accused a finance company of swindling them, according to a story by reporter Marc Davis in the Nov. 18 edition of The Virginian-Pilot and The Ledger-Star, Norfolk, Va.

According to Davis' story, TranSouth Financial Corp. has agreed to pay that much, plus nearly $2 million in lawyer fees, to settle the case in Norfolk's federal court.

That is in addition to the $10.9 million settlement that Falk, the used-car dealer, reached in his part of the case five years ago.

Lawyers accused Falk and TranSouth of cheating customers in a complex used-car financing scam. Charlie Falk's Auto Wholesale, the biggest used-car dealer in Hampton Roads, settled by forgiving $10.5 million in defaulted loans to customers and paid $400,000 in damages, mainly for legal fees.

That means the total settlement by Falk and TranSouth was $17 million.

Not all Falk customers are eligible for the TranSouth settlement. It generally covers those who bought cars in the early 1990s, financed them through TranSouth, defaulted on loans, had their cars repossessed and then owed a "deficiency judgment." A more precise definition of who is eligible is not yet available.

The settlement ends seven years of legal wrangling -- one of the oldest pending cases in Norfolk federal court.

One settlement condition is that no one involved can discuss details. Nevertheless, financial terms are available in the public court record. TranSouth will publish public notices in The Virginian-Pilot and other newspapers to advise potential claimants, according to Davis' story.

The customers' lead attorney, Kieron F. Quinn of Baltimore, wouldn't comment, saying only that a settlement had been reached which was satisfactory to all parties.

The lawsuit was filed in 1993 and has bounced five times between Norfolk and a Richmond appeals court. The case was scheduled for trial several times, but never got there.

Finally in August, the three sides -- Falk, TranSouth and the customers -- reached a financial settlement. Some non-financial details are still unresolved. Lawyers expect an agreement any day, according to Davis' story.

A judge must approve the settlement before any payout. That hearing is tentatively set for February. If the deal is approved, eligible customers will be notified by mail on how to proceed.

Lawyers said this was the first class-action lawsuit ever certified by Norfolk's federal court. Such cases are extremely rare in any courthouse. Judge Raymond A. Jackson certified the class-action against TranSouth in March 1999, and an appeals court later upheld that action.

Here's how the scam worked, according to the lawsuit:

Falk sold used cars at high prices and arranged customer financing with TranSouth at high interest rates of up to 36 percent. When a customer missed a payment, TranSouth repossessed the car and mailed the customer a default notice.

That notice told the customer that he could get the car back by paying the amount due, or the car would be sold at a "private sale."

The cars then were "sold" back to Falk at an artificially low price. Falk's collection agency then would obtain a "deficiency judgment" in court against the customer for the amount due over the artificially low sale price, usually $2,000 to $5,000.

Falk then would resell the car at full price, starting the cycle again.

The case against TranSouth hinged on the default notice to customers. The lawsuit claimed that this was mail fraud because it concealed the phony nature of the "private sale" to Falk.

Lawyers for the customers said TranSouth wanted Falk's customers to default on their loans, and about half did, according to Davis' story.

Several lawyers from Baltimore, Washington, Virginia Beach and Chesapeake cooperated on behalf of the customers, including the Virginia Poverty Law Center and the Trial Lawyers for Public Justice.