Consumer advocate Rosemary Shahan, an expert on "lemon law," [1] is stepping in to pinch-hit for Hal Rosner and will answer your auto-related questions. Rosemary has testified before Congress on behalf of car buyers and has many victories against auto manufacturers, dealers and insurers. Though very knowledgeable, Rosemary is not an attorney and can only provide advice of a general nature. To find a consumer attorney, go to www.naca.net [2]. For more on Rosemary Shahan, visit http://www.carconsumers.com/ [3]
Submit your Auto Fraud experience here [4].
Scam 1. Negative Equity/Trade-In Overestimation
This arises in a transaction that includes a trade-in vehicle when more is owed on the trade-in vehicle than the actual cash value of the vehicle. Generally, a customer is led to believe that the dealership is valuing the trade-in vehicle at the same amount as what is owed (thus the customer won't owe anything on the trade-in.) In reality, the secret actual cash value (the value the dealership is really giving the trade-in) is less than the amount owed. The difference is added to the cash price of the new vehicle (or the capitalization costs of a leased vehicle.) By inflating the cash price or cap costs of the vehicle, you the customer are illegally paying more in sales tax and registration. The dealership may also be violating the laws related to selling a vehicle for the advertised price (a dealership may not sell for more than advertised price.) A similar illegal practice may occur when a lease balance is paid off. These are still illegal practices even when the customer is told what is happening.
Scam 2. Packing (inflated monthly payments)
In a packing case, the customer is quoted an inflated monthly payment. Once the customer accepts the monthly payment amount, the dealership adds accessories (alarms, service contracts, GAP insurance, paint/fabric protection, window etching, low jack, etc.) in order to reach the inflated monthly amount. The customer does not realize that the accessories are optional nor that they are paying extra for the accessories (they are led to believe the accessories are included with vehicle or not told at all.)
Scam 3. Rewritten Contracts/Backdating
Often a customer will not qualify for financing upon the terms on the first contract. The customer may be required to increase a down payment, higher APR, etc. in order to qualify for a loan. The dealership has the customer come to sign a second contract with the different terms but backdates the second contract with the date of the first contract. This affects the finance disclosure laws in that the customer is being charged interest for a time period in which the contract is not yet in effect, etc. In addition to making a material misrepresentation regarding when the customer takes the obligation of the new contract, a backdated contract often also violates the single document rule (explained below) because another form (usually called Acknowledgment of Rewritten Contract) has the actual date when the contract was signed. Further, many customers are not told that they do not have to sign a second contract, instead they can choose to cancel the contract and return the new vehicle and have the down payment and trade in vehicle refunded. Finally, a dealership only has 10 days to tell you they want to make changes to the contract or cancel the contract. After the 10 days, the dealership cannot change the deal.
Scam 4. "Gotta Put It All in One Document" Rule
The law provides that all obligations of both parties must be contained in a single document (this explains why purchase agreement are so long in the automobile industry.) Often, dealerships will have customers sign other documents, such as trade in forms that state that the customer agrees to pay any difference between the trade in value and pay off of a trade in vehicle if it is different than the amount on the purchase agreement (and any associated attorney fees). Or, the dealership will agree to make payments on a trade-in vehicle but not include the trade-in vehicle in the purchase agreement. Another example is a "hold check agreement" (see below) in which the customer agrees to pay additional money towards the down payment on a later date. These documents violate the one document rule.
Scam 5. The Deferred Down Payment Scam
Many customers are unable to pay the entire down payment at the time the purchase contract is signed. Dealerships will allow customers to make down payments in payments (called deferred down payments). The code recognizes these types of payments and requires that deferred down payments be itemized, including the amount and date due for the deferred down payments. However, rather than disclosing deferred down payments are required by the code, dealerships will have customers write checks for the deferred down payments and then agree not the deposit the checks until an agreed upon date. As part of this transaction, customers are made to sign a hold check agreements that states what date the checks will be cashed and also have additional provisions regarding any returned checks, thus creating obligations that are not included in the single document (purchase agreement.)
Scam 6. Changes to the Advertised Price
The law states that a dealership cannot sell a vehicle for more than the advertised price (even if the customer is unaware of the advertised price.) What is an advertisement is broadly defined to include window stickers as well as the usual media ads. If a dealer inflates the cash price of vehicle to include other items, that would, in practice, result in selling a vehicle for higher than the advertised price. (Which in addition affects the amount the customer is charged for taxes, licensing & registration fees and finance charges.)
Scam 7. Using Your Language Against You
Civil Code §1632 provides that if a lease/purchase of a vehicle, is primarily negotiated in Spanish, then a Spanish translation of the contract must be provided to the customer prior to signing the English language contract. This law was recently expanded to include Chinese, Vietnamese, Tagalog and Korean. Failure to comply gives the customer right to rescind.
Scam 8. The Whole Truth About Used Cars
Dealerships are required to disclose material known facts about a used vehicle such as if the vehicle was:
- involved in a prior accident (that caused substantial damage)
- it was a prior rental vehicle
- a lemon law buy back (the vehicle was repurchased by either manufacturer or dealer under the lemon law because of a defect)
- odometer readings not accurate, etc.
They are also prohibited from misrepresenting facts about the vehicle's history (such as its never been in an accident, it was a trade vehicle (when it was a rental), etc.
Scam 9. So is it New or is it Used?
The law requires that a dealership describe the vehicle being purchased as either "new" or "used". A used vehicle also includes a "demo" or demonstrator vehicle (vehicle used by manufacturer or dealership representatives) but often the contract will state the vehicle is "new." Also, some vehicles were previously sold but for some reason returned (usually because the failure to obtain financing) and this vehicle may also be used but is listed as new.
Scam 10. "Certified" Used Vehicles
Several manufacturers and some dealerships have "certified" used vehicle programs. Generally, a used vehicle that passes certain standards is labeled "certified used" and is suppose to guarantee to the customer that the used vehicle is in good working order and free from major structural damage (including prior accidents.) However, a lot of vehicles that don't actually qualify as "certified" under the standards advertised are being labeled certified. Customers are ending up with certified vehicles with frame damage from prior accidents.
[4]Hal Rosner is the founding partner of Rosner and Mansfield [5], a leading California law firm specializing in auto fraud. Hal has been gracious enough to offer his help to UCAN.org users free of charge. CONTACT HAL [4]
If you suspect that you have been the victim of auto fraud, or just have a general question, post a comment for Hal using the link below and his response will appear beneath your post on this page. You MUST include the following information:
- First Name
- State