Submission Number: 00066
Received: 1/30/2012 12:20:26 PM
Commenter: Thomas Domonoske
Organization: Legal Aid Justice Center
Agency: Federal Trade Commission
Initiative: Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles; Project No. P104811
00066-82562.pdf Size = 73 KB
00066-82563.pdf Size = 21 KB
00066-82564.pdf Size = 137 KB
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The attached documents all regard the problem of yo-yo sales.
One is five page analysis of the legal problems associated with yo-yo sales. It explains the yo-yo sale, how it occurs, and why it is always a misrepresentation even if the dealer later decides not to call off the transaction. The core legal problems are the dealer misrepresenting to the consumer that credit has been offered and accepted, the dealer claiming a condition that is an illusory condition, and the dealer inconsistently implementing the asserted condition. The core marketplace problem is that dealers who engage in yo-yo sales receive an improper competitive advantage over dealers who only give consumers a contract to sign when the dealer has actually approved the deal.
Another document is a recent Virginia Supreme Court case where a dealer called off a transaction months later, and then repossessed the car without complying with the Uniform Commercial Code's notice requirements. In this case, the consumer did not challenge the dealer's right to call off the sale but instead simply asserted that any repossession had to comply with repossession law. The Virginia Supreme Court rejected the dealer's argument that it was the owner of the car and that it did not have to follow the repossession laws.
Another document is a recent case from the North Carolina Court of Appeals. This gives a good example of one way yo-yo sales proceed. The Court of Appeals reversed the trial court's grant of summary judgment for defendant, and found that material issues remained for trial. The opinion details the facts of the transaction and points out that an unconditional retail installment sale contract was used. Despite that unconditional document, the dealership called off the transaction and repossessed the car.
When a dealership has not yet decided whether to approve an application for credit and enter into a retail installment sales contract or lease with a customer, it should not give the consumer a retail installment sales contract or lease to sign. The FTC should prohibit dealers from giving a consumer a retail installment sales contract or lease to sign unless the dealer has decided to approve the application on the credit or lease terms disclosed in the contract.