Submission Number: 00089
Received: 3/14/2012 3:49:15 PM
Commenter: John Gayle
Organization: The Consumer Law Group, P.C.
Agency: Federal Trade Commission
Initiative: Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles; Project No. P104811
Attachments: No Attachments
Case filed in the United States District Court Eastern District of Virginia, Zachary Martin v. Global Select, et al, Case No. 3:11cv654.
(An Arlington, Va. car dealership.)
This is a case arising from a common sales tactic in the retail automobile sales industry called “a yo-yo sale” or “spot delivery.” Using this tactic, the dealer sells an automobile to the consumer “on the spot.” The consumer signs all paperwork, often pays a down payment and/or provides a trade in, receives a certificate of registration, temporary or transferred tags, gets insurance coverage for the vehicle, and is provided possession of the automobile. All purchase and loan documents are signed by the consumer. The consumer leaves the dealership believing he or she owns the automobile since he is told his loan was approved. The sale is financed by the dealer (as the creditor) with a Retail Installment Sales Contract (RISC). As in the present case, only after the sale is done does the dealer then attempt to sell or assign this installment credit contract (the RISC) to a third party finance company. When the dealer for whatever reason decides not to go through with the deal, or the third party finance companies it “shopped” the loan to is unwilling to purchase the RISC, the dealer attempts to “undo” or cancel the sale, and repossesses or yanks it back from the buyer like a yo-yo.
Sometimes, as in the present case, the dealer will submit a credit application on certain terms to third party lenders, that approve the loan on those terms, but the dealer does not advise the consumer of the terms actually accepted, and convinces the buyer to agree to terms that are higher or “worse” for the consumer by claiming that the terms, such as an interest rate and monthly payment, as the only terms that were be approved, terms which create a higher profit for the dealer, since the actual interest rate that was approved was lower. The consumer never learns that his credit request for a loan on the lower terms was approved because the dealer never advises that the lower terms were approved, and the third party lender never provides the buyer notice of the approval, as required by the Equal Credit Opportunity Act. (ECOA).
Sometimes, as in the present case, the dealer will also attempt to get the customer to sign a second batch of purchase documents, requiring more money, since it knows the customer is emotionally committed to the car and is vulnerable to the threat that the deal will be cancelled if he does not sign the new, more expensive contract. However, if the sale is cancelled, neither the dealer nor the finance company send the consumer any written notice of adverse action, and sometimes, as in this case, the dealer confiscates the down payment, even though it has cancelled the purchase contract and repossessed the vehicle.
These shady practices violate the ECOA, the Truth In Lending Act (“TILA”), and the Federal Fair Credit Reporting Act (“FCRA”). They also violate the Virginia Consumer Protection Act (“VCPA”), the Virginia Motor Vehicle Code, and often violate the Uniform Commercial Code since the repossession occurs before any default and no notice of disposition of the repossessed vehicle is provided. Furthermore, these tactics of fraudulently inducing the signing of the contract and then failing to abide by the contract and canceling the sale, constitutes fraud and breach the contract.
I have several other cases, where the car dealerships (in Arlington and Norfolk Va.), that take a vehicle in on trade, and the military serviceman,purchases another car, but the dealership never pays off the trade in, causing significant hardship for the service man due to his credit, and loss of security clearance due to credit problems. The dealership goes out of business, we get a default judgment against the out of business dealership, and the service person cannot get full reimbursement for his damages awarded by the court.