Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811 #00061

Submission Number:
Carrie Ferraro
Legal Services of New Jersey
New Jersey
Initiative Name:
Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811
Dear FTC: LSNJ maintains a state wide hotline to provide legal advice to low income consumers. On average, the consumer unit receives about 5-10 calls per month related to car sale issues. From this pool of calls, it is common to find dealers who engage in many different forms of fraud. The following are some examples of misconduct. Dealers orally misrepresent the material terms of the sale contract such as the interest rate, the mileage or the condition of the car. If a consumer objects to the interest rate, the dealer will say, pay the monthly payment on time for a few months and we will get you into a loan with a better interest rate later. When the consumer asks for the lower interest rate as promised, it is not provided. Dealers engage in packing, that is including products or services within a contract for sale that the consumer does not want and/or does not know about. These products include gap insurance, service contracts and extended warranties. Sometimes dealers inflate the costs of certain products or services or don't actually provide them. Also, a dealer may inflate the costs associated with obtaining registraton documents for the vehicle. Dealers also engage in yo yo sales. A yo yo sale involves the dealer entering into a contract with the consumer and letting the consumer drive away with the car. The dealer often takes and "sells" the consumer's trade in. Sometimes the dealer explains that there is no financing for the car and it will not be a "problem", it will certainly obtain financing later. Other times, the consumer drives the car away without any knowledge that he has not purchased the car and that there is no financing on the car. The consumer believes he owns the car. The dealer then requires the consumer to return the car. The dealer sometimes threatens to call the police if the car is not returned expeditiously. The dealer sometimes sends out a tower to take the car back. In the alternative, the dealer requires additional less advantageous terms and conditions to the contract, such as a co-signer or a higher interst rate. The consumer is often misled into believing that there is no way to cancel the deal. Dealers also may not have title to a car when they sell it. This may be a sign that a dealer is soon to go out of business or soon to be shut down by state authorities. If that is the case, consumers are sometimes stuck with cars they cannot use or sell. Consumers with the help of the Motor Vehicle Commission(s) and/or the Division of Consumer Affairs are then required to attempt to track down legal title. I hope that this is helpful. If you have any questions or concerns, or require more information, I would be more than happy to provide additional information. Regards Carrie Ferraro, Esq./s