Public Citizen Outs Car Dealer Scams
Public Citizen Sends Information to Officials in Florida, California, Texas,
Tennessee, Georgia
May 27, 2004
Public Citizen is providing government officials in five states with
information about reported rip-offs by auto dealers in those states, ranging
from loan terms being changed without customers' knowledge to buyers being
charged for "free" add-ons.
The stories are among more than 700 received by the consumer advocacy
organization after publishing a report detailing how auto dealers scam
consumers.
The December 2003 report, Rip-Off Nation: Auto Dealers' Swindling of
America, outlined a wide range of industry-wide practices, including
inflating the cost of warranties, reporting one set of numbers to the
customers and another set to the bank, and stuffing contracts with extras
that the customer never agreed to pay for.
After issuing the report, Public Citizen encouraged consumers to contact the
organization if they thought an auto dealer had defrauded them during a
vehicle purchase. The largest number of complaints came from Florida (90
complaints), California (52), Texas (42), Tennessee (22) and Georgia (20).
Public Citizen said it has sent letters to the attorneys general of Florida,
California and Texas; the Tennessee Division of Consumer Affairs; and the
Georgia Governor's Office of Consumer Affairs, providing details of the
experiences reported by consumers in those states.
"They told me that my interest rate was 2.15 percent but after I signed I
did some calculations and realized it is actually 10 percent!" wrote a Los
Angeles consumer. "Also, they charged me for both an aerodynamics package
and a spoiler, but a spoiler is included in the aerodynamics package!"
Said an Austin, Texas, buyer, "I was told that I would have a four-year loan
and the loan coupons turned out to be [for] a five-year loan." A
Jacksonville, Fla., consumer reported three different cash prices for the
vehicle on three different contracts. And an Atlanta, Ga., consumer reported
being charged a $1,000 fee just to receive a loan.
"Unfortunately, these stories of egregious and blatant consumer rip-offs are
all too typical," said Public Citizen President Joan Claybrook. "From the
snapshot these buyers have provided, it is evident that dealers are ripping
off customers, sometimes for thousands of dollars each. The government
officials should take action now to stop this fraud."
In the letters, Public Citizen urged government officials to assess whether
the states' consumer laws provide adequate protection for auto purchasers
and to collaborate with other state agencies, such as the Department of
Motor Vehicles, and with other consumer protection or attorney general's
offices around the country, to stem dealership fraud.
Consumers buying automobiles are particularly vulnerable to being ripped off
by auto dealers because of the large size of the purchase, the flurry of
paperwork and the fact that the financial deals are often complicated. Some
dealerships use unscrupulous tactics to squeeze the highest possible profit
from each sale.
Public Citizen issued its report in December 2003 detailing the many ways
that consumers may fall victim to unscrupulous dealers. They include:
? The dealer boosts the manufacturer's suggested retail price with extras,
some of which may already come with the vehicle.
? Sales managers run credit reports on potential buyers without their
permission to learn how much credit the customer has and even what the
customer's last car payments were, for use in price negotiations.
? Banks may have "sweetheart" relationships with dealers, imposing an
uncompetitive interest rate in order to kick back to the dealer the dollar
value of a few percentage points of the loan without the buyer's knowledge.
? Customers are manipulated during the sales process to pay more than the
agreed-upon price. This is often done with the use of worksheets listing
add-ons.
? If the sale is made after hours, customers are asked to sign blank bank
forms that the dealer offers to fill in later, ostensibly after talking to a
bank during business hours. The numbers reported to the bank may not reflect
what the customer agreed to.
To protect themselves, consumers should:
1) obtain financing at verifiably competitive rates or independently of the
dealer;
2) refuse to sign any contract containing an arbitration clause;
3) never sign blank financial forms;
4) remember that dealers make money from extras and add-ons and view with
skepticism offers of "free" items; and
5) never drive a car off the lot before all financial transactions have been
agreed upon by the lending institution.
Consumers must also be willing to walk away from the deal at any point that
something smells fishy or they are treated disrespectfully, as hard-ball
sales tactics can distract consumers from the precise terms of a deal.
Consumer News
June 17 2004
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• Ford Credit Owes Refund to 150,000 Lease Customers
• "Pedia Loss" Claims Challenged
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• Experian, ConsumerInfo.Com Named in Class Action Suit
• USA TODAY News
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