When buying a car, beware of dealers who let you leave with the vehicle without financing in place.
Buying a car is a big day for anyone, but when you are worried about your credit affecting your purchase, it can be especially exciting to hear that the deal is done. Unfortunately, for many people in Virginia and across the United States, things may take a turn for the worse after you drive out of the dealership in your new vehicle.
In many cases, car dealerships may let you drive off in your new car the very same day, even if it is after usual business hours or on a weekend. This is referred to as "spot delivery," because you are able to leave with a new car "on the spot." In those situations, the dealership may not have finalized the financing before letting you leave with the car.
What is a yo-yo scam?
Imagine you just left the car dealership with your new car. You were worried about your credit, but the terms of the agreement you were offered were good. You're excited about your new purchase and you're happy with the deal you made. You've been led to believe the deal is final.
A few days later, you get a call from the dealership. They want to discuss the terms of your agreement. You head back to the dealership only to be told the deal can't go through as originally agreed upon and they try to add new, worse terms. If you don't agree to the new terms, they threaten to take legal action against you if the car is not brought back. They may also tell you that they are unable to refund your down payment or the vehicle you traded in when making the deal.
This situation is referred to as a yo-yo scam, because you are brought back into the dealership as if you're attached to the string of the old-fashioned children's toy.
According to a report conducted by the Center for Responsible Lending in 2012, yo-yo scams affect a large number of people across the country every year. The researchers surveyed over 2,100 people who suffered finance issues related to a vehicle over a one-year period. Of those questioned, over one-quarter of the individuals - 590 people in total - had been the victim of a yo-yo-scam.
The horrible consequences of yo-yo-scams
The Center for Responsible Lending report found that over 60 percent of those subjected to a yo-yo scam ended up paying a higher interest rate than the one quoted in their original deal. In total, those who signed new agreements in a yo-yo scam ended up with interest rates that were five percentage points higher than other people in similar situations.
In most cases, despite these unfavorable terms, the consumer ended up agreeing to a new deal so that he or she could stay in possession of the vehicle. In rarer situations, the car buyer either agreed to a deal for a different car or decided not to buy a car from the dealership.
According to the International Business Times, yo-yo scams sometimes even result in threats or physical violence. In one situation, a car buyer reported that two men came to his worksite and informed him that the car dealership where he had purchased his vehicle had sent them to retrieve the car. He reported that one of the men "violently chok[ed]" him during the incident.
What is wrong with a yo-yo scam?
When a car dealership tries to unwind a sale in the typical yo-yo scam, they violate a number of state and federal laws. Depending on the specific facts, the dealership may have violated the Federal Truth in Lending Act, Fair Credit Reporting Act, and Equal Credit Opportunity Act. They also likely committed common law fraud, conversion and violated the state Consumer Protection Act. It is important that you have the matter reviewed by an attorney familiar with this type of scam, and ready and willing to go to bat to protect your rights.
What can I do if I was the victim of a yo-yo-scam?
If the car dealership where you purchased your vehicle is trying to change the terms of the deal or is threatening you, it is important to understand your options. Do not simply rely on the information you're getting from the dealership.
When you, as a consumer, are treated unfairly, you need to seek counsel from a skilled consumer protection attorney. At Thomas R. Breeden, P.C., we understand the challenges you face when up against a car dealership. We will work diligently on your behalf to ensure your rights are protected.