May 27, 2004
Public Citizen Notifies Government Officials in
Five States of Auto Dealer Scams
After Being Deluged With Stories from Consumers, Public Citizen Sends Information to Officials in Florida, California, Texas, Tennesseeand Georgia
WASHINGTON, D.C. – 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 today 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. Public Citizen sent the information only of those buyers who gave their permission.
“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.
To view the letters sent to the attorneys general as well as new national and state fact sheets, click here. Consumers interested in filling out surveys and reading more information should click here. To read Public Citizen’s report, click here.