For most of us, buying a car is still the biggest consumer purchase (other than buy a home) that we will make in our lifetime. Whether you buy a new or used car in California, you still have rights. And the dealership may try to take advantage of you. We help consumers in a wide range of auto dealer fraud cases, including:

Undisclosed Damage/Sale of Unsafe Vehicle: You still have some rights even if you bought a used car. There are certain standards that car dealers must meet in selling vehicles in California, whether they are sold as new or used. They still must pass a safety inspection and there are certain things that still need to be disclosed.

Yo-Yo Financing: Were you told that you were “pre-approved” for financing for a vehicle only to get a call a few weeks later telling you that you need to come back and sign a new contract? You may have just been a victim of a “Yo-Yo” financing scheme.

Certified Pre-Owned Fraud: The term “certified pre-owned” has a legal meaning in California. Cars must meet certain requirements before they are sold as “CPO.” Often, these requirements are ignored and consumers are sold vehicle that not only should not have been certified, they should not even be on the road.

Motorcycle “Credit Card” Financing: Dealerships are required to provide extensive disclosures when a vehicle is financed. Some dealers are trying to get around these requirements by selling motorcycles on credit cards. The disclosures are not provided, and consumers are tricked into paying more for their motorcycles (at higher interest rates) than they otherwise would have ever agreed to pay.

Lemon Laundering: If a manufacturer repurchases a vehicle under the lemon law, they have to brand the title as a “lemon.” This is to allow the next buyer to know that they are getting into. Lemon laundering occurs when the manufacturer tries to get around the title branding requirements and make a known defective vehicle seem clean again.

Wrongful Repossessions: Conn Law, PC assists consumers in a number of repossession issues. A wrongful repossession occurs when the lender repossess the vehicle without a valid reason.

Unlawful Assessment of Post-Repossession Deficiency Debt: After the repossession of your vehicle, the lender might claim that you are liable for a deficiency balance. However, the lender can allow assess and collect on the deficiency if they strictly comply with California’s post-repossession procedures and provide the proper notices. Many do not comply with the notice requirements but still try to assess deficiencies anyways. The Conn Law team has been successful in eliminating over $1 billion in deficiencies in California.

Undisclosed Damage/Sale of Unsafe Vehicle

Even in selling used cars in California, dealers have to meet some standards. For example, used car dealers are generally required to perform “safety inspections” on their cars before they put them out for sale. At the very least, if a dealership wants to sell a vehicle to a consumer for “on-highway” use, they first have to check and confirm the following:

1. The emergency parking brake adequately works, can be engaged, and won’t fail;
2. The vehicle has an adequate windshield and working windshield wipers;
3. The vehicle has at least two mirrors, including on the left-hand side;
4. The vehicle has at least two headlamps, with at least one on each side of the vehicle;
5. All lighting equipment is in good working order;
6. The horn works;
7. The odometer is accurate or is disclosed as inaccurate;
8. The vehicle has a front and rear bumper;
9. The muffler exhaust system is in good working order and not equipped with a cutoff or bypass device;
10. The tires have adequate tread depth;
11. Each seat has a seatbelt;
12. The vehicle passes smog;
13. The airbag system functions; and
14. The heater/defroster is adequate to remove snow, ice, frost, fog, or internal moisture from the windshield.

In addition, there is a generally accepted dealership “standard of care” that any known frame damage or structural damage must be disclosed.

Frame damage should be disclosed, if reasonably known. And it is known, more often than you might think. As consumers, we have to rely on publicly available reports like Carfax and AutoCheck. But dealership have access to other resources. For example, if a dealership buys a vehicle at auction, existing frame damage may be disclosed. Even if it isn’t explicitly disclosed, the dealerships has other ways of suspecting that the car might have unrepaired frame or structural damage. The National Auto Auction Association sets forth a vehicle conditioning grading scale for cars sold at auction: five means excellent and zero means inoperative. If a vehicle has a score of less than 3, there is a good chance that it has either repaired or unrepaired frame damage or structural damage. Many reputable car dealerships simply will not buy a vehicle if it has a score below 3.5. If the vehicle has a substandard score, either the dealership should not buy it or if it does, are on notice that the vehicle could have frame damage. This should be disclosed to the customer.

It is not enough for the dealership to show you a “clean” Carfax or AutoCheck. If they know, or should know, that the vehicle has structural damage, this should be disclosed to you.

Failure to disclosure known frame damage or structural damage can violate California law. If you were unknowingly sold a vehicle with frame damage you should seek legal advice immediately. You can also give us a call or fill out our online contact form.

Yo-Yo Financing

“Yo-Yo” financing, also known as “spot delivery,” happens when the dealership sells you the vehicle, on the spot, without having the financing already arranged. If you buy a car from a dealership and have the dealership arrange for the financing through a third party, the dealership actually acts as the lender until they can sell your contract to another financial institution. This is because the retail installment sales contract is entered between you and the dealership, whereby, you agree to make payments for a certain period of time to the holder of the contract before you get title. Until the dealership assigns the contract, the dealership is the holder. Sometimes, the dealership just acts as the “finance company” for a few minutes (or even a few seconds), until the deal goes through. Sometimes, the holding period is longer.

“Spot delivery” is not illegal in California in and of itself. Under most California retail installment sales contracts, the dealership has ten days after the date of the contract to make a good faith effort to assign it. If they cannot find anyone that will accept the financing within the ten day period, they can ask you to unwind the contract. However, if they unwind the deal, they have to give you back your down payment and if you traded-in a vehicle, they either have to give you back your old vehicle or pay you the fair market value (Kelly Blue Book) for the vehicle.

Yo-Yo financing is what happens when the dealership acts in bad faith. Sometimes, the dealership will put you into a deal that they know will not get approved. They hope that you will fall in love with your new car, so much so, that when they call you a few days later and tell you that you have to sign a new contract with a higher payments or put more down, you will agree, just so you can stay in the car. They bring you back in like a yo-yo.

Even worse, the dealer may wait until after the ten day period to try to bring you back in. Even though they have no right to get out of the contract after the ten days are up, they might tell you that you have to sign a new contract. This is not true. The dealership just does not want to act as the financial institution.

If the dealership does not try to contact you until after the ten days are up, the contract is binding. You do not have to sign anything else.

So what should you do if you think you are the victim of a Yo-Yo financing scam? First, get legal advice. You can give the attorneys at Conn Law, PC a call. You can also fill out our online intake form.

Certified Pre-Owned Fraud

What makes a car “certified pre-owned”? In California, a dealership cannot advertise a vehicle as “certified” if:

1. The vehicle’s odometer has been rolled back;
2. The vehicle was a lemon law repurchase;
3. The vehicle’s title is branded as “Lemon Law Buyback,” “manufacturer repurchase,” “salvage,” “junk,” “nonrepairable,” “flood,” or another similar designation;
4. The vehicle has been improperly repaired after a collision, fire, or flood;
5. The vehicle has structural or frame damage;
6. The vehicle is sold “AS IS” or if the dealer disclaims any warranties on the vehicle; or
7. The term “certified” is used in an untrue or misleading way.

California Vehicle Code Section 11713.18

In addition, prior to selling a “Certified Pre-Owned” vehicle, the dealership has to provide you with a completed inspection report showing all of the components inspected.

On top of this, most manufacturers have their own “Certified Pre-Owned” programs with 100-plus point requirements. These often provide even more extensive limitations on what cars can be certified.

Despite these strict regulations and requirements, some unscrupulous dealerships will sell just about anything as a “certified pre-owned” car. The salesperson will print out a “clean” Carfax or AutoCheck report, show it to the customer, and tell the customer that the vehicle is “perfect.” The problem with this is that Carfax isn’t perfect. Not everything is picked up by Carfax and even things that are take time to appear on the reports. Sometimes it can take months, if not years, before an accident shows up on the the Carfax report. The dealers know this and know that they can’t just rely on a “clean” Carfax report for certifying cars. They have to inspect the vehicle.

The Conn Law, PC team has seen countless cases where so-called “certified pre-owned” vehicle were sold with extensive frame damage or for other reasons, never should have been certified. Not only should these cars never have been certified, often, they are unsafe to drive and should not be sold at all! Usually, the dealerships had either inspected the vehicles (or had received an auction report showing damage) and knew that the car never should have been certified, or “certified” the car without even performing an inspection. Either scenario runs afoul of California law.

Depending on the circumstances, other improper “certifications” can occur if the vehicle had been used as a daily rental car, numerous body panels were replaced, the vehicle contains non-OEM (Original Equipment Manufacturer) parts, or if the vehicle had multiple unrepairable issues prior to it being sold as a CPO.

To make things worse, it can be months or even years before the consumer realizes that their CPO vehicle was improperly certified. The consumer will unknowingly drive an unsafe car for years and only find out when they try to trade it in.

Improper CPO certification can serve as a violation of California’s Consumers Legal Remedies Act, the Unfair Competition Law, and the False Advertising Law. And sometimes, it is simply fraud.

If you believe that you were sold a “certified” pre-owned vehicle that never should have been certified, you should seek legal advice. We do not charge for consultations and may be able to help. You can also fill out our online contact form.

Motorcycle “Credit Card” Financing

Buying a motorcycle in California should be no different from buying a car. They are both motor vehicles that must be registered with the California Department of Motor Vehicles. In most respects, California law treats them as the same.

And just as with cars, if the dealership arranges the financing of the motorcycle, California’s Rees-Levering Automobile Sales Finance Act requires that the dealership provide the consumer with a single document that sets forth “all of the agreements of the buyer and seller with respect to the total cost and the terms of payment for the” motorcycle. This is what is known as the “Single-Document Rule.”

This means that the finance agreement, a retail installment sales contract, has to set forth the following on a single document (or at the very least, on multiple pages that are attached together and sequentially numbers) and tell the consumer: (1) the interest rate; (2) the monthly payment amount; (3) how many payments have to be made, (4) the finance charge; and (5) the total cost of the motorcycle.

There is a new trend where some motorcycle dealerships (and manufacturers) are trying to get around these disclosure requirements (and make more money off of their customers) by signing up their customers for branded “credit cards” and then putting the motorcycle “cash sale” on the new credit cards. But the Single Document Rule means that there should only be one transaction; not two.

A major problem with this (other than it costing more for the consumer), is that the real terms of the transaction are hidden from the customer. The consumer does not know how much they are going to have to pay for how long. And the interest rate can change (almost always by going up) at any time!

While dealership tells the consumer about the great “teaser rate” and “low introductory payments” they hide how much the rate will go up or how long it will take to pay off the bike. The consumer thinks they have gotten a great deal until a year later or so when the interest rate and monthly payments dramatically increase.

The victims do not realize that they have been taken advantage of until much later when their requirement minimum payments go up.

And even though the transaction looks like a “cash sale,” the financial institution still takes a security interest in the motorcycle. This means that if you fall behind, the motorcycle can be repossessed.

The Conn Law, PC team have brought class action cases against multiple motorcycle dealerships alleging Rees-Levering and other violations arising out of motorcycle transactions financed by these “credit cards.” These transactions do not provide consumers with adequate disclosures. In fact, this type of transaction is exactly why California law requires such extensive disclosures.

If you think you have been a victim of this type of scheme or this has happened to you, please give us a call or fill out our online intake form.

Lemon Laundering

Part of the manufacturer’s repurchase obligation under the lemon law is that they also have to brand the vehicle’s title as a lemon. This way, the next customer will know that they are buying.

In enacting the Automotive Consumer Notification Act, the California legislature was worried that “used and irrepairable motor vehicles are being resold in the marketplace without notice to the subsequent purchaser” and determined that consumers “have a right to information relevant to their buying decisions”

Because of this law, once a consumer properly asks for a lemon law buyback, and the manufacturer knows or should know that the vehicle is required by law to be replaced, not only does the manufacturer have to repurchase the vehicle, but they also have to “inscribe the ownership certificate with the notation ‘Lemon Law Buyback,’ and affix a decal to the vehicle.”

Manufacturers don’t want to do this. If the title is branded, they can’t resell the vehicle for as much. So throughout the years, manufacturers have thought of ways to try to get around the title branding requirements. But the law is clear, lemons must be branded.

One common scheme is that if a customer calls asking for a lemon law buyback, the manufacturer will politely refuse and then graciously offer to “help” the customer get “a really good deal” on the trade in. This is illegal. In this case, the manufacturer is engaging in lemon laundering by trying to get the customer to trade-in the vehicle. The vehicle will appear as “clean” and the next buyer will not know of the unrepairable issues or the fact that the prior owner tried to have it bought back.

Keep in mind that the lemon law also applies to leases. Many people will lease a vehicle, and even though they have numerous issues and think that their car is a “lemon,” they don’t ask for a repurchase. They think, "it is just a three year lease, I can put up with it." The problem with this, if is the vehicle is simply returned at the end of the lease, the next purchaser will not know about the vehicle’s issues and that it qualified for a lemon law buyback. We have even seen cases where vehicles that qualified for a repurchase under the lemon law were later sold as “certified pre-owned” vehicles. Not only was the title not branded, it was re-sold at a higher price.

A more flagrant violation by manufacturers is when they repurchase a vehicle in response to a buyback request but simply refuse to brand the vehicles’ title as a “lemon.” This is more common if the repurchase occurs before litigation. The manufacturer might put language in a release claiming that the buyback is simply “goodwill” and not pursuant to any warranty laws. But the law in California is clear, even if no lawsuit was filed, the title still has to be branded.

If you believe that you have been a victim of a lemon laundering scheme or bought a laundered lemon, please give us a call or fill out an online contact form.

Unlawful Repossessions

A financial institution can only repossess a vehicle if there is a “default” on the contract. And per Uniform Commercial Code Section 1-309, the financial institution can only repossess a vehicle “if it in good faith believes that the prospect of payment or performance is impaired.”

So what does this all mean? A “default” can occur when the consumer fails to meet any obligation under the contract. The most common “default” that we see is missed payments. There are other types of defaults, such as not having car insurance on the vehicle or allowing the vehicle to get impounded. It is important to check the fine print on your contract, there are a number of ways that you could be in “default” and not even know it. For example, many retail installment sales contracts forbid the consumer from taking their vehicle outside of the United States without the lender’s consent. You could be in default just for taking the vehicle to Mexico!

A default alone is not enough. The lender must also have a good faith belief that future payments will not be made. California does not provide for a minimum number of days that you can be late before the lender can repossess your car; there is not required “grace period.” But this does not always mean that the lender can repossess the car if you are just a few days behind. If the lender has repeatedly allowed you to pay late in the past, they may be “estopped” from repossessing the vehicle if you are just a few days late. Even though you would be in “default,” the lender knows that you normally pay late, and your prospect of payment is not impaired. The lender would not have a “good faith” belief that the prospect of future car payments has been impaired. A repossession under these circumstances might be unlawful.

And a repossession is unlawful if there is no default at all! This does happen. Sometimes a vehicle gets repossessed by mistake. The repo agent can pick up the wrong car or there is a “glitch” on the financial institution’s part so a consumer with a current contract has their vehicle repossessed by mistake. More often, there is a miscommunication between the consumer and the financial institution; the parties might agree to push back the payment due date, but this does not get reflected in the lender’s computer system and the vehicle gets repossessed even before the next payment is actually due. Other times, a consumer can buy a new car (and even pay cash), but the selling dealership does not pay off the prior owner’s outstanding loan balance; the former financial institution might repossess the vehicle, thinking it still belongs to the prior owner.

The worst situations are repossessions where there is no default and no mistake; the financial institution or dealership orders a repossession when they know there was no default. This is often the end result of yo-yo financing. If the consumer asserts their rights and refuses to allow the dealer to cancel the contract after the 10 day cancellation period is up, the dealership, not wanting to be a lender, may simply repossess the vehicle, thinking they will get away with it.

If you believe that you have been a victim of a wrongful repossession, please give us a call or fill out our online contact form.

Unlawful Post-Repossession Debt

In California, your obligations to the financial institution might not end once the vehicle is repossessed. Even after they repossess your vehicle and sell it at auction, the financial institution still may claim that you owe more and try to collect a “deficiency balance” from you.

But this is only legal if the financial institution strictly complied with California’s post-repossession requirements. The ability to assess a deficiency is contingent on these requirements.

So what is required?

First, the repossession itself needs to have been lawful. If the repossession itself was illegal, the customer certainly does not owe a deficiency balance.

Second, the financial institution must have timely sent the post-repossession notices that strictly comply with California law. What notices must be sent out depends on how the vehicle was financed. Most vehicles that are financed in California are financed through retail installment sales contracts that are governed by the Rees-Levering Automobile Sales Finance Act.

Rees-Levering requires that the financial institution, within 60 days of the repossession, send out a “Notice of Intent to Dispose of Property” NOI that contains detailed information and provides the consumer with specific rights. If any of the nine detailed categories of information are missing or are incomplete, then the financial institution can not assess a deficiency.

Rees-Levering requires that the NOI give the consumer “the right to redeem the motor vehicle.” This means that the consumer can get the car back by paying the entire amount owed on the contract plus late fees and repossession costs. The right of redemption must always be given.

Depending on the circumstances, the NOI may need to provide the consumer with the “right to reinstate the contract.” This means, that the consumer can cure the default (pay the owed payments), pay any late fees or repossession expenses, get back the car, and continue with the contract. The lender only has to give the right of reinstatement once every twelve months and only twice during the term of the loan. In addition, the lender can deny the right of reinstatement under certain situations. However, if the lender does deny the right of reinstatement, the NOI has to state why reinstatement is being denied.

The NOI has seven other categories of required information, including: it must tell the consumer who to pay to reinstatement and redeem; where the car can be picked up, provide for the right to request a ten day extension, and contain a number of disclosures.

If any of these are missing, the financial institution cannot require the consumer to pay a deficiency.

Even if you think you cannot afford to get your car back, it is very important to keep all of your paperwork and hold onto whatever the lender sends you. If the lender tries to collect a deficiency from you or files a lawsuit against you, you may have a complete defense and owe nothing if the lender had failed to provide you with a compliant NOI.

If your vehicle has been repossessed or a lender is trying to collect a deficiency from you, please give us a call or fill out our intake form.

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