Search
Unfair and Deceptive Acts and Practices: 7.3.8 Misrepresentations As to Consumer Cancellation Rights
Penalties for canceling sales and the handling of deposits and cancellation rights must be disclosed.286 A dealer cannot promise consumers they may back out of a deal, when this is not the case.287 Penalty clauses in sales contracts may be unenforceable if they provide for unreasonable liquidated damages, as a matter of contract law.
Unfair and Deceptive Acts and Practices: 7.3.9 Cooling-Off Periods in Automotive Sales
While the existence of a three-day cooling-off period for car sales is a widespread misconception, in an odd twist, consumers may have such a cancellation right, at least for certain types of car sales or in certain states. As described NCLC’s Fair Credit Reporting,288 federal or state credit repair legislation may treat car dealers as credit repair organizations, and, as such, they must provide a three-day cooling-off period and meet other statutory requirements. Failure to comply can lead to voiding of the transaction.
Unfair and Deceptive Acts and Practices: 7.3.12 Private Sellers and Curbstoners
Sometimes a consumer buys a used vehicle through a want ad from someone who appears to be a private seller. If the used vehicle turns out to be a problem vehicle—a rebuilt wreck, for example—the buyer should always investigate whether the seller really is just an individual selling their own car. A subpoena to the newspaper in which the car was advertised may reveal that the seller has advertised many cars, suggesting that selling cars is actually a side business. Depending on the volume of business, the seller may have been required to obtain a dealer’s license from the state.
Unfair and Deceptive Acts and Practices: 7.4.1 Introduction
Used car sales are an important area of consumer abuse. This subsection covers both sale of cars that are offered as used and also cars sold as new when they are really used. The next section examines UDAP precedent dealing with new car sales. In handling a used car case, it is important also to review §§ 7.1–7.3, supra, as well.
Unfair and Deceptive Acts and Practices: 7.4.2 FTC Used Car Rule
The FTC’s Trade Regulation Rule on the Sale of Used Motor Vehicles (Used Car Rule) requires dealers who offer a used car to put a window sticker on the vehicle with specific information, provide a copy of the sticker to the consumer, and incorporate information from the sticker into the sales agreement. It also prohibits certain misrepresentations and requires information about warranties to be disclosed.
Unfair and Deceptive Acts and Practices: 7.4.4 Nature of Prior Use
It is deceptive to misrepresent or fail to disclose the nature of a car’s prior use, such as when the vehicle was used as a taxicab or police car.326 A number of cases have found it deceptive to fail to disclose a vehicle’s prior use as a daily rental.327 It is also deceptive to fail to disclose that a vehicle has been previously purchased at a repossession sale,328 or to misrepresent a car sold at auction as purchased from an individual.
Unfair and Deceptive Acts and Practices: 7.4.5 Odometer Rollbacks and Mileage Misrepresentations
Tampering with odometers, failing to disclose accurate odometer readings, and misrepresenting a car’s mileage are all deceptive practices.333 Even a dealer’s innocent misrepresentation of a vehicle’s odometer reading, due to a rollback by a previous owner, is a UDAP violation, because scienter and intent are not elements of UDAP claims.334 In such a situation the consumer may also have a claim against one or more upstream sellers of the vehicle.335
Unfair and Deceptive Acts and Practices: 7.4.7 “Lemon Laundering” (Undisclosed Sale of Car Previously Returned As a Lemon)
Lemon laundering occurs when a defective vehicle, after a number of unsuccessful repair attempts, is returned to the manufacturer pursuant to a remedy under a state lemon law and that defective vehicle is then put back into the stream of commerce with no disclosure of its history. The detailed discussion of lemon laundering found in NCLC’s Automobile Fraud354 lists a number of states that have enacted lemon laundering statutes.
Unfair and Deceptive Acts and Practices: 7.4.8 Deceptive Practices Relating to Goodwill Buybacks
With the growing utilization of lemon laws and lemon laundering statutes, manufacturers are increasingly offering lemon car owners a “good will” buyback, instead of a replacement pursuant to the state lemon law. These goodwill buybacks may involve UDAP claims for both the consumer whose vehicle is bought back and also for any consumer who subsequently buys the vehicle.
Unfair and Deceptive Acts and Practices: 7.4.9.2 The Special Case of a Demonstrator with a Repair History
A vehicle that is a demonstrator, program car, executive vehicle, or the like has never been titled, and still retains its status under many state laws as a new vehicle. This has an interesting application when, as is the case in many states, a state law requires disclosure of damage to new vehicles if that damage is over a certain dollar amount.372
Unfair and Deceptive Acts and Practices: 7.4.9.3 Dealer Resale of the Same Junk Used RV or Car to Lure Consumers into More Costly Deals
Apparently, some used vehicle dealers, particularly recreational vehicle dealers, are engaging in a churning scheme whereby they seek out defective vehicles to be resold to multiple consumers. These junkers are advertised at very low prices, bringing customers onto the lot. The consumer is either switched to another vehicle or sold the defective vehicle. When it soon breaks down, the consumer brings the vehicle back and is switched into another vehicle.
Unfair and Deceptive Acts and Practices: 7.4.10 Misrepresentations Concerning Clear Title
When a car dealer represents that it can sell a car, it represents that it has good title to the car.374 It is a UDAP violation for even an innocent car dealer relying on a seemingly valid certificate of title to sell a car that later turns out to be stolen.375 It may be a UDAP violation to sell a vehicle that should have a salvage title even if the dealer does not have actual knowledge of the vehicle’s history.376 It is also a UDAP violation to se
Unfair and Deceptive Acts and Practices: 7.4.11 Misrepresentations of Vehicle Characteristics
Used car dealers cannot misrepresent a car’s characteristics, such as the number of cylinders that a vehicle contains.380 It is also deceptive to fail to disclose that the engine in the vehicle is not the type designed for that vehicle.381 A dealer engages in a deceptive practice when it sells an engine different than represented, and which was not in as good working order as represented.382 Misrepresenting the model of a vehicle is a UDAP violatio
Unfair and Deceptive Acts and Practices: 7.4.12 Misrepresentations As to Vehicle Warranty
Dealers cannot misrepresent the extent of the warranty,384 or represent that a vehicle is sold with a warranty, when it is not.385 In states which prohibit the disclaimer of the implied warranty of merchantability, it may be a UDAP violation to misrepresent that a car is sold “as is” with “no warranty.”386 Dealers must also disclose, prior to sale, that a used vehicle is sold without any warranty,387
Unfair and Deceptive Acts and Practices: 7.4.14.2 Credit Repair Laws May Apply to “Buy-Here, Pay-Here” Dealerships
An integral part of most “buy-here, pay-here” dealerships is that they offer to improve the consumer’s credit rating, presumably by providing financing that allows the consumer to build a credit history.
Unfair and Deceptive Acts and Practices: 7.4.14.3 Revolving Repossession Practices
“Buy-here, pay-here” dealerships aggressively repossess cars if the consumer is behind in the monthly or weekly payments. This can quickly lead to a “revolving repossession” scheme because the cars have such low cash value and because the dealership can turn around and sell the same car for so much. That is, there is a tendency for “buy-here, pay-here” dealerships to purchase the car back themselves and resell the car to another consumer.
Unfair and Deceptive Acts and Practices: 7.4.14.4 Information to Obtain in Discovery
Finance companies and others aggressively promote “buy-here, pay-here” programs and provide extensive training and advice on how to set up and maintain such a program. Consequently, discovery requests may produce graphic material explaining how the dealership operates. In addition to deposing sales and management personnel involved in the program, request all documents dealing with the program, particularly sales and training manuals. Manuals provided by third-party finance companies should especially be sought.
Unfair and Deceptive Acts and Practices: 7.5.1 Introduction
New car sales pose a number of issues, covered in various places in NCLC treatises, as described in § 7.1, supra.
Unfair and Deceptive Acts and Practices: 7.5.3 The Monroney Sticker
The manufacturer, prior to delivery of a new vehicle to a dealer, must affix a sticker to the windshield or side window. The sticker must be clear, distinct and correct, and must include the make, model, and vehicle identification number, the final assembly point, the name and place of business of the intended dealer, and how the vehicle is to be transported to that address.444
Unfair and Deceptive Acts and Practices: 7.5.4 Undisclosed Damage Before a New Car Is Sold
New automobiles may be damaged in transit to the dealership or may be damaged at the dealership before the consumer takes over ownership. Manufacturers and dealers prefer to fix and repaint these vehicles and pass them off as new. The practice has become so common that about half the states have enacted laws regulating the practice, requiring disclosure of certain amounts or types of damage to the vehicle occurring before its first retail sale.
Unfair and Deceptive Acts and Practices: 7.5.6 Stealing Manufacturer Rebates
A dealer who steals rebates that manufacturers provide to the consumer is obviously committing a UDAP violation,479 in addition to a tort. The more difficult issue is how to discover and prove that the theft took place.
Unfair and Deceptive Acts and Practices: 7.5.7 Destination Charges
One interesting and unresolved question is whether it is a UDAP violation for automobile manufacturers to include in a new car sticker price a “destination charge” that is not based on actual transportation costs. Some manufacturers use a “destination charge” that is an average charge for all cars shipped that year, and not the actual charge to ship a particular car from the manufacturer to a particular destination. Lawsuits challenging this practice have been settled, but the terms are confidential.
Unfair and Deceptive Acts and Practices: 7.5.8 Slow and Non-Delivery of Ordered Cars
A few state UDAP regulations establish standards concerning slow delivery of ordered cars.480 More generally, it may be a UDAP violation to continually stall a consumer and mislead the consumer into believing a car will be delivered when the dealer has no basis for this claim.481 Dealers cannot misrepresent that delivery will be soon when they know this will not happen.482 Nor can a dealer fail to order a model as promised, and then later try to sw