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AG: Dealer can't keep down payment if spot delivery unravels

November 12, 2010

The Illinois attorney general’s office has seen an uptick this year in area dealers who fail to return a customer’s down payment when a spot delivery unravels, and the office has opened investigations against six dealers, assistant attorney general Greg Grzeskiewicz said.

Grzeskiewicz led a July 28 meeting of the Illinois Attorney General’s Dealer Advisory Committee, which includes CATA representatives and gathers semiannually to discuss dealer-related issues.

He noted one dealer who, when spot-delivering a vehicle, asks his customers to sign a statement that they will pay 42 cents for each mile the vehicle is driven if financing cannot be secured and it must be returned.

Section 2C of the Illinois Consumer Fraud and Deceptive Business Practices Act forbids a seller from retaining any part of a down payment of a sale conditioned on the consumer having an acceptable credit rating.

According to the act, any retention ". . . under those circumstances as a fee for investigating the credit of the consumer or as liquidated damages to cover depreciation of the merchandise which was the subject of the purchase order or contract or for any other purpose is an unlawful practice within the meaning of this Act, whether that fee or those charges are claimed from the down payment . . . or made as a separate charge to the consumer."

Even in cases of repossession, Grzeskiewicz said any deposit must be returned and any trade-in must be returned if the dealer can’t arrange financing at the same term agreed to by the customer. He said some dealers were charging the customers for excessive wear to the returned vehicle, but that is not allowed.

"This (uptick) may be a result of financing being more difficult to obtain in this economy," he reasoned.

Other matters the attorney general’s office is monitoring:

• Sales of vehicles for more than their advertised price. The infraction commonly occurs when dealers list reduced prices on Internet ads. The Better Business Bureau writes letters to offenders, and the attorney general has taken enforcement action. A consumer does not have to see the ad with a lower price for the infraction to have occurred.

• Totaling limited rebates in ads. Don't do the math. It is problematic when a dealer must call a customer weeks after the sale to say that the customer did not qualify for one or more of the limited rebates and thus must return to the dealership to pay the difference.

But Ed Burke, who owns Naperville Jeep-Dodge and attended the meeting, said he and dealers he knows instead tell customers who claim a military rebate without supporting documents that if the customer returns later with the necessary documents, the dealer will re-bill the transaction minus the rebate amount.

• Ads that tout "payments as low as." Such ads also must depict the high range of payments.

• CouponsAnother Internet-heavy source of infraction, which direct the customer to mention the coupon in order to reduce the selling price, or take the coupon to the dealership to earn a higher trade-in allowance. "This still pops up every once in a while," said Grzeskiewicz.

• Use of the word "guaranteed" in AutoTrader Buying Center ads. The use is misleading because the initial value established for a consumer’s vehicle is likely to change upon inspection, and the program itself initially anticipated that, advising that final offers could be different than the guaranteed amount. Recent radio spots correct the matter.

Under the program, a vehicle can be used as a trade-in on the purchase of another vehicle, or purchased by dealers--the Buying Centers—with no sale of another vehicle to the consumer.

• Sales negotiated in a language other than English. An Illinois law enacted in 2001 makes it simpler for retailers to conduct a transaction or other negotiation with a customer in a foreign language. A single form, available on the CATA Web site, can be used to confirm that the customer understands the obligations of the contract or other written negotiation, after an explanation to the customer in his native language.

A consumer advocate at the committee meeting said foreign-speaking people complained to him that they neither understood recent vehicle sales transactions nor signed the necessary form. With the form absent, he said he asked the dealership employee to sign a statement attesting that at no time was the negotiation discussed in a second language.

• Dealers who buy used vehicles from other dealers without also obtaining the title. Recently, said Grzeskiewicz, the problem stems from dealers about to close who sell their inventories without settling all liens. The new dealer never gets the title, and then he sells the title-less car. "Now there’s a problem because the new consumer owner never gets a title. You have to unwind this deal to make the customer whole."

He advised dealers not to pay for any vehicle before obtaining its title.