Contrary to the spin from unscrupulous car dealers, and erroneous reports in the news, it is illegal for car dealers to sell dangerous used cars with unrepaired safety recalls. Injured or misled consumers or their surviving family members who sue dealers that engage in such reckless practices usually win confidential settlements. The dealers insist on confidentiality to cover up their illegal activity. The legal settlements are a telltale sign that the dealers know perfectly well what they are doing is illegal.
So if you discover that a crooked car dealer sold you an unrepaired recalled used car, you should get expert legal advice and fight back.
Here’s the scoop: There is a FEDERAL law against car dealers selling recalled NEW cars. There is also a FEDERAL law that prohibits rental car companies with fleets of 35 or more vehicles from renting or selling recalled rental cars, which are legally considered USED vehicles. That is because they were purchased by the rental car companies, making them USED. While there is still no specific FEDERAL law against other car dealers selling recalled USED cars, if they do, they risk being held accountable under various STATE laws.
No less an authority than the U.S. Federal Trade Commission has noted:
“…state product safety, tort, and other consumer protection laws, provide important safeguards to consumers affected by defective cars.”
An attorney who advises auto dealers has also warned them that if they sell used recalled cars, they face serious sanctions under state laws. According to a report in Automotive News:“There are theories of liability that plaintiff attorneys may attempt to attach to these vehicles, even if dealers are using good-faith efforts to identify potential open recalls,” says Shawn Mercer, a partner at Bass Sox Mercer, a Tallahassee, Fla., law firm that specializes in dealership franchise law… “depending on the jurisdiction,” Mercer says, “potential liability can stem from violations of state laws or common law tort claims.” (Emphasis added)
The article also cautions car dealers:
“Selling a vehicle with an undisclosed safety problem makes for dissatisfied customers and can have legal repercussions, even if the dealership was unaware of the recall.” (Emphasis added)
One legal case that stands out, making the point that state law prohibits dealers and other businesses from failing to exercise due care, or acting with negligence, is Houck vs. Enterprise. Sisters Raechel and Jacqueline Houck were ages 20 and 24 when they visited their parents in Ojai, California. On their way back home to Santa Cruz, they were killed by an unrepaired recalled rental car — a Chrysler PT Cruiser that caught on fire, and also lost steering. They ended up colliding with an 18-wheeler semi-trailer truck and perished in the crash.
Their heartbroken, grieving parents sued Chrysler and Enterprise under state laws, for failing to exercise the common law duty of care, and for negligence, resulting in wrongful death. Eventually, on the eve of trial, Enterprise admitted 100% liability — under state laws. A jury awarded the Houcks $15 million in compensatory damages.
Years later, the President of the California New Car Dealers Association made the false claim that it wasn’t illegal for dealers to sell unrepaired recalled used cars. The Houcks’ attorneys wrote a scathing letter pointing out that violating state civil laws is illegal. The attorneys cited the unanimous jury decision in the Houcks’ favor, and also cited state laws against negligence and common law torts.
CARS worked closely with Cally Houck, Raechel and Jacqueline’s mother, to get a new federal law enacted to prohibit rental car companies or car dealers from renting, loaning, or selling unrepaired recalled cars. The battle lasted for years, with auto manufacturers and dealers actively opposing the bill, even after the rental car industry had dropped its opposition. But eventually we won.
That victory means that not only do rental car companies remain liable under state laws, but they also face enforcement by the National Highway Traffic Safety Administration (NHTSA), the nation’s premier auto safety agency.
Thanks to the passage of the Raechel and Jacqueline Houck Safe Rental Car Act, NHTSA now has the authority to issue fines or take other action if a rental car company violates the law — even if no one is injured or killed as a result. Thus, the Act saves lives and prevents more tragedies from happening.
CARS supports the ongoing efforts of Senators Blumenthal and Markey, and U.S. Representative Jan Schakowsky, to enact federal legislation to make it a violation of federal law, enforceable by NHTSA, for car dealers to sell unrepaired recalled used cars.
Meanwhile, victims of crooked dealers who play “recalled used car roulette” with their customers’ lives, should get legal advice and fight back, using existing state laws. It’s also important for state attorneys general to enforce the existing state laws against fraud, violations of express and implied warranties, and other provisions of law.
CARS applauds the District Attorney in Sedgwick County Kansas — one of the few law enforcement officials in the nation who is standing up to the powerful car dealer lobby in order to protect car buyers and others who share the roads.
Auto manufacturers attack California’s landmark auto lemon law
Pro-consumer / auto safety organizations urge Gov. Newsom to veto SB 71
Auto manufacturers who produce seriously defective vehicles are backing legislation on Governor Gavin Newsom’s desk that would drastically weaken the ability of hapless victims of lemon automobiles to use California’s auto lemon law to get a refund. If Governor Newsom signs the bill (SB 71) into law, millions of California vehicle owners would face a much higher risk of being stuck with lemon autos that are unreliable and often unsafe to drive.
In a letter sent to legislators in Sacramento, the Alliance for Automotive Innovation — the trade association for dozens of international auto manufacturers — argues for passage of SB 71, authored by Senator Tom Umberg (D-Santa Ana), the powerful Chair of the California State Senate Committee on the Judiciary.
SB 71 would take away the ability of consumers who purchase faulty lemon cars for less than $35,000 to access “unlimited civil” courts, where they can easily get legal representation — usually at no cost to them — and may be awarded up to double their damages as a civil penalty, if they win and prove that the manufacturer’s refusal to promptly comply with the lemon law was “willful.”
Instead, consumers whose vehicles cost less than $35,000 would be forced to submit their cases to “limited civil” courts where they would face a number of procedural hurdles that usually make it impossible for them to win. For example, they are unlikely to be able to get enough discovery to prove their case. This means that scofflaw auto manufacturers who produce problem-riddled lemon cars priced below $35,000 would be able to get away with foisting them off on California car buyers and refusing to honor their warranties and fix them. Thus, auto giants would save potentially tens of millions of dollars in auto repair costs they would otherwise have to spend to fix problem cars under warranty.
If Governor Newsom signs SB 71 into law, he would be the first California governor to weaken protections for California’s car buyers under California’s landmark auto lemon law, widely regarded as the best in the nation. In the past, governors of both major political parties, democrats and republicans alike, have signed bills to improve and expand protections against defective lemon cars, starting with Governor Ronald Reagan, who signed California’s Song-Beverly Consumer Warranty Act — the original “lemon law” — in 1970.
The timing couldn’t be worse, since consumer surveys show increasing dissatisfaction and complaints about major defects in new vehicles, which are prone to myriad problems caused by faulty electronics and software programming.
According to J.D. Power’s annual survey of initial quality among motor vehicles: “In the IQS, J.D. Power ranks automakers based on verified-owner responses, calculating for each a problems-per-100-vehicles (PP100) score. Looking at recent study results, the number of problems increased by 18 PP100 between 2021 and 2022 and climbed a massive 30 PP100 from 2022 to 2023. That’s nearly 50 PP100 combined in just two years. Automakers are seeing more persistent problems with their new technologies.“ — New Tech Drives Major Increase in Vehicle Quality Issues, JD Power report June 22, 2023.
According to the official analyses of SB 71, the only supporters are debt collectors and auto manufacturers and suppliers.
CARS and other non-profit organizations who give consumers a voice in the legislative process are fighting back. We’re urging Governor Newsom to veto SB 71. Here’s our letter to Governor Newsom. The more Californians the Governor and his staff hear from, the better.
ACTION ALERT!!
Save YOUR right to fight back against greedy auto manufacturers
Don’t let auto giants stick you with an unsafe, defective lemon car
Save California’s auto lemon law – act NOW!!
What can you to make YOUR voice heard and save California’s auto lemon law, so you can fight back if your “dream car” turns out to be a lemon?
Send a brief personalized e-mail message to California Governor Gavin Newsom, here. Under topic, choose “An active bill” and then “SB 71”. Where it asks for your position, choose “CON.” In your comments, let the Governor know that you live in California and urge him to VETO SB 71. Use your own words to explain why. For example, “I spent over $30,000 to buy a brand new car, and it was in the shop for repairs for over two months. Ford refuses to buy it back. California needs a strong auto lemon law. Don’t weaken it. I urge you to VETO SB 71.”
We all saw the images of the devastation caused by Hurricane Ian, including vehicles floating in flood waters. It’s estimated that over 358,000 vehicles were submerged – many of them in highly corrosive salt water.
Live far away from Florida? You may think you don’t have to worry about flood cars from Hurricane Ian showing up near you. But flood cars are often shipped to auctions in other states and end up all over the map. Many will be resold in Florida, Georgia, Alabama, Mississippi, and the Carolinas. But others will be shipped to far-flung states. Flood car crooks target certain states because they have large car markets and can command higher prices. Like California, New York and Texas. Plus consumers there may not be on the lookout for flood cars, making them easy prey for scamsters.
New Cars Get Flooded Too
Even if you’re in the market for a new car, it’s important to be on high alert.
That’s because it’s not only used cars that get flooded. New cars that were submerged while parked on car lots at large, franchised new car dealerships are also declared a total loss. But that’s not the end of the road for those “brand new” cars, SUVs, and trucks. Instead of being crushed, water-logged cars are towed away and parked in row after row, covering acres of vacant land. They sit there with the sun beating down on them, causing mold, bacteria, and mildew to grow. Some are still festooned with seaweed and slathered in grime and slime.
Then they’re shipped to auction companies like Copart and Insurance Auto Auctions (IAA) that have ties to auto insurers. Copart and IAA brazenly trumpet the fact they have flood-damaged cars available. For example, on October 18, IAA offered 9,968 “Hurricane Ian” vehicles for sale. They sell them to the highest bidders, who can bid online. The buyers may be from distant states, or even other countries.
Unscrupulous characters buy flood cars at a discount, spiff them up, attempt to mask the musty odors, and quickly resell them. Car dealers are eager to snap them up. Then they sell them for top dollar, without any discount. That way, they not only make a fatter profit, they also are less likely to arouse suspicion that something’s wrong. If the car is marked down, buyers are more likely to be wary. In other words, the “normal” pricing is part of the deception.
Some car dealers sell severely damaged or flood cars as so-called “certified” vehicles, advertising that they passed a rigorous inspection and charging hefty markups. The bottom line: don’t trust any seller, whether they’re an individual or a car dealer. Check out the car yourself, before you buy.
Why avoid flood cars?
FLOOD CARS ARE UNSAFE
Flood cars are hazardous. Today’s cars are basically computers on wheels. All the sophisticated safety systems, including the braking, steering, stability control, and navigation features, are controlled by electronics and by millions of lines of computer code. Imagine dropping your personal computer into the ocean, and letting it soak. After it gets a dousing in salt water, even if you were able to start it up, the sensitive electronics are doomed to corrode.
FLOOD CARS ARE UNHEALTHY
Flood cars are harmful to your health. Besides being unsafe to drive, flood cars are hopelessly contaminated with spores, mold, bacteria, and various toxins. They’re prone to causing serious health problems, particularly for people with asthma, allergies, and compromised immune systems. Even if they’ve been cleaned up cosmetically and sprayed to mask the odors, they are basically rotting from the inside out.
FLOOD CARS ARE UNAFFORDABLE
Flood cars are inevitably going to have massive, expensive problems that defy repair. Worse, even if you pay extra to get a new or “nearly new” car with a warranty from the manufacturer, that warranty will be deemed to be void. Some consumers have found this out the hard way, paying top dollar for “new” vehicles that were submerged in a flood. They immediately experienced major problems. Then they were shocked and dismayed when the manufacturer refused to honor the warranty, citing the fact the car had been flooded and declared a total loss.
Extended service contracts are also void. Typically, service contracts exclude “pre-existing conditions” such as being wrecked or flooded. So you could end up paying a lot more for the coverage, but be unable to use it to cover expensive repairs.
If you try to resell the car, dealers or other consumers will most likely offer you far less than you paid, or still owe to a lender. Or they may flat-out refuse to buy it. Worst case scenario – you could get stuck with an expensive, unsafe lemon car you can’t drive, can’t fix, and can’t sell.
How to avoid flood cars
Don’t expect to find a mackerel on the manifold or a trout in the trunk. Scamsters are too smart for that. They scrub and clean the cars, spiffing them up cosmetically. They may remove the floor mats and even replace some of the upholstery. They spray cans of deodorizers in the interiors, to disguise unpleasant smells. So at first glance, the cars may appear pristine. But behind that appealing facade, they’re rotting from the inside out. So be sure to look deeper. The time to do this is BEFORE you agree to buy.
Here are steps you can take to stay safe and avoid hazardous flood cars and also steer clear of cars with deadly safety recall defects. To save you time and money, the easiest, least expensive steps are first. That way, you can eliminate the worst lemons before you spend more time or hard-earned dollars.
Step 1: Get the Vehicle Identification Number, or VIN. This is a unique number, usually 17 digits. It’s like the vehicle’s fingerprint. The VIN unlocks a treasure trove of information about a car’s past. Typically, the VIN is stamped on a small metal plate on the dashboard. It’s usually also on a sticker inside the driver door jamb, on the title, and on sales documents. It may also be displayed in ads.
Check FREE database of unsafe vehicles with deadly safety recall defects
Step 2: Enter the vehicle’s VIN at the website for the National Highway Traffic Safety Administration, here. This is quick, easy, and free. Auto manufacturers are required to provide information about deadly safety recall defects to this government website. If the vehicle has an unrepaired safety recall defect, it’s too risky to buy, even if it wasn’t flooded. When you check here first, you can save yourself from paying anything or taking any more time to look further.
Warning: The way auto manufacturers describe defects in their recall notices may make it seem like the defects are not a serious threat. But that can be deceiving. For example, a recall due to “floor mats” caused the tragic deaths of four members of a family in San Diego who were on their way to a soccer game when the defect caused the accelerator pedal to stick. BMW describes one recall defect as causing a “thermal event.” Translation: the car is prone to catching on fire, and bursting into flames.
Next: IF the vehicle passes the safety recall test
Step 3: Enter the VIN at the National Motor Vehicle Title Information System, or NMVTIS. This database of total loss vehicles is operated by the U.S. Department of Justice. All the U.S. states, except for Hawaii, participate and share data with NMVTIS. This is the best place to search next, specifically for total loss flood cars.
Consumers for Auto Reliability and Safety sued the U.S. DOJ and won, compelling the DOJ to issue federal rules that require each of these businesses, in all 50 states, to report every vehicle under 5 model years old that they declare a total loss to NMVTIS, within 30 days (many report daily):
▪ Auto insurers
▪ Self-insured entities, including large auto dealership chains and rental car companies
▪ Salvage pools and salvage auctions, such as Copart and Insurance Auto Auctions
▪ Junkyards
▪ Auto recyclers
▪ Scrap vehicle shredders
▪ Scrap metal processors
▪ Vehicle remarketers
NMVTIS is the only database where insurers must report vehicles they declare a total loss, within 30 days, in order to comply with federal law. When it comes to total loss vehicles, NMVTIS tends to be more up-to-date and complete than other databases, and often captures total loss vehicles that other databases miss. That’s largely because totaled vehicles must be reported to NMVTIS – even if they are not considered a total loss under relatively weak state laws, which frequently allow hazardous totaled vehicles to go undetected.
The DOJ has approved over a dozen NMVTIS data providers who charge a small amount (usually less than $10) to access NMVTIS’ total loss data. This is less expensive than Carfax or Autocheck. So check here first. If the vehicle shows up in NMVTIS because it was a total loss, play it safe and reject it.
NMVTIS is a very valuable resource, but it has limits. What’s not necessarily included in NMVTIS?
▪ Older vehicles, 5 model years or older – they are not required to be reported, although some businesses report older vehicles voluntarily
▪ Vehicles that are severely damaged, but not declared a total loss
Plus – sometimes major companies violate federal law and fail to report total loss vehicles to NMVTIS. So even if a vehicle doesn’t show up in NMVTIS, it’s not necessarily a clean bill of health. It’s still really important to take the next steps and get a car that passes the “NMVTIS test” inspected by a trustworthy automotive expert you choose yourself, and also check out the car yourself, in person.
Next: Visual inspection and test drive
Step 4: Look carefully for tell-tale signs of flood damage, including:
• Silt or other residue in odd places, like under the floor mats, in crevices, in the trunk, and inside the wheel well
• Rust or signs of corrosion
• Fogging inside headlamps or taillights
• Water lines in the passenger cabin, engine compartment, or trunk
• Musty smell, particularly when you turn on the air conditioning or heat
• Heavy scents from air fresheners or cleaning solutions
• Mold or mildew
• Used cars with brand-new upholstery
• Stalling, difficulty starting, electrical glitches, or other driveability issues that act up during a test drive
• Warning lights that illuminate on the dashboard
Other tell-tale signs:
• Title document stamped with a “brand” that indicates the vehicle was “salvage,” “junk” “rebuildable,” “water/flood” “rebuilt” “water-damaged” or simply “flood”
• Seller who refuses to show you the vehicle’s title prior to sale, making lame excuses for not letting you look it over carefully before you buy
• Signs the title was altered. Some crooks use white-out to cover up the “flood” brand or literally punch holes in the title to remove the brand, using a hole punch
• Vehicles with titles from Florida or other states hit hard by Hurricane Ian
Step 5: IF the car passes all of those tests, then the last step is to get it inspected by a trustworthy automotive technician you choose and pay for yourself. Do NOT rely on the seller to give you an honest inspection report. Many dealers advertise they only sell cars that pass their “150 point” or “172 point” inspection. This is designed to keep you from getting your own inspection done.
But they fail to fix deadly safety recall defects, and may also lie about flood damage. They count on the fact that most of their victims won’t bother to sue, and if they do, they can force them to submit to arbitration – a rigged system paid for by car dealers where victims almost always lose.
Here’s a good resource for finding a trustworthy, qualified automotive technician, based on ratings provided by other car buyers and vehicle owners: Mechanics Files
Usually, it costs about $100 for a thorough inspection. Look for auto techs who have been in business a long time and consistently receive top ratings. Ideally, they should be expert in repairing and inspecting the same brand / make that you are interested in buying. That way, they may also be able to tell you about problems you can expect that are common to that particular vehicle, and how much it would cost to fix them. Ask the technician if they would be willing to work with you and the seller to inspect the car where it’s located, using diagnostic tools that are portable. Unless they have something to hide, the seller should be willing to cooperate with you to get the inspection done.
More tips for avoiding flood car headaches:
Beware of “title washing.”
Crooked car dealers and others who traffic in flood cars sometimes engage in an illegal practice known as “title washing” to make it easier to sell severely damaged vehicles to unsuspecting car buyers. The crooks exploit loopholes in state laws to obtain supposedly “clean” titles, erasing title brands such as “salvage” or “flood.”
NMVTIS makes it more difficult for crooks to get away with laundering car titles across state lines. But it still happens.
Some states have a reputation for being title-washing states. Sleazy car dealers send titles with a “flood” brand to one of those states and within weeks, they obtain clean titles. Presto! Now they can advertise those dangerous cars as having “clean” or “clear” titles, show prospective buyers a “clean” title, and charge top dollar. The cars may never actually leave Florida, but now they have new, “clean” titles from another state.
For example, the office of Pennsylvania Attorney General Josh Shapiro cracked down on a title washing fraud ring that allegedly involved car dealers and companies in multiple states.
What about vehicle history reports from Carfax or Autocheck?
Sometimes obtaining a vehicle history report from Carfax or Autocheck can tell you more useful information about the vehicle’s history. For example, Carfax may have information about odometer readings, prior repairs, airbag deployments, and safety recalls, and may also show when a vehicle was sold before. In general, the more you find out about a vehicle’s history, the better. But….
Warning!
Carfax and Autocheck are notorious among auto fraud experts for being unreliable. Both databases tend to have a lot of holes. Many consumers complain they were shown a “clean” Carfax when they bought their car, then found out about a prior wreck or flood damage that didn’t show up until after it was too late.
Plus Carfax and Autocheck slip disclaimers into the fine print, aimed at taking away your rights. Their “buyback guarantees” are extremely difficult to enforce.
Bottom line: Vehicle history reports are definitely NOT a substitute for a personal inspection and an inspection by a trustworthy automotive expert you choose yourself.
What if you already bought a flood car?
If you find out that someone already sold you a flood car, get advice from an experienced auto fraud attorney. Even if it was sold “AS IS,” you may have protection under your state’s consumer protection laws, such as laws against committing fraud, engaging in unfair or deceptive acts or practices, or violating an implied warranty. The way the vehicle was advertised and what you were led to believe about the vehicle’s condition when you were shopping may be major factors in whether you have a good case. The website for the National Association of Consumer Advocates is a good resource for finding an auto fraud expert in your state.
As if it wasn’t bad enough that car dealers are exploiting new and used car buyers by engaging in price-gouging during a pandemic. Making their customers’ lives even worse, some dealers and lenders are also illegally repossessing their cars. That’s so they can resell them and make another killing by exploiting someone else.
But the pro-consumer folks that President Biden appointed to head up the Consumer Financial Protection Bureau have noticed. They just announced they’re cracking down on illegal auto repossessions. Some of the practices they identified are:
“Illegally seizing cars: Servicers are repossessing vehicles from borrowers who made payments sufficient to stop the repossession or who entered a payment plan. Given the high level of harm caused by wrongful repossessions, servicers must ensure that every single repossession is valid.
Sloppy record keeping: Incorrectly coded records or agents failing to talk to their colleagues about canceling repossession orders hurts consumers and is a violation of federal law. Servicers need to ensure proper communication between them and any third-party processing a repossession.
Unreliable balance inquiries: Inaccurate balances can lead to a borrower paying less than a sufficient amount to avoid delinquency, resulting in a repossession. People are also having their vehicles repossessed because their loan payments are processed in a different order than what they had been told.
Ransom for personal property: Servicers are still holding personal property found in repossessed vehicles hostage until the property owner pays a fee, a practice the CFPB has been cracking down on for years.”
What can you do if a dealer or lender repossesses your car, SUV, or truck, and you suspect it’s illegal?
Complain to the CFPB. Here’s where you can file a complaint: Submit a complaint
Get legal advice from an attorney who specializes in representing victims of auto fraud. Be sure to ask if they are willing to represent you on a “contingency” basis, or at no cost to you. Here’s a good resource for finding an auto fraud expert in your state, by contacting the National Association of Consumer Advocates.
How can you avoid becoming a victim of an illegal repossession?
#1 Join a local credit union and get pre-approved for a loan BEFORE you shop for a car. Most credit unions are not as crooked as the big auto lenders tend to be.
If you can defer buying a car, save up and pay cash.
Consider buying your car from another consumer, instead of a car dealer. That way, you can save a LOT of $$ and also avoid a lot of hassles, like having your car basically stolen and your personal property held hostage.
Here are CARS’ tips for how to get a good deal on a nice, safe, reliable used car — while telling crooked dealers and lenders “Bye-Bye”!!
Popular video about this auto lending scam: Comedian and news commentator John Oliver reveals how car dealers and lenders engage in “churning” — buying overpriced cars that often break down soon after purchase, repossess them, and resell them again and again, making a huge profit each time. At the expense of honest, hard-working car buyers.
If you’re shopping for a new car, or a used car, you already know what the experts are saying. Car prices are soaring. For new vehicles, greedy car dealers are demanding $10,000, $20,000 or more over the manufacturers’ retail sticker price, which is usually already inflated by the manufacturers.
Car dealers are also price-gouging consumers over the price of used vehicles, and routinely selling them dangerous unrepaired recalled used vehicles without bothering to get the safety recall repairs done first — even though federal law requires auto manufacturers to provide safety recall repairs for free, for at least 15 years from when the recall is issued.
Car dealers often downplay the risks posed by safety recall defects. Don’t fall for it. Your life is precious, and if you’re paying top dollar to a professionally licensed car dealer, you deserve to get a car that is at least free from deadly defects, like brakes that fail, catching on fire, steering wheels that come off in the driver’s hands, sticking accelerator pedals, and faulty airbags that propel shrapnel into the passenger cabin, causing severe or fatal injuries such as blindness, or bleeding to death.
Car dealers are bragging in the automotive press about how their profits are also going through the roof. Billionaire investors like Bill Gates and Melinda French Gates — who are heavily invested in the AutoNation dealership chain, and Warren Buffett, whose Berkshire Hathaway conglomerate owns multiple car dealerships outright — are making vast profits by ripping off new and used car buyers, selling unsafe vehicles, and exploiting the computer chip shortage.
Some states have laws against price-gouging, but don’t hold your breath waiting for your state’s attorney general to protect you. Car dealers are so politically active and well-connected, they hardly ever get sued by public law enforcement agencies, no matter how blatantly they violate the law.
So what can you do to avoid falling prey to greedy car dealers? Many car buyers are purchasing vehicles from other consumers, who don’t have to pay for advertising, overhead, and glittering, impressive structures. or attract investment capital. Other consumers also don’t impose forced arbitration clauses on car buyers — unlike car dealers, who typically refuse to sell you a car unless you first surrender your Constitutional right to fight back in court, if they violate the law by committing fraud, rolling back odometers, falsifying loan applications, selling unsafe junkers or flood cars, selling cars that they don’t even own, or engaging in other crooked practices.
You can save a LOT of money by buying a car from another consumer, instead of being ripped off by a greedy car dealer. But you still have to be careful. Some con artists pose as private sellers, when in fact they are unlicensed dealers. They may tell you that they’re selling their own car, or their cousin’s car, when in reality that got that potential deathtrap on wheels from an auto auction, after it was rejected by another consumer and other dealers decided they didn’t want it on their car lot.
Here are tips from experts about how to get a good deal on a safe, reliable used vehicle, by taking control of the transaction yourself and buying from another car owner. This step-by-step process takes some time, but it can save you tons of $$ — and potentially save your life, and the lives of those you love.
Wishing you and your family safe, happy motoring, and freedom from price-gouging, inflation-fueling greedy car dealers!
At a time when the price of used cars is skyrocketing, and many people are flocking to buy used cars to reduce the risks of exposure to Covid posed by public transportation, are consumers getting what they are paying for?
Unfortunately, many of them are being cheated, to the tune of thousands of dollars. Their lives are also often at risk, and tragically, some used car buyers and their families and friends are being injured or killed.
According to the Consumer Federation of America’s 2021 Annual Nation’s Top 10 Consumer Complaints, auto transactions top the list, leading to more consumer gripes to state and local consumer protection agencies than any other product or type of transaction. It’s been the same for a long time, year after year.
These days, American car buyers are paying more, and being treated worse.
Car dealers routinely rip off consumers in numerous ways. Like:
Advertising cars at one price — then after you are on the lot, charging double, or more, particularly if the dealer employs “e-contracting”
Forging signatures on documents
Selling junky cars that break down soon after you buy them
Selling cars that fail to pass emissions tests, and pollute the air we breathe
Selling dangerous cars that they know were severely wrecked, while claiming they have a “clean Carfax” so they must be OK
“Loan packing” — charging thousands of dollars extra for high-profit items such as worthless service contracts, GAP, theft etch, and other unwanted stuff
Overcharging for financing, in exchange for kickbacks from auto lenders
Racist financing and discriminating against people of color
Repossessing cars, even when the buyers are making all the payments in full and on time — basically, a form of car theft
Selling stolen vehicles
Selling cars with altered odometers, and lying about how many miles they’ve been driven
Charging bogus, inflated “document fees” or “concierge fees”
Yo-yo financing — getting you to sign a contract to buy a car on good terms, then after you drive off the lot, telling you that the contract isn’t valid, or the financing “fell through,” and demanding more — sometimes under threat of arrest for “auto theft”
All of those scams are costly and risky for car buyers, especially car buyers who are from communities of color.
But the absolute worst car dealer rip-off of all is charging consumers extra for dangerous, potentially deadly unrepaired recalled cars.
It’s not only corner car lots who are foisting off seriously defective deathtraps onto used car buyers, for top dollar. It’s also huge conglomerates like CarMax and even their competitors at online “disrupters” Vroom and Carvana, who all claim their vehicles have passed a thorough inspection, but fail to get the free repairs done to fix hazardous safety recall defects that maim or kill people.
How can a car that is so defective, it’s prone to catching on fire while parked in your driveway, pass any inspection? Or a car with bad brakes that fail? Or with a steering wheel that may come off in your hands? What kind of inspection is it, that fails to catch and fix the safety defects that are likely to kill you?
Making this outrageous scam even worse, the perpetrators of this scam claim they “disclosed” that the vehicle had an “open recall,” attempting to shift the blame — and any legal liability — onto their victims. Of course, they know that hardly anyone reads those “disclosures,” especially when they’re hidden in a huge stack of 30 + documents that you have to sign.
And of course, the “disclosures” are usually only in English, and don’t really convey what’s at stake. There’s no skull and crossbones. Just a lot of long-winded, legalistic jargon.
Please don’t fall for this scam. Be sure any car you buy is actually safe, before you drive it away.
Best of all, don’t even set foot on a car dealer’s lot. Experts are sharing their 12 step-by-step tips for how to buy a safe, reliable vehicle that’s free from deadly safety recall defects, for a lot less than a car dealer would charge: 12 Easy Tips from auto experts
Stay safe and save not only your $$, but also your life!!!!!
According to news reports, Miami-Dade police recently arrested a used car dealer and charged him with rolling back the odometer on a used 2101 Mazda CX9, erasing more than 81,000 miles.
Electronic odometers were supposed to make it harder for car dealers to cheat used car buyers by lopping miles off odometers. But the switch to electronic odometers just spawned a black market in odometer-tampering tools that are cheap and easy to buy online.
The multi-billion $$ fraud continues to plague used car buyers. In fact, it’s ridiculously easy for crooked car dealers to engage in odometer fraud, with little fear of getting caught.
The National Highway Traffic Safety Administration is tasked with policing odometer fraud, but the agency is chronically understaffed and under-funded, and seldom acts unless they find a widespread pattern of illegal rollbacks.
One of the worst impacts of odometer fraud: victims of the illegal practice often end up having to pay out of pocket for expensive, unanticipated repairs that can leave them deep in debt or without a car.
A double whammy — even if you buy an extended service contract, they usually exclude coverage for vehicles with altered odometers.
How can you avoid falling prey to crooked car dealers who alter odometers? Check out CARS’ tips for how to get a good deal on a safe, reliable used car, without having to set foot on a car dealer’s lot.
The FTC announced today that the agency has” reached an agreement with Richard Berry, the owner and manager of a group of bankrupt auto dealerships in Arizona and New Mexico, to resolve charges that he and the dealerships deceived consumers and falsified information on vehicle financing applications. Many of the affected consumers were members of the Navajo Nation.”
According to Samuel Levine, Acting Director of the FTC’s Bureau of Consumer Protection, “When Berry’s auto dealerships falsified income and down payment information to qualify people for loans they couldn’t afford to pay back, they set people up for failure – including default, repossession, and ruined credit. That’s why the FTC sued Berry and his dealerships.”
In a news release, the FTC stated the following:
The FTC reached an earlier settlement with the four dealerships: Tate’s Auto Center of Winslow, Tate’s Automotive, Tate Ford-Lincoln-Mercury, and Tate’s Auto Center of Gallup. If approved by the district court, the present settlement against Berry, would result in a $450,000 payment to the FTC and conclude the FTC’s case.
The FTC’s complaint, filed in August 2018, alleged that the defendants falsified consumers’ income and down payment information to get vehicles financed and engaged in unlawful advertising. In an earlier ruling in the case, the judge found that the defendants violated the Truth in Lending Act (TILA) and Consumer Leasing Act (CLA) by failing to disclose legally required information in their advertisements.
In addition to the $450,000 payment, the proposed settlement prohibits Berry from misrepresenting information in documents associated with a consumer’s purchase, financing, or leasing of a motor vehicle, and misrepresenting the costs or any other material fact related to vehicle financing. The proposed order also requires Berry to provide consumers sufficient time to review and obtain a copy of the relevant vehicle financing documents and prohibits him from violating the TILA and CLA.”
Unfortunately, this is not an isolated case. Car dealers are notorious for targeting people of color — including indigenous Americans, recent immigrants, and others they consider vulnerable — and cheating them, causing severe hardship and sometimes homelessness when their victims lose their only means of transportation to work / schooling / child care / medical care.
How can you avoid falling prey to a predatory auto dealer? Don’t even go there. Here are CARS’ tips for how to navigate the private market, and avoid the headaches and heartaches of buying at a “stealership.”
Since 2015, auto manufacturers have recalled more than 26.5 million vehicles due to defects that can cause them to burst into flames. Some manufacturers recommend that the owners park the cars outside, where they may be less likely to burn down homes. Recently, General Motors warned owners of 2017 – 2019 Chevy Bolts with faulty batteries they should park them outside, after battery fires erupted in Bolts.
But beware: if you buy an unrepaired, recalled firebomb car from a car dealer like CarMax, and it catches on fire and burns down your home, or destroys a whole town, they will try to pin the blame on you.
This is a lesson that Californian Anthony Santos found out the hard way, after a Ford F-150 pickup he purchased from CarMax caught on fire in his driveway and caused over $200,000 in damage to the pickup, his garage, and his home. Fortunately, he and his children were able to escape the flames.
Before he bought the pickup from CarMax, Ford had issued a safety recall because the truck had a dangerous defect that made it prone to catching on fire without any warning.
CarMax failed to get the FREE safety recall repair done before selling the pickup to Mr. Santos. Despite neglecting to get the repairs done, CarMax advertised that the pickup had passed CarMax’s “125 point inspection.” This of course would lead car buyers to believe that it must at least be safe and free from known, hazardous safety recall defects.
After the truck caught on fire, CarMax tried to pin the blame on Mr. Santos for not finding out about the recall, taking his truck to a Ford dealership, and getting the safety recall repair done himself. Mr. Santos fought back and sued CarMax, but eventually the huge, publicly traded auto dealership chain won, on a technicality.
Bottom line: Buying cars from CarMax is risky, especially if you live where there’s a serious threat of wildfires.
P.S. Another hazard: Sometimes car buyers have experienced lengthy delays in getting safety recalls fixed, due to severe shortages of repair parts. CARS has heard from unfortunate car buyers who ended up waiting over a year for a repair. Meanwhile, they were afraid to drive their own cars. In some states, legislators have introduced bills to make driving your own car illegal, if the safety recall repairs haven’t been done.
You work hard for your money. You have better things to do with it than give it away to a greedy, conniving car dealer. But if you shopped at an auto dealership last year, chances are you paid too much. By a lot.
Car dealers across the nation are crowing about the record-breaking profits they’re making during the pandemic. Their fat profits are being fueled by people who are flocking to buy cars — understandably fearful about taking public transportation, flying in airplanes, or using ride-shares or other modes of transportation where they risk being in an enclosed space with others who may be spreading the Coronavirus.
According to Automotive News, “AutoNation, of Ft. Lauderdale, Fla., hit a record-high quarterly F&I [Finance and Insurance] profit per vehicle retailed on a same-store basis with an average of $2,172, an increase of 12 percent, or $240, from year-ago figures.”
AutoNation is publicly traded on Wall Street. They operate over 315 new car dealerships nationwide. Over the years, their biggest investor has included an entity affiliated with Microsoft founder Bill Gates, one of the wealthiest men in the world.
Keep in mind that $2,172 is just AutoNation’s profit on the financing and insurance products they foist off on consumers. They also profit handsomely on the price of the car itself.
Imagine what you could do with $2,172. Maybe feed your family for months. Pay college tuition and get a better job. Get a much better vehicle you really like, that’s friendlier to the environment and safer for you and your family.
Plus — something AutoNation apparently doesn’t like anyone to mention publicly — they deliberately sell their customers cars with dangerous unrepaired safety recall defects. Especially cars with killer safety defects that you cannot get fixed because there are huge shortages of repair parts.
So if you buy that recalled car, there’s no way you can get it made safe. Sometimes the parts delays can last for months, or over a year. Meanwhile, you are your family are at serious risk of being injured or killed.
Please don’t assume you will have time to get the recall fixed before tragedy strikes. Auto safety defects are like ticking time bombs. In San Diego, four members of one family –a highway patrol officer, his wife, their 13-year-old daughter, and the officer’s brother-in-law — were killed by an unsafe car the same day, just hours after a dealership handed the CHP officer the keys. They were on their way to a soccer match when the fatal defect happened.
If you don’t feel like overpaying for a dangerous deathtrap, please consider buying from another consumer and avoiding car dealers altogether. You still have to be careful, and do your homework. But at least you won’t be stuck dealing with a dealership chain that is out to maximize their profits at your expense.
How can you take control of your car buying experience, and get a good deal on a nice, safe, reliable used car? Check out these step-by-step tips from pro-consumer experts.
Your life is precious. You deserve to get the full value of what you pay for. Stay safe — and save!
According to the Federal Trade Commission, the agency is “sending refunds totaling nearly $1.5 million to individuals who were affected by allegedly unlawful financing and sales practices by Bronx Honda.
According to the FTC, Bronx Honda and its general manager told sales employees to charge higher financing markups and fees to African-American and Hispanic customers. The defendants told employees that these groups should be targeted due to their limited education, and not to attempt the same practices with non-Hispanic white consumers.
The FTC further alleged that Bronx Honda failed to honor advertised sale prices, changed the sales price on paperwork in the middle of the sale without telling the consumer, double-charged consumers for taxes and fees, and misrepresented to consumers that they were required to pay extra reconditioning and warranty fees to purchase ‘certified’ vehicles.
The FTC is providing refunds, averaging about $371 each, to 3,977 victims of Bronx Honda’s practices. Those who receive checks should deposit or cash their checks within 60 days, as indicated on the check. The FTC never requires people to pay money or provide account information to cash a refund check.
Recipients who have questions about the refunds, or consumers who financed a car purchase from Bronx Honda in 2016 through 2018 and have not previously requested a refund, should contact JND Legal Administration at 888-921-0727.”
Unfortunately, such practices are all too common at auto dealerships across the nation. How can you avoid giving your business to a crooked car dealer who is ripping people off, based on their race?
If you’re looking for a new car, your options are extremely limited. That’s because corrupt legislators have granted car dealers a special monopoly on new car sales, insulating them from competition and drastically increasing prices and harmful practices. Just about the only exception is Tesla, and car dealers have been battling against Tesla for years, in many states, to keep them from being allowed to sell new vehicles without car dealers getting to make a killing.
But if you are looking for a used car, you have the choice of buying a car directly from another consumer, eliminating the middleman, saving money, and reducing the risk of being cheated by a professional crook.
You still need to be careful, but if you do your research, find your own financing in advance, and insist on a thorough inspection, you can get a great deal on a safe, reliable used car. Check out CARS’ tips on how to avoid car dealers’ tricks and traps.
Jeffrey Goldberg’s report in The Atlantic, “Trump: Americans Who Died in War Are ‘Losers’ and ‘Suckers,” met with flat denials by the White House. But President Trump’s actions speak louder than his words. In addition to the many other incidents that have been covered by news organizations, where Trump disparaged members of the Armed Forces, and viciously attacked Gold Star families, there’s another action he took, that goes beyond his words to demonstrate an appalling level of contempt for the military community.
If you have any lingering doubt that President Trump treats America’s brave, patriotic military heroes like “suckers,” please consider this:
President Trump ignored the voices of the entire military community and sold out our brave military heroes and veterans to greedy, unscrupulous corporate scofflaws like Wells Fargo that engage in predatory and illegal practices and have a history of preying on military service members, veterans, and their families.
Those predatory, illegal practices often create financial readiness problems that can cause members of the Armed Forces to lose their security clearances, harming their military careers, costing our nation the full benefit of their extensive training and expertise, and jeopardizing our national security.
Pres. Trump even hosted a signing ceremony in the White House with representatives of unscrupulous, predatory banking interests — behind closed doors — to celebrate his shameful, anti-consumer, anti-military act. Then the White House released a photo, showing him surrounded by gleeful GOP representatives of Congress and banking trade associations whose member banks have been repeatedly caught violating state and federal consumer protection laws, scamming their customers and engaging in massive fraud.
His signature means that military service members and veterans are being denied basic, precious Constitutional rights they risk their lives and sacrifice to defend.
Those are legal rights that others — such as car dealers — were granted by Congress, and that President Trump himself has exploited to the hilt, as the most litigious president in U.S. history, while denying the same rights to members of the Armed Forces.
President Trump, Vice President Pence, and Republican Members of Congress killed the Obama Administration Rule That Would have Freed Wronged Consumers, Including Military Service Members, to Fight Back in Court Against Corporate Scofflaws That Rip Them Off
In 2016, The Military Coalition, a consortium of uniformed services and veterans organizations representing more than 5.5 million current and former servicemembers and their families and survivors, spoke up publicly for ensuring access to justice for all, including active duty military service members and veterans.
The Coalition includes familiar household names such as AMVETS, the National Military Family Association, Vietnam Veterans of America, and Iraq and Afghanistan Veterans of America. They united in an effort to help ensure that military service members are free to join forces to defend themselves from illegal acts committed by unscrupulous banking interests, predatory lenders, and crooked debt collectors.
The military organizations urged the Consumer Financial Protection Bureau (CFPB) to finalize a proposed rule to restore the Constitutional right to band together and fight back in an open court of law against corporate lawbreakers who prey on military personnel. Greedy, unpatriotic corporations like Wells Fargo.
Wells Fargo Preyed on Military Service Members
The scandal-riddled bank got caught illegally seizing vehicles from active duty military service members without even bothering to get a court order — a blatant violation of the Servicemembers Civil Relief Act (SCRA).
The SCRA has always enjoyed widespread bi-partisan support. It’s aimed at ensuring that military servicemembers can focus on defending our nation and fulfilling their mission without the stress and distractions posed by financial issues that are often very difficult and time-consuming to resolve, even for consumers who are not serving in a remote location half way around the world, on a submarine or aircraft carrier in the middle of an ocean, or in the midst of a war zone.
During the Obama Administration, federal investigators were alerted about a complaint that a North Carolina member of the Army National Guard, Dennis Singleton, filed with the Army’s Legal Assistance Program. He told the Legal Assistance attorney that Wells Fargo suddenly repossessed his car in 2015, just as he was deploying to Afghanistan to serve in Operation Enduring Freedom. Wells Fargo sold his car at an auction, then sought a deficiency balance of over $10,000 from him and his family — leaving them with no car, trashed credit, and a huge debt.
The investigators corroborated his complaint. According to the U.S. Department of Justice, they also uncovered “a pattern of unlawful repossessions spanning over more than seven years.”
Under fire from the DOJ, Wells Fargo eventually admitted it had illegally seized over 400 vehicles from active duty troops, without giving them any opportunity to defend themselves in court. The DOJ also charged Wells Fargo with violating the federal law against exceeding the 6% interest rate cap on loans to service members, making them more likely to default. Wells Fargo finally agreed to pay the harmed military personnel $4 million, repair their credit, and refrain from violating those laws in the future.
But there’s more….
Army Staff Sergeant Jin Nakamura was stunned to find out, while he was serving overseas in Operation Iraqi Freedom, that Wells Fargo had seized his 2006 Nissan Altima — even though he had arranged for direct payments from his account before he was deployed to his new duty station.
It wasn’t until later, when Staff Sergeant Nakamura filed a private, civil class action lawsuit on behalf of himself and other service members who were also harmed by the same illegal practices at Wells Fargo, that the cases of over 400 more active duty military personnel came to light. In a shocking display of hutzpah, Wells Fargo was busily ripping them off the same way, and seizing their vehicles, while the DOJ’s investigation was actually already underway.
According to Staff Sergeant Nakamura’s attorney, Bryce Bell, the contract that the Staff Sergeant signed when he bought his car did not include a clause that would have forced him to submit his case to the unfair, rigged system dominated by crooked corporations, known as “arbitration.” So he was free to fight back against Wells Fargo in an open, public court of law. His class action litigation settled when Wells Fargo finally agreed to refund $5 million in compensation the bank owed Staff Sergeant Nakamura and the hundreds of other service members.
That freedom to join forces in order to fight back against such scams, like Staff Sergeant Nakamura did on behalf of hundreds of other brave Members of the Armed Forces, is super-important for active duty military personnel. That’s because they may not be able to fight back at all, if they must act alone — especially if they are serving in a remote location or a war zone.
That freedom was guaranteed by the 7th Amendment of the U.S. Constitution, but radical, controversial decisions issued by Republican-appointed Justices on the U.S. Supreme Court have robbed wronged workers, consumers — including military Servicemembers — and small business owners of their right to fight back in a court of law.
Under the leadership of President Obama’s appointee Richard Cordray, the Consumer Financial Protection Bureau sided with pro-consumer groups and the military organizations, and issued a rule that would have restored that Constitutional right in a major way, freeing victims of predatory lenders and crooked banks to band together and fight back in court. But it was immediately under attack.
Crooked banks, along with Republican Senators and Representatives who benefit handsomely from their campaign cash, cooked up a scheme to kill the consumer watchdog agency’s rule in Congress before it could even take effect. Their goal: to let crooked banks get away with ripping off American consumers — including members of the Armed Forces — with little or no fear of being held accountable.
So the lawbreakers could evade having to face the music in an open, public court of law, where judges and juries are tasked with applying the law, the banks were dead-set on depriving American consumers and military Servicemembers of their Constitutional rights and forcing them to submit to a rigged, privatized “alternative” system dominated by the greedy, lawbreaking special interests themselves — called “forced arbitration.”
“Forced arbitration is an un-American system wherein service members’ claims against a corporation are funneled into a rigged, secretive system in which all the rules, including the choice of the arbitrator, are picked by the corporation. Found in almost every financial services contract, forced arbitration clauses systematically include a provision banning the rights of consumers to band together to hold a corporation accountable. Given the exponential and expansive use of these clauses by financial institutions in contracts with service members, prohibiting the practice of forcing service members to surrender fundamental Constitutional and statutory rights through the use of pre-dispute forced arbitration clauses is now more critical than ever.
Our service members protect our nation against both foreign and domestic threats. The sacrifices and logistical undertakings they and their families make in order to serve are compelling reasons alone to ensure they are not only shielded from predatory financial practices and unscrupulous lenders, but are also able to enforce their congressionally mandated rights through our civil justice system if and when violations arise.
However, class action waivers work against these rights. They are particularly abusive when enforced against service members, who may not be in a position to individually challenge a financial institution’s illegal or unfair practices because of limited resources or frequent relocations or deployment. Furthermore, for those service members on active duty and serving overseas, it is critical to retain the ability to get justice without having to interrupt their service and distract their attention from the mission at hand. Since these types of service members cannot participate full time in pursuing an individual claim, being able to enforce their rights through the class action mechanism is essential. Thus service members should receive the benefits of participating in a class action despite their inability to shoulder the burden of bringing a claim alone.
Our nation’s veterans should not be deprived of the Constitutional rights and freedoms that they put their lives on the line to protect, including the right to have their claims heard in a trial by a jury when their rights are violated. The catastrophic consequences these clauses pose for our all-voluntary military fighting force’s morale and our national security are vital reasons for the CFPB to act quickly to finalize the regulations.”
But instead of siding with The Military Coalition, the GOP sided with the crooked banks and predatory lenders.
The Republican majority in Congress decided to exploit a rarely used law, the Congressional Review Act, to overturn the Consumer Financial Protection Bureau’s rule. That allowed them to undo the rule with a simple majority vote, avoiding a filibuster in the Senate. Using that arcane Act also had the added impact of prohibiting the Consumer Financial Protection Bureau from issuing a similar rule in the future, unless Congress specifically allows the agency to revisit the issue.
The legislation to overturn the rule, House Joint Resolution 111, was hotly debated on the Floor of the House of Representatives. Then-Minority Leader Nancy Pelosi and other pro-consumer, pro-military champions spoke forcefully against the measure. All of the Democrats sided with consumer advocacy organizations and the military, and voted NO. But all of the Republicans, with the lone exception of Rep. Walter Jones, who had served in the North Carolina National Guard, voted AYE, and the resolution passed in the House and moved on to the Senate.
Once again, the resolution was hotly debated. Democratic Senators, including Senator Jack Reed of Rhode Island, a distinguished U.S. Army Veteran, spoke eloquently in defense of preserving the rule. Sen. Elizabeth Warren delivered an impassioned speech on the Senate Floor, blasting the legislation and quoting from letters from military groups, raising their voices for all to hear.
When the vote was taken, all the Democratic Senators sided with the military coalition and voted NO, to preserve the rule. Only two Republican Senators, Lindsey Graham and John Kennedy — both attorneys — voted NO. All their GOP colleagues voted AYE, siding with the crooked banks, resulting in a tie. For a brief time, the future of the CFPB’s rule hung in the balance.
In a historic moment of high drama, Republican Vice President Mike Pence rode to the Capitol to break the tie, arriving on the Senate Floor around midnight. He voted AYE, siding with the crooked banks, and against the military, sending the measure to President Trump’s desk.
To his shame, Republican Senator Chuck Grassley, who had championed the successful effort in Congress to grant car dealers a special exemption from forced arbitration and restore the Constitutional rights of car dealers to have their cases heard in a court of law, voted against restoring those same rights to regular citizens and members of the Armed Forces.
Our nation’s military doesn’t often ask anything from their Commander in Chief. In return for their selfless, immeasurable sacrifice and deep devotion to keeping our nation safe and defeating our enemies, they rarely ask their Commander in Chief for anything in return, other than to have their backs.
But in a rare move, the military community asked President Trump to veto the measure. The American Legion publicly announced their decision to call on him for a veto, declaring:
“The leader of the nation’s largest veterans service organization expressed concern over the loss of financial protections for veterans and servicemembers in the wake of a U.S. Senate late night vote on Wednesday.
Fifty-one members of the Senate voted to overturn a recent Consumer Financial Protection Bureau (CFPB) rule on arbitration agreements intended to provide consumers with an opportunity to sue in court when they have been harmed by financial institutions.
‘Every servicemember and veteran should have the right and responsibility to confront predatory loan practices,”’ said American Legion National Commander Denise H. Rohan. ‘We will not be silent while banks and payday loan shops rip off servicemembers and veterans.’
But President Trump utterly ignored their pleas. Instead, he signed that travesty into law. Among the invited guests who smiled down upon Pres. Trump as he signed the anti-consumer, anti-military measure: GOP members of Congress and a representative of an enormous banking trade association that includes banking interests like Wells Fargo.
Because of the Republican members of Congress, Vice President Pence, and President Trump, scofflaw corporations continue to trample on the Constitutional rights of our military heroes. Crooked banks remain free to force our nation’s military Servicemembers to submit disputes to an unfair, rigged, secretive forum that those special interests dominate — private, mandatory arbitration.
The laws to protect military service members as consumers are often ignored in arbitration. No matter how unfair the decisions rendered by the arbitrators are, there is usually no opportunity to appeal. Given how burdensome and rigged arbitration is, it’s rarely even used for consumer cases.
So whenever President Trump or Vice-President Pence proclaim their supposed fondness and regard for our nation’s military Servicemembers, please keep in mind that when the chips were down, they eagerly, gleefully went out of their way to betray them to their lawbreaking Big Bank buddies.
U.S. Senator Grassley’s statement in support of S 1140, granting car dealers a special exemption, freeing them from forced arbitration:
“While arbitration serves an important function as an efficient alternative to court, some trade-offs must be considered by both parties, such as limited judicial review and less formal procedures regarding discovery and rules of evidence. When mandatory binding arbitration is forced upon a party, for example when it is placed in a boiler-plate agreement, it deprives the weaker party the opportunity to elect another forum.
As a proponent of arbitration I believe it is critical to ensure that the selection of arbitration is voluntary and fair…Unequal bargaining power exists in contracts between automobile and truck dealers and their manufacturers. The manufacturer drafts the contract and presents it to dealers with no opportunity to negotiate…The purpose of arbitration is to reduce costly, time-consuming litigation, not to force a party to an adhesion contract to waive access to judicial or administrative forums for the pursuit of rights under State law…..
This legislation will go a long way toward ensuring that parties will not be forced into binding arbitration and thereby lose important statutory rights. I am confident that given its many advantages arbitration will often be elected. But it is essential for public policy reasons and basic fairness that both parties to this type of contract have the freedom to make their own decisions based on the circumstances of the case.”
While S. 1140 did not pass, auto dealers were given an exemption from the FAA, in order to preserve their rights, thanks to passage of H.R. 2215 in 2002. That act, now codified at 15 U.S.C. section 1226, prohibits auto manufacturers from including any type of pre-dispute arbitration clause in franchise contracts with auto dealers. Specifically, it provides that arbitration may be used to settle a controversy arising out of a motor vehicle franchise contract only if both parties consent, in writing, and only after the dispute arises.
