(TriceEdneyWire.com)—When it comes to purchasing and financing a vehicle, Black and Latino consumers—more often than other racial or ethnic groups—are frequently targets of deceptive advertising and abusive financing practices.
In recent days, two law enforcement agencies have acted to curb yo-yo scams and other abusive and deceptive practices of auto dealer groups. The separate actions link a shared consumer abuse that occurs from Los Angeles to New York.
A settlement announced in mid-March between the Federal Trade Commission and Sage Automotive, which has dealers throughout the Los Angeles area, requires Sage to stop yo-yo scams and deceptive financing and advertising practices. Sage will also pay more than $3.6 million to be returned to consumers who were harmed by these illegal actions. This enforcement action is the first-time that the FTC has taken action on yo-yo scams.
Yo-yo scam occurs when a car dealer sends a consumer home thinking that the financing is final, but then later tells the consumer that he or she as to agree to a new financing contract or return the car. Often, dealers tell the consumer that the down payment is non-refundable, the car traded-in has been sold, and/or threatens to have the consumer prosecuted for theft if the car is not returned.
According to FTC’s complaint, Sage frequently engaged in yo-yo scams, falsely told consumers that their money or trade-ins would not be returned, and threatened consumers with criminal prosecution or repossession if they did not sign new, more expensive finance contracts than they were initially promised.
By targeting financially challenged consumers and consumers with limited English language skills with false promises of low prices, low down payments and low monthly payments, Sage also packed unauthorized add-on products into contracts. The end result for many customers was that they drove off with a more costly financing contract than originally understood.
The FTC stated, in filing the complaint, “The car-buying process is a two-way street. The FTC expects dealers to honor their contractual obligations, and will pursue those who use yo-yo financing tactics and pack unwanted costly add-ons onto consumers’ contracts.”