Vehicle Defects, Deception and Fraud in Financing are Dominant Areas of Consumer Harm in Auto Sales: Consumer Attorney Survey
Washington, D.C. — Misrepresentations and failure to disclosure vehicle defects; fraud and trickery in financing; and deceptions in advertising, pricing, and warranty coverage, are the most prevalent areas of harm for consumers in vehicle transactions, according to a National Association of Consumer Advocates survey of attorneys who assist consumers affected by risky auto industry practices.
In a year marked by the COVID-19 pandemic and its resulting financial shock for millions of households, this survey sheds light on harms connected to vehicle purchases, the second highest national consumer expense after housing.
“There is an ocean of fraud and unfair practices in the sales of cars to consumers,” said Bernard Brown, a consumer attorney in Kansas City. “Remember that this not only hurts consumers — it puts honest dealers and other industry players at a severe competitive disadvantage.”
The survey of advocates from 33 states who work for private law firms, legal aid, and other nonprofit organizations, gives an overview of their efforts defending consumers hurt in the course of negotiating, buying, and financing motor vehicles, as well as consumer harms related to auto debt collection and the repossession process.
A majority or more of survey participants said that in the past four years they have assisted consumers with claims related to vehicle defects or failure to disclose true car condition (84% of participants); misrepresentations or fraud re: car advertising, pricing, or warranty coverage (78% of participants); deception or fraud in financing and loan costs (76% of participants); failure to deliver title or misrepresentations related to title (67% of participants); spot delivery or yo-yo financing schemes (63% of participants); false promises and deceptions related to add-on products (56% of participants).
“Shady auto industry tactics appear to overwhelm buyers in nearly all stages of vehicle sales,” said Sophia Romero, an attorney at Legal Aid Center of Southern Nevada.
Overall, participants identified vehicle defects; financing problems; and misrepresentations or fraud in advertising, pricing or warranties, as the top three auto issues that cause the most systemic harm to consumers in the auto sales market.
According to the survey, consumers’ troubles continue as a result of the barriers to justice that they face, such as forced arbitration clauses, class action bans, and contract terms that waive or remove regulatory requirements and other statutory protections.
Survey respondents also expressed deep concerns about consumer harms with spot delivery or yo-yo financing schemes; subprime auto lending debt traps; add-on products; failure to deliver and misrepresentations related to title; unlawful repossessions; abusive debt collection; dealer markups on loans; odometer tampering, fraud and misrepresentations; unrepaired safety recalls; and e-contract abuse. They called for added consumer protections or outright bans of systemic and harmful practices in these areas.
Advocates identified numerous auto industry practices that deserved closer scrutiny and investigation, such as a practice they have observed among some used car dealers of covering up defects in cars and selling them “as is.” Others called for investigations of price gouging and unfounded charges in car sales contracts for unnecessary and “forced” add-on products.
Many advocates recommended closer scrutiny of e-contracts in auto sales as well as more oversight of illegal conduct during the repossession process.
Read the survey report here.