Washington, D.C. — Consumer Federation of America joins the National Association of Consumer Advocates, the Center for Responsible Lending, Consumers for Auto Reliability and Safety, the National Consumer Law Center, and U.S. PIRG in urging the Federal Trade Commission (FTC) to issue a new rule which prohibits deceptive “yo-yo” or spot delivery practices by auto dealers.
When a consumer signs a credit contract disclosing the cost of financing and drives the car off the lot, the deal appears to be complete from the consumer’s perspective. Some dealers, however, employ a deceptive tactic where they know at the time of the sale that the deal may not actually be final. The dealer calls the consumer days, weeks or even months later to tell them that they need to pay additional costs or a higher interest rate to keep the car, or that the deal needs to be completely undone and the consumer must return the car. This process of subjecting a consumer to being “yo-yo’d” back and forth to the dealership pressures consumers to pay more than what they expected and agreed to and adds significant stress and uncertainty to an already complicated and expensive financial transaction.
“Yo-yo sales frequently harm consumers by lowering their credit scores, forcing them to forfeit their hard-earned down payments, and jeopardizing their primary means of transportation,” stated Erin Witte, Director of Consumer Protection for Consumer Federation of America.
In the petition, the consumer advocates asked the FTC to issue a rule that requires dealers to add language to the consumer credit contracts which states that the terms of the deal are final, even if the contract is assigned to a third party. Violations would be enforceable by the FTC. The petition provides real-life examples of consumers’ experiences with spot deliveries, including one instance where a consumer was yo-yo’d to the dealership repeatedly with requests to sign new contracts, provide a co-signer, and provide new financial documents. After 40+ days, the dealer said that the deal fell through and threatened to file a stolen vehicle report unless the consumer returned the car.
“The proposed rule would help to ultimately lower the cost of vehicle purchases and level the playing field between consumers and car dealers,” continued Witte. Consumer advocates also pointed out that this practice undermines federal laws like the Truth in Lending Act which requires the timely disclosure of clear and accurate financial terms.
“Certainty, transparency and clarity of sale terms, particularly the financing details, are crucial to facilitate a smooth, incident- and injury-free process for all parties in this seemingly complex process,” stated the consumer groups in support of the petition.
Contact: Erin Witte, 202-596-9807