Posts Categorized: Auto Fraud

Todd Murray featured in Kare 11 story about fraudulent sale of damaged cars

Kare 11 recently ran an investigative report about how Minnesota’s lax vehicle title laws could lead to a surge in flood cars and other damaged vehicles being sold in Minnesota. Our own Todd Murray was featured in the story and shared his insights about this issue.

 

 

 

 

 

How to avoid buying a flood car

It’s expected that thousands of cars damaged in Hurricanes Harvey and Irma will be put on the used car market in the coming months. These flood cars will be cleaned up, repaired, and shipped across the country. Because of our lax vehicle title laws, a substantial number of these flood vehicles will likely end up in Minnesota.

Flood cars present significant performance and safety issues for unsuspecting buyers. For example, a vehicle’s electrical and computer systems–including brake and steering systems–are often compromised by water damage. Water submersion may also cause damage to the vehicle’s frame or structural components and often leads to mold growth in the car’s interior. These problems may not appear for months or even years. Here are some tips to avoid unwittingly buying a flood car:

Inspect the vehicle closely for signs of flood damage:

*Musty or moldy smell;

*Rust or flaking metal on the vehicle’s undercarriage;

*Electrical components, such as radio, speakers, windshield wipers, or door locks that don’t work;

*Any signs of water damage, mud, sand, or silt.

Do your homework:

*CarFax reports contain information about the vehicle’s history, including where it came from. Consumers should be extremely wary of a vehicle from South Florida, Houston, or other flood-damaged areas.

*The National Crime Bureau keeps a database of vehicles reported as salvaged by many insurance companies. Consumers may search the database for free using the vehicle’s VIN number.

Keep in mind that these reports do not always provide a complete picture of the vehicle and there is often a lag between when a vehicle is, say in a flood, and when that information shows up in a database.

Ask the dealer lots of questions, including:

*Whether the vehicle has been in a flood. Keep in mind that a flood car may have a clean title, so don’t rely on the dealer’s misleading answer that the vehicle is a “clean title vehicle.” Insist on a straight answer to your question.

*Whether the vehicle has a branded title. Some flood cars–but not all–will have a title “brand” on them to notify buyers of flood damage.

*Whether they’ve inspected the vehicle for possible flood damage. Again, get specific answers to exactly what they inspected and when.

Trust your instincts.

Don’t be pressured into a hasty decision and trust your gut. If you have a bad feeling about the condition of the vehicle or doubt what the salesperson is telling you, simply walk away. There are a lot of quality used vehicles out there.

 

 

Conditional delivery: how car dealers use it to scam buyers

If you’ve ever bought a vehicle from a dealer and financed the purchase, chances are you signed something called a conditional delivery agreement. If you read this agreement carefully, it states that the dealer has the right to cancel the sale if the dealer can’t assign your auto loan to a lender on terms agreeable to the dealer. In other words, if the dealer changes its mind about the deal, it has the right to unwind the transaction. This provision, typically in the fine print of the sales contract, is the source of one of the most widespread auto dealer abuses today and applies to both new and used car sales.

Here’s how the scam works: you agree to buy a vehicle and you fill out a credit application for financing. The dealer tells you that you’ve been approved for the loan and you sign the loan agreement and other typical sales paperwork, which contains the conditional delivery language. You either don’t notice this provision because it’s in the fine print or the dealer tells you it’s nothing to worry about. So you give them a cash down payment and turn over your trade-in. The dealer gives you the keys to your new car and you drive it home thinking you’re all set.

But you’re not. A few days later, the dealer calls you and tells you that your financing “fell through” and that you need to bring the vehicle back and sign a new loan agreement. If you complain, they might threaten to repossess your new vehicle or even to call the police and report it stolen. So you go back to the dealership. And you learn that your trade-in has already been sold and that the new loan that they’re demanding that you sign has a higher interest rate than the one you originally agreed to. Although you don’t want to sign this new agreement, you don’t have a choice because your trade-in is gone and they’ve threatened to repossess your new vehicle and keep your downpayment if you don’t agree to the new, less favorable, loan on the spot. You need the new vehicle to get to work and to drive your kids to their activities, so you reluctantly sign the unfavorable new loan.

Dealers call this practice conditional delivery or spot delivery. Consumer advocates call it a “yo-yo” scam. Either way, it’s a blatantly unfair and one-sided practice. The dealer doesn’t want you to think about the deal overnight, it wants the deal closed on the spot. On the other hand, the dealer wants to keep its options open after you’ve driven the car off the lot. It doesn’t want to be rushed into a hasty deal. The conditional delivery agreement makes the deal final for the buyer, but not for the seller.

Sometimes the yo-yo scam is simply the dealer re-thinking the terms of the sale after the fact. Other times, it’s a deliberate scheme from the beginning to inflate the finance costs. There’s evidence that dealers target customers with poor credit or low income. In other words, dealers use the yo-yo scam to rip off people who can least afford to be ripped off.

Although the conditional delivery provision in the contract gives the dealer some legal cover, there are ways to attack this unfair practice through a lawsuit. If you’ve been a victim of a yo-yo scam, you should discuss the situation with an attorney right away.

Minnesota’s Lemon Law: An Overview

Most people use the term “lemon” to describe any vehicle that has repeated problems. But in Minnesota the “lemon law’ is a statute that protects buyers of new vehicles that have problems that can’t be fixed.

There are five basic elements to a lemon law claim in Minnesota:

  • (1) The defect has to arise and be reported to the manufacturer or authorized dealer within two years of the date of purchase or within the term of the manufacturer’s warranty, whichever date is earlier. Although there are certain circumstances where this time period can be extended, in general, the lemon law doesn’t protect you against problems that crop up after two years.
  • (2) You have to give the manufacturer a reasonable opportunity to fix the defect. If you’ve given the manufacturer four or more opportunities to fix the same problem, or if they’ve had your vehicle for 30 or more days, the law presumes that they have had a reasonable opportunity to fix the issue. On one of these attempts, you have to give the manufacturer written notice of the problems. Also, if the problem affects the steering or braking systems, you may only have to allow one repair attempt.
  • (3) The defect has to still be present after the manufacturer has had a reasonable opportunity to fix it. In Minnesota, at least, the court is going to want to know whether there is still a problem.
  • (4) The problem has to substantially impair the use or value of the vehicle. This is a subjective test that is fact-specific and is usually decided on a case-by-case basis.
  • (5) The defect can’t be caused by your negligence or misuse of the vehicle. You can’t abuse or neglect your vehicle and then blame the manufacturer for not being able to fix it.

Before starting a lawsuit under Minnesota’s lemon law, you have to engage in an Alternative Dispute Resolution process if the manufacturer offers one. The manufacturer of your vehicle will be able to give you information about their informal dispute process. This ADR process is not binding, though, and you can bring a lawsuit in court if you believe the ADR result is unjust.

If you bring a successful lemon law claim, you have the choice of a refund or replacement. The refund has to include the full purchase price of the vehicle, although there may be an offset for the mileage you’ve driven the vehicle. If you elect a replacement vehicle, it has to be one of comparable to the one you’re returning. In addition, the manufacturer has to pay for your attorney fees and costs for bringing the lawsuit. This is important because most lemon law attorneys are able to take the case on a contingency fee, where you pay no attorney fees out of pocket.

Prior accident used vehicles: what you need to know

One of the most serious types of auto fraud is the concealment of a vehicle’s prior accident history. A previous wreck will negatively affect a vehicle in three main ways:

  • Diminished value: A vehicle with a prior accident history will almost always be worth less than a clean vehicle. The reason is simple: most people won’t buy a vehicle with a prior accident, and they definitely won’t pay clean retail price for it. Depending on the circumstances, a prior accident may diminish a vehicle’s value by fifty percent.
  • Safety risks: It’s very difficult and expensive to repair major collision damage, especially if the accident caused frame or structural problems.  Once a car’s structure is compromised, it may not be possible to restore its original integrity. This can pose serious safety risks if the vehicle is ever in another accident. The damaged frame will probably not perform as the manufacturer intended it to, which can expose passengers to significant injuries or even death.
  • Branded title: In many circumstances, a prior accident will result in a branded vehicle title. In Minnesota, for example, if an insurance company appears in the chain of title, the title will have a “salvage” stamp on it. A “salvage” stamp will require additional steps, such as an inspection, before a title can be issued. And a branded title will make the vehicle more difficult to sell and will significantly diminish its value.
Minneapolis auto fraud lawyers

Pamela Carls – flickr.com

Because of these issues, the only way to profitably sell a prior accident vehicle is to conceal its wreck history from the buyer. A dealer can buy a rebuilt wreck for less than wholesale price, conceal the accident history, and charge clean retail price for the vehicle. Or the dealer can pay pennies on the dollar for a still-damaged vehicle at a salvage auction, make cosmetic repairs, and sell the vehicle to an unsuspecting buyer as a clean vehicle at full retail price. As long as the dealer is willing to check its conscience at the door, it can increase its profit margin by selling prior accident vehicles.

If you find out that your used vehicle has previously been in an accident, the first thing you should do is get it inspected by a reputable body shop or collision center. If you’re in the Twin Cities, I recommend Schoonover Bodyworks. Tell the collision center that you suspect that the vehicle has been in an accident and that you want them to examine it to confirm. If the body shop confirms that the vehicle has been in an accident, ask them whether there is any structural damage or safety concerns. Also ask whether the signs of the accident would have been apparent to a knowledgeable car dealer. And be sure to get an estimate for any recommended repairs.

Then, call or go to the dealer who sold you the car. Tell them about what you’ve learned and ask whether they knew about the prior accident. Ask them what they will do to fix the situation, but don’t commit to anything on the spot.

It’s also a good idea to discuss the situation with a lawyer with experience handling auto fraud cases. There’s a good chance that you will have legal claims against the selling dealer and those claims may require the dealer to pay your attorney fees. Once you know what your legal options are, you can decide whether it makes sense to try to negotiate a resolution with the dealer or to assert your claims in court.

And if you’re in the market for a used car, here are some steps you can take to avoid buying a prior accident vehicle in the first place:

  • Do your homework: buy a CarFax or AutoCheck report for the vehicle. Most prior accidents are noted on these reports, although there is a lag time between the date of the accident and when it shows up on the report. So don’t rely exclusively on the CarFax report. You should also ask to see the vehicle’s title to make sure it isn’t branded. But remember: just because it has a clean title, doesn’t mean that there wasn’t a prior accident.
  • Ask the dealer: be sure to ask the sales rep about prior accidents. If he tells you that there aren’t any, ask him how he knows that. It’s also good to have the dealership note the lack of accident history in writing in the purchase papers. Also, be sure to read the paperwork very carefully. Some dealers will slip a disclosure of the prior accident into the fine print.
  • Get an independent inspection: ask to have the vehicle inspected by a mechanic or body shop of your choosing. You will have to pay for this yourself, but it’s worth it. Prior accident damage is easy to spot by a trained professional who knows what to look for. An ounce of prevention is worth a pound of cure.

These steps don’t guarantee that you won’t end up with a rebuilt wreck, but they definitely increase your chances of getting a safe, reliable used vehicle.

 

Fight odometer fraud with the Federal Odometer Act

According to a 2002 study by the National Highway Traffic Safety Administration, there are over 450,000 cases of odometer fraud each year. The study estimates that the increased cost consumers pay to buy vehicles with odometer rollbacks is over a million dollars per year, which makes it one of the top crimes against property in the United States.

Fortunately, car buyers have a powerful tool to combat odometer rollbacks–the Federal Odometer Act. The Odometer Act has several major protections against odometer fraud:

• It prohibits odometer tampering

• The Act forbids false statements about an odometer reading during a sale

• It requires that a transferor disclose a vehicle’s odometer reading each time it’s transferred

• The Act establishes notice procedures when a repair results in a change to the odometer reading

The Odometer Act allows a person victimized by odometer fraud to bring a lawsuit against anyone who has violated the Act with intent to defraud. Successful litigants are entitled to $10,000 or three times their actual damages, whichever is greater. Further, the rollback artist has to pay for the buyer’s attorney fees and court costs. In addition, the Odometer Act provides for federal agency enforcement and many states, including Minnesota, have criminal penalties for odometer fraud.

We’re Minneapolis auto fraud lawyers who have successfully litigated odometer fraud cases. Get in touch today if you think you’ve been taken advantage of by a odometer rollback.

When Buying a Used Car, Watch Out for Worthless Service Contracts

Buy a new or used car these days and you can expect the salesperson to pressure you to buy a service contract or “extended warranty.” For a fee, which is usually rolled into the financing, these products provide repairs or maintenance for a certain period of time, say 2 years or 24,000 miles. But they rarely provide much benefit to the buyer and often only serve to pad the dealer’s bottom line.

Source: Flickr

Source: Flickr

Here’s an example of what I mean. In a recent case, our client bought a used vehicle with over 100,000 miles on it. The client also bought a service contract for an additional $2,500 or so. The service contract lasted for 5 years or an additional 100,000 miles. Our client rolled the cost of the service contract into his loan for about $50 a month. At this point, you might be thinking this sounds like a pretty good deal.
However, the fine print of the service contract provided for a maximum reimbursement of only $3,000, less a $100 deductible. So the maximum reimbursement was actually $2,900. Further, a great deal of possible mechanical problems were excluded from coverage.
 So, our client paid $2,500 for the right to be reimbursed $2,900. In other words, he paid $2,500 to potentially receive an additional $400, but only if: (a) a problem occurred; (b) the problem occurred during the term of the service contact and (c) the problem wasn’t excluded from coverage. He would have been better of declining the service contract and putting the $50 a month into a savings account. The savings account could have been used for any repair at any time. And if no repairs are necessary, he could have used the money for something else.
Before agreeing to buy any service contract, make sure you understand the total cost (not just the monthly cost), the total amount of coverage, and what is covered and what’s not. Don’t rely on the salesperson to tell you these things, read the terms for yourself. And if you don’t understand the terms, it probably doesn’t make sense to buy it.

“As is” isn’t a license to rip you off on a used car

Dealers can't hide behind an as-is disclaimer when they knew the car was bad

Photo by Jennifer – flickr.com

We get a lot of calls from people who have unknowingly bought cars from dealers with serious defects. Generally, when a car is sold it comes with an “implied warranty” that the car will be fit to drive.

But when a consumer lets the dealer know that the car is no good and they want their money back, the dealer will often insist that the car was sold “as is,” and so it’s “not my problem.” But the dealers don’t understand the law–there are many reasons a buyer will have remedies even when the car is sold as is. I’ll break down a few of them here. (more…)

What to do if your car has missing airbags

Minneapolis auto fraud lawyers

Pamela Carls – flickr.com

As we discussed in an earlier post, car dealers sometimes sell a formerly wrecked car without disclosing to the buyer that it’s been in a serious accident. Maybe the most shocking is where the dealer repairs the car, but doesn’t replace the airbags (and of course, doesn’t tell the unsuspecting buyer.) In some cases, the airbag compartment has been found filled with packing peanuts or paper towels. Airbags cost $1,000 to $3,000 to replace, and so if the dealer buys the car at auction, fails to make the repair, and doesn’t tell anyone, that’s $1,000 to $3,000 of pure, dirty profit to them. Here are a few steps you can take to detect whether your airbags are missing:

1. Check the airbag compartment. Is there physical damage to any of the airbag compartments? Tears or scratches in the dashboard could be indicators that the airbags have previously been deployed. (more…)

How to know your car is a rebuilt wreck

Minneapolis auto fraud

Photo by Bradley Olin – flickr.com

Shady car dealers like to find ways to sell bad cars for as much money as possible. A really opportunistic dealer may sell a frame-damaged car with shoddy repairs, not disclosing that the car has serious structural issues. Once a car has sustained serious frame damage, it will often never again be safe to drive, unless very careful and expensive repairs are completed. The safety issues involved in rebuilt wrecks can be severe and possibly life-threatening.

Search the history. One of the ways to find out whether a car is a rebuilt wreck is to search its history. Summary history reports like Carfax and AutoCheck may tell part of the story, so they can be a good first place to look. You might also pull a title history on the car, to see if an insurance company ever owned it, or if it ever had a salvage title. You can pull a title history by contacting the state motor vehicles department in every state the car has been titled. (more…)