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NOT BORN IN THE USA?THE PERILS OF BANKRUPTCY FILINGS BY UNDOCUMENTED PERSONS
By Richard J. Parker: Shareholder in Parker, Butte, & Lane, P.C. (reprinted with permission of the author, December, 2017)
Immigration status is a complex legal issue for anyone not born in the USA. While some people born overseas are still U.S. citizens at birth, there are some hoops to jump through that do not exist for those born in the U.S. For example, even if Barack Obama had actually been born in Kenya, he would still be a U.S. Citizen, just as is John McCain who is a U.S. citizen despite being born in the Panama Canal Zone. Likewise for Ted Cruz who was born in Canada.
Immigration and Bankruptcy – the issues are: Can a non-citizen or any other undocumented person file for bankruptcy; the second issue is should they?
The first issue is easy.
Under the definitions section at 11 USC 109(a), a person without proper documentation of citizenship or legal status can in fact file bankruptcy if they meet the statutory criteria. The bankruptcy Social Security Official Form 121 even provides for the possibility that a debtor would not have a social security number or tax identification number. Although the concept sometimes puzzles court clerks, judges or United States Trustees in some parts of the country, the case law is clear. In addition, Official Form 121 certainly leaves that “no numbers” option open. Form 101 – the Petition page which – does not have quite the specificity as it asks for “only the last 4 digits of YOUR Social Security Number or federal Individual Taxpayer Identification Number (ITIN)” (emphasis added).
The right of a person to file without either number was upheld by in Florida in 2001. In re: Merlo, 265 BR 502.
After the debtor failed to list a social security number, the chapter 13 Trustee filed a motion to revoke confirmation and dismiss the case or in the alternative require disclosure of a number. In this case the debtor was a 70+ year old citizen of Argentina who was neither a U.S. Citizen nor a Legal Permanent resident (LPR). What his status actually was not discussed. the court held that the fact that he did not have and could not get a social security number did not prevent him from filing bankruptcy.
However, attention should be given to 18 U.S.C. 152 with regard to false oaths. See also FRBP 1005, FRBP 2002 (n), and 1 I U.S.C. 342(c). And remember that the right of the debtor to assert the Fifth Amendment in bankruptcy proceedings is limited.
The second issue is whether such a person should file.
Given the current political climate, non-citizens are under increased scrutiny in many aspects of their lives. In doing a triage of a person without legal status seeking to file a bankruptcy, the attorney should consider 5 major factors:
- Has the person used a social security number not issued to him or her by the government?
- Has that number been used to incur credit obligations?
- Does the person have ANY prior contacts with either immigration or law enforcement?
- Are there any reasonable alternatives to filing bankruptcy; and
- Has the person been adequately informed of the risks of the very public act of filing bankruptcy?
If the person has USED any social security number or tax identification number, it appears that this information must be disclosed on Official Form 101, even if it is not necessarily appropriate or required to put that number on the Petition itself. As an aside, many ITIN’s are set to expire in 2017 and 2018 if not renewed.
If the number has been used, that fact MIGHT lead to a charge of ID theft.
Perhaps one of the most notorious cases in this area is In re Perez, 374 BR 445, (Bankr., D. Colo., 2007) and 415 BR 445 (Bankr. D. Colo. 2009, after remand from the Colorado U.S. District Court). After a very complicated procedural history, the debtor did in fact receive a discharge in 2009 in his case filed in 2005. It is unclear what other non-bankruptcy issues the debtor had to deal with, though the bankruptcy court did mention identity fraud since the social security number used actually belonged to another person in California. While the cases are too complex to relate here, they do make for interesting reading.
The situation has been muddied more than a bit by the U.S. Supreme Court.
In 2009 the Supreme Court (unanimously) held that a conviction of aggravated identity theft could not be upheld as the government was not able to prove that the defendant “knowingly” used a means of identification of another person. Again, this is a fascinating read at 556 U.S. 646, 129 S.Ct., 173, L.Ed. 853, but beyond the scope of this discussion.
This case was followed by the Colorado Supreme Court in finding that a person buying a car with a social security number belonging to another person, but using his own name, could not be found guilty of “criminal impersonation.” In Felix Montes-Rodriguez v The People of the State of Colorado. (No 09SC322, 2010), the conviction of criminal impersonation was reversed. The decision included such interesting asides such as that a social security number is not a legal requirement for obtaining a loan, even though they are required by banks. The dissent did indicate that such conduct was now proscribed by a newer statute related to identity theft. There was of course a spirited dissent.
What if an invented or “borrowed” or otherwise invalid social security number has been used for credit purposes?
If an invented or “borrowed” or otherwise invalid social security number has been used for credit purposes, it is certainly possible that an affected creditor could file an adversary proceeding alleging misrepresentation in the credit application. They would of course have to prove all of the elements, including reliance. However, defense of such a case would greatly increase the cost of the case and further exposure of the debtor/defendant to official scrutiny.
If the undocumented person has had any prior contact with immigration or law enforcement, officials may be watching the bankruptcy filings as well as any civil or criminal actions. Immigration lawyers in Oregon and elsewhere have reported their clients being picked up in or just outside state courts and municipal courts and immigration lawyers in some parts of the country have reported Immigration and Customs Enforcement (ICE) officers appearing at 341(a) meetings to detain debtors. While the circumstances are unclear there has been a report of a DACA individual (Deferred Action for Child Arrival) arrested at a creditor’s meeting in Houston this summer.
Before making the decision to file bankruptcy, the prospective debtor needs to be informed of the risks of making use of the bankruptcy option.
This should include at least one meeting with an immigration attorney to discuss the risks in their local area and a signed informed disclosure. Enforcement priorities of ICE differ from state to state and even by District offices. Knowledge of local culture and current practice is essential.
The foregoing does not mean that a person without a Social Security number or ITIN should never consider bankruptcy. In addition to the persons without any documentation, there are many people who are in the country who are present with permission, but do not have such numbers. For example, a person who is here on a short term business or visitor’s visa and is involved in an uninsured car accident. There is no reason for them not to file bankruptcy if it would be beneficial to them.
REPERCUSSIONS OF FILING BANKRUPTCY
If a person is a Legal Permanent Resident (LPR) or has other permission to be present such as a work visa, filing of a bankruptcy is not a problem. Filing of a bankruptcy petition will not prevent the later maintenance or acquisition of either LPR status or US Citizenship. At one time in the past there was talk of making the filing of a bankruptcy a “sign of moral turpitude.” However, that “improvement” was not enacted. All that is required as far as the finances of an individual applicant is that they have filed all of their federal tax returns and that no federal tax is unpaid. Even if there is tax debt owed, the problem can be fixed by proving to Immigration that you have a written payment plan in place – usually that would be an installment agreement.
Another area in which personal finance seeps into the immigration world is if a person is acting as a sponsor of a non-citizen.
A sponsor is required to submit a 1-864 form which promises to support the arriving alien in order to avoid that person from becoming “a public charge.” The obligation can continue for a long as 10 years.
Some states have made use of this submission in dissolution cases. The signing of the Affidavit of Support MIGHT lead to a non-dischargeable domestic support obligation of a greater duration than might ordinarily be ordered. Before signing an Affidavit of Support for an arriving alien, the sponsor should obtain independent legal advice.
Only a few bankruptcy cases have been found which cite this immigration Affidavit of Support. in one such case. an Oklahoma state court had entered a Decree of Dissolution with no further spousal support. The ex-wife who had obtained permanent resident status via an T-864 filed by her husband, brought suit in the U.S. District Court for Specific Performance of the Affidavit of Support. After the court refused to dismiss her action, the ex-husband filed a chapter 7 bankruptcy. The ex-wife then filed an adversary proceeding alleging a domestic support obligation under the Code. After having the matter under advisement for 2 months, the bankruptcy court dismissed based on the “Rooker-Feldman” doctrine.
The First Circuit SAP reviewed this decision in Schwartz v Schwartz, 409 BR 204 (2008), ultimately holding that both the “Rooker-Feldman Doctrine and res judicata precluded the bankruptcy court from consideration of the Decree of Dissolution entered in the state court.
While it seems likely that most other bankruptcy courts would also decline jurisdiction, it is an added complication.
There have been many state court decisions which relied upon the 1-864 Affidavit of Support in fixing a spousal support obligation at 10 years. See, inter alia, Davis v United States, 499 F3d. 590 (6th Cir. 2007) in which the state court was ordered on remand after appeal to specifically enforce the Affidavit of Support, thus changing the duration of support from 8 years to 10 years.
EXEMPTIONS
There is case law and practice in some states (Florida among them) which while allowing filing by non-citizens holds that exemptions are not available to such filers since they are not “residents.” However, a debtor should be able to use federal exemptions if denied the use of state exemptions.
DRIVER’S LICENSES
A bankruptcy attorney will frequently see a prospective client whose major debt is an uninsured auto accident which has led to a license suspension. That is generally not an issue for a citizen and a bankruptcy discharge will require a state to return driving privileges to such a person. However in recent years it has become virtually impossible for an undocumented person to obtain an Oregon driver’s license or obtain reinstatement of a suspended license. See ORS 807.062 for requirements to obtain a driver’s license. Some non-citizens avoid this problem by obtaining an international driving permit which is good for 1 year unless you become a “resident.” A “resident” must obtain a driver’s license within 30 days of residency. There is also a problem that many people encounter when seeking to obtain a commercial driver’s license.
While many people are legally present, although not legal permanent residents, many states regulations deny commercial driver’s licenses to anyone who is not a U.S. Citizen or LPR. This is based upon a Department of Transportation regulation which many immigration attorneys consider to have been improperly promulgated.
THE ROLE OF THE UNITED STATES TRUSTEE
While the staff attorneys of a US Trustee office may not go looking for undocumented aliens on the docket, they are an arm of the Department of Justice and if a referral is received from a panel trustee, a disgruntled creditor or ex-spouse, they are obligated to investigate and possibly make a referral to the US Attorney. While the US Trustee is under a duty to investigate such matters, it appears that there is not as strong an imperative as there is in preventing the bankruptcy system from being used by people in the marijuana industry.
That being said, there have been reports that in some districts it is routine for the US
Trustee to advise ICE of any filings by persons with ITIN ‘s. Also, while the Bankruptcy Code does not seem to require government issued photo ID, it is US Trustee policy.
CONCLUSION
While there are some areas of law (workers compensation, wage and hour laws and civil rights among them) in which the federal government will essentially look the other way when immigration status is raised as a shield, that ignoring of the status is done not for the benefit of the individual, but for the good of the system and society. Such an incentive to ignore immigration status is not present when a bankruptcy is filed for personal benefit without an aspect of the public good.
In general, the attorney for the bankruptcy attorney should err on the side of caution and seek other solutions to the financial problems being suffered by a prospective debtor who may be subject to adverse immigration consequences.
Richard J. Parker: Shareholder in Parker, Butte, & Lane, P.C., Portland. OR; B.A. Reed College (1975) ;J.D., Golden Gate University School of Law (1978); member of the Washington State Bar since 1978 and the Oregon State since 1980; practices focus on bankruptcy, student loans, collections and immigration law; past Chair, Consumer Bankruptcy Sub-committee of the OSB Debtor-Creditor Section (1998-1999); editorial board of the OSB Debtor–Creditor Section Newsletter (2003-president); Co-chair of the Pro Bono Bankruptcy Clinic Sub-Committee 2012-present): Member of the OSB Debtor Creditor Section Executive Board, (2013- present): past Section Secretary and current Treasurer.
The post THE PERILS OF BANKRUPTCY FILING BY AN UNDOCUMENTED PERSON appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
NOT BORN IN THE USA?THE PERILS OF BANKRUPTCY FILINGS BY UNDOCUMENTED PERSONS
By Richard J. Parker: Shareholder in Parker, Butte, & Lane, P.C. (reprinted with permission of the author, December, 2017)
Immigration status is a complex legal issue for anyone not born in the USA. While some people born overseas are still U.S. citizens at birth, there are some hoops to jump through that do not exist for those born in the U.S. For example, even if Barack Obama had actually been born in Kenya, he would still be a U.S. Citizen, just as is John McCain who is a U.S. citizen despite being born in the Panama Canal Zone. Likewise for Ted Cruz who was born in Canada.
Immigration and Bankruptcy – the issues are: Can a non-citizen or any other undocumented person file for bankruptcy; the second issue is should they?
The first issue is easy.
Under the definitions section at 11 USC 109(a), a person without proper documentation of citizenship or legal status can in fact file bankruptcy if they meet the statutory criteria. The bankruptcy Social Security Official Form 121 even provides for the possibility that a debtor would not have a social security number or tax identification number. Although the concept sometimes puzzles court clerks, judges or United States Trustees in some parts of the country, the case law is clear. In addition, Official Form 121 certainly leaves that “no numbers” option open. Form 101 – the Petition page which – does not have quite the specificity as it asks for “only the last 4 digits of YOUR Social Security Number or federal Individual Taxpayer Identification Number (ITIN)” (emphasis added).
The right of a person to file without either number was upheld by in Florida in 2001. In re: Merlo, 265 BR 502.
After the debtor failed to list a social security number, the chapter 13 Trustee filed a motion to revoke confirmation and dismiss the case or in the alternative require disclosure of a number. In this case the debtor was a 70+ year old citizen of Argentina who was neither a U.S. Citizen nor a Legal Permanent resident (LPR). What his status actually was not discussed. the court held that the fact that he did not have and could not get a social security number did not prevent him from filing bankruptcy.
However, attention should be given to 18 U.S.C. 152 with regard to false oaths. See also FRBP 1005, FRBP 2002 (n), and 1 I U.S.C. 342(c). And remember that the right of the debtor to assert the Fifth Amendment in bankruptcy proceedings is limited.
The second issue is whether such a person should file.
Given the current political climate, non-citizens are under increased scrutiny in many aspects of their lives. In doing a triage of a person without legal status seeking to file a bankruptcy, the attorney should consider 5 major factors:
- Has the person used a social security number not issued to him or her by the government?
- Has that number been used to incur credit obligations?
- Does the person have ANY prior contacts with either immigration or law enforcement?
- Are there any reasonable alternatives to filing bankruptcy; and
- Has the person been adequately informed of the risks of the very public act of filing bankruptcy?
If the person has USED any social security number or tax identification number, it appears that this information must be disclosed on Official Form 101, even if it is not necessarily appropriate or required to put that number on the Petition itself. As an aside, many ITIN’s are set to expire in 2017 and 2018 if not renewed.
If the number has been used, that fact MIGHT lead to a charge of ID theft.
Perhaps one of the most notorious cases in this area is In re Perez, 374 BR 445, (Bankr., D. Colo., 2007) and 415 BR 445 (Bankr. D. Colo. 2009, after remand from the Colorado U.S. District Court). After a very complicated procedural history, the debtor did in fact receive a discharge in 2009 in his case filed in 2005. It is unclear what other non-bankruptcy issues the debtor had to deal with, though the bankruptcy court did mention identity fraud since the social security number used actually belonged to another person in California. While the cases are too complex to relate here, they do make for interesting reading.
The situation has been muddied more than a bit by the U.S. Supreme Court.
In 2009 the Supreme Court (unanimously) held that a conviction of aggravated identity theft could not be upheld as the government was not able to prove that the defendant “knowingly” used a means of identification of another person. Again, this is a fascinating read at 556 U.S. 646, 129 S.Ct., 173, L.Ed. 853, but beyond the scope of this discussion.
This case was followed by the Colorado Supreme Court in finding that a person buying a car with a social security number belonging to another person, but using his own name, could not be found guilty of “criminal impersonation.” In Felix Montes-Rodriguez v The People of the State of Colorado. (No 09SC322, 2010), the conviction of criminal impersonation was reversed. The decision included such interesting asides such as that a social security number is not a legal requirement for obtaining a loan, even though they are required by banks. The dissent did indicate that such conduct was now proscribed by a newer statute related to identity theft. There was of course a spirited dissent.
What if an invented or “borrowed” or otherwise invalid social security number has been used for credit purposes?
If an invented or “borrowed” or otherwise invalid social security number has been used for credit purposes, it is certainly possible that an affected creditor could file an adversary proceeding alleging misrepresentation in the credit application. They would of course have to prove all of the elements, including reliance. However, defense of such a case would greatly increase the cost of the case and further exposure of the debtor/defendant to official scrutiny.
If the undocumented person has had any prior contact with immigration or law enforcement, officials may be watching the bankruptcy filings as well as any civil or criminal actions. Immigration lawyers in Oregon and elsewhere have reported their clients being picked up in or just outside state courts and municipal courts and immigration lawyers in some parts of the country have reported Immigration and Customs Enforcement (ICE) officers appearing at 341(a) meetings to detain debtors. While the circumstances are unclear there has been a report of a DACA individual (Deferred Action for Child Arrival) arrested at a creditor’s meeting in Houston this summer.
Before making the decision to file bankruptcy, the prospective debtor needs to be informed of the risks of making use of the bankruptcy option.
This should include at least one meeting with an immigration attorney to discuss the risks in their local area and a signed informed disclosure. Enforcement priorities of ICE differ from state to state and even by District offices. Knowledge of local culture and current practice is essential.
The foregoing does not mean that a person without a Social Security number or ITIN should never consider bankruptcy. In addition to the persons without any documentation, there are many people who are in the country who are present with permission, but do not have such numbers. For example, a person who is here on a short term business or visitor’s visa and is involved in an uninsured car accident. There is no reason for them not to file bankruptcy if it would be beneficial to them.
REPERCUSSIONS OF FILING BANKRUPTCY
If a person is a Legal Permanent Resident (LPR) or has other permission to be present such as a work visa, filing of a bankruptcy is not a problem. Filing of a bankruptcy petition will not prevent the later maintenance or acquisition of either LPR status or US Citizenship. At one time in the past there was talk of making the filing of a bankruptcy a “sign of moral turpitude.” However, that “improvement” was not enacted. All that is required as far as the finances of an individual applicant is that they have filed all of their federal tax returns and that no federal tax is unpaid. Even if there is tax debt owed, the problem can be fixed by proving to Immigration that you have a written payment plan in place – usually that would be an installment agreement.
Another area in which personal finance seeps into the immigration world is if a person is acting as a sponsor of a non-citizen.
A sponsor is required to submit a 1-864 form which promises to support the arriving alien in order to avoid that person from becoming “a public charge.” The obligation can continue for a long as 10 years.
Some states have made use of this submission in dissolution cases. The signing of the Affidavit of Support MIGHT lead to a non-dischargeable domestic support obligation of a greater duration than might ordinarily be ordered. Before signing an Affidavit of Support for an arriving alien, the sponsor should obtain independent legal advice.
Only a few bankruptcy cases have been found which cite this immigration Affidavit of Support. in one such case. an Oklahoma state court had entered a Decree of Dissolution with no further spousal support. The ex-wife who had obtained permanent resident status via an T-864 filed by her husband, brought suit in the U.S. District Court for Specific Performance of the Affidavit of Support. After the court refused to dismiss her action, the ex-husband filed a chapter 7 bankruptcy. The ex-wife then filed an adversary proceeding alleging a domestic support obligation under the Code. After having the matter under advisement for 2 months, the bankruptcy court dismissed based on the “Rooker-Feldman” doctrine.
The First Circuit SAP reviewed this decision in Schwartz v Schwartz, 409 BR 204 (2008), ultimately holding that both the “Rooker-Feldman Doctrine and res judicata precluded the bankruptcy court from consideration of the Decree of Dissolution entered in the state court.
While it seems likely that most other bankruptcy courts would also decline jurisdiction, it is an added complication.
There have been many state court decisions which relied upon the 1-864 Affidavit of Support in fixing a spousal support obligation at 10 years. See, inter alia, Davis v United States, 499 F3d. 590 (6th Cir. 2007) in which the state court was ordered on remand after appeal to specifically enforce the Affidavit of Support, thus changing the duration of support from 8 years to 10 years.
EXEMPTIONS
There is case law and practice in some states (Florida among them) which while allowing filing by non-citizens holds that exemptions are not available to such filers since they are not “residents.” However, a debtor should be able to use federal exemptions if denied the use of state exemptions.
DRIVER’S LICENSES
A bankruptcy attorney will frequently see a prospective client whose major debt is an uninsured auto accident which has led to a license suspension. That is generally not an issue for a citizen and a bankruptcy discharge will require a state to return driving privileges to such a person. However in recent years it has become virtually impossible for an undocumented person to obtain an Oregon driver’s license or obtain reinstatement of a suspended license. See ORS 807.062 for requirements to obtain a driver’s license. Some non-citizens avoid this problem by obtaining an international driving permit which is good for 1 year unless you become a “resident.” A “resident” must obtain a driver’s license within 30 days of residency. There is also a problem that many people encounter when seeking to obtain a commercial driver’s license.
While many people are legally present, although not legal permanent residents, many states regulations deny commercial driver’s licenses to anyone who is not a U.S. Citizen or LPR. This is based upon a Department of Transportation regulation which many immigration attorneys consider to have been improperly promulgated.
THE ROLE OF THE UNITED STATES TRUSTEE
While the staff attorneys of a US Trustee office may not go looking for undocumented aliens on the docket, they are an arm of the Department of Justice and if a referral is received from a panel trustee, a disgruntled creditor or ex-spouse, they are obligated to investigate and possibly make a referral to the US Attorney. While the US Trustee is under a duty to investigate such matters, it appears that there is not as strong an imperative as there is in preventing the bankruptcy system from being used by people in the marijuana industry.
That being said, there have been reports that in some districts it is routine for the US
Trustee to advise ICE of any filings by persons with ITIN ‘s. Also, while the Bankruptcy Code does not seem to require government issued photo ID, it is US Trustee policy.
CONCLUSION
While there are some areas of law (workers compensation, wage and hour laws and civil rights among them) in which the federal government will essentially look the other way when immigration status is raised as a shield, that ignoring of the status is done not for the benefit of the individual, but for the good of the system and society. Such an incentive to ignore immigration status is not present when a bankruptcy is filed for personal benefit without an aspect of the public good.
In general, the attorney for the bankruptcy attorney should err on the side of caution and seek other solutions to the financial problems being suffered by a prospective debtor who may be subject to adverse immigration consequences.
Richard J. Parker: Shareholder in Parker, Butte, & Lane, P.C., Portland. OR; B.A. Reed College (1975) ;J.D., Golden Gate University School of Law (1978); member of the Washington State Bar since 1978 and the Oregon State since 1980; practices focus on bankruptcy, student loans, collections and immigration law; past Chair, Consumer Bankruptcy Sub-committee of the OSB Debtor-Creditor Section (1998-1999); editorial board of the OSB Debtor–Creditor Section Newsletter (2003-president); Co-chair of the Pro Bono Bankruptcy Clinic Sub-Committee 2012-present): Member of the OSB Debtor Creditor Section Executive Board, (2013- present): past Section Secretary and current Treasurer.
The post THE PERILS OF BANKRUPTCY FILING BY AN UNDOCUMENTED PERSON appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 3.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Common Auto Dealer Scams – below are links to several articles:
Car Buying Scams Exposed
- The Old “Financing Fell Through Scam (aka Spot Delivery Scam)”
- The Classic “Lie To The Customer About Their Credit Score” Scam
- The Oops, “Forget To Pay Off Your Trade In” Scam
- The Immoral “Straw Purchase Scam”
- The Made Up “Your Online Lender Bounces Checks” Scam
- The High Pressure “Forced Warranty” Scam
- The Ridiculous “Dealer Prep” Scam (Excessive Fee)
- Watch out for “We’ll Payoff Your Car No Matter How Much You Owe!” Ads
- The Dangerous Previously Wrecked Used Car, Sold “As Is” Scam
- The Sneaky “We lowered your payments! Come back and re-sign!”
- 21 Scams Used By Devious Car Dealers — And How To Avoid Them
- 10 Car Dealer Scams That Should Be on Every Consumer’s Radar
- Car Dealership Scams
- Used Car Buying Scams
There are several federal and state statutes in place that prohibit car dealer fraud and misrepresentation. While “lemon laws” cover the sale of defective vehicles, car dealer fraud laws are meant to protect consumers looking to purchase a car, truck, van, or motorcycle.
Link to part 1 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 3 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 3.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Common Auto Dealer Scams – below are links to several articles:
Car Buying Scams Exposed
- The Old “Financing Fell Through Scam (aka Spot Delivery Scam)”
- The Classic “Lie To The Customer About Their Credit Score” Scam
- The Oops, “Forget To Pay Off Your Trade In” Scam
- The Immoral “Straw Purchase Scam”
- The Made Up “Your Online Lender Bounces Checks” Scam
- The High Pressure “Forced Warranty” Scam
- The Ridiculous “Dealer Prep” Scam (Excessive Fee)
- Watch out for “We’ll Payoff Your Car No Matter How Much You Owe!” Ads
- The Dangerous Previously Wrecked Used Car, Sold “As Is” Scam
- The Sneaky “We lowered your payments! Come back and re-sign!”
- 21 Scams Used By Devious Car Dealers — And How To Avoid Them
- 10 Car Dealer Scams That Should Be on Every Consumer’s Radar
- Car Dealership Scams
- Used Car Buying Scams
There are several federal and state statutes in place that prohibit car dealer fraud and misrepresentation. While “lemon laws” cover the sale of defective vehicles, car dealer fraud laws are meant to protect consumers looking to purchase a car, truck, van, or motorcycle.
Link to part 1 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 3 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 2.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Common Auto Dealer Scams
The following is a reprint from Public Counsel.org
Let’s face it: Americans love to drive, and buy hundreds of thousands of cars each year. While most auto dealerships play by the rules, there are still some dealers that do not. This list takes a closer look at some of the more common abuses and provides information on steps that consumers can take to educate and protect themselves.
1. Bait and Switch
2. Packing the Contract
3. Advertising Bait and Switch
4. Hiding a Lemon or Wreck
5. Financing Fraud – Lying about credit scores
6. Buy-Lease Switch
7. Trade-in Fraud
8. Co-signer Scam
9. Requiring Options
10. Yo Yo Sale
Number 1: Bait and Switch – False statements about the price of the car.
You walk into a dealership and a salesman gives you a price quote. But when you are preparing to finish the deal, the price on the contract is not the same price that you were quoted. You may also notice that your contract contains other fees that increase the Total Cash Price of your vehicle. Click on this link see what you should watch out for: Sample contract (Front | Back).
What you should do:
• Make sure that the Total Cash Price on the written contract matches the price that you were told. If the prices are different, you may be the victim of fraud.
• If the dealership refuses to honor the representations made to you by the salesperson, refuse to sign the contract and walk away from the dealership.
Number 2: “Packing the Contract” – Adding unwanted options and accessories.
Some dealerships “pack” a contract with add-ons like service contracts, warranties, options and accessories that you did not ask for. Common add-ons are “protection packages” and rust-proofing. Click on this link see what you should watch out for: Sample contract: (Front | Back).
What you should do:
• Before you sign, look at your contract carefully for any items you did not authorize.
• If you were told something was included for “free”, check to see that the item is in the contract and that you were not charged for it.
• If you find any items that you don’t want, tell the salesman that you will not pay for it. Put a line through the item in the contract and reduce the Total Sale Price by that amount.
Number 3: Advertising Bait and Switch
Don’t be fooled by advertisements that offer a handful of vehicles for extremely low prices. Some dishonest dealers will claim that those few cars have been “already sold”, then they will try to sell you other cars at higher prices.
What you should do:
• Read the fine print of all advertisements especially if it looks too good to be true.
• If you are interested in buying one of these “special deals”, call the dealership to make sure it’s still available. When you call, specify the car’s VIN (Vehicle Identification Number) which should be included in the advertisement.
• Take the ad to the dealership and make sure you know the car’s Kelley Blue Book (www.kbb.com) value.
Number 4: Hiding a Lemon or Wreck
When buying a used car, watch out for cars that were previously wrecked, or cars that had to be returned to the manufacturer because of multiple repair problems (known as “lemons”). Learn more at What Do I Need To Know Before Buying or Leasing a Car? and What can I do if my car is a Lemon?
What you should do:
• Always test-drive a vehicle.
• Always have a mechanic inspect a used car before buying it.
• Ask for the repair records. If the dealership doesn’t want to provide it, then buy your car elsewhere.
• You can check a vehicle’s prior registration history by using a vehicle history report search service like Carfax (www.carfax.com).
Number 5: Financing Fraud – Lying about credit scores
Credit repair schemes
Another common scam used by dishonest dealers is to trick customers into believing that you have bad credit. They may tell you that your credit score is too low and you don’t qualify for a low interest rate. The point of this is to convince you that the high-interest financing offered by the dealership is a good deal. Learn more at What Do I Need To Know Before Buying or Leasing a Car?
What you should do:
• Get a copy of your credit report which includes your credit score. You can get a copy of your credit report from any of the three credit bureaus:
– TransUnion www.tuc.com, 1-800-888-4213
– Experian www.experian.com, 1-888-397-3742
– Equifax www.equifax.com, 1-800-685-1111
• Shop around for financing. Credit unions and other financial institutions often offer lower interest rates than what the dealerships offer.
Number 6: Buy-Lease Switch
BUYING a car means that when you finish making payments on it, you will OWN the vehicle.
LEASING means that there is a period of time – the lease period – when you’ll be making monthly payments on the car and at the end of the lease period you will NOT own the car (unless you make a large payment to own it). Plus, if you want to return the car before the lease period is over, you’ll have to pay a big penalty (an “early-termination fee”) to do that.
Customers are routinely scammed when salespeople lead you to believe that you are purchasing when you are really leasing (and vice versa). Other misrepresentations include telling customers that you will own the car at the end of the lease. This is false because almost all leases require you to make a large payment at the end of the lease in order for you to own the car.
What you should do:
• Make sure you read and understand the entire written contract. If you want to buy a car, make sure the contract you are signing doesn’t have the word “lease” in it. It seems obvious but many customers are easily tricked at the dealership Bring a friend if you are not sure.
• Don’t allow yourself to be pressured into a lease if you want to buy.
• Shop around and make sure you understand what your obligations are.
• Learn more by downloading: What should I know before buying a car? or by downloading What should I know before Leasing a Car?
Number 7: Trade-in Fraud
Many customers who trade in their old cars are tricked by dealerships who are not truthful about the value of the trade-in. They might tell you, “A 1999 Toyota like yours only sells for $3,000.” But the Toyota’s wholesale value may really be worth a lot more. Customers who don’t know what they can get for their car if they were to sell it today (the wholesale value) are likely to accept statements like these and may walk away with very little for their trade-in. The dealership will then turn around and sell the trade-in for much more. Learn more at What Do I Need To Know Before Buying of Leasing a Car?
What you should do:
- If you are not sure of the condition of your car and/or its market value, you may want to take it to a few dealerships. Tell them that you are thinking of trading in your car and see what they offer you for it. This amount may be a more accurate estimate of your car’s market value.
- If you are thinking about trading in your old car, make sure you know its current market value. You can go to the library or bookstore to find a book that lists values of most cars.
Also try these websites:
Kelley Blue Book (www.kbb.com)
Edmunds (www.edmunds.com
Number 8: Co-signer Scam
When customers don’t qualify on their own for financing, dealerships often suggest that they get a friend to co-sign. Often, however, a salesperson will tell the co-signer that he/she is only signing as a reference to help the primary buyer. This is false. If you are thinking of co-signing for someone, you should know that the co-signer is equally responsible for paying the debt and can be sued if the primary buyer doesn’t make payments.
What you should do:
• In most cases, it is not a good idea to be a co-signer for any type of loan.
• Only co-sign if you are prepared to make the payments for the car.
Number 9: Requiring Options
Some dealerships will tell customers that they have to buy additional options or accessories for them to qualify for financing, a special interest rate or a reduced price. This is not an accepted business practice and may be illegal.
What you should do:
• If you hear this pitch, leave the dealership right away.
Number 10: “Yo Yo Sale”
Typical Scenario: You purchase a car and drive it home. The next day, you receive a call from the dealership, informing you that there is a problem with the financing and that you have to return to the dealership. When you return to the dealership, the salesperson states that you did not qualify for financing, but that they can still process the deal at a higher interest rate (or with a larger down payment).
What you should do:
• Most auto contracts are contingent upon the approval of financing, so the dealership can cancel the deal if the financing falls through. However, problems with financing should not lead to a renegotiating of the terms of the original contract. If you still want the car, get your own financing.
• Ask to speak with the finance company representative to clarify the nature of the problem.
• If the dealership insists on a higher interest rate or additional payments, walk away.
You may also want to check out our Auto Fraud Diagnostic Tool (Click Here)
Link to part 3 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 2 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 2.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Common Auto Dealer Scams
The following is a reprint from Public Counsel.org
Let’s face it: Americans love to drive, and buy hundreds of thousands of cars each year. While most auto dealerships play by the rules, there are still some dealers that do not. This list takes a closer look at some of the more common abuses and provides information on steps that consumers can take to educate and protect themselves.
1. Bait and Switch
2. Packing the Contract
3. Advertising Bait and Switch
4. Hiding a Lemon or Wreck
5. Financing Fraud – Lying about credit scores
6. Buy-Lease Switch
7. Trade-in Fraud
8. Co-signer Scam
9. Requiring Options
10. Yo Yo Sale
Number 1: Bait and Switch – False statements about the price of the car.
You walk into a dealership and a salesman gives you a price quote. But when you are preparing to finish the deal, the price on the contract is not the same price that you were quoted. You may also notice that your contract contains other fees that increase the Total Cash Price of your vehicle. Click on this link see what you should watch out for: Sample contract (Front | Back).
What you should do:
• Make sure that the Total Cash Price on the written contract matches the price that you were told. If the prices are different, you may be the victim of fraud.
• If the dealership refuses to honor the representations made to you by the salesperson, refuse to sign the contract and walk away from the dealership.
Number 2: “Packing the Contract” – Adding unwanted options and accessories.
Some dealerships “pack” a contract with add-ons like service contracts, warranties, options and accessories that you did not ask for. Common add-ons are “protection packages” and rust-proofing. Click on this link see what you should watch out for: Sample contract: (Front | Back).
What you should do:
• Before you sign, look at your contract carefully for any items you did not authorize.
• If you were told something was included for “free”, check to see that the item is in the contract and that you were not charged for it.
• If you find any items that you don’t want, tell the salesman that you will not pay for it. Put a line through the item in the contract and reduce the Total Sale Price by that amount.
Number 3: Advertising Bait and Switch
Don’t be fooled by advertisements that offer a handful of vehicles for extremely low prices. Some dishonest dealers will claim that those few cars have been “already sold”, then they will try to sell you other cars at higher prices.
What you should do:
• Read the fine print of all advertisements especially if it looks too good to be true.
• If you are interested in buying one of these “special deals”, call the dealership to make sure it’s still available. When you call, specify the car’s VIN (Vehicle Identification Number) which should be included in the advertisement.
• Take the ad to the dealership and make sure you know the car’s Kelley Blue Book (www.kbb.com) value.
Number 4: Hiding a Lemon or Wreck
When buying a used car, watch out for cars that were previously wrecked, or cars that had to be returned to the manufacturer because of multiple repair problems (known as “lemons”). Learn more at What Do I Need To Know Before Buying or Leasing a Car? and What can I do if my car is a Lemon?
What you should do:
• Always test-drive a vehicle.
• Always have a mechanic inspect a used car before buying it.
• Ask for the repair records. If the dealership doesn’t want to provide it, then buy your car elsewhere.
• You can check a vehicle’s prior registration history by using a vehicle history report search service like Carfax (www.carfax.com).
Number 5: Financing Fraud – Lying about credit scores
Credit repair schemes
Another common scam used by dishonest dealers is to trick customers into believing that you have bad credit. They may tell you that your credit score is too low and you don’t qualify for a low interest rate. The point of this is to convince you that the high-interest financing offered by the dealership is a good deal. Learn more at What Do I Need To Know Before Buying or Leasing a Car?
What you should do:
• Get a copy of your credit report which includes your credit score. You can get a copy of your credit report from any of the three credit bureaus:
– TransUnion www.tuc.com, 1-800-888-4213
– Experian www.experian.com, 1-888-397-3742
– Equifax www.equifax.com, 1-800-685-1111
• Shop around for financing. Credit unions and other financial institutions often offer lower interest rates than what the dealerships offer.
Number 6: Buy-Lease Switch
BUYING a car means that when you finish making payments on it, you will OWN the vehicle.
LEASING means that there is a period of time – the lease period – when you’ll be making monthly payments on the car and at the end of the lease period you will NOT own the car (unless you make a large payment to own it). Plus, if you want to return the car before the lease period is over, you’ll have to pay a big penalty (an “early-termination fee”) to do that.
Customers are routinely scammed when salespeople lead you to believe that you are purchasing when you are really leasing (and vice versa). Other misrepresentations include telling customers that you will own the car at the end of the lease. This is false because almost all leases require you to make a large payment at the end of the lease in order for you to own the car.
What you should do:
• Make sure you read and understand the entire written contract. If you want to buy a car, make sure the contract you are signing doesn’t have the word “lease” in it. It seems obvious but many customers are easily tricked at the dealership Bring a friend if you are not sure.
• Don’t allow yourself to be pressured into a lease if you want to buy.
• Shop around and make sure you understand what your obligations are.
• Learn more by downloading: What should I know before buying a car? or by downloading What should I know before Leasing a Car?
Number 7: Trade-in Fraud
Many customers who trade in their old cars are tricked by dealerships who are not truthful about the value of the trade-in. They might tell you, “A 1999 Toyota like yours only sells for $3,000.” But the Toyota’s wholesale value may really be worth a lot more. Customers who don’t know what they can get for their car if they were to sell it today (the wholesale value) are likely to accept statements like these and may walk away with very little for their trade-in. The dealership will then turn around and sell the trade-in for much more. Learn more at What Do I Need To Know Before Buying of Leasing a Car?
What you should do:
- If you are not sure of the condition of your car and/or its market value, you may want to take it to a few dealerships. Tell them that you are thinking of trading in your car and see what they offer you for it. This amount may be a more accurate estimate of your car’s market value.
- If you are thinking about trading in your old car, make sure you know its current market value. You can go to the library or bookstore to find a book that lists values of most cars.
Also try these websites:
Kelley Blue Book (www.kbb.com)
Edmunds (www.edmunds.com
Number 8: Co-signer Scam
When customers don’t qualify on their own for financing, dealerships often suggest that they get a friend to co-sign. Often, however, a salesperson will tell the co-signer that he/she is only signing as a reference to help the primary buyer. This is false. If you are thinking of co-signing for someone, you should know that the co-signer is equally responsible for paying the debt and can be sued if the primary buyer doesn’t make payments.
What you should do:
• In most cases, it is not a good idea to be a co-signer for any type of loan.
• Only co-sign if you are prepared to make the payments for the car.
Number 9: Requiring Options
Some dealerships will tell customers that they have to buy additional options or accessories for them to qualify for financing, a special interest rate or a reduced price. This is not an accepted business practice and may be illegal.
What you should do:
• If you hear this pitch, leave the dealership right away.
Number 10: “Yo Yo Sale”
Typical Scenario: You purchase a car and drive it home. The next day, you receive a call from the dealership, informing you that there is a problem with the financing and that you have to return to the dealership. When you return to the dealership, the salesperson states that you did not qualify for financing, but that they can still process the deal at a higher interest rate (or with a larger down payment).
What you should do:
• Most auto contracts are contingent upon the approval of financing, so the dealership can cancel the deal if the financing falls through. However, problems with financing should not lead to a renegotiating of the terms of the original contract. If you still want the car, get your own financing.
• Ask to speak with the finance company representative to clarify the nature of the problem.
• If the dealership insists on a higher interest rate or additional payments, walk away.
You may also want to check out our Auto Fraud Diagnostic Tool (Click Here)
Link to part 3 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 2 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 1.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Top Ten Consumer Scams (including auto scams)
Reprint from the Arizona Attorney General’s Office
- Auto Purchases and Repair (details listed below)
- Work-at-Home Jobs and Business “Opportunity” Schemes
- Certified Check Fraud
- Charity Fraud and Scams
- Internet Auctions and Fraud
- Identity Theft
- Mortgage Foreclosure “Rescue” Schemes
- Payday and Other “Quick Cash” Loans
- Prize Notification Scams
- Telemarketing Rip-offs
Also included in this publication is a Resource Page and Important Information about Consumer Complaints
Buying a New or Used Car
Next to a home, an automobile is often the largest purchase consumers make. Consumers who are not aware of their rights often make bad deals. The Attorney General’s Office has a separate publication entitled Consumers’ Guide to Buying a Car: Steer Clear of Trouble! that is available on our Web site at www.azag.gov.
Red Flags
• A salesperson rushes you to sign paperwork without giving you a chance to review the contract terms.
• Advertised minimum trade-in amounts and free gifts. Dealers may raise the price of the car to offset a low value trade-in or the cost of the “gift.”
• A contract that has terms substantially different than what was advertised or what the salesperson promised.
• A salesperson suggests putting false information on your finance application, such as inflating your income. Providing false information to obtain financing is a crime and you could end up with a contract you cannot afford.
• A salesperson suggests you take the car home before financing is approved. This practice is designed to “lock you in” to a purchase. If you take a newly purchased car home and find out later you will have to pay more than expected for financing, you should be able to get your trade-in back and return the newly purchased car (A.R.S. § 44-1371). Auto Purchases and Repairs Protect Yourself
• Do your homework. Get information about car dealers from the Better Business Bureau (us.bbb.org). Research the car’s value before negotiating a price. Look up the value in the Kelley Blue Book (www.kbb.com) or at Edmunds.com (www.edmunds.com).
• Arrange financing with your bank or credit union before car shopping.
• Be skeptical of the claims made in car advertisements and read the fine print carefully. (Save copies!)
• Make sure all promises made by the salesperson or dealership are put in writing and that you get a copy.
• Request a free vehicle history report from the dealer before buying a used car.
• Read all documents and understand all terms before signing a purchase contract. Do not sign contracts with blank spaces.
• Make sure the financing is approved before turning in your trade-in vehicle or accepting the new car.
• If you are buying a used car, have a trusted mechanic inspect it before you buy.
• If you decide to finance through a dealer, negotiate the price first. Once the price is settled, then negotiate the monthly payment.
• With dealer financing, always ask the dealer if the interest rate being offered is their lowest rate, whether the rate includes any profit for the dealer, and if so, how much.
• REMEMBER: Arizona does not have a cooling-off period or three-day right to cancel a car sale.
Extended Warranties and Service Contracts
At the time of purchase, dealers may offer an extended warranty or service contract for an additional cost, but it can be expensive. In fact, extended warranties are often one of the most profitable aspects of car sales. Think carefully before purchasing a service contract. If the car model you have purchased has a record of reliability or you expect to own your car for five years or less, it may not be worthwhile to purchase an extended warranty.
If you are interested in a service contract, remember that cost and coverage vary greatly and may be subject to negotiation. Make sure you receive a copy of the terms and conditions of the contract from the provider.
If you pass on an extended warranty at the time you purchase your car, you may receive notices in the mail years later informing you that your original warranty is about to expire or has expired. These notices may not come from the dealership where you purchased your car, but instead may be sent by an independent service contract provider trying to sell you an extended warranty. Certain providers of service contracts or extended warranties must be registered with the Arizona Department of Insurance. Therefore, before responding to a solicitation, contact the Department of Insurance (www.id.state.az.us) to make sure the extended warranty provider is in compliance with state law.
Arizona’s Lemon Law New Car:
The Arizona Lemon Law (A.R.S. § 44-1261 et seq.) has some specific protections. Consumers should consult the law or an attorney if their new car does not operate in a reasonable manner.
Here are the basics:
The period covered by the Lemon Law is the same as the term of the manufacturer’s warranty or two years or 24,000 miles, whichever is earlier. The covered period begins on the date the consumer receives the vehicle.
During the covered period, if the manufacturer fails to repair the defect(s) after four attempts, or if the car is out of service by reason of repair for a cumulative total of 30 or more calendar days, the manufacturer must accept return of the car or replace it with a new car (contact your dealer).
Used Car: A used car is covered by the Arizona Used Car Lemon Law (A.R.S. § 44-1267) if a major component breaks within 15 days or 500 miles after the car was purchased, whichever comes first. You have to pay up to $25 for the first two repairs. The recovery for the consumer is limited to the purchase amount paid for the car.
Car Repairs
At some point, your car will need repairs. Knowing how your car operates and familiarizing yourself with the owner’s manual for your car will help you spot problems. It is best to find a trusted mechanic and auto repair shop before your car needs repairs. This will help you avoid making a last-minute or unnecessarily expensive decision.
Red Flags
- Aggressive scare tactics employed by repair shop personnel to pressure customers.
- Refuse to give you a written estimate.
- Failure to provide a warranty on parts and labor. Protect Yourself
- Ask for car repair recommendations from people you trust. Check with the Better Business Bureau to see if there are any complaints against the repair shop.
- If your car is under warranty, make sure that the repair shop is authorized to provide service for your car’s make and model. Work done by an unauthorized repair shop could void the warranty.
- If possible, get several written quotes from different repair shops before a major repair is done.
- Get a written estimate first. The estimate should identify the problem to be repaired, the parts needed and the anticipated labor charge. Make sure you get a signed copy of the estimate.
- Pay your bill with a credit card, if you can, to give you maximum flexibility to dispute the charge if something goes wrong. • Prepare for repairs by learning about your vehicle and preventa tive maintenance, before you experience a problem.
- Test drive your vehicle after having it repaired to make sure the car is fixed to your satisfaction.
- There is no such thing as a “standard warranty” on repairs. Make sure you understand what is covered under your warranty and get it in writing.
Click here for the entire article from the Attorney General’s Office
Link to part 2 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 1 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
HOW TO AVOID BEING RIPPED OFF BY A CAR DEALERSHIP OR CAR SALESMAN, part 1.
Ever wondered what you should do if you are scammed by a car dealership or a car salesman? What are the used car dealer tricks? How do you avoid a car dealer lying to you about financing?
In order to be a victim you need to learn how to beat the salesman or dealership.
Below are a series of articles or links to various resources. If you read them all you will see a pattern of lying, scheming and outright fraud. Know their games before you are caught in their web of deceit.
Now don’t get me wrong – I really believe there are honest car dealers, but they are so few that they are painted with the same brush as all the bad ones. Do your homework in order to avoid losing money, time and your senses.
Top Ten Consumer Scams (including auto scams)
Reprint from the Arizona Attorney General’s Office
- Auto Purchases and Repair (details listed below)
- Work-at-Home Jobs and Business “Opportunity” Schemes
- Certified Check Fraud
- Charity Fraud and Scams
- Internet Auctions and Fraud
- Identity Theft
- Mortgage Foreclosure “Rescue” Schemes
- Payday and Other “Quick Cash” Loans
- Prize Notification Scams
- Telemarketing Rip-offs
Also included in this publication is a Resource Page and Important Information about Consumer Complaints
Buying a New or Used Car
Next to a home, an automobile is often the largest purchase consumers make. Consumers who are not aware of their rights often make bad deals. The Attorney General’s Office has a separate publication entitled Consumers’ Guide to Buying a Car: Steer Clear of Trouble! that is available on our Web site at www.azag.gov.
Red Flags
• A salesperson rushes you to sign paperwork without giving you a chance to review the contract terms.
• Advertised minimum trade-in amounts and free gifts. Dealers may raise the price of the car to offset a low value trade-in or the cost of the “gift.”
• A contract that has terms substantially different than what was advertised or what the salesperson promised.
• A salesperson suggests putting false information on your finance application, such as inflating your income. Providing false information to obtain financing is a crime and you could end up with a contract you cannot afford.
• A salesperson suggests you take the car home before financing is approved. This practice is designed to “lock you in” to a purchase. If you take a newly purchased car home and find out later you will have to pay more than expected for financing, you should be able to get your trade-in back and return the newly purchased car (A.R.S. § 44-1371). Auto Purchases and Repairs Protect Yourself
• Do your homework. Get information about car dealers from the Better Business Bureau (us.bbb.org). Research the car’s value before negotiating a price. Look up the value in the Kelley Blue Book (www.kbb.com) or at Edmunds.com (www.edmunds.com).
• Arrange financing with your bank or credit union before car shopping.
• Be skeptical of the claims made in car advertisements and read the fine print carefully. (Save copies!)
• Make sure all promises made by the salesperson or dealership are put in writing and that you get a copy.
• Request a free vehicle history report from the dealer before buying a used car.
• Read all documents and understand all terms before signing a purchase contract. Do not sign contracts with blank spaces.
• Make sure the financing is approved before turning in your trade-in vehicle or accepting the new car.
• If you are buying a used car, have a trusted mechanic inspect it before you buy.
• If you decide to finance through a dealer, negotiate the price first. Once the price is settled, then negotiate the monthly payment.
• With dealer financing, always ask the dealer if the interest rate being offered is their lowest rate, whether the rate includes any profit for the dealer, and if so, how much.
• REMEMBER: Arizona does not have a cooling-off period or three-day right to cancel a car sale.
Extended Warranties and Service Contracts
At the time of purchase, dealers may offer an extended warranty or service contract for an additional cost, but it can be expensive. In fact, extended warranties are often one of the most profitable aspects of car sales. Think carefully before purchasing a service contract. If the car model you have purchased has a record of reliability or you expect to own your car for five years or less, it may not be worthwhile to purchase an extended warranty.
If you are interested in a service contract, remember that cost and coverage vary greatly and may be subject to negotiation. Make sure you receive a copy of the terms and conditions of the contract from the provider.
If you pass on an extended warranty at the time you purchase your car, you may receive notices in the mail years later informing you that your original warranty is about to expire or has expired. These notices may not come from the dealership where you purchased your car, but instead may be sent by an independent service contract provider trying to sell you an extended warranty. Certain providers of service contracts or extended warranties must be registered with the Arizona Department of Insurance. Therefore, before responding to a solicitation, contact the Department of Insurance (www.id.state.az.us) to make sure the extended warranty provider is in compliance with state law.
Arizona’s Lemon Law New Car:
The Arizona Lemon Law (A.R.S. § 44-1261 et seq.) has some specific protections. Consumers should consult the law or an attorney if their new car does not operate in a reasonable manner.
Here are the basics:
The period covered by the Lemon Law is the same as the term of the manufacturer’s warranty or two years or 24,000 miles, whichever is earlier. The covered period begins on the date the consumer receives the vehicle.
During the covered period, if the manufacturer fails to repair the defect(s) after four attempts, or if the car is out of service by reason of repair for a cumulative total of 30 or more calendar days, the manufacturer must accept return of the car or replace it with a new car (contact your dealer).
Used Car: A used car is covered by the Arizona Used Car Lemon Law (A.R.S. § 44-1267) if a major component breaks within 15 days or 500 miles after the car was purchased, whichever comes first. You have to pay up to $25 for the first two repairs. The recovery for the consumer is limited to the purchase amount paid for the car.
Car Repairs
At some point, your car will need repairs. Knowing how your car operates and familiarizing yourself with the owner’s manual for your car will help you spot problems. It is best to find a trusted mechanic and auto repair shop before your car needs repairs. This will help you avoid making a last-minute or unnecessarily expensive decision.
Red Flags
- Aggressive scare tactics employed by repair shop personnel to pressure customers.
- Refuse to give you a written estimate.
- Failure to provide a warranty on parts and labor. Protect Yourself
- Ask for car repair recommendations from people you trust. Check with the Better Business Bureau to see if there are any complaints against the repair shop.
- If your car is under warranty, make sure that the repair shop is authorized to provide service for your car’s make and model. Work done by an unauthorized repair shop could void the warranty.
- If possible, get several written quotes from different repair shops before a major repair is done.
- Get a written estimate first. The estimate should identify the problem to be repaired, the parts needed and the anticipated labor charge. Make sure you get a signed copy of the estimate.
- Pay your bill with a credit card, if you can, to give you maximum flexibility to dispute the charge if something goes wrong. • Prepare for repairs by learning about your vehicle and preventa tive maintenance, before you experience a problem.
- Test drive your vehicle after having it repaired to make sure the car is fixed to your satisfaction.
- There is no such thing as a “standard warranty” on repairs. Make sure you understand what is covered under your warranty and get it in writing.
Click here for the entire article from the Attorney General’s Office
Link to part 2 of this series
The post How To Avoid Scams by Car Dealers & Salesmen, Part 1 appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
by Joe Nocera
Bloomberg News on Monday posted an article about something that has become a pretty big deal in New York City: Taxi drivers are committing suicide.
Since November, six drivers, beset with financial difficulties, have taken their own lives, most recently last Friday. After every death, there are calls from the Taxi Workers Alliance, which represents the drivers — and plenty of others — for the city to start restricting the number of Uber and Lyft cars on the road. Taxi drivers view Uber Technologies Inc. and Lyft Inc. as not so much disrupting their industry as destroying it.
I suppose you can't really blame them for portraying Uber and Lyft as the enemy. In 2011, before Uber entered the New York market, there were 13,587 yellow cabs in the city of 8.5 million people.
The number of cabs in New York has been capped since 1937, after a Depression-era glut made it impossible to make a living as a taxi driver. The mechanism the city used to restrict cabs was a medallion that one had to buy to own a cab. Because there were so few cabs for so many people, the law of supply and demand kicked in, driving up the price of medallions. According to the New York Times, the value of a medallion topped out at $1.3 million in 2014.
Today, according to Bloomberg, there are an astonishing 80,000 "app-based transportation vehicles," driving around New York City. If 13,587 cabs were too few, then it's fair to say that the current 100,000-plus cars-for-hire are too many. The price of a medallion has dropped as low as $130,000.
Taxicab operators who thought their medallion would finance their retirement are now drowning in debt. Cabbies — many of whom lease their cabs from medallion owners — can no longer make their lease payments because their business has dwindled. And there is one other downside: All those app-based cars have slowed down traffic in New York by 23 percent since 2010, costing the city an estimated $34 billion a year.
On the other hand, is it really fair to blame everything on Uber and Lyft? I would argue that before throwing rocks at the competition, the New York taxi industry would do well to take a long, hard look in the mirror. Like internet stocks in the late 1990s, and real estate in 2005 and 2006, medallions were a bubble that was bound to burst. Uber and Lyft mainly provided the pins that popped it.
As was the case in many cities, yellow cabs in New York held a monopoly on cars-for-hire — and as is often the case with government-mandated monopolies, the result was an industry that put its own needs before that of its customers. As my colleague Barry Ritholtz pointed out recently, the taxi industry changed shifts between 5 p.m. and 6 p.m. — the exact moment when the largest number of people were trying to hail cabs. It was impossible to get a cab when it rained, or if there was a subway breakdown. Cars were often grimy.
Did the taxi industry care? No. So long as cabs remained scarce, the value of their medallions kept going up — and that's all that really mattered. As the price rose, people wanting to buy medallions had to take out loans that were as big, or bigger, than their mortgages. But that was OK too. They made the same assumption that homebuyers made in 2006: that the price could only keep rising.
There are any number of things the industry could have done to minimize the impact of Uber and Lyft. The most obvious was to have increased the number of cabs over the years, something that could have been sensibly calibrated so that cabbies could still make a good living while riders had an easier time finding a taxi. It could have embraced technology so that people could hail a cab via an app instead of having to stand at a corner and hope for the best. 1 And it could have replaced medallions with renewable licenses, which would have ended the bubble before it got out of hand.
But the taxi lobby was powerful, and so was the industry's view that medallions were a sure-fire way to get rich. The situation was untenable, however; if Uber hadn't come along to burst the bubble, something else would have. Because the taxi industry had treated riders so shabbily, people embraced the new cars-for-hire even though they were usually more expensive than a taxi ride.
What is astonishing to me is that the industry still doesn't seem to realize that it sowed the seeds of its own destruction. For instance, in a case decided late last year, two medallions owners sued the city's Taxi & Limousine Commission for failing to maintain the "financial stability" of the medallions — as if that were somehow a government responsibility. But, wrote the judge, the plaintiffs "have pointed to no statute or regulation that compels the Taxi & Limousine Commission to artificially inflate the value of medallions." The suit was tossed.
In another case, medallion owners and their lenders sued the city and the commission for, as Reuters put it, "jeopardizing their survival by imposing burdensome regulations and letting the Uber ride-sharing service take passengers away." That suit got tossed as well.
At a rally outside city hall Monday, the Taxi Worker Alliance once again pointed to Uber and Lyft — "Wall Street companies," an alliance official called them — as the reason for the cabbies' struggles. She called on the city to both regulate them and reduce their number.
I have some sympathy with the latter request. A cabbie — or an Uber driver — ought to be able to make a living driving a car-for-hire, and that doesn't appear to be possible now. 2 But any reduction should involve every kind of car-for-hire, not just Uber. There is no law that says the number of Uber cars must shrink so that all 13,587 taxis can be saved.
Medallions are a different story. When the internet bubble burst, nobody bailed out tech investors. And when the subprime loan bubble burst, the federal government took the position that it had to let foreclosures run their course, no matter how much pain they inflicted on homeowners. Why should medallion owners be treated any differently?
Medallion owners had a sweet deal for a long time. Now that sweet deal is going away. It's painful, yes, but it's not the job of government to protect a monopoly. Once medallions are no longer prized for their ability to make people rich, everyone in New York — taxi drivers included — will be better off.
- It uses such technology now, but it's a day late and a dollar short.
- I've spoken to many Uber drivers over the years. I've yet to meet one who said he could make a living driving full time for the company.
Copytight 2018 Bloomberg L.P. All rights reserved.
After a growing furor among Uber drivers in New York City in 2016 over plunging incomes, Uber relented and made a rare concession: It agreed to recognize a local driver group.
The group, the Independent Drivers Guild, was not quite a union, but it would meet regularly with Uber management and advocate for drivers. Still, there was lingering suspicion that the guild was a pawn for Uber since it accepts money from the powerful company.
But two years later, the guild is taking an increasingly confrontational stance toward Uber as it pushes for higher pay and a cap on new drivers.
Backed by veterans from the Barack Obama and Bernie Sanders presidential campaigns, the guild is drawing attention to the plight of Uber drivers struggling to make a living — just like taxi drivers.
After a taxi driver killed himself last month — one of six driver suicides since December — the Independent Drivers Guild called for new regulations in stark terms, saying city leaders had ignored “widespread exploitation.” While Uber as a corporate behemoth has eviscerated the yellow cab industry, front-line workers in both worlds share a common bond over their economic desperation.
“How many more of our families must be shattered before the city will act?” said Sohail Rana, an Uber driver and guild member.
Yet some continue to doubt the guild’s independence. Leaders will not say how much Uber pays the guild as part of its agreement to represent drivers or how many dues-paying members it has. But officials at Uber are hardly pleased by the group’s decision to go after its bottom line.
The guild’s campaign comes as New York City is considering stricter rules for Uber and other ride-hailing services that have flooded the streets with vehicles. Mayor Bill de Blasio and the City Council are under pressure to address several issues: setting fair wages for drivers, reducing street congestion and stabilizing the crashing values of taxi medallions.
Last Monday, Uber’s chief executive, Dara Khosrowshahi, visited City Hall as part of a global charm offensive to repair the company’s image. Mr. Khosrowshahi met with Corey Johnson, the City Council speaker, who said recently that it had been a mistake not to rein in Uber’s growth in 2015, when Mr. de Blasio tried unsuccessfully to institute a cap.
Uber has become hugely popular in New York, and its trips outpaced yellow taxis for the first time last year. There are about 65,000 vehicles affiliated with Uber in the city, which provide more than 400,000 trips per day, according to the Taxi and Limousine Commission. Lyft, its main rival, tallies about 112,000 trips per day. City law caps the number of yellow taxis at about 13,500; they typically make about 300,000 trips each day.
New Yorkers get cheap rides in nice vehicles — and a respite from the failing subway — while Uber is moving toward an initial public offering next year at a value of $48 billion. But many of the drivers who New Yorkers and Uber executives rely on are feeling hopeless.
Drivers are trapped in predatory car loans. The money they make from each trip is relatively paltry after fees, like sales tax, are deducted and after Uber takes its cut of more than 20 percent.
Pedro Acosta began driving for Uber shortly after the service arrived in New York in 2011. At first, he made a good living. Uber enticed drivers, promising they would make $5,000 during their first month. But then the app started reducing its rates.
“They dropped the price so much,” Mr. Acosta said at his apartment in East New York, Brooklyn, the day after he worked an 11-hour shift. “We have to work so many hours.”
Mr. Acosta made 4,457 trips for Uber last year, or more than 85 rides each week. He made about $30,000 after expenses, according to his tax returns, an amount that he said was difficult to live off in an increasingly expensive city. He has six children, and his wife works giving massages and facials.
His expenses add up quickly — a $750 monthly car payment, insurance, gas, oil changes, professional clothing. To buy his 2016 Mitsubishi Outlander SUV, Mr. Acosta took out a loan with an interest rate of 17.7 percent. He makes a point of wearing a tie in hopes of improving his rating as a driver and making his children proud.
A survey by the Independent Drivers Guild found that one-fifth of drivers had household incomes of less than $30,000 per year. A survey by a competing group, the New York Taxi Workers Alliance, which represents taxi and ride-hailing service drivers, found that about 44 percent of drivers made incomes between $20,000 and $39,000.
Mr. Acosta, a guild member, pays $18 in dues each month. The group has given him a voice, he said, like when it fought to allow passengers to tip from within the app — an idea Uber embraced last year. Most riders still do not tip, though. “They got used to not paying a tip,” he said.
The guild is now calling for change. It wants a minimum pay rate for app drivers, similar to the metered fare taxi drivers earn; a limit on Uber’s commission; and a halt to licensing additional drivers.
The City Council is considering a series of bills, including one that would restrict the number of for-hire vehicles. At the same time, the city’s taxi commission is studying driver pay and is planning to propose new rules this summer to address the problem.
Meera Joshi, the city’s taxi commissioner, said an influx of vehicles has made it much harder for drivers to find trips.
“The pay, from what we can see, has been declining, in part because of the competition among apps to offer the lowest passenger price,” Ms. Joshi said.
Alix Anfang, a spokeswoman for Uber, said the driver pay study was a good idea.
“We believe that all full-time drivers in N.Y.C. — taxi, limousine and Uber alike — should be able to make a living wage and support their families,” Ms. Anfang said.
The drivers who have taken their lives were from across the industry — men who drove taxis and for livery and black car services. The latest suicide was Abdul Saleh, a yellow taxi driver who leased his cab and died last week, according to the Taxi Workers Alliance.
In light of the taxi driver suicides, Mr. Khosrowshahi said he would support a fee on Uber trips to pay for a “hardship fund” to support taxi medallion owners who are struggling. Medallions once sold for more than $1 million and now go for as low as $175,000.
Bhairavi Desai, executive director of the New York Taxi Workers Alliance, slammed the “hardship fund” as a public relations stunt and an attempt to avoid new regulations. Ms. Desai is a frequent critic of the Independent Drivers Guild, arguing that its leaders cannot be trusted because they receive money from Uber. Ms. Desai says the guild’s attacks on Uber are meant to give the impression that it is not cooperating with the company.
“They have to create tension to have some level of credibility,” Ms. Desai said.
The taxi workers alliance, which was founded in 1998 and has about 4,000 dues-paying members, has also pressed for new rules, including a vehicle cap and minimum fare rate.
But the Independent Drivers Guild’s message is more polished. The guild, which is affiliated with a regional branch of the International Association of Machinists and Aerospace Workers, hired Revolution Messaging, the company behind Mr. Sanders’s digital campaign in 2016. It was founded by staffers from Mr. Obama’s 2008 campaign.
Last week, the guild’s executive director, Ryan Price, criticized Mr. Khosrowshahi’s “hardship fund” as another fee that would hit workers.
“Uber’s C.E.O. needs to address the widespread hardship faced by drivers for his own company before considering taking another cut from our sub-minimum wage pay,” Mr. Price said.
Facing low wages and long hours, some Uber drivers have quit. But Mr. Acosta keeps working for the company because he needs a job with flexibility. One of his sons has spina bifida and uses a wheelchair. He has to take him to many appointments.
“I don’t have any other choice,” Mr. Acosta said.
Copyright 2018 The New York Times Company. All rights reserved.
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