You bought a car and a couple days later the dealership comes by in the middle of the night and steals it back from you. Surprised? It happens all the time.
JT went to a car dealer and found a late model used vehicle he liked. His credit was okay – not stellar – but good enough to allow him to finance the car without getting a co-signer. The salesman and the others involved in the deal kept coming and going from the desk where he was sitting, bringing papers and talking about different lenders but assured JT they could get him financed. He had $1,000 for a down payment. As closing time at the dealer approached, they put some papers in front of him and said they had worked everything out. He signed and gave them the $1,000. He got in his new (but gently used) car and drove home.
A few days later, the salesman called him and told him there was a "problem" with the paperwork. Could JT come back to the dealership? JT went in and found his salesman who took him back to see the finance people. They told him that the bank which had approved his loan the other night had reneged. The good news is that they had found him a new bank and this one would move forward with a loan – even though JT already had the car – and only at a slightly higher interest rate. The papers were all filled out for JT's signature. They wanted to tear up the paperwork from the other day.
I have heard from many consumers who sat down and signed the new papers at this point. Instead, JT said words to the effect of, "Gentlemen, I believe you are attempting to be dishonest with me. Hence, I shall exit now." I wasn't there so we'll go with that.
The next morning he looked at his driveway and his car was gone. He called the police to report the stolen car. Shortly after, he was notified that the car wasn't stolen; it had been "repossessed" by the dealer. When he called them, his salesman said they were forced to do that when JT had refused to sign the new papers. All he had to do to get the car back was sign the new papers and pay the towing bill. The car was at the dealer. If he did not want to do that, they would simply keep his down payment for their troubles.
JT called an attorney and brought in all of his paperwork. Please keep in mind that this transaction took place in Michigan and this is an area of law that varies wildly from state to state. In JT's case, there was a Purchase Agreement which was signed by both parties. And then there was a finance contract. That contract was typical for Michigan in that it said that the buyer and seller agreed to a financial arrangement (down payment, monthly payments etc) and that the dealer was then authorized to assign the loan to a lender. But, it was the seller who was initially lending JT the purchase money.
What had most likely happened was that the assignment of the loan had failed. The dealer hadn't gotten anything approved and just hoped they could find a bank willing to take over the deal. Or, they had planned on ripping off JT all along. Interestingly, this meant JT could simply make his monthly payments to the dealer until they managed to reassign his loan and he would not be in breach. Of course, the dealer was not trying to reassign the loan; they were trying to shake him down for more money.
I advised JT to make his monthly payments to the dealer and we filed suit. The transaction JT saw is sometimes called a "Spot Delivery" – although those are quite often cases where the vehicles are given to the buyer without even pretending there is financing in place. In JT's case, they told him the financing was there. These deals are also sometimes called "Yo-Yo Financing" for obvious reasons.
Our lawsuit was simple: JT owned a car. The dealership stole it. We sued them for theft. Michigan has an interesting law that allows you to sue a thief for treble damages. And those can be construed as the value of the goods at the time of the theft. So, the moment we filed suit, JT was into this for $1,000. Each month he made a monthly payment. But our lawsuit named a sum closer to $50,000 (three times the purchase price of the car). The statute also allows for the recovery of court costs and attorney fees. It's cases like these which defendants are not wise to drag out. And they didn't. A short while later, they agreed to settle.
JT didn't get a gigantic windfall but he did get all his money back and something for his trouble. His attorney fees and court costs were likewise paid. During the case, I took the deposition of one of the dealership's finance people. That is, I got to question him under oath in front of a court reporter about the case. A few months after the case resolved, I saw the man in a restaurant and he came over and said Hello. He said he no longer worked at the same dealer. I asked him about JT's case. How common was something like that?
"Grabbing a car to get more money? They did it all the time."
"No, I mean that you guys settled with us?"
"Oh, that never happens. No one ever sues us. Most everyone just paid to get the car back. Why do you think they keep doing it?" He gave me his card.
There are many variations on this scam but the upshot is that the buyer is asked to come back to the dealer after the deal has been finalized, to "correct" or "redo" some paperwork. And it happens all the time. Search the term "spot delivery" on the interwebs if you are curious.
I implore you: If this ever happens to you, call an attorney before you go back to the dealer. Simply do a web search for an attorney who handles "auto fraud" or even "lemon law" (the fields are closely enough related) and simply ask for some free advice. It might mean the difference between you keeping the car or walking home from the dealer.
A few readers will gripe about my "call an attorney" advice here and ask if there isn't some self-help they can resort to. No, there isn't any simple advice I can give you like that. The laws on this really are different from state to state. Further, there are a variety of other laws which might prove helpful in your case that were not mentioned above, both Federal and state. Depending on how your situation unfolded, there might be violations of the Truth in Lending Act, Equal Credit Opportunity Act, the Motor Vehicle Sales Finance Act (a state law in Michigan but most states have a similar one) and the Fair Credit Reporting Act, just to name a few. A local attorney who is versed in them is the best place for an aggrieved consumer to start.
Follow me on twitter: @stevelehto
Steve Lehto has been practicing consumer protection and lemon law for 23 years in Michigan. He taught Consumer Protection at the University of Detroit Mercy School of Law for ten years and wrote The Lemon Law Bible. He also wrote Chrysler's Turbine Car: The Rise and Fall of Detroit's Coolest Creation and The Great American Jet Pack: The Quest for the Ultimate Individual Lift Device.