The Consumer’s Friend

Extended warranties, extended service contracts, maintenance agreements are a huge profit center for car dealerships.  For consumers, however, it is like buying soda and popcorn at the movie theatre to take home: a great way to overpay!  (Keep in mind that you can usually buy the same or similar products elsewhere for FAR less.)  Now, one of the nations largest chains says it is hungry for more consumer overcharges.  According to Automotive News, AutoNation Inc., the nation’s largest dealership group, will push even harder to sell extended-service contracts and prepaid maintenance in 2012, on top of record F&I [Finance and Insurance]revenues per vehicle in 2011.”There’s going to be a continued or an even stronger focus on [F&I] products, and we’ve done a good job on products in the past,” said COO Mike Maroone, to Automotive News. AutoNation averaged $1,223 per vehicle in F&I revenues in the fourth quarter, up about 5 percent from a year ago. The figure represents profits from F&I product sales as well as from finance reserves — the dealer’s share of interest-rate profits. For the full year, AutoNation averaged $1,201 per vehicle in F&I revenues. That was the first time the group topped $1,200 for a full year.

If the dealership says on the purchase contract that you paid money down when you didn’t, the dealership has violated the Truth-in-Lending Act, among other laws.   A Connecticut dealership that listed a fictional down payment on a customer’s sales contract has recently been found to owe the consumer damages.  Don Mallon Chevrolet Inc. in Norwich, Conn., must pay plaintiff Agdaliz Negron $1,000 plus attorney fees for violating the Truth in Lending Act, U.S. Magistrate Judge Thomas Smith said. After a nonjury trial, Smith rejected the store’s argument that it had merely made an inadvertent, “bona fide error.” The case involved the May 2007 purchase of a 2004 Chevrolet Impala, including a service contract, VIN etching and a GAP policy. With financing, the total sale price was $27,580.Documents listed a $250 down payment. In his decision, Smith said the $250 “fictitious down payment” resulted in assessing sales tax on that amount, making the extra sales tax “in reality part of the finance charge.” The award was a $1,000 statutory amount,  the maximum statutory award under the Truth in Lending Act.

The Detroit News reports that federal safety regulators have opened an investigation into 830,000 Toyota vehicles over complaints of fires sparked by power window switches.

The National Highway Traffic Safety Administration said Friday it was opening a preliminary investigation into the 2007 Camry and RAV4 after receiving six consumer complaints alleging a fire in the driver’s side door.

“Based on the available information, it appears the fires are originating from the power window master switch located on the driver’s door,” NHTSA said.

Odometer fraud is huge problem for California Used-Car Buyers.  Consumer protection groups have estimated at least 20% (or more) of all used cars sold have the odometers “rolled.”  Of course, odometers are electronic/digital now and are not actually manually rolled back.  Computers are used now.  Many of these vehicles have “washed” titles running through Texas or other border states.   Look for old stickers and repair orders showing higher miles.  Look for unusual wear and tear.  Most importantly, have a competent mechanic inspect any used car you buy.   Ask him or her to see if there are any signs of problems with the mileage as shown on the odometer.

The Consumer’s Friend recently posted a story about a retired lawyer taking on Honda over mileage in small claims court.  She’s won, for now.  The Torrance Small Claims Court Commissioner ruled that American Honda Motor Co. misled the woman by claiming the hybrid could achieve as much as 50 miles per gallon, the Los Angeles Times reports.

Heather Peters, who maintained she never got more than 41 miles per gallon, was awarded $9,867 in damages, just shy of the $10,000 she was seeking.

“It is a victory for Civic Hybrid owners and consumers everywhere,” Peters, identified as a former lawyer, told the Times. “Sometimes big justice comes in small packages.”

The Times notes that her damage award is greater than any she would likely collect in a class action. Peters opted for the small claims route after learning a proposed class action settlement would result in $8.5 million for trial lawyer fees, with car owners receiving as little as $100 and rebate coupons for a new car.

Honda has vowed to appeal, saying in a statement published by the Times on Thursday: “American Honda believes that the judgment in this case is a radical and unprecedented departure from California and federal law.”  On appeal the Honda lawyers are a’comin’.

For GMAC, AmeriCredit, GM Financial, or any other auto finance company operating in California, they must provide a thorough and fair Notice of Intent to Sell to consumer’s whose vehicles they have repossessed.  You have the right to reinstate or pay off your contract, and if that is not provided, they can’t come after you for the post-sale balance.  If you have been repoed by GMAC, AmeriCredit, or any other financial institution (yes, credit unions too!), give us a call and report what happened.  858.451.0291.

As part of its report over the increase in Small Claims jurisdiction from $7500 to $10000 dollars, the Los Angeles Consumer Affairs Department recognized that “Legal representation by an attorney can be difficult to find for
minor disputes involving less than $25,000 in damages. “  This is one reason why class actions and consumer protection laws generally are so important: if you want a fair fight with the corporations, you need a case that lawyers will accept; and without a financially viable case, lawyers simply can’t stay in business suing on small damage amounts.

AB
125 – Chapter 24 – Ins. Code §§1758.96 & 1758.992

Effective on May 10, 2011 (Urgency
Bill)

Summary: Clarifies that insurance deductibles may be covered by GAP
insurance, expands the types of vehicles that can be covered by GAP insurance,
and clarifies the role of “waiver” clauses.

Background: When a car is totaled in an accident, insurance companies
typically pay the replacement value, known as the “actual cash value.” Since
cars lose a lot of their value as soon as they are purchased, and consumers may
owe more than the actual cash value, many consumers find themselves owing a
lender much more than the insurance settlement will provide if they total a
relatively new car. To fix this possible loss, the legislature allowed insurance
companies to sell GAP (guaranteed automobile protection) insurance which would
take care of that difference. However, the Department of Insurance issued an
opinion that the statute does not permit GAP insurance to cover the consumer’s
automobile insurance deductible, although it could pay consumers up to an
additional $5,000 necessary to purchase another car.

The New Law: Clarifies and fixes problems with the current law by:

• Changing the definition of “GAP” so that the deductible amount provided by a
  standard property damage insurance policy may also be covered by GAP insurance.
• Providing that a “waiver” clause in a vehicle conditional sales contract or
  lease agreement may include the deductible amount provided by a standard
  property damage insurance policy. A waiver clause is similar to GAP insurance
  and can be sold by people who are not licensed insurance agents.
• Replacing the word “automobile” with the word “asset” in the definition of
  these contracts so that other vehicles, such as motorcycles, motorhomes, boats,
  and off-road vehicles, are also eligible to be covered by GAP protection.
• Authorizing waiver clauses to also include a discount or incentive, above
  the amount required to satisfy the obligation on the loan, lease or sales
  contract, for the vehicle owner to purchase a replacement vehicle using the same
  seller, lender or lessor.

Thanks to the Los Angeles County Consumer Affairs Department for providing this info!

This new law establishes a misdemeanor penalty for repair dealers who fail to
properly repair and restore an airbag to its original condition after preparing
a written estimate.

Background: At least 30,000 car repairs are performed each year where a
deployed airbag is not replaced. Nationally, 20% of all deaths in crashes caused
by an airbag failure to deploy are due to the airbag not having been installed
in a repair prior to the crash. It is already fraud to invoice a customer for
replaced parts that were not actually replaced, but it is difficult to prove
that fraud has occurred.

The New Law: Establishes a misdemeanor penalty of up to one year in jail, a
$5,000 fine, or both for an automotive repair dealer who prepares for a customer
a written estimate that includes replacement of a deployed airbag and who fails
to repair and restore the airbag to original operating condition