Car Loan Problems The car loan contracts used by car dealers often break the federal law of the Truth in Lending Act and the Illinois law of the Consumer Protection Act. Sometimes the car dealers charge you a higher interest rate than the rate the dealer has obtained from your local bank. For example, the car dealer may arrange financing from the bank at a rate of 7%, but the bank gives the dealer permission to mark the interest rate up to 9% - the 2% difference is the dealer's commission or profit. Trouble is, the car dealer never tells you that he/she is marking up the interest rate. The bank and car dealer may both be at fault here. This is called yield spread premium. It is illegal unless the mark up is disclosed to you. It rarely (if ever) is. Anyway, the long and short of it is that you, the consumer, lose. The dealer often marks up extended warranties and service contracts by as much as 300% and pockets the difference. Also, the dealer tacks on credit insurance - disability or death - to increase the profit of the sale. This is called payment packaging. The salesman finds out from you what you can afford for a monthly car payment, and then he/she proceeds to build up the payment to match the monthly figure you gave him/her. Negative equity loans are also a problem that can hurt you, the buyer. Negative equity happens when you trade in your car, but owe more on it than the car is worth. This creates negative equity. When the car dealer does the paper work, he/she often handles this situation in a way that violates the Truth in Lending Act. The law tells the dealer how to handle the negative figure on the loan contract. Another problem is called spot delivery. Here the buyer drives away from the dealership with the new car thinking the deal is complete. Later, the salesman calls and tells the buyer he/she must bring the car back because the loan was not approved. This is illegal. Other problems include selling a damaged car (for example, the car was in a flood), forgery of loan documents, concealing the history of a car (rental or demo), failure to transfer title, and rolling back the odometer. Credit Card Problems This section is about illegal things that businesses do to consumers and buyers. This section is not about bankruptcy laws and procedures. Although a lot of times when people file bankruptcy and carefully check out their credit bills and agreements, they find out that the business or credit card companies did illegal things. The Truth in Lending Act regulates credit transactions between consumers and creditors. Common violations of the law are: 1. Failure to give clear and conspicuous written disclosure before consummation of the transaction or to segregate them in one group of the contract. 2. Failure to include all required disclosures, including the identity of the creditor, amount financed, finance charges, annual percentage rate, and total sales price. 15 USC Sec. 1638; 12 CFR Sec. 226.17,18. Debt Collection Practices: Questions and Problems The Fair Debt Collection Practices Act, 15 USC Sec. 1692 et. seq. apply to debt collectors who regularly collect or attempt to collect debts. This includes collection agencies and attorneys. Here are the common violations of the law: 1. Failure to send consumer written notice of the debt within 5 days of the initial communication. Sec. 1692 (g) 2. Failure to inform the consumer that he/she has 30 days in which to dispute the debt. 3. Threats that the collector will garnish wages, threat to file suit. 4. Threat that the consumer will be arrested. 5. Communicating with someone other than the consumer, except to find the whereabouts of the consumer. Credit Reporting Practices: Questions and Problems The Federal Fair Credit Reporting Act regulates the activities of credit reporting agencies. The Act is designed to protect the consumer from inaccurate or arbitrary information in their credit report. The federal law has requirements to make sure that these files are private; rules that require untrue or disputed information to be removed from the credit report; rules which entitle the consumer to get a copy of his/her credit report; rules on how long certain information may be kept in your credit report. 15 USC 1681 et. seq.
I hope this information helps you. Call me with your questions. This area of law is complicated; even lawyers and judges don't understand it. The purpose of the law and courts is to help the people. Don't let the big guys trample on your rights.
Thank you, William C. Faber, Jr.
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