I am thinking this could happen with truck dealers as well
Car buyers shocked by unpaid liens
THE ASSOCIATED PRESS
SACRAMENTO, Calif.–The U.S. wave of auto dealership closures has come crashing down on thousands of people who are on the hook for used-car loans that dealers were supposed to absolve.
When a car buyer still owes money on a vehicle he is trading in, the dealer promises to pay off the outstanding loan, then resells the vehicle.
But, as more dealers go out of business, some are sticking consumers with the bill.
Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.
"It's devastating for people when it happens because they have two car payments and they can't afford them," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.
That's a Sacramento-based non-profit that lobbies on behalf of vehicle owners.
"Their credit is destroyed for no fault of their own because the dealer defaulted."
Regulators in California and other states, including Florida, Iowa and Washington, are seeing a surge in consumer complaints.
They warn the problem is sure to grow this year because of the deepening recession and continued trouble in the auto industry.
About a quarter of all car buyers are vulnerable because they still owe money on their trade-in or lease when they buy another vehicle, according to industry tracker Edmunds.com.
It's become more common for a driver to owe money on a trade-in as people stretch their car payments over six or seven years to make them more affordable.
A few states have programs that require dealers to post substantial insurance bonds to repay victimized car buyers.
Consumers in states with no such program, or a poorly funded one, have little recourse but to sue and hope for at least a small slice of the assets if the dealer has filed for bankruptcy.
Authorities have brought charges in rare cases where they have proof of intentional wrongdoing, but local prosecutors, motor vehicle departments and state attorneys general are paying more attention as the problem grows.
California state Senator Ellen Corbett, a Democrat from San Leandro, has introduced legislation that would require dealers to prove they're paying off a vehicle's lien before transferring the title.
That's already a requirement in some states, said Jason King, spokesman for the American Association of Motor Vehicle Administrators.
Corbett's bill would require auto dealers to post bonds as high as $250,000 with the California Department of Motor Vehicles so liens could be paid off if a dealership collapses.
"It's becoming a serious problem because the consumer, through no fault of their own, may be facing financial ruin just because they purchased a car," Corbett said.
California is hit particularly hard because it has the nation's largest auto market, more dealers going out of business, and more buyers who owe money on their trade-ins.
Complaints also are rising in Florida.
Between March 1 and Sept. 1, 2008, Florida officials deemed valid 103 complaints regarding auto dealers' delinquent loan payments.
By comparison, there were 37 confirmed complaints during the same period in 2007.
Florida also received more than 1,886 confirmed complaints of delays in title transfers during that five-month period in 2008, compared with 900 a year earlier, said Ann Nucatola, spokesperson for the state's motor vehicle department.
Car buyers shocked by unpaid liens
THE ASSOCIATED PRESS
SACRAMENTO, Calif.–The U.S. wave of auto dealership closures has come crashing down on thousands of people who are on the hook for used-car loans that dealers were supposed to absolve.
When a car buyer still owes money on a vehicle he is trading in, the dealer promises to pay off the outstanding loan, then resells the vehicle.
But, as more dealers go out of business, some are sticking consumers with the bill.
Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.
"It's devastating for people when it happens because they have two car payments and they can't afford them," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.
That's a Sacramento-based non-profit that lobbies on behalf of vehicle owners.
"Their credit is destroyed for no fault of their own because the dealer defaulted."
Regulators in California and other states, including Florida, Iowa and Washington, are seeing a surge in consumer complaints.
They warn the problem is sure to grow this year because of the deepening recession and continued trouble in the auto industry.
About a quarter of all car buyers are vulnerable because they still owe money on their trade-in or lease when they buy another vehicle, according to industry tracker Edmunds.com.
It's become more common for a driver to owe money on a trade-in as people stretch their car payments over six or seven years to make them more affordable.
A few states have programs that require dealers to post substantial insurance bonds to repay victimized car buyers.
Consumers in states with no such program, or a poorly funded one, have little recourse but to sue and hope for at least a small slice of the assets if the dealer has filed for bankruptcy.
Authorities have brought charges in rare cases where they have proof of intentional wrongdoing, but local prosecutors, motor vehicle departments and state attorneys general are paying more attention as the problem grows.
California state Senator Ellen Corbett, a Democrat from San Leandro, has introduced legislation that would require dealers to prove they're paying off a vehicle's lien before transferring the title.
That's already a requirement in some states, said Jason King, spokesman for the American Association of Motor Vehicle Administrators.
Corbett's bill would require auto dealers to post bonds as high as $250,000 with the California Department of Motor Vehicles so liens could be paid off if a dealership collapses.
"It's becoming a serious problem because the consumer, through no fault of their own, may be facing financial ruin just because they purchased a car," Corbett said.
California is hit particularly hard because it has the nation's largest auto market, more dealers going out of business, and more buyers who owe money on their trade-ins.
Complaints also are rising in Florida.
Between March 1 and Sept. 1, 2008, Florida officials deemed valid 103 complaints regarding auto dealers' delinquent loan payments.
By comparison, there were 37 confirmed complaints during the same period in 2007.
Florida also received more than 1,886 confirmed complaints of delays in title transfers during that five-month period in 2008, compared with 900 a year earlier, said Ann Nucatola, spokesperson for the state's motor vehicle department.
