Distressed Customers May Unfairly Target Dealerships

Auto dealers may face a rash of allegations from customers who have become financially stressed during these hard times and now seek ways to void contractual agreements made at dealerships.

So says Michael Benoit, a Washington attorney specializing in auto finance and dealership issues, anticipating groundless charges against dealers from people who've experienced a reversal of fortunes.

“We'll see an increase in unfair and deceptive activities claims,” he says at a recent Consumer Bankers Assn. auto finance conference. “You'll see, ‘The salesman told me this, the salesman told me that.’ It's defensible, but you'll see more of it.”

However, desperate people doing desperate things can go both ways.

Benoit speaks of an upswing in dealership hanky-panky as finance and insurance personnel, anxious to close deals during the current auto sales drought, fudge credit-applications information.

“We'll see claims in which a customer's income was misstated or overstated to get approval,” Benoit says. “Four people in an F&I office recently got arrested for that.”

He also predicts it will become legally harder to repossess a car, as state legislatures consider beefing up consumer-protection acts.

“We'll see more bills to protect debtors and keep them in their cars,” Benoit says, citing a Connecticut House of Representatives bill that would amend legislation on repossessing collateral.

“The bill says that filing for bankruptcy is not considered an event of default and not grounds to repossess a car, although everything I've seen says it is,” Benoit says.