The Lemon Law Blog

California's Car Buyers Bill of Rights gives used car buyers the right to return the vehicle for any reason within two days, but only if the buyer agrees to pay a fee ranging from $75 to $400 depending on the price of the vehicle. The first problem is that many dealers are persuading buyers to waive this protection. A second problem is that some dealers are simply refusing to take vehicles back even when the buyers paid for the return option. Some refuse to take back vehicles without payment of unauthorized "restocking" fees.

On November 28, 2007, consumer groups held a press conference on the steps of the Capitol to highlight the defects in the law. Rosemary Shahan of the consumer group CARS pointed out there is no good reason a buyer should have to pay anything for the two day right of return. If the vehicle is returned, the law provides for reasonable "restocking" fees and that should be sufficient compensation for the inconvenience.

Rosemary presented KABOB client Oscar Marin Fuentes as someone who was not protected by the Car Buyers Bill of Rights. Fuentes purchased a used 2005 Chevy Silverado from Capital City Motors in Sacramento. The dealer had Fuentes, who does not speak fluent English, waived the two right of return. With a day or two after taking delivery, Fuentes noticed that door would not seal and air was coming in gaps in the cabin. Fuentes returned the truck to the dealer the next day asking for his $23,500 back, but the dealer refused. Investigation revealed the truck had been in two severe accidents, one a roll-over. The air bags had popped.

At the news conference, Fuentes showed the press the problems with the truck. ABC News' video on Fuentes discussing the problems with the truck is here.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Dealer Fraud

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Car sales and leases are not sealed with a handshake these days. After hours of haggling, you’ll be told: “Sign here. And here. And here. And here.” Of course, you should get an exact copy of every document signed or initialed at the dealership before taking delivery of the vehicle. Too often, consumers are so excited to escape the high-pressure atmosphere, they hurriedly stuff their papers in the glove box and drive away. Meanwhile, the dealer is completing its own file.

Just what does the dealer keep for itself? Altogether, those items make up the Deal File, sometimes called the Deal Jacket. It contains internal documents that reflect the transaction, parts of which consumers never get to see. The file might include things like the credit application, a four-square page or other paper trail of promises, the ‘recap sheet’ or sales summary, vehicle invoice, finance papers, DMV information, repair history, inspections, trade-in calculations and separate agreements relating to after-market items. Even the front of this folder may have handwritten notes or other key information. Last but not least, the Deal File reveals how much profit was made on the transaction.

Fraud, if there is any, is likely to show up here. An experienced lawyer can peel back layers of deception by doing the math, applying intuition and noticing numbers that do not add up. It is sometimes shocking. Clearly car dealers are entitled to make a profit – that’s what they are in business to do. Yet, the Deal File can disclose profit centers that have nothing to do with the car it self, like a “theft protection” product that costs $37 and is rolled into the vehicle price at $1,400, or a service contract that costs the dealer $250 and is charged to the buyer at $2,500. At some point it becomes unconscionable. We even see instances where the Deal File shows a finance department is cheating its own sales personnel out of commissions just by moving extras from one line item to another.

When I started practicing consumer law in the 1980s, it was hard to get these internal documents. The defendants first denied they existed, and then cited bogus privacy concerns. Now we obtain this essential evidence routinely in the discovery process.

Last month, the California Court of Appeals issued a decision in a case called Lewis v Robinson Ford Sales, Inc. using evidence of the Deal Files to certify a class action for violation of the Rees Levering Act, an important California Truth-in-Lending law. At first the appellate court was going to leave the decision unpublished. We, and a number of other consumer advocates, urged the court to publish the case. The court agreed. Among other things, the case clarifies the evidentiary value of “Deal Files” as standard documents in the automotive industry and recognizes that vehicle transactions “can be evaluated through the deal jacket” for violation of consumer protection laws.

Posted by Nancy Barron | Permalink | Email This Post

Posted In: Lemon Law 101

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