Georgia Consumer Fraud Attorney

Lemon Car Laundering

Consumer advocates call it “lemon laundering.” It is the resale without proper disclosure of cars with a history of chronic problems which required the manufacturer to buy it back under the lemon law.  This occurs all too frequently in Georgia. We have had success in pursuing Georgia automobile dealers for this conduct. We have handled cases involving Nissan, GM and Hyundai vehicles.

We have all heard of the Lemon Law. This law, applicable to new cars, provides that if the consumer has recurring problem, or if the car is out of service for 30 days or more in a specified time, then the consumer may make the manufacturer buy the car back. When the car is bought back, what happens? These cars will typically be less valuable than other non lemon cars. Most consumers would steer away from a car that is known to have a history of problems.

Manufacturers typically administer repairs to the car then resell the car at large “closed” auctions where only dealers of that type of car may buy them.  These cars are typically low miles, recent model cars.  Most states require that the manufacturer put a brand on the title of the car and provide notice to the first consumer purchaser of the car after the repurchase. Texas requires that a “hanger” be placed on the car advising it was a lemon law buyback.  Texas and Georgia require that the new purchaser sign a form mandated by law advising them the car was a lemon.

One way to launder a lemon is to take it to a dealer-only auction out of state, says Rosemary Shahan, president of Sacramento-based Consumers for Auto Reliability and Safety (CARS). Frequently, vehicles repurchased in states that have “title branding” laws are auctioned in states that don’t have those laws (Illinois does not), where they get “clean” titles, Shahan said.  Other methods include hiding the “disclosure” in a stack of documents to be signed or calling the customer to return after the purchase to sign documents, claiming there was an error, or “we missed one document”, then having the customer sign the disclosure without the customer ever realizing it. We have seen a  pattern of this occurring at a specific South Atlanta dealership.

The Georgia Lemon Law, OCGA 10-1-790 provides:

(a) No manufacturer, its authorized agent, new motor vehicle dealer, or other transferor shall knowingly resell, either at wholesale or retail, lease, transfer a title, or otherwise transfer a reacquired vehicle, including a vehicle reacquired under a similar statute of any other state, unless the vehicle is being sold for scrap and the manufacturer has notified the administrator of the proposed sale or:

(1) The fact of the reacquisition and nature of any alleged nonconformity are clearly and conspicuously disclosed in writing to the prospective transferee, lessee, or buyer; and

(2) The manufacturer warrants to correct such nonconformity for a term of one year or 12,000 miles, whichever occurs first.

GA. COMP. R. & REGS. §122-23-.02. Return, Transfer and Resale of a Reacquired Vehicle provides:
(1) A reacquired vehicle shall not be transferred, leased, or sold, either at wholesale or retail, unless the following conditions are met:

(a) At the time of each transfer of the reacquired vehicle, the transferor shall provide the transferee the form required by Rule 122-23.01.
(b) The ultimate consumer must be provided the opportunity to read the form in its entirety before purchasing or leasing the reacquired vehicle.
(c) Both the transferor of the reacquired vehicle and the ultimate consumer must sign the form at the time of the sale or lease to the ultimate consumer. The original of the form shall be provided to the ultimate consumer. The transferor of the reacquired vehicle must send a copy of the completed and dated form to the Administrator within thirty (30) days from the date of the sale or lease.

(2) The manufacturer shall activate the warranty required pursuant to O.C.G.A. § 10-1-790(a)(2) at the time of the sale or lease of the reacquired vehicle to the ultimate consumer. The manufacturer shall also notify the Administrator that the warranty has been activated within ninety (90) days of the sale or lease.
Authority O.C.G.A. §§ 10-1-790 and 10-1-795

An example of our work is set out below.

 

Summary judgment PDF of Bender v. Southtowne Motors of Newnan lemon car laundering case
Bender Response to Motion for Summary Judgment

Links to other articles

http://www.ohiolemonlaw.com/buyer-beware/laundered-lemons/

http://articles.chicagotribune.com/2002-06-25/business/0206250055_1_lemon-laundering-dealership-gm-dealer

http://www.nytimes.com/2007/08/26/automobiles/26LEMON.html?n=Top%2FClassifieds%2FAutos%2FTopics%2FMotoring&_r=0

Falsifying Credit Information is a Crime

We often see clients come in who we wonder how they qualified for the loan to buy the car. We have learned that it is because the dealer finance personnel provide false data to the finance company. I had a retired truck driver come in last month. His income consisted of about $1500 per month including a VA benefit.  He had been sold a $35,000 car. We called the finance company and learned that his application had been falsified and they said he made over $35,000 per year.  We told the finance company that he only made $1500 per month and showed them.  WE took back the car and the finance company let him out of the deal.

This article talks about this criminal activity.

Employees of the Serra dealership in Birmingham were federally indicted for this crime.

“As managers and salesmen in a car dealership, these defendants falsified customer information used to make loans, defrauding the banks who trusted the dealership to present truthful information during the vehicle financing process, and harming customers by fraudulently inflating the value of the vehicles they purchased,” she said. “This type of fraud is the auto-industry equivalent of the mortgage fraud that contributed to the financial meltdown, and could threaten the security of our financial markets,” Vance said.

“Today’s arrest clearly illustrates that individuals who engage in these types of illegal activities will be held accountable for their actions,” Hyman-Pillot said. “These defendants clearly took advantage of the people in their community, as well as financial institutions. They manipulated the system and falsified documents with the intention of increasing profits at the expense of others.”

“This case is significant to the FBI not merely because of the loss amounts, but also because of the many victims left in the wake of this scheme who had trusted the defendants with handling their vehicle financing,” Schwein said

The 11-count indictment charges the defendants with conspiring with others at the dealership, between August 2010 and October 2013, to defraud financial institutions, Nissan North America and Serra Nissan customers by fraudulently increasing vehicle sales in order to boost personal profits.

The indictment also charges Wilkinson, Burton, Perry and Riley with bank fraud for fraudulent loan information submitted to financial institutions in October 2012. Defendants Wilkinson, Perry and Henderson also are charged with wire fraud for fraudulent information submitted to automotive financing companies such as Nissan Motor Acceptance Corporation and Santander Consumer USA.

How do you avoid this? Well make sure you give accurate information to the dealer. Ask to see the credit application filled out before you sign it. Don’t let there be blanks for your income. Do not agree to providing false income information. That is a crime. Contact the finance company once approved to verify the information.  Be suspicious if you are being sold more car than you thought you could afford.

Emissions Victory vs. Chair of GIADA

In a recent case T. Michael Flinn represented a consumer in a claim against the dealership owned by chairman of the Georgia Independent Automobile Dealer’s Association.  The consumer visited the lot and located a car and contracted to buy same. While she waited for what they told her was their obtaining another key on her behalf, they took the car to get it emissions tested. It failed. They did not tell her. They allowed her to leave the lot with the car which broke down on the way home. She brought the car back, and asked for a refund of her payment.  The dealer refused. She asked for a replacement car. The dealer refused. The dealer did offer to repair the car. Faced with the dealer’s refusal to refund the money, and without the ability to buy another car somewhere else, the consumer took the car back after repair. The check engine light immediately illuminated again. The care failed another emissions test and the consumer again asked for a refund. The dealer said “no” and pointed to the “as is” clause.

If the “Check Engine” light is illuminated on a 1996 or newer model year vehicle, the vehicle will fail the emission inspection. An emission-related problem has been detected by the vehicle’s on-board diagnostic (OBD) computer and it must be repaired before the vehicle will pass the emission inspection. If the “Check Engine” light is illuminated, the OBD computer will indicate the general area of failure. A diagnostic analysis should be obtained by a qualified repair facility prior to making any repairs. Georgia Clean Air Force Publication.

According to Georgia law, sellers of gasoline-powered cars and light-duty trucks (8,500 pounds gross vehicle weight rating [GVWR] or less) located within the 13-county testing area, regardless if they are a private party, dealership or auctioneer, must sell a vehicle with a current, valid passing Georgia Vehicle Emissions Inspection Report (VIR) if the buyer is going to register the vehicle in one of the 13 metro Atlanta counties: Cherokee, Clayton, Cobb, Coweta, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Paulding or Rockdale. Georgia Clean Air Force Publication.

Here, the dealer did not obtain a valid passing emissions certificate and broke the law, regulations for used car dealers, and the Code of Ethics for his own Association.

The case was required to be heard by an arbitrator because the dealer had her sign an arbitration agreement without explaining to her what it meant. (Click here for why you should never sign an arbitration agreement). The arbitrator did award the consumer all the money she had paid on the car but did not find the conduct reprehensible enough to award punitive damages or treble damages.  The arbitrator also awarded attorney’s fees.

No Surprise that ‘Auto Complaints’ Tops List of Consumer Complaints

Georgia Office of Consumer Protection Administrator John Sours sent this article listing the most complained of consumer complaints.  The article was based upon surveys conducted by the Consumer Federation and surveyed general-purpose consumer protection agencies at the city, county and state level about the top, worst, and fastest-growing complaints in 2013. The survey also asked about new kinds of problems that consumers reported, the agencies’ biggest achievements and challenges, and new laws needed to better protect consumers.  Number 1 on the list was Auto Complaints.

  • Auto: Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes.

This comes as no surprise to us here at georgiaconsumerlawyer.com.  The methods of fraud and deception used by the used car industry are as broad as man’s imagination.  We are seeing new and evolving methods of fraud like those mentioned on this web page including emissions issues daily.

 

Watch out for “Non Emissions Waivers”

Don’t let them fool you.  This is basically just a way for the dealer to get a bad car off his hands and try to make a quick buck hoping nobody will notice.

I have recently filed four lawsuits against the same car dealer, Loving Care Cars of Atlanta, Georgia for selling cars without a current and valid passing Georgia Vehicle Emission Inspection Report (VIR).

When a dealer sells a car, it may be required have to have a passing VIR depending on where you live.  There are thirteen Clean Air Force covered counties in the metro Atlanta area (Cherokee, Clayton, Cobb, Coweta, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Paulding or Rockdale).  And if you live in one of these counties, a dealer must have a passing VIR on the vehicle before the purchase.

391-3-20-.18 Sale of Vehicles. Amended.

(1) No person shall sell any responsible motor vehicle, as defined by the Act, intended for highway use without a currently valid passing Certificate of Emission Inspection, as required under this Chapter, if the purchaser is required to register the vehicle in any covered county. Any person violating this Rule shall be guilty of a misdemeanor.

One way Loving Care Cars tried to get around this Georgia law was by getting the buyers to sign a “Non Emissions Waiver.”  This form stated that the buyer would not register the vehicle in an emissions-covered county.  And if the buyer decided to register it, he/she would get repairs to bring the car to pass emissions and not hold the dealer responsible.  This was despite other documents that provided that the car was going to registered in a clean air county.

This powerless waiver has been specifically disallowed by the Clear Air Force.  Whether or not the buyer signs this, it is still illegal for a dealer to sell you a car that does not pass emissions testing.  And above all, you will not be able to register the vehicle if you live in one of the clean air counties above.

You can check the Georgia Vehicle Inspection Report (VIR) by submitting the VIN of the car at:  http://www.cleanairforce.com/motorists/emissions-testing/vir-reprints/