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Car Buying Laws

Lemon laws protect you after the purchase in case of mechanical defects and non-conformities. But what laws protect you before and after you drive off the lot, with regard to financing, paying and credit reporting? You are protected by a series of must know consumer rights, including the Truth in Lending Act (TILA)Fair Credit Reporting Act (FCRA)Electronic Fund Transfer Act (EFTA)Equal Credit Opportunity Act (ECOA). These laws are like the lemon law in that violations entitle you to damages and no cost attorney representation.

Truth In Lending Rights

The federal Truth in Lending Act (TILA) regulates creditors and auto loan lenders and provides protection to consumers to prevent any non disclosure or inaccurate disclosure crucial information during the finance negotiations and lending process. Creditors such as banks, credit unions and finance companies are required to comply with TILA and provide you a “final disclosure statement” at the time of loan closing. This Truth In Lending disclosure is required to be in a specific format, and typically must include the creditor’s name and address; the amount you are financing with an itemization and disclosure of the total sales price and down payment/required deposit information; the finance charge and the annual percentage rate (APR), along with any variable rate information; the payment schedule and the total number of payments; a demand feature along with both a prepayment policy and a late payment policy; whether there are any security interests in the loan and whether there are any security interest charges; any insurance requirements (for example, GAP auto or GAP life); a contract reference; and an assumption policy.

A lender’s failure to comply with T.I.L.A. permits an aggrieved consumer to bring a claim in any U.S. district court or in any other competent court within one year from the date on which the violation occurred, and except as otherwise provided by state law, allows a longer period where T.I.L.A. violations are asserted as a defense, set-off, or counterclaim. Violations of TILA permit a consumer to recover actual damages, statutory damages in the amount of double the correctly calculated finance charge, but in any event not less than $200 or more than $2,000, plus payment of your attorney fees (so hiring a lawyer to protect your TILA rights should cost you nothing out of pocket. Contact an experienced consumer protection attorney if you suspect that all important information concerning the specific terms of your loan agreement was not disclosed or was incorrectly disclosed during the lending and purchasing process.

Fair Credit Reporting Rights

Special deals that offer incentives such as 0% APR (annual percentage rate) or no money down can often be found, most offered by automobile manufacturers and their financing arms. In the majority of auto financing deals your credit rating, determined by your credit history, has a large impact on how attractive the loan offer you receive may be. Even the amount of an acceptable down payment will be determined by the status of your credit.

If a dealership, bank or finance company pulls your credit report, the report should be a true representation of your credit history as this will almost guarantee that you receive the most attractive loan rate possible. If during the loan process you discover your credit report has errors, you may not wind up with the best offer or the lending institution may request more of a down payment. This could be a violation of the Fair Credit Reporting Act (FCRA), a law that was enacted to make certain your payment history, including your vehicle payment history is accurate and up to date.

Violations of the FCRA may entitle you to actual damages (for example, the difference between the loan rate you should have received in your credit report was accurate versus the loan rate you did receive, plus statutory damages, plus payment of your attorney fees for bringing an action under the FCRA.

It is imperative you check your credit report prior to applying for a loan as you must dispute any inaccuracies to the furnisher or reporting agency and provide them an opportunity to cure the inaccuracy before bringing a claim under the FCRA. The Federal Trade Commission sponsors a website where you can pull a report from each of the major bureaus for free once a year so pulling the report is free. You can receive free help disputing inaccuracies by calling 888-565-3666, and if you have already disputed to no avail, you can get free* legal help.

Equal Credit Opportunity for All

All consumers applying for a loan to finance their vehicle, regardless of race, religion, national origin, marital status, or gender are protected from credit discrimination. The law that regulates the granting of credit to ensure fairness and equality is the Equal Credit Opportunity Act (ECOA). Banks, finance companies and others who extend credit for vehicle purchases must comply with this law. If you purchased a vehicle and think that discrimination was a factor during your vehicle transaction, your rights under the Equal Credit Opportunity Act may have been violated. For example:

  • When a consumer has attempted to secure a loan or credit and is denied, notice must be provided to the applicant along with the reason for denial.
  • A credit provider cannot ask race, national origin, color or religion, age or marital status during the application process.

An experienced consumer protection attorney can assist in ensuring that you were treated fairly and in compliance with this law. If you think a violation has occurred, the creditor or lender could be liable for damages up to $10,000 and your attorney fees and court costs may be paid for by the defendant under the “fee-shifting” provision of this law.

Making Your Car Payment Electronically

After your credit approval and purchase of your vehicle you may decide to use one of the convenient methods now available to make a monthly car payment via electronic fund transfer such as auto pay, or online bill pay. Before you set up this type of payment, the creditor or lending institution must give you information regarding your rights and it must be given in a form that you can keep. Regulated by the Electronic Fund Transfer Act (EFTA) this information includes the type of electronic transfers you can make, fees and limits on transfers, your rights concerning documentation of transfers and procedures to stop payments, third party disclosure rights, error reporting procedures and transaction liabilities by the lender.

Sometimes an electronically based payment can go awry, either due to technical or other issues. Though you have been provided with documents and information it may be tough to sift through and find out exactly what went wrong and if a violation has occurred. Contact our consumer protection lawyers by calling 888-565-3666 for a free consultation; we can assist in advising as to your rights concerning electronic fund transfers and your vehicle payments.

Avoiding Being a Victim of Auto Fraud

Last but not least, buying a new or used car can be a pitfall for being a victim of consumer fraud. Unscrupulous sellers are everywhere, whether you are buying a new car or a car that has been previously owned. Be on the lookout for things like the car’s prior history (for example, was it ever in an accident; has it suffered hail damage, or damage during transport or a prior accident, and/or was it previously repurchased by its manufacturer because it was a “lemon.”

Also, be careful for what is called “spot delivery”, or where you have not yet been finally approved for financing but the dealer takes your trade and gives you the new car “on the spot.” Often times, this is just a “yo-yo” sale where the dealer calls you back, tells you that your loan was denied and makes you sign for a new higher loan or give a bigger down payment, and when you try to back out, the dealer tells you that your trade in was already sold.

Every state has a form of an unfair or deceptive trade practices act or prohibits fraud through common law, and being a victim of fraud may entitle you to actual damages, punitive damages and attorney fees. Contact Attorneys For Consumers licensed in your state by calling 888-565-3666 for a free consultation.

Learn more about how to avoid auto fraud.

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  1. I couldn’t agree more that it is important to get the history report for a used car before making a purchase, as the article suggests. Buying a used car can go a lot of ways, and to have it end up in your favor you need to do your homework. There are many great used cars out there, so the trick is to weed out those that are less than great.

  2. I just got a 99 suberben 2 weeks ago and traded the down payment for my 96 Yukon and the service engine light came on Friday so it’s Monday and I took it to Auto zone for them to check it and they said it has 2 codes 1 is the Cadillac converter and the 2nd is a sencer for the Cadillac converter so I took the paper to the dealership and they said “Auto zone is stupid ” and did there own test and said oh it’s just the sencer they told me to wait to get the emissions test until they do the sencer and I’m still paying on it and it was as is what should or can I do I’m a dissabled mother of 7 and only have a limited money income and I told them I need something reliable and won’t brake down in a month

  3. does the Hawaii lemon law cover you when your buying a used car from a private party?

  4. Jeremiah Parent

    I just brought my 2004 F150 to the garage at 233973 because there was a problem with my battery gauge. I just got it back and it reads 172378. The motor and transmission was completely rebuilt before I purchased it

  5. My daughter just bought a 2011 Nissan Rogue yesterday from Sands Kia in Surprise AZ. She lives in Flagstaff. While driving home on I-17N, the vehicle was unable to maintain safe speeds; frequently would get stuck in 2nd gear; at every uphill, the car would lose speed. She was in the slow lane, hazards blinking, terrified the car wouldn’t get her home in the middle of the night. We intend to bring it back to the dealership tomorrow and ask for her money back – she paid cash. What are her rights and options in this situation?

    • HI Jana,

      My daughter just had this exact situation occur in her 2012 Nissan Rogue…can you tell me what rights you had to remedy the situation?

      She literally purchased the car and drove 40 miles before it was ‘stuck in 2nd gear’…

    • I just purchased a 2003 Chevy 1500 4WD truck from a ford dealer took it for a test drive all was good no leaks that I could see engine was clean I did a Carfax on it and all came back ok body was in good condition has not been wrecked interior was clean so I purchased the truck on my way home the check engine light comes on I took to Oreilys they checked the code and and said it was a oxygen sensor not sure which one out of the 4 it has later that night my transmission slipped out of 4th gear at 75 MPH and the Tac jumped but the truck was not increasing in speed I took off cruise control and it came back and resumed and then slipped again for a moment and then was driving ok. I took back to the dealer they replaced an oxygen sensor but at my request did not look at the transmission the salesman said they did get to that. So I had an appointment with a Chevy Dealer but could not get in for a week. After they said they fixed the sensor at the Ford dealer I drove about 2 miles and the check engine light came back on they told me they do complete inspection of the vehicle and all was ok. I took to Chevy this morning Right wheel bearing is loose front axle seals are leaking and there are 2 transmission lines that are leaking and have to be replaced I was having them do a tune up and look at the sensor that was causing my check engine light they were able to clean that and correct the problem and do an oil change I added the transmission fluid and filter change on account of the leaks because at this point I cannot trust anything they have told me. I did talk to the owner who traded it in he was the second owner he had the truck for year and had no issues put new shocks & tires on. This truck has 89000 miles on it I KNEW I WOULD HAVE TO PUT 2000.00 in this truck because the tires are cheap and I like to know where I am with a Vehicle as far as all maintenance. The bill I will have to pay the Chevy dealer is 1800.00$ I guess I will have to wait on my tires.

  6. I bought a 2005 dodge ram with the odometer reading 113000 miles in the state of Nevada. It turns out after I bought it I find out it has over 260,000 miles on it and it is a clean title with no reported rebuild. I took it to my mechanic and it turns out it needs about $3,000 worth of repairs. Is there anything I can do?

  7. Nakia C. Mosley jn.

    My motorcycle RX-6 Yamaha I got from the salesman 2 weeks ago. Among other checks, I was also given a check of the VIN https://www.faxvin.com/vin-check/wisconsin. So I can find out how many miles has Yamaha bike passed before I buy it. So this is one of my recommendations for those who plan to buy a car or motorbike. Always get a VIN check.

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