Articles Posted in Automobile Dealership Fraud

I have previously posted about how I believe Carfax misleadingly promotes their product. Their recent “Carfox” commercials certainly lead you to believe a clean Carfax report virtually guarantees a good car. It just isn’t so. In fact, here’s what a Carfax Consumer Affairs Analyst said recently in an e-mail about their product:

The reporting of accident events through our service is based primarily on three main aspects:
1) Whether the event in question was reported to any data source capable of collecting electronic records (government agencies, etc.),
2) If CARFAX receives date from the source collecting events in the jurisdiction involved (CARFAX is not contracted with all sources available), and 3) The time when data is made available to us (CARFAX does not receive events instantly from sources providing data to us).

We suggest using our service as one important tool along with a physical inspection in the car buying process, but never for sole reliance. I am sorry if you were under any other belief regarding what our service provides.

Seriously? Basically, she’s sorry if we believed their advertising. That’s not right.

As you may be aware, the so-called Wall Street reform bill has now passed in the House and the Senate. The House version exempts automobile dealers from financial regulatory oversight, while the Senate version does not. I strongly believe that Indiana car dealers need the supervision that could, and hopefully would, come with their inclusion in this law. I recently wrote a letter as part of a successful effort by consumer groups, the U.S. military and others to defeat the Brownback amendment, which would have excluded dealers from the Senate’s version of the bill. Here is the text of that letter:

To whom it may concern:

My name is Robert Duff. I am a consumer law attorney in the State of Indiana. I am writing to express my opinion that the passage of the Brownback amendment would be a huge disservice to the citizens of this state. Here is why I hold this opinion:

I have been a lawyer for 18 years and worked for large and small law firms in Indianapolis, but opened my consumer law practice a little over three years ago. I have a website at My website generates most of my business, which comes to me by telephone calls and e-mails of consumers who are in distress. Typically, they believe they have been ripped off in one way or another. I get more calls about car dealers than anything else – at an average of about one a day.

The specific issues with these consumers are varied, from the sale of odometer rollbacks and undisclosed wrecks to the denial of warranty repairs. But the issue I see more than any other is yo-yo financing. I can’t tell you how many calls I’ve received from panicked consumers who have been told by dealership personnel that their “financing fell through” and they need to either come in and sign new paperwork or bring the car they bought back. These consumers are confused because they believed they had a deal. And they did have a deal. When I look at the documents sent to me by these consumers, I ALWAYS find, every single time, that the dealership has financed the sale of the vehicle to the consumer. The Retail Installment Sales Contract states something like: “You agree to purchase from us, on a time basis, subject to the terms and conditions of this contract and security agreement (Contract), the Motor Vehicle (Vehicle) and services described below.” It amazes me how car dealers can maintain with a straight face that they don’t do financing. I have hundreds of documents in my office that show otherwise.

Despite the fact that the deal has been negotiated and completed, car dealers tell Indiana consumers that it’s not really done until “they have been approved for financing.” This is patently false. The reality is that the deal was done when the consumer sat in the finance manager’s office and executed the paperwork to buy and finance the car. But, unfortunately, car dealers are often not bound by reality. If the consumer does not comply with their demand to sign new documents or return the car, the car dealer first bullys and intimidates the consumer. If the consumer still won’t capitulate, the car dealer ALWAYS repossesses the vehicle. Very often when this happens, down payments and trade-ins are not returned to the consumer. I have one client who was tricked into bringing back the car she bought by the promise her trade-in and down payment would be returned. After she brought the car back, neither her trade-in or down payment were returned to her – leaving her without transportation or the money to purchase it.

Being the victim of a yo-yo financing scam is an incredibly demeaning and frustrating experience. I am doing my best to defend the rights of these consumers and bring lawsuits to right these wrongs. But I feel overwhelmed. I have to turn away potential clients because I simply don’t have the time to assist all of them. There are not enough consumer law attorneys in Indiana, so I have nowhere to refer these consumers. I need help and Indiana consumers need help. Wrongdoing by Indiana car dealers, particularly with regard to financing, is rampant.

I strongly urge you to vote to defeat the Brownback amendment. Please call me if you have any questions or concerns. I would love the opportunity to speak with you, or have one of my clients relay their story to you. I know that if you spoke to a couple of my clients, you would quickly realize just how badly the oversight of car dealers in Indiana is needed.


Robert E. Duff Indiana Consumer Law Group/
The Law Office of Robert E. Duff

My last blog entry, way too long ago, concerned Carfax and the unreliability of their reports. Well, Carfax has put themselves in the news again and I just couldn’t help but comment. I just read on a local news agency’s internet page that Carfax has put all the Cash for Clunker cars’ vehicle identification numbers (VINs) on its website and has set it up so those VINs can be searched for free. Cash for Clunker cars were supposed to be destroyed, at least the engine and transmission, and of course should not be showing up for sale. Carfax’s apparent press release noted these cars are going to start showing up here and there – a point on which I am in full agreement with Carfax.

The article I read didn’t have a link to it, so I went to the Carfax site. Not surprisingly, I spent about ten minutes searching for it and could not find it. It wouldn’t surprise me if Carfax is making it intentionally difficult to access so that frustrated consumers will just decide to buy a regular Carfax report on the car. I could be wrong. Maybe the website is set up so that no reports are sold on Cash for Clunker vehicles but instead when a person tries to buy a report on such a car a huge warning pops up. I hope so. But knowing what I know about Carfax, I have my suspicions.

Anyway, I found the link in another news article. The free search can be conducted here.

With almost three quarters of a million vehicles “retired” in the Cash for Clunkers program, I promise you that some greedy businesses are going to be selling these vehicles all over the United States – including Indiana.

I was working today on one of my car dealership fraud cases when I came across a Carfax Vehicle History Report. Having seen Carfax’s recent television commercials, some of which are pretty funny (check this one out: Carfax Commercial), I thought another brief blog entry might be in order because I’m really bothered by how unreliable I have found Carfax reports to be. Now, I’m not saying they’re useless. In fact, I have recommended to family and friends that they purchase both a Carfax and Autocheck report on any vehicle they are considering purchasing. The primary reason is to see if anything shows up. If it does, I have found that it tends to be accurate. But if nothing shows up, it really doesn’t mean much. Carfax reports are very often incomplete and really shouldn’t give you the peace of mind the Carfax commericals imply you should receive from their report (“Get the truth about used cars.”). Sadly, some dealers love to find a car that sells for less at auction because of a defect but has a clean Carfax report (which the dealer will use to sell the vehicle to a consumer for more profit without disclosing the defect) .


Be warned: obtaining a Carfax report is not the end of your investigation into the purchase of a used car, but the beginning.

I would like to take a second to highlight a case recently decided by the Indiana Court of Appeals. It is important not because it made new law but simply because it is a good reminder of what the law is.

The case is captioned Brad Lawson v. Rodney Hale d/b/a R.H. Equipment. It was decided on February 26, 2009. Brad Lawson bought a used tractor from R.H. Equipment. At the time of purchase, Mr. Lawson inquired whether there were any problems with the tractor. Hale did not disclose any problems, despite the fact that he knew the engine had a cracked block that had been ineffectively repaired.

The case was tried to the Court without a jury and the judge found for the defendant. The Court of Appeals reversed and directed the trial court to enter judgment for the Plaintiff on the fraud claim, citing it as a “textbook case” of fraud. The lesson we are reminded of is summarized in two important sentences from the opinion: “[F]raud is not limited only to affirmative representations; the failure to disclose all material facts can also constitute actionable fraud. When a buyer makes inquiries about the condition, qualities or characteristics of property ‘it becomes incumbent upon the seller to fully declare any and all problems associated with the subject of the inquiry.

This is great, very broad language for Indiana consumers. It will be very rare indeed that a consumer will purchase a vehicle without making at least some inquiry as to the condition, qualities or characteristics of the car. Once this inquiry is made, the dealership has an affirmative obligation to disclose all material facts about the car.

Within the last week, the Associated Press reported that a lady who won a car on the game show “The Price is Right” had filed a lawsuit against the game show, CBS Broadcasting and the dealer who sold her the car. Back in 2004, she won a new 2004 Pontiac GTO Coupe while appearing on the show. She had the car for approximately a year when she took it in for service and learned that it had been wrecked and repaired before it was delivered to her as a “new” car.

This lawsuit has garnered publicity simply because of the connection with “The Price is Right.” Before I became a consumer lawyer, I would have read this article and thought what a freaky set of circumstances this was. A car dealer took a car that they knew had been wrecked, repaired it and passed it off to this contest winner, ripping her off for potentially thousands of dollars. Then the contest winner somehow finds out about it and sues. Wow. Sadly, these are not freaky circumstances. It happens every day all over the United States, and as I say that I don’t believe I’m exaggerating.

You see, before I became a consumer lawyer I didn’t realize how much money is involved in buying and selling cars in the U.S. Or how competitive the market is. Or how greedy dealers can be. Or how people who work in the industry, for whatever reason, get to a place where misleading consumers and taking advantage of them isn’t seen as wrong but as a legitimate way to do business.

I receive numerous calls from Indiana consumers every week about all kinds of issues. A majority of those calls, though, are from Indiana consumers who believe they have been ripped off by car dealers. Often, they have. The misrepresentations abound: never been wrecked, one owner – woman driver, warranty, actual mileage and on and on. Plus, my favorite misrepresentation, typically made in a phone call twenty or thirty days after the sale: we couldn’t get you financed so you need to bring the car back since there’s no deal – and if you keep the car you’ve stolen it and you’re a thief.

I used to be blissfully unaware of these things, but now I enjoy pursuing justice for victims of this kind of conduct. And, hopefully, somewhere along the way, I hope I can help some car dealers understand that, for dealers who make money off of Indiana consumers, The Price is Wrong.

I just read a letter to the editor of a Henderson County, North Carolina newspaper on the dangers of arbitration agreements. Having seen the impact of mandatory arbitration agreements, I couldn’t agree more with the writer’s comments. Here is a reprint of the letter in its entirety:

Published Friday, September 28, 2007
Protect your right to go to court
To The Editor: Today a local automotive dealership refused to sell me a car because I refused to forfeit my constitutional right to a jury trial. I refused to sign their arbitration agreement.

Consumers, if you have a dispute with the dealership and you have signed this document, you are required to use an arbitration organization of their choice. You relinquish all rights to a trial by jury, all rights to participate in a class action suit and have very limited access to discovery.

I have never participated in a lawsuit and hopefully never will. I support voluntary arbitration, but this is mandatory. Search online for car dealership arbitration agreements. You won’t find one positive comment for this practice.

Question the integrity of a dealership requiring this. Ironically, manufacturers once required dealerships to sign these. Dealerships lobbied for a law (H.R. 534/S 1020) preventing it.

Proponents argued “It is unfair for the stronger party in a contract to insist that the weaker party forfeit the right to access the courts as a condition of doing business.”

Ask a dealership in advance if they require arbitration agreements. If they do, walk away. Protect your rights.

Susan Holder
Mills River

The newspaper’s online edition is found at

Importantly, Ms. Holder doesn’t mention one of the main drawbacks of arbitration: it can cost consumers hundreds or thousands of dollars to protect rights that could be vindicated in the court system for a filing fee of $133.

Since most people don’t really think about the possibility of having to file a lawsuit at the time they purchase a car, I seriously doubt many consumers will follow Ms. Holder’s advice. But that doesn’t make it any less wise. If you have any problems down the road, and you signed an arbitration agreement or your purchase order contained one, I can guarantee you will wish you had.

In the course of doing some research this week, I discovered that Indiana is one of only three states that does not require automobile dealer’s to post a bond of some kind. See, look for yourself by clicking here.

Being in the minority isn’t always a bad thing; sometimes Indiana is progressive. But I don’t think that’s what is going on here.

A bond, from my perspective, is a guarantee that my client who wins a lawsuit against the dealership will be able to collect at least some, if not all, of the judgment. Indiana consumers, unfortunately, have been left unprotected in this area. Unfortunately, I’m not sure why. Has it simply slipped through the cracks? Has the dealers’ lobby been successful in stopping the legislation? I don’t know.

It’s the corner car lots, the ones that may not be able to pay your judgment, where having a bond could matter.

I think I’m going to try to find out why Indiana auto consumers are less protected than consumers in almost every other state.

CarFax is the nation’s most popular way to research the history of used cars, and not just by consumers. Whether you live in Lebanon, Indianapolis, or West Lafayette, or anywhere else for that matter, chances are your local dealership has an account. More than 29,000 car dealers in the United States have one.

But the reliability of CarFax’s reports has recently been questioned because of attention from the settlement of a nationwide class-action lawsuit. The lawsuit alleged that CarFax’s reports were not as comprehensive as CarFax claimed. The settlement will give millions who purchased a CarFax report before October 27, 2006 the opportunity to choose one free or multiple discounted reports, or a 20 percent discount on a vehicle inspection. Big whoop. My guess is that the discounted inspection is coming a little late for most of the CarFax report purchasers.

Anyway, this publicity emphasizes what should really be common sense – that there’s really no way a report like this could be 100% accurate. A vehicle history report can certainly be a tool to use in making a used car purchase, but it should never be the sole reason to make a buying decision.

There can sometimes be a substantial lag time between damage to a vehicle and the time that information makes it into the CarFax database. And there are significant sources of relevant information that still are mostly not included in the database, such as insurance claims. With regard to insurance claims, though, that does seem to be changing recently.

CarFax itself has stated that they have never implied that a report was the only tool a buyer needed, stating “we’ve always encouraged people to get an inspection by a mechanic.” And that really is the bottom line. If you aren’t a mechanic or a person with significant automobile knowledge, the smartest thing you can possibly do in purchasing a used car is have it inspected by a mechanic. It will be worth every penny.

After all, you wouldn’t want to purchase one of these vehicles unknowingly, would you?
And no, I have no idea how that happened or even could have happenedI
As an interesting aside, guess who owns AutoCheck, CarFax’s chief competitor? None other than Experian, of credit reporting fame.

This blog post is going to be short, because there’s really no discussion necessary.

When you purchase a car at a dealership, HAVE YOUR FINANCING LINED UP BEFORE YOU VISIT THE DEALERSHIP. Period. It’s that simple.

This will help you avoid the possibility of being a victim of a host of possible scams, will assure you get the best rate possible, and will give you leverage in negotiating the purchase price of the vehicle. Don’t finance through the dealership.