[T]eri Langlois’ car problems started in August, when she bought a red 2012 Focus for $8,000 from Formula Ford in Rutland.
Langlois was happy with the vehicle, although she said the financing process at the dealership surprised her. She hadn’t expected to qualify for a loan because of her low credit score.
“Something didn’t feel right,” she said. “I’ve seen my parents go to dealerships and you spend close to half a day there. I was there for only, what, a couple of hours, and that kind of shocked me a little bit.”
Langlois said that the dealership assured her they would help her get financing through the Boston-based Santander Bank. But later on, after she had purchased the vehicle and taken it back to her home in North Springfield, the dealership called to say that that her financing hadn’t gone through after all, and she needed to bring the car back and find another lender.
Grace Pazdan, a consumer rights attorney with Vermont Legal Aid, said Langlois was the victim of a “yo-yo sale fraud.” Pazdan has filed about a dozen court complaints over fraudulent car dealership loans in the last 18 months.
“This is a common scheme where dealers try to extract additional amounts in down payments and get car purchasers to sign new contracts on less favorable terms based on the misrepresentation that the purchaser does not have a valid legal claim to the vehicle that they already signed a contract for,” said Pazdan. Formula Ford did not return a call seeking comment.
The dealership has filed a complaint against Langlois, said Barre attorney Andy Delaney, who is representing her in the case. Delaney said he intends to file a counterclaim.
“They pulled some really sneaky stuff,” Delaney said. “This has been really rough on her.”
Pazdan recently advocated for an elderly man named Stanley Brookins who bought a car and a truck from Gardner Motor Sports in Bennington. Brookins, who has a ninth grade education and difficulty reading, lives on a Social Security benefit of $800 a month. He ended up with payments of $594 a month, said Pazdan in a complaint she filed in Bennington Superior Court. Pazdan said she couldn’t disclose the outcome of the case. Company owner Gary Gardner declined to comment.
Pazdan has created a spreadsheet that shows examples from around Vermont of fraudulent or deceptive auto dealership loan contracts. In some cases, buyers are signed up for loan payments that are more than half of their monthly income. Interest rates of 19 percent are not uncommon.
Part of the problem, Pazdan said, is that dealers fill out buyers’ information for them on their computers, and buyers sometimes don’t know what the dealer said on their behalf. She described a client whose income, made up of Social Security benefits, was exaggerated from $800 to more than $3,000. The client, who is illiterate and has a 10th-grade special education, was told his payments would be $220 a month, when they would in fact be $400 a month, Pazdan said.
“This is illustrative of the types of loan applications we have seen when we are able to get our hands on them,” Pazdan said.
Auto dealer fraud is a common complaint nationally. The Vermont attorney general’s office includes information for car purchasers on its website, and Vermont law requires dealers to provide buyers with a form showing the financing terms. It also caps auto loan interest rates at 20 percent.
Legal Aid would like the law to go further, and is working on a bill that would address some of the concerns. One is the document filing fee, which now ranges from $65 to $599. Legislation that will be heard in the Senate Economic Development, Housing, and General Affairs Committee would cap that at $150. It would also mandate that buyers receive a copy of the information submitted to the lender at the time they buy the car. Existing Vermont law only requires dealers to provide copies of the sales contract and an additional disclosure form.
Vehicles sold in Vermont in 2017
“People often have difficulty getting a copy of the loan documents,” said Legal Aid lobbyist Wendy Morgan. “If they get a copy at the time they buy the vehicle, they’ll be less likely to have a discrepancy that goes unseen.”
It’s not clear if there’s a possibility of a law change this year. Sen. Becca Balint, D-Windham, who sponsored the Legal Aid bill, said the matter will get at least a hearing in Senate Economic Development.
It was Balint who set the amount of the cap on the document charges. She said she took the tight margins of the auto sales economy into account.
“I felt it was really important for us to set a reasonable cap,” she said. “I know my dealers in Brattleboro are trying to make an honest living, I understand they are trying to figure out ways they can make the deal in such a way that they’re not coming out behind.”
The Vermont Auto Dealers Association, or VADA, feels there’s no need for a new law. VADA has been providing mediation for buyers and dealers for 35 years, said its executive director, Marilyn Miller. Miller is proud of the program, which VADA runs with the Vermont Attorney General’s Office, and thinks it is sufficient to handle disagreements between buyers and auto dealers. She said she hasn’t seen examples of the type of fraud outlined by Pazdan.
“I would want to see the complaints. How many are there; do they really meet the qualifications of fraud that they say they do?” Miller said.
She added that if someone brought a claim of actual fraud to the VADA’s consumer assistance program, they would be advised to seek help from a lawyer.
“There are laws in place to deal with fraudulent kinds of behaviors,” Miller said.
Pazdan said the finance companies are implicated as well, adding that their business model is to obtain permission to garnish wages and then collect against the auto buyers for decades.
“People are buying a crappy used car at 19 percent interest for 84 months, paying way more than what the car is worth in the first instance,” she said. “So even after that person eventually defaults, my understanding is the finance companies are covering their costs for purchasing the contract plus often getting judgments and wage garnishments and collection mechanisms allowing them to collect for years under these contracts.”
Langlois is working with an attorney to resolve her problem with the dealership.
“I’m not one to cause too many problems,” said Langlois. “I don’t want to be made to look like a bad person when I’m actually a very honest and giving person. I was so happy about the car, I mean I was elated. Someone was actually going to work with me. And then this happens.”
