April 29, 2022

For Immediate Release:

Consumer Advocates Urge FTC to Take Action on Deceptive Car Sale Tactic

Simple rule change would restore consumer confidence in the auto market

Washington D.C. – Today, the National Association of Consumer Advocates (NACA), joined by the Consumer Federation of America, the Center for Responsible Lending, Consumers for Auto Reliability and Safety, the National Consumer Law Center on behalf of its low income clients, and U.S. PIRG called on the Federal Trade Commission (FTC) to issue a new rule that would put an end to systemic, abusive yo-yo financing practices.

Yo-yo sales occur when a car dealer leads a consumer to believe that a sale is final and complete and the car is theirs to keep. But in fact the dealer holds the door open for itself with additional fine print that allows it to make changes that often depend on their ability to sell or assign the credit contract to a third-party. Car buyers are then surprised when days, weeks or even months later, the dealer summons them with demands to change the credit terms, change the purchased vehicle, or unwind the deal completely.

In their petition, advocates propose that the FTC require auto dealers to add language to consumer credit contracts stating that the terms of the signed contract are to be treated as final, require that the consumer was fully approved for the credit terms in the contract before the signing, and require that the credit terms cannot be changed whether or not the contract is or will be assigned to a third party. Violations would amount to an unfair and deceptive practice under the Federal Trade Commission Act.

“Requirements that the consumer be fully approved for the credit terms in the contract before the signing, and that the credit terms in the contract are final whether or not the contract is assigned to a third party are necessary to prevent systemic deception and abusive yo-yo practices,” the petition said.

The current state of allowing dealers to void a contract if they cannot find a third-party finance company to purchase a credit contract invites abuses and obstructs the protections and public interest purposes of important federal laws.

On the other hand, “(a)n FTC rule addressing yo-yo sales would complement and underscore existing federal laws that apply to the sale of a vehicle, including the Truth in Lending Act, the Federal Odometer Act, and the Equal Credit Opportunity Act,” the petitioners said.

Ultimately, the proposal would discourage dealers from offering consumer contracts that they are unwilling to honor, thereby enhancing competition among dealers and financing companies for the benefit of the marketplace.