How to Stop the Car Financing Yo-Yo

Consumer groups call for federal action to rein-in shady auto credit practices

Andy Spears


Photo by Opollo Photography on Unsplash

A coalition of consumer groups is urging the Federal Trade Commission (FTC) to take action that would prohibit so-called “Yo-Yo” auto sales. In practice, this means allowing a buyer to drive a car off the lot before a contract is fully executed with a third-party credit agency.

Here’s how the practice works:

When a consumer signs a credit contract disclosing the cost of financing and drives the car off the lot, the deal appears to be complete from the consumer’s perspective. Some dealers, however, employ a deceptive tactic where they know at the time of the sale that the deal may not actually be final. The dealer calls the consumer days, weeks or even months later to tell them that they need to pay additional costs or a higher interest rate to keep the car, or that the deal needs to be completely undone and the consumer must return the car. This process of subjecting a consumer to being “yo-yo’d” back and forth to the dealership pressures consumers to pay more than what they expected and agreed to and adds significant stress and uncertainty to an already complicated and expensive financial transaction.

“Yo-yo sales frequently harm consumers by lowering their credit scores, forcing them to forfeit their hard-earned down payments, and jeopardizing their primary means of transportation,” stated Erin Witte, Director of Consumer Protection for Consumer Federation of America.

The consumer groups calling for FTC action on this issue include Consumer Federation of America, Consumers for Auto Reliability and Safety, Center for Responsible Lending, U.S. PIRG, National Consumer Law Center, and the National Association of Consumer Advocates.

Specifically, the groups outline a course of action in their petition that asks the FTC to issue a rule that requires dealers to add language to the consumer credit contracts which states that the terms of the deal are final, even if the contract is assigned to a third party. Violations would be enforceable by the FTC.

The advocates offered several examples of “yo-yo” practices in their petition, including one where a consumer was yo-yo’d to the dealership repeatedly with requests to sign new contracts, provide a co-signer, and provide new financial documents. After 40+ days, the dealer said that the deal fell through and threatened to file a stolen vehicle report unless the consumer returned the car.

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .