You go to a car lot and apply for financing to buy a car. “Congratulations!” they say. “You’re Approved.” So you sign the contract and drive off in the car. Only later do you discover that you were not, in truth, approved. Your “approval” has been yanked, and now they’re asking you to come back with the car. That’s a Yo Yo Sale.
Yo-Yo Sales are one of the most pernicious forms of fraud. The buyer is tricked into putting down good money for a car they will likely never own. This causes them to lose their ability to shop around to other, less fraudulent dealers. They may get jerked around for weeks waiting on title applications, tag paperwork, and their deal papers. Then, worst of all, when the deal falls through, the dealer thinks they can repo the car and keep your down payment. Yo-Yo sales are the sort of scam that typically only befalls poor working folks.
Depending on how the paperwork is written, Yo Yo sales can be a form of fraud, a breach of contract, false advertising, and violations of federal consumer protection laws like the Equal Credit Opportunity Act and the Truth in Lending Act.
The most common way I address YoYo sales is by claiming fraud. In Alabama, fraud is defined a false statement of an important fact that the buyer relied upon, causing the buyer harm. In a Yo-Yo sale, the most common fraudulent misrepresentation is the statement that the buyer is “Approved.” If the approval is conditional, then it is not really an approval. Dealers try to paper over this misrepresentation by having the buyer sign a document called a “Spot Delivery Agreement,” a “Conditional Delivery Agreement,” or a “Bailment Agreement.” These can be enforceable, but often the dealer does not perform his own obligation under the Conditional Delivery Agreement to seek financing in good faith. Furthermore, some of these agreements impose massive costs on the buyer, making them unconscionable.
My second favorite way to address a YoYo sale is through the Equal Credit Opportunity Act, or ECOA. ECOA requires that whenever you apply for consumer credit, the creditor has to give you a firm approval, denial, or counteroffer within 30 days, and if they don’t approve you, then they have to send you a written statement of the reasons you were not approved. The sorts of dealerships that conduct yo-yo sales almost never do this. They just don’t care about following the law.
Signs of a YoYo Sale.
- They don’t give you a copy of the retail installment sales agreement. This is the document that states what your interest rate and monthly payments are. It is the document that describes the sale of the vehicle. When they’re trying to YoYo you, they don’t give you a copy of the contract. They’ll just give you a copy of a spot delivery agreement. They don’t want you to have proof that you are the new owner of the vehicle. They want to hold all the cards. If you ask for your paperwork copies, they say “We’ll send them in the mail.” This is the hallmark of a YoYo. NEVER EVER EVER drive off with a car unless you have a copy of the title application and retail installment contract.
- You don’t get a copy of your title application the day you take the vehicle home. Similarly, they won’t process your title application until they’ve found the financing that they want. Again, they want to hold all the cards. Alabama law requires that they process your title application within 10 days. If they don’t do this, something fishy is going on.
- They ask you to sign a Spot Delivery Agreement or Conditional Delivery Agreement. NEVER do this. If they won’t make a full and final deal with you, then you need to take your business somewhere else. Their excuse is that “this is just something we need you to sign while we’re finishing up the financing paperwork.” It’s a scam. Don’t believe them. There are other places you can go that will deal with you fairly. Shop around until you have a final deal.
- Excuses, Excuses, Excuses. They constantly make excuses for their failure to finish the deal. They’re dragging you along hoping to steal your down payment. The longer you have the vehicle, the more they think they can keep your down payment as a charge for the “use” of the vehicle.
- They ask you to return the car to the dealership. Maybe they say they need to sign more papers. Maybe they want to “repair” something. Once they’ve decided to pull the YoYo, they will do whatever it takes to get the car back from you. They want to move the car to another buyer ASAP.
How to Protect Yourself from a YoYo Sale
- Get copies of ALL documents you sign. Insist on getting a copy of every document you sign. The Truth in Lending Act requires that they give you a copy of your installment agreement before or at the time you sign it. If they don’t do this, they’re breaking the law. Tell them that by law they are required to give you a copy. They know this is true. In fact, before even asking for copies, you should go ahead and photograph each page of each document you sign. They can’t prevent you from doing this, or take your cell phone away.
- If they won’t give you copies, demand the down payment be returned. Just go ahead and tell them that you know they’re doing something illegal and you want no part of it.
- Return the Car and get your money back ASAP. If you already signed a Conditional Delivery Agreement or Spot Delivery Agreement, then return the car to the dealership on the day listed in the agreement. Most of these documents have a deadline for finalizing the deal. If there is one, be sure that you follow it. Don’t take any dealer assurances that they’re still working on it or that you can keep it. They will go back on their word later. All that matters is what the paperwork says.
If you’ve been YoYo’d by an Alabama dealer, call the law office of Judson E. Crump, PC at 251-272-9148 to learn your rights.