The Government Can Help Regulate Your Car Loan Balance

Understanding Excessive Automotive Charges
So, what are some things that you can do to combat excessive automotive charges? If you’ve purchased a vehicle from a dealer, many times there were add-ons and things tacked on to your loan that were not proper. Maybe added on by the dealer, maybe added on by the lender. Where did that put you? That may have put you in a position where you owe more on that car than it’s worth. You have negative equity. You have upside down, underwater—they call it different things. Basically, what it means is you owe more on that car than it’s actually worth. End of story. And it makes you buried in that car where you can’t get out of it. You can’t sell it. You can’t trade it in. The way dealers refer to it, they say you have a firm grip on that car. You can’t let go of that car. And that could be a problem for you. Maybe your payment’s too high. Maybe that car no longer suits your needs. Maybe you need a truck to haul things and you have a car. Maybe you have a sedan and you need a van because now you have kids. There are a lot of reasons why you need to get out of that car.

FTC’s Role in Car Purchase Protection
So, what does the FTC say about this? The FTC is a government agency called the Federal Trade Commission. They have a cars rule that requires certain things to happen on a purchase. And if it didn’t happen, you may have some recourse. And this is one of the things that we look at when we do a car short sale. You can take a look at the link below for more information about doing car short sale services and the instructions. But basically, this is from the FTC. This is a bulletin that’s a guide for car dealers. It tells dealers what to do and what not to do. And it has that in the guide. So remember, this is an insider internal guide for car dealers to know what they have to do. And a lot of times they don’t do this. It lays out principles to protect people shopping for cars and trucks—practices that are already business as usual for honest dealers.

Dealer Conduct and FTC Guidelines
Here are the practices. It prohibits misrepresentations. It requires dealers to clearly disclose the price, the actual price you can pay to get the car. It’s illegal—this is important—to charge consumers for add-ons that don’t provide a benefit. You probably have add-ons on your finance contract that didn’t provide you any benefit. You also have to get express informed consent before charging for anything. There are probably things you were charged for that you did not give consent for, especially informed consent. They may have put something in front of you.

Examples of Violations That Could Offer Recourse
So, let’s take a look at a couple of basic examples of what these types of problems could be for the dealer that could give you recourse. So, here is a more detailed breakdown of those four things. It prohibits misrepresentation. It makes it illegal for a dealer to make misrepresentations about topics that would affect consumers’ buying choices. So, when you bought your vehicle, were you misrepresented about things that were important for you to know about your buying choice? Deceptive claims about price, financing, or add-ons are examples. What add-ons did you get? Were you given proper information?

Add-Ons and Lack of Benefit
We’ll skip number two because that’s more about pricing. It makes it illegal for dealers to charge consumers for add-ons that don’t provide a benefit. If the consumer, meaning you, won’t benefit from an add-on, the dealer can’t charge for it. There are probably a lot of things on your vehicle that were add-ons. You have to get, as a dealer, consent before charging for anything. No surprise fees, no hidden charges. Dealers must get a clear and informed yes to what they’re buying and how much they’re being charged for.

Loan Balance and Improper Charges
I’m pretty sure that part of your loan balance that you owe on that car that’s upside down or out of equity are things that were charged improperly. Don’t you think? Remember, this is a federal government rule. This is a big win for consumers. You can expect established standards of truth and transparency. That’s what this is all about. This comes from the federal government.

Disclosure Requirements
And here’s the key. These add-ons that are put on top of vehicle price are not required. And the dealer has to tell you they’re not required. So, if they put on any kind of protection package or service contract, sometimes they’ll tell you it’s required. When making any representation, the dealer must clearly disclose it’s not required and the customer can buy or lease the vehicle without the add-on. The disclosure must be in writing. So, this is a big deal. Sometimes your loan amount might be 10 or 15% of it could be from these add-ons. In some cases, things like gap insurance.

Informed Consent and Documentation
When they charge you an amount of money, so if your vehicle is totaled, you don’t have to pay the negative equity, it would be illegal to charge that if there are certain exclusions built into it that don’t benefit you. This is a very important factor that a lot of people don’t know about. And here’s the big one. They have to get your informed consent about these add-ons, what the charge is for, how much it is, and how it benefits you. All the fees and costs will be charged over the period of repayment, meaning that if there’s interest on this add-on, they have to tell you about that, too.

Illegal Conduct and FTC Standards
There’s a lot of illegal conduct according to the FTC, meaning that if the document has a pre-checked box or if it distracts you from knowing what you’re getting into, if they’re talking to you or they show you something else while you have to sign it, you have to have a fully informed yes before the business can charge you. And they have to keep records of that. So, if they don’t have the records, it’s invalid.

Clear Language and Visual Requirements
Visual disclosures, fine print, dense blocks of text, or language hidden where consumers aren’t likely to see it, won’t meet the FTC’s clear and conspicuous standard. So, if you have contracts with fine print that tells you your limitations that’s smaller than where it tells you what’s good about it, it doesn’t work. And they’re going to look at things like how big the text is. Does it contrast with the background? Is it the same color as the background? Is it located where consumers will easily see it? And if it doesn’t, it doesn’t qualify.

Plain Language and No Jargon
Most importantly, it has to be in plain language. It must use words and grammar understandable to ordinary consumers. They can’t rely on the fact that you don’t understand it. So if they use industry jargon, double talk, it does not meet that standard. So let’s take a look at your paperwork to see how they worded the disclosures. Is it valid?

Waiving Rights is Prohibited
And you might think, well, the dealership made me waive my rights. They answer that question. What if a car buyer agrees to waive their protections? The rule expressly prohibits that. It’s a violation of the rule for anyone to even attempt to obtain a waiver of these protections. So, if the car dealer says, “Well, you waived your rights,” they can’t do that. They have to keep records. They have to keep records that they did all this in writing, documented for at least 24 months, probably longer depending on your state. They also have to keep records that the add-ons meet the requirements, copies of all service contracts, gap insurance, loan-to-value ratios. They have to keep everything. And if they don’t keep it, again, it’s void.

Conclusion and Consumer Action Steps
So, this is right from the horse’s mouth from the Federal Trade Commission. These are all things you need to know about when it comes to looking at methods to try to get out of your car loan. Look, you’re not going to get the car for free, right? But if you do have a vehicle you need to get rid of and maybe you owe more on it than it’s worth, these are ways you can reduce some of your principal, maybe work on getting some bids on the car that are higher. And we can work on both of those to help you get out of your car loan, sell the car to a retail buyer, or pay it off with a reduced principal and be able to get that excessive high car loan off of your monthly payment.

Final Note and Related Videos
Again, it’s no magic bullet. It doesn’t get you a free car. It doesn’t magically get your payment erased, but you have to do a little bit of work, request things, do some due diligence, file some documents, and you can attempt to make your vehicle balance be reduced so that it’s closer to what the car might be worth.

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