Repossessing A "Spot Delivery" Deal

We occasionally get a panic call from a local new-car dealer, asking if we help them with a emergency repossession account.

It usually goes like this...customer came rolling in the dealership in their rusted out Lebaron, and after dancing with the salesman,  drives off in a new Chrysler 300, thinking they have a deal.  


However the dealership can’t get the deal run through any financing entity.....customer fibbed about actually having a job, let's say. And in the meantime, the dealership might have complicated the situation by selling (or junking) the customers LeBaron.  Ouch!


The dealership calls the customer and asks...and then demands.... he/she bring the car back, because the financing fell through.  Of course, Mr New Car Owner says “no”....a deal is a deal.  Plus they've been showing off the new ride to the neighborhood. 


So the dealership is calling us, the recovery agent, to insert ourselves in this super tense situation (often with verbal threats having been thrown around from either side), to repossess the new car "sold".....and now "unsold" on this “spot delivery”.

Well, the Federal Trade Commission is holding a series of round tables to surface information about abusive lending and collection practices, and on Nov 17th, they were advised by a leading consumer-advocate attorney that this is a practice that needed to be shut down.

Time to Crack Down on Conditional Car Loans, FTC Is Told
"Yo-yo" loans are prevalent enough to warrant new consumer protection rules
ConsumerAffairs.com


It's time for the Federal Trade Commission (FTC) to crack down on abuses of conditional car loans, consumer advocates testified at a recent Washington hearing.

"In no other area of our commerce can someone sign on the dotted line, deliver the product, and then cancel the transaction and insist on the product being returned because the final credit transaction did not produce the hoped-for income," said Ian Lyngklip, a Southfield, Mich., attorney.

"It's like I walked into a supermarket, purchased an apple, walked outside and took a bite only to have a clerk run into the parking lot and insist the apple be returned," Lyngklip said.

The practice of issuing conditional loans, known as spot delivery or yo-yo loans in the car industry, is prevalent enough and harmful enough to warrant FTC protective regulations and enforcement action, Lyngklip said.

"It is unconscionable that a dealer would sell a car and then, because the final credit terms are unfavorable, send the repo man out to repossess the car and refuse to give back the down payment or reimburse for payments made," added Lyngklip.

A spot delivery, or yo-yo sale, happens when the car dealer sells the consumer a vehicle and completes all the steps necessary to sell the car including executing a contract of sale, signing title, taking a down payment and turning over the keys.

After the transaction is finished, the dealer calls the consumer back claiming the deal has fallen through. In some instances the dealer uses fraudulent means or forcible repossession to take the car back.

The FTC Roundtable was entitled "The Road Ahead: Selling, Financing & Leasing Motor Vehicles." Lyngklip was one of five experts participating in a panel which discussed "Which Practices, If Any, Cause Significant Harm to Consumers, And What Are Potential Solutions."




We don't like losing business, but on this one, we have to agree. The customer is told its a "done deal" when they roll out.  We know the dealership is anxious to get the customer behind the wheel, have him start smelling the new leather and start jamming to the Bose sound system....but it seems like a dicey proposition for all involved...including the repossessor, when a deal is forcefully "unwound" on a consumer. 


Just sayin'.