NEW YORK, NY— The Department of Consumer Affairs (DCA) Commissioner Lorelei Salas today joined Mayor Bill de Blasio at City Hall as he signed Introduction 1539 and 1540 to combat predatory practices in the used car industry. These new laws require used car dealerships, which DCA licenses, to post a Consumer Bill of Rights and disclose information about financing and pricing, provide all required notices to the consumer be in the language used to negotiate the contract, and provide consumers with the option to cancel their contract within two days of the sale. This package of legislation was introduced by Council Member Rafael Espinal, Jr., Chair of the Council Committee on Consumer Affairs, Council Member Dan Garodnick, and Council Member Jumaane D. Williams following a public hearing hosted by Commissioner Salas and Council Member Espinal.
“This law provides much needed transparency in an industry plagued by deceptive and illegal sales practices,” said DCA Commissioner Lorelei Salas. “For many, buying a car is one of the largest purchases they will ever make. By requiring second-hand automobile dealers to post and distribute a bill of rights to consumers, as well as offer a cancelation policy, we can better ensure that hard-working New Yorkers have time to evaluate their purchase and aren’t being taken for a ride by predatory dealers. DCA is committed to educating consumers of their rights, and will continue to hold the industry accountable so that those businesses that do comply with the law are not unfairly competing with those who do not.”
This package of laws will help protect consumers by:
DCA currently licenses 784 used car dealerships and has received nearly 5,800 complaints from consumers about used car dealerships over the past four years. The complaints range from instances of forgery on contracts to a lack of material disclosures by dealership staff. As a result of the mediation of consumer complaints, investigations and settlements, DCA has secured more than $2.7 million in consumer restitution and assessed nearly $1.8 million in fines against used car dealerships over the past three years. These new laws will help tackle common predatory practices engaged in by used car dealers such as deceiving consumers into loans with longer-than-necessary repayment terms and failing to disclose hidden dealer markup rates.
“Second hand auto dealers will now come to understand that while their cars may be used, our consumers will not be abused,” said NYC Council Member Rafael Espinal. “I am proud to pass Intro No. 1539-A, which will increase disclosure requirements, strengthen penalties for violators of the law and create a two-day contract cancellation option, allowing consumers precious time to think through their decision. The fallout from a bad car loan could be worse than the mortgage crisis, but now vulnerable New Yorkers will have the empowerment tools they need to make good financial choices. I thank Mayor de Blasio for continuing to support vulnerable New Yorkers and signing this bill into law.”
“Used car dealers who operate unscrupulously often target New Yorkers who are from low income, under-banked, immigrant communities,” said Council Member Dan Garodnick. “All consumers—especially our most vulnerable neighbors—must be protected, and these deceitful sales tactics must come to an end. Our new Consumer Bill of Rights will empower purchasers of used cars and clamp down on predatory practices in this industry.”
Advocacy is one prong of DCA’s efforts to combat these predatory practices, which also includes enforcement and education. In March 2017, DCA announced charges against Major World, one of the largest local used car dealerships in the city with multiple locations in Queens, for using deceptive financing and sales practices that resulted in predatory lending targeting immigrants and New Yorkers with low incomes. In May 2017, DCA announced charges against multiple used car dealerships in Brooklyn, which are all under the same ownership, and their owners for engaging in deceptive and unlawful trade practices that preyed on New Yorkers. DCA alleges these dealerships mislead consumers about the price and safety of their cars, and failed to disclose financing terms. DCA also, for the first time, sought consumer restitution from finance companies— Credit Acceptance Corp., Clover Commercial Corp, and Westlake Financial Services—involved in subprime lending. In September 2017, DCA announced a settlement agreement with Credit Acceptance Corp. who agreed to reimburse has agreed to pay restitution to the victims of these illegal practices. These cases are both pending trial.
DCA offers an online guide to Getting Your Finances in Gear to Buy a Used Car, which is available in English, Spanish, Arabic, Bengali, Chinese, Haitian Creole, Korean, and Russian. The guide informs New Yorkers of their rights when arranging financing for their used car purchase and provides general tips about used car dealerships. DCA also offers a comprehensive Used Car Buyer Guide with tips about shopping for a used car. Any New Yorker who is trying to get their finances in order before buying a car or who is struggling with debt, can make an appointment for free, one-on-one financial counseling at one of the City’s Financial Empowerment Centers by calling 311.With auto loan debt being the fastest-growing household debt (Federal Reserve Bank of New York), DCA is now pursuing new approaches, like obtaining restitution from the financing companies involved in the used car lending, in order to make consumers whole. Seeking restitution from the financing companies, which, by contract, take on any consumer claims against the dealerships, helps to assure that consumers will be made whole after the losses they suffered from the dealerships’ deceptive practices. Deceptive and illegal practices by dealerships hurt both consumers and lenders, and lenders would be wise to scrutinize the dealerships with which they do business. DCA encourages any consumer who feels a used car dealership has misled them about the price of their car or sold them an unsafe automobile to contact the agency by calling 311, or by filing a complaint at nyc.gov/dca.