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Yo-yo financing is a common form a dealer fraud

On Behalf of | Aug 3, 2020 | Dealer Fraud

Money is a major issue when it comes to purchasing a vehicle, whether new or used. Not many in Pennsylvania have cash to lay down for the entire cost of the vehicle. While some arrive at a dealership with the backing of a bank that is ready to give them a loan, others rely on the dealership to arranging financing through its relationships with lending institutions, especially if the customer has special circumstances like an unfavorable credit score or low income. Unfortunately, this is a perfect opportunity for unscrupulous businesses to commit dealer fraud through “yo-yo scams.”

A yo-yo scam occurs when a customer signs the appropriate papers for financing and drives the vehicle home, usually the same day. However, suddenly the dealer contacts the customer to return to the dealership a few days later because something went wrong with the loan. The scam then involves the dealership renegotiating the financing to leave the customer with higher interest and unfavorable terms.

The dealer may have led the customer to believe the purchase of the vehicle was a done deal and it was the customer’s to keep when the dealer had actually only allowed the customer to take the vehicle for a test drive. A few days later, when the customer does not bring the car back, the dealer calls to threaten legal action or repossession to pressure the buyer into a predatory loan. Dealers who commit these acts typically look for potentially vulnerable customers, such as young people, the elderly, immigrants, minorities or those who seem uninformed about the car buying process.

Many do not realize they are being scammed until it is too late. However, when a dealer pressures customers to sign contracts with some blank spaces, fails to fully explain the terms of the contract or does not present a contract at all, it may be an indication of dealer fraud. A customer who is the victim of a yo-yo financing scam has every right to reach out for advice from a skilled Pennsylvania attorney.

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