Buyer Beware - Bad Auto Loan Deals Are Increasing
Consumer complaints related to auto loans for both new and used cars have increased exponentially during the COVID-19 pandemic. According to a recent report by the California Public Interest Research Group (CALPIRG), the number of customer reports between March and July of this year is more than any other five-month period in the Consumer Financial Protection Bureau's eight-year history.
From being denied loan payment relief to unethical collection attempts, consumers submitted more than 2,800 complaints related to auto lending products and leases during this five-month period. From deceptive add-ons to incorrect credit reporting, the CFPB database reveals an array of abusive practices and scams practiced by dealerships that deal with bad credit, captive finance companies, and even banks.
The pandemic has already put employment and the economy to a standstill. To add to these problems, the CARES Act passed by Congress in March 2020 didn’t include auto loan debt relief. As a result of this, a lot of consumers weren’t able to make their monthly payments. This led to collection attempts and a spike in customer complaints regarding harassing behavior by collection agencies.
What Are the Complaints Regarding?
The CFPB's Consumer Complaint Database reveals a wide variety of abusive practices involving auto lending products and leases, which can damage a borrower’s credit report. Based on the dealership complaints raised by consumers, here are five major issues during the period of March to July 2020:
- Unnecessary add-ons: Complaints regarding dealerships trying to sell expensive add-ons such as insurance, accessories, and extended warranties
- Changing terms: There have been over 280 reports about dealerships changing loan terms during or after closing. For instance, forcing customers to accept a higher rate than what was initially quoted. A few complaints are also about ‘yo-yo financing,’ wherein a dealership tries to change the lending terms after the customer has driven off the car
- Confusing billing: One in five auto lending product complaints include the term ‘billing problem.’ Moreover, almost 42% of the reports talk about broken billing systems that cause late fees
- Deceptive sales techniques: Many grievances also describe that customers felt high-pressure when looking for loans, add-ons, insurance, and other products. Some complaints also referred to dealerships using shady techniques or not providing complete information about fees
- Unethical debt collection practices: The majority of consumer complaints are regarding debt collection practices for pending repayments. Almost 45% of these grievances describe harassing behavior by debt collection agencies