Consumer Law

Bill Requiring Car Dealers to Pay Off Liens on Trade-Ins is on the Governor's Desk

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

Many consumers have been burned by used car dealers who failed to pay off the loans on cars customers traded in. Car dealers then sold the cars without disclosing to the buyers that there were liens on the cars. The finance company's lien did not disappear with the sale. In many cases, the finance company repossessed the cars from the new buyers.

A bill now on the Gov. Schwarzenegger's desk would make it illegal for car dealers to sell a vehicle without having paid what is due on the loan or lease.

SB95, written by Senator Ellen Corbett, would require dealers to pay off existing loans on trade-ins within 21 days. The trade-in couldn't be sold to someone else until that loan was paid off.

The state finance department is asking the Governor to veto the bill claiming a fund set up last year will take care of the problem, but Rosemary Shahan, a consumer advocate who sponsored the bill, said the argument does not make sense."Why should consumers get ripped off, then have to apply to a fund instead of just not getting ripped off in the first place?"

District attorneys, the California Bankers Association and the Alliance of Automobile Manufacturers support the bill.

Full post as published by Lemon Law Blog on September 23, 2009 (boomark / email).