Dept. Of Transportation Urged To Investigate Cash For Clunkers Scams

By Laura Woodhead

Consumer protection groups urged the Department of Transportation (DOT) Thursday to investigate scams stemming from the Car Allowance Rebate System, commonly called Cash For Clunkers, in a letter sent to Secretary of Transportation Ray LaHood.

According to the groups, some dealers are making customers sign liability waivers that will result in the consumer being held liable if the dealer is not given a rebate by the government, despite being accepted by the dealer as meeting all “Cash for Clunkers” standards. According to these contracts, the consumer would have to pay up the loss or risk losing their new car, even if their old car had already been crushed, said Joe Ridout, spokesman for Consumer Action during a conference call with reporters.

“We are troubled by this disturbing new trend,” said Ridout. “Frankly, we feel that dealers should be bending over backwards in gratitude to car buyers, who in their role as tax payers, provided this financial lifeline to dealerships.”

“The DOT should send a clear message that car buyers should in no way be liable,” he added. “Dealers have reaped the benefits of the program and should be made to play by its rules.”

The letter also called for an investigation into so called “double dipping,” in which dealers deliberately mislead the consumer into paying the “Cash for Clunkers” payment upfront under the promise they will receive the check for $4500 later, only to have the dealer take the money and later tell them that their car did not qualify.

“Some are taking advantage of consumers who are still confused about the program,” Ridout said. This puts consumers “at risk of being charged twice, once as a taxpayer footing the bill for this subsidy to assist car dealerships and the second time as a customer of a dealer known to double dip.”

Rosemary Shahan, President of Consumers for Auto Reliability and Safety, said that she understood the anxiety that was behind the contingency contracts, when many dealers were unsure of how long the program would last or if they would recieve a check. However, it should be them, not the consumer that carried the liability, Shahan said.

“A lot of them have gone out on a limb and entered into a lot of contracts on the promise the money is forthcoming and they are still waiting for the deals to be processed,” Shahan said. “The question is: should consumers take the risk when dealers know what they are getting into?”

“If the dealers decides, given all the unknowns, that they want to go ahead and offer these [Cash for Clunkers] contracts they should be assuming the risks and argue it out with the government,” she said.

In response to the letter, the DOT has placed a warning on the Cash for Clunkers website (www.cars.gov) telling customers that “consumers are not required to sign contingency agreements to pay back the dealer should the cars credit be rejected.”