Rewriting and Backdating Contract Scam
Knowledge is the best weapon for consumers to protect themselves from dealer fraud. Let`s unveil how one of the most common dealer tricks, rewriting or backdating contact scam works.
When shopping for a car a customer is not always inclined to qualify for financing under the terms of contract originally adjusted. When necessity arises to qualify for a new loan a customer may be required to increase annual percentage rate or down payment. Then the car dealer makes the customer return to sign another contract with new terms. The second contract is backdated with the date of the first one. Thus the customer is compelled by the dealer to pay finance charges for a period of time during which the contract hasn`t come into force.
Plus to misinforming when the customer undertakes the obligation of the second contract, a backdated one runs counter to the single document rule (according to the requirements of Automobile Sales Finance Act obligations that both parties undertake in a transaction must be reflected in a single document) as the date of another document known as “Acknowledgment of the Rewritten Contract” coincides with the actual date of the contract. Moreover a major part of customers doesn`t acknowledge their rights for opting to cancel the deal and return the new car and not to sign another contract with unfavorable terms of financing.
So the customer is facing rewriting or backdating contract scam when the dealer forces him/her to sign a new contract for lease or purchase of a car, backdating it to the date of the contract signed before. Very often backdating dealer fraud is accompanied by yo-yo financing or spot delivery car scam where the finance officer made the customer believe that vehicle purchase deal was finalized only to call him back later to modify the structure of the previous agreement.
For the sake of justice it must be mentioned that not only dealer`s intention to pocket extra profit may lead to rewriting or backdating contract; it may be done for convenience or because the lender`s acceptance of the deal is bound to the original date of sale. However rewriting or backdating contract is not legal in the U.S. Changing the date of the contract is a violation of some consumer protection laws and it entails some undesirable consequences for the buyer and dealer.