Hold Check Agreements Violate Single Document Rule

Hold Check AgreementsAuto fraud occurs when a car dealer fails to disclose or lies about the vehicle a customer wants to buy. Violation of single document rule and requiring hold check agreements with improper procedures are among commonly used dealer tricks.

Single Document Rule

Under AFSA (Automobile Sales Finance Act) obligations of both dealer and buyer should be  in a single document. Signing a separate document regardless of its purpose after the deal is illegal. But, dealers often oblige customers to sign additional documents. For example; trade-in forms or hold check agreements. The signing of trade-in forms is necessary when the dealer is going to pay for trade-in car but doesn’t include it in the purchase contract. By signing hold check agreement the buyer gives his consent to pay extra money towards the down payment.

Hold Check Agreement

Not every customer can pay the entire down payment after the signed contract. Very often dealers make concessions to customers by allowing deferred down payments via installment. It means that the dealer and the buyer have agreed that a certain part of the payment will be due a later period. Deferred down payment is recognized by the vehicle code, but it must be  in the contract with both date and amount of payment. But, a fraudulent dealer doesn’t disclose deferred down payments as required by the vehicle code. Instead, he makes the customer write checks for the deferred down payments to deposit them until an agreed upon date.

Auto fraud occurs when the dealer asks buyers to sign hold check agreements that lay out the dates when the checks should be cashed. Additional provisions related to returned checks are also  in the agreement. This creates obligations which the original purchase contract does not include.  Hence violating the single-document rule.

If you have faced any type of car dealer fraud contact The Margarian Law Firm at (818) 553-1000 for the FREE consultation.