What is a Straw Purchase Car Scam?
Straw purchase car scam is a widespread occurrence nowadays. You are probably thinking at this moment, ‘’What is a straw purchase car scam?’’ It is worth to note that previously the police used this term for referring to firearm sale to ineligible purchasers. That’s to say when a person purchases a handgun for someone who has no right to own one. So, what does this term mean exactly in car buying? Actually, it is almost the same. When a car buyer cannot take a car loan, he/she asks a friend or a family member to co-sign. This usually happens, when the dealership informs the buyer that his/her credit score is so bad, that the person won’t get the car loan.
Very frequently, this car scam occurs, whenever interest rates rise. In this situation, not many potential car purchasers can qualify for these car loans. Essentially, straw car scam occurs when buyers don’t have a credit history yet. It is also true that at times people fail to pay their bills in time. As a result, they have a bad credit.
Typical scenarios of straw purchase scam
So, you have made up your mind to purchase a vehicle and just head to the dealership. You find the car that you were always driving, but ‘’only in your dreams.’’ However, it turns out you have a bad credit score. You get very upset, as you lack financial means to obtain the car. The smart dealer will quickly find the solution. It is finding a co-signer with a positive credit history. You return to the dealership with the co-signer next day. Here are a few common scenarios of what happens later:
- An unscrupulous car dealer succeeds in misleading the co-signer to fill out the wrong paperwork. After several days the co-signer discovers that the car loan is in his/her name. It is not in the name of the person he/she wanted to co-sign for.
- You and the co-signer have already signed the paperwork. Thus, you drive the vehicle home in a perfect mood and show it proudly to your friends and family. You enjoy driving your dream car for several days, then suddenly you get a call from the dealership. This is what the dealer tells you, “We are sorry to inform that your car loan isn’t approved. You have to return the car. Please visit the dealership for discussing the details.’’ When you are already there, the dealer tells you that you should also pay for the miles that you have put on the car. Typically, the customer may ask exactly what he can do to remain the owner of the car. The dealer may kindly advise you that the best choice is asking the co-signer to purchase the automobile for you. You should ALWAYS remember that purchasing a car for another person is not legal in certain states.
Avoiding the straw purchase car scam
If you want to prevent this car scam, you should take certain steps. This is what you should do not to appear in such unpleasant situations.
To begin with, you shouldn’t allow the car dealer to find out information related to your credit history. You had better have a clear idea of your credit scores. For this reason, it is a good idea to review your credit reports. Don’t hesitate to make sure that the car dealer has provided you with a lender’s approval letter. Pay attention to the following issue: it should contain the names of both people who are on the loan.
It is a useful piece of advice to avoid signing more than one contract. In case you have to sign another contract at the dealership, you should keep something in mind. To be more concrete, prior to signing another contract, you have to rip up the first contract.
At this point, it is appropriate to mention the Federal Trade Commission’s Trade Regulation Rule on Credit Practices. What is the main requirement of this regulation rule? In fact, you should include a notice to co-signer form in case of all motor vehicle retail installment contracts. Now let’s understand exactly what contains the Notice to Co-Signer. Well, it states that a co-signer has certain responsibilities when the signer fails to fulfill the points of the contract. If one of your friends requested you to act as a co-signer, reading the contract in detail is vital. Also, don’t forget to get the copy of this contract before signing it. Another essential tip of not becoming the victim of this scam is that both people meet at the dealership. Don’t forget to talk with each other and agree to sign the contract only when you are together at the dealership.
Are you a victim of a straw purchase car scam?
Do you suspect that you have become the victim of straw purchase car scam? Probably, the wisest decision is filing a complaint with your State’s Attorney General’s Office. Furthermore, you also have the option of turning to the Better Business Bureau. In this way, you help other consumers to be aware of the dishonest car dealer. If there is an increased number of complaints concerning the dealer in question, they will carry out an investigation. The reality is that different states have different laws concerning this car scam. You should have a reliable lawyer by your side to guide you through this process and fight for your rights.
As a conclusion, we would like to advise you not to co-sign for anyone. This is really dangerous because you will have to make the payments if the person fails to do it.