Straw Purchase Dealer Fraud
Auto finance fraud occurs frequently in car dealerships across the country. There are a large number of car finance fraud variеties, and one of them is known as straw purchase scam.
Initially the term “straw purchase” was used to indicate the purchase of gun for someone who had no right to possess it. Today this term is metaphorically used predominantly in the sphere of vehicle sales and describes the situation when someone with better credit history buys a car for someone with bad credit. In general straw purchase scam is hard to detect.
Let`s unveil how this car finance fraud work. If the desire to get a new vehicle is bigger than a credit score the dealer can offer the customer to find a co-signer with good credit history to balance his bad history and help to qualify for an auto loan.
There are three ways the straw purchase scam can develop.
A dealer informs the customer that if they both apply for a loan the interest rate will be too high. But if co-signer with good credit history purchases the vehicle by himself, the monthly payment will be two times less.
If the dealer fails to apply this scenario he may turn to the second one. If a customer has already taken the vehicle home the dealer will wait some days, call him to inform that his loan was not approved and ask to bring the car back immediately. Moreover the customer will be charged for the miles he put on the car. The customer will certainly ask what he can do to keep the car and the dealer will hint that his co-signer can buy a car instead of him. The dealer can only lead the customer to this decision as buying a car for another person is illegal in some states.
The third scenario of straw purchase is pretty fraudulent when done by auto dealer. This car finance fraud occurs when the co-signer comes to the dealership and is misled by the finance officer while signing the paperwork. The co-signer confused by a large amount of paperwork puts his signature as a primary signer. And he learns about it when he received the mail for the first payment.
How to avoid the straw purchase dealer scam?
• Always know about your credit history
• Explore all the possibilities of getting auto loan, not limiting yourself to dealership`s financing
• Read attentive all the provisions of the contract and don`t sign more than one at a time
Victims of car finance fraud can file a complaint. But before it they have to find out what legal resources are available in your state.