GRAND RAPIDS, Mich. (WOOD) -- When you buy a vehicle -- especially a used one -- you’re always taking a bit of a risk. But the battle one West Michigan buyer ended up fighting was beyond anything thing he could have imagined.
Now, Mark Todd is warning others about “yo-yo” financing. He doesn’t want anyone else to endure the kind of phone calls he’s received from the dealer he once trusted.
“Do you have f***ing cash?” asked Don Miller, owner of Midwest Motors, in one phone call to Todd. “Because if you don’t, you don’t have a car. Do you understand that?"
Todd thought he had bought a car in late February when he traded in his 2002 Jeep at Midwest Motors on M-89 in Plainwell.
“They didn’t think they could get me financing at first because I was so underwater with the Jeep that they didn’t think they could do it,” said Todd.
But with his mom as a co-signer, he said Midwest was able to get him into a 2013 Kia Optima. Todd signed the finance contract and application for title, turned over his Jeep, forked over the $1,000 down payment and drove the car off the lot.
One week later, Midwest told Todd his “financing fell through,” and he’d have to return the Kia and retrieve his Jeep.
“Mark, where’s my car at?” Miller asked in one phone call.
“Well, we have an agreement and I’m going to hold you guys to it,” Todd replied.
“There’s no agreement. You don’t have financing with the bank,” Miller explained.
“You can buy the car. That’s fine. But you got to bring in the cash then,” he continued.
Todd brought in a lawyer instead and filed a lawsuit in federal court.
“This is a classic yo-yo case,” said Tony Valentine, Todd’s lawyer.
>>PDF: Lawsuit against Midwest Motors
WHAT ARE "YO-YO" LOANS?
Consumer advocates say credit-challenged car buyers across the country are often victimized by “yo-yo” loans.
Generally, car dealers prefer not to be in the business of lending money. So when a buyer agrees to a finance contract, the dealer turns around and sells that loan to a third-party lender, like a bank or credit union. Sometimes dealers find out they cannot sell the loan for the amount they expected, which is why they go back to the buyer and demand that they return the car or change the financing terms.
“I’ve been doing this for 20 years, and you’ve been buying a car for about a week,” Miller said on the phone.
“So if you want to trust me in this, bring the car back,” he continued.
“Your (Jeep) is sitting here,” Miller said in another call. “Come pick up your car and give me my car back. It’s real simple.”
The recordings of the calls were provided by Todd's attorney, Valentine. There were other calls that were recorded, but Valentine gave Target 8 only the portions he said were pertinent to his case.
==App users can click here to listen to the audio.==
IS THAT LEGAL?
But what Miller told Todd wasn't in line with what the State of Michigan has to say on the matter. The state has tried to simplify the issue by clarifying its position regarding “yo-yo" financing:
“If the purchaser signed the application for title and took delivery off the vehicle, then transfer of ownership has occurred,” explained Fred Woodhams, spokesperson for the Michigan Secretary of State.
Todd says both of those things occurred in his case. He signed the application for title, which is called an RD-108, and Midwest gave him the keys to the Kia and accepted his Jeep as a trade-in.
“If the finance company subsequently rejects the loan contract after interest in the vehicle transfers to the purchaser, it become the dealer’s responsibility to offer financing to the purchaser under the same terms as the original finance contract,” Woodhams explained. “This may require the purchaser to make payments directly to the dealer.”
But in Midwest Motors’ answer to Todd’s lawsuit, its attorneys wrote that “Midwest does not extend credit to consumers and that financing for credit transactions is provided by third parties.”
The dealership’s attorneys went on to say that several third-party lenders refused to finance Todd’s deal, in part because the co-signer, Todd’s mom, had a “past auto repossession history.”
“Because financing was denied,” wrote Midwest’s attorneys in a court filing, “the sale of the automobile in question could not be finalized and therefore Midwest demanded return of the automobile in question and the trade-in automobile provided by Plaintiff was made available to the Plaintiff for pick-up."
>>PDF: Midwest Motors' response to Todd's lawsuit
One of the attorneys representing Midwest Motors told Target 8 that Todd’s claims were “baseless” and that Midwest would mount a “vigorous” defense. Beyond that, Randy Groendyk,of Varnum Law would say only that Todd’s financing was “denied.”
Midwest repossessed the Kia after police refused to get involved, calling the conflict a civil matter. The dealership has posted the Kia for sale again.
In the meantime, Todd’s old Jeep sits in the corner of the Midwest Motors lot.
Don Miller refused comment for this story, instead referring Target 8 to his attorneys.
The Secretary of State urges anyone who’s experienced a “yo-yo financing” deal to file a complaint with its office, which Todd did.
Michigan’s Department of Insurance and Financial Services oversees auto financing transactions. It issued a bulletin in April 2013 clarifying its position on the issue.
>>PDF: DIFS bulletin
Researchers at The Center for Responsible Lending conducted a survey to gather data on what they refer to as “yo-yo scams.”
HOW TO PROTECT YOURSELF FROM "YO-YO" LOANS
The National Consumer Law Center has the following advices for credit-challenged car buyers:
- Try to obtain your financing from a third-party lender separately, on your own, before you start shopping.
- Read the fine print. That's where dealers try to slip in language making the sale conditional on their finding a third-party to service your loan. However, state regulators have made it clear that such conditional clauses are not enforceable in Michigan because they are “manifestly contrary” to the Motor Vehicle Safety Finance Act.
- Sleep on it. Don’t sign the papers until you’re fully aware of your rights as a car buyer.
- If you have been the victim of “yo-yo” financing, file a complaint with the Secretary of State and/or the Department of Insurance and Financial Services.
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File a complaint with the Secretary of State
File a complaint with the Department of Insurance and Financial Services