Auto Dealer Fraud Law is a specific type of consumer law. Consumers who have problems with their new or used vehicles can sue the dealership for fraud.

Auto dealer fraud law protects consumers who are shopping for a vehicle from deceptive and unfair practices by dealerships, as opposed to the sale of defective cars (which has its own separate set of rules, sometimes called "lemon laws"). There are a bunch of federal and state regulations that serve as your primary sources of auto dealer fraud law.

Transactions involving the purchase or lease of a vehicle are complicated for customers, especially those new to the process. Dealers are well-versed in the workings of these transactions with years of experience negotiating prices, writing contracts, financing, and explaining extended warranty options.

While this approach can be very successful, fraudulent dealers may also rationalize their conduct based on a general attitude within the industry - especially the used car industry - that ingenuity in the sales process is acceptable and that customers buy at their own risk.

Fraud is illegal and can occur in the car dealership industry. Illicit acts include customers being charged unfair interest, massive deposits, unnecessary upgrades, and many other things.

The types of fraudulent activity at auto dealerships can be broken down into two broad categories:

Non-disclosures and affirmative misrepresentations. Non-disclosures involve the salesperson withholding information that could affect the desirability or value of a vehicle. For example, if they knew that the vehicle was previously used as a rental, was damaged, or its warranty expired, they are required by the Federal Trade Commission to disclose that information to potential buyers. If the salesperson fails to make proper disclosures, that constitutes fraudulent activityand the dealership may be liable.

Affirmative misrepresentations are misleading statements that a salesman makes to the customer that benefits the salesman but hurts the customer. This is different from non-disclosures, where the salesman is not involved in the deception.

In some cases of affirmative misrepresentation, the deceit is blatant. Dealers may lie to a customer by saying a car is new when it has been used or by labeling a vehicle as certified pre-owned when the manufacturer made no such endorsement. In other cases, victims may have their down payments or trade-in vehicles misappropriated by the dealership.

A recent study found that one pervasive scheme, referred to as "yo-yo financing," includes the scenario where a dealer offers to sell the customer a vehicle under a payment plan. Several weeks after the sale, the dealer contacts the customer with the unfortunate news that the financing company has rejected the credit application, leaving the dealer to offer the customer a more costly in-house payment plan.

When an auto dealer is defrauding customers, the victim will likely find the tort action of fraud to be the most effective means of inflicting retribution upon the dealer. To establish a common law claim for fraud, the victim must show that the dealer omitted or misrepresented material facts, resulting in a financial loss for the victim.

The facts at issue must pass the "but for" test to qualify as material. In other words, the customer would not have purchased the vehicle for the omitted or misrepresented facts.

After your fraud claim has been presented and confirmed, the dealer may be liable to you for damages. Court costs and attorney fees may be available for especially shameful or predatory conduct by the dealer, and punitive damages may be awarded to punish the dealer and discourage others from engaging in similar behavior.

A class-action lawsuit is a lawsuit filed by a group of people complaining about the same thing.
Only a single instance of fraud may be readily provable. But, that would be unusual in an otherwise honest auto dealer. More likely, the actions that harmed a particular plaintiff were merely one occurrence in an ongoing scheme perpetrated by the dealership owner or employees.

Other customers may come forward with similar complaints when the fraud is discovered and made public. This can lead to a class-action lawsuit to determine the rights of all plaintiffs in one proceeding. A class-action suit has benefits and drawbacks for a single victim, and the matter should be discussed with an attorney.