1. The Regulatory Landscape of Auto Dealer Fraud
The legal framework governing auto sales is a patchwork of federal statutes and state Unfair and Deceptive Acts and Practices (UDAP) laws that creates strict liability for technical violations.
Plaintiff attorneys utilize these statutes to transform minor paperwork errors into claims for treble damages and attorney fees. The primary federal drivers of litigation are the Truth in Lending Act (TILA) and the Magnuson-Moss Warranty Act.
We analyze the specific allegations to determine the scope of liability. A violation of TILA is a math problem while a UDAP violation is a perception problem. We defend against both by demonstrating that the dealership acted in good faith and that the consumer suffered no actual financial harm. We work to strip away the inflammatory language of fraud to reveal the underlying contractual dispute.
Truth in Lending Act (TILA) Compliance
TILA requires the clear and conspicuous disclosure of credit terms. Allegations of auto dealer fraud often center on the TILA box in the retail installment sale contract. Plaintiffs allege that the APR was manipulated or that the finance charge was hidden.
We conduct a mathematical audit of the contract. We verify that the Annual Percentage Rate was calculated correctly based on the amount financed and the term. We argue that any discrepancy is within the statutory tolerance allowed by Regulation Z. We also defend against claims regarding the itemization of the amount financed. If the plaintiff claims that a fee was hidden we point to the specific line item in the contract where it was disclosed and signed for by the buyer. By proving technical compliance with federal disclosure rules we dismantle the foundation of the fraud claim.
State UDAP Statutes and Consumer Protection
State UDAP laws prohibit unfair or deceptive acts. These statutes are dangerous because they are broad and often allow for punitive damages. A claim might arise from a verbal promise made by a salesperson that contradicts the written contract.
We defend these cases by enforcing the integration clause in the purchase agreement. We argue that the written contract represents the entire agreement between the parties and supersedes any prior verbal representations. We also challenge the element of reliance. We demonstrate that the consumer did not rely on the alleged misrepresentation when making the purchase decision. We present evidence that the buyer is a sophisticated consumer who understood the terms of the deal.
2. Defending Yo-Yo Financing and Spot Delivery Claims
Spot delivery or conditional delivery is a standard industry practice that is frequently attacked by consumer advocates as a bait-and-switch tactic known as yo-yo financing.
This occurs when a customer takes the car home before financing is final. If the bank rejects the loan and the dealer calls the customer back to sign a new contract at a higher rate it often triggers an allegation of auto dealer fraud.
We defend the legitimacy of the spot delivery process. We argue that it is a convenience to the customer that allows them to take immediate possession. We rely on the specific language of the Bailment Agreement or the Rescission Agreement signed at the time of delivery.
The Conditional Delivery Agreement
The defense hinges on the paperwork. We ensure that the dealer utilized a compliant Spot Delivery Form that clearly states the sale is contingent upon third-party financing approval.
We prove that the dealer made a good faith effort to secure financing at the agreed terms. We produce the callback sheets and the rejection notices from the lenders to show that the financing failure was real and not fabricated. We argue that the dealership has no incentive to unwind a deal and that the collapse of the financing was beyond their control. This documentation proves that the request to return the vehicle or sign a new contract was a contractual right rather than a fraudulent scheme.
The 10-Day Rule and Notification
Many states impose strict timelines for notifying a customer that financing has failed. If the dealer misses the 10-day window they may lose the right to rescind the contract.
We litigate the timeline. We use email timestamps and certified mail receipts to prove that the customer was notified immediately upon the lender rejection. We argue that the dealer acted promptly to resolve the issue. If the customer refuses to return the vehicle after being notified we file counterclaims for conversion and breach of contract. We shift the narrative from a predatory dealer to a customer who is wrongfully possessing a vehicle they have not paid for.
3. Financial Product Packing and Hidden Fees
Allegations of payment packing involve the unauthorized addition of aftermarket products like GAP insurance and service contracts and theft deterrents to the monthly payment without the explicit consent of the buyer.
This is a focus of the Federal Trade Commission and state regulators. Plaintiffs claim they were told these products were free or mandatory for financing.
We defend the F&I process. We focus on the menu selling system used by the dealership. We produce the signed menu that clearly lists the base payment and the payment with the optional products.
Voluntary Protection Products (VPP) Disclosure
We demonstrate that the customer made a voluntary choice to purchase the protection products. We rely on the separate disclosure forms for each product.
If the customer signed a GAP waiver that states in bold caps that the purchase is not required to obtain credit it negates the claim of coercion. We argue that the buyer had the opportunity to review the contract and the right to cancel the products. We often find that the customer utilized the service contract for repairs before filing the lawsuit which proves they knew they had purchased it and valued the coverage.
Defending the Itemization of Charges
Plaintiffs often allege that dealer fees or document fees are illegal surcharges. We defend the legality of these fees under state law.
We show that the fees were charged uniformly to all customers and were properly disclosed on the buyer order. We argue that the dealer provided valuable services for these fees such as handling the title work and registration. We challenge the assertion that these are hidden fees by pointing to the multiple places in the deal jacket where the fees are itemized and initialed by the consumer.
4. Odometer Fraud and Title Washing Allegations
Odometer fraud and title washing represent the most serious forms of auto dealer fraud because they involve the physical alteration of the vehicle or its legal history to deceive the buyer about its true value.
These claims often carry criminal liability in addition to civil damages. The Federal Odometer Act allows for treble damages or $10,000 per violation whichever is greater.
We represent dealerships accused of selling vehicles with rolled-back odometers or undisclosed salvage history. We trace the chain of title to identify where the discrepancy occurred.
The Federal Odometer Act Defense
Liability under the Odometer Act requires an intent to defraud. A dealership is not strictly liable if they unknowingly sold a car with a rolled-back odometer that they acquired from an auction or a trade-in.
We assert the defense of lack of intent. We produce the odometer statement provided to the dealer by the previous owner. We show that the dealership relied on the Carfax or AutoCheck report available at the time which showed no discrepancy. We argue that the dealer was a victim of the fraud perpetrated by the previous owner rather than the perpetrator. We demonstrate that the dealership followed reasonable procedures to verify the mileage and had no reason to suspect tampering.
Title Branding and Disclosure
Allegations of title washing involve the sale of a salvage or flood vehicle with a clean title. We analyze the title history.
If the title was clean when the dealer received it we argue that the dealer had no duty to investigate further absent visible signs of damage. We work with forensic mechanics to inspect the vehicle. If the alleged frame damage is minor or cosmetic we argue that it did not meet the statutory threshold for a salvage brand. We defend the appraisal process of the dealer and argue that they disclosed all known defects to the buyer as required by law.
5. Class Action Defense and Arbitration
Consumer class actions pose an existential threat to dealerships by aggregating minor technical violations into a massive liability that can bankrupt the business.
Plaintiff attorneys seek to certify classes based on systematic errors in document fees or TILA disclosures. The most effective defense against a class action is the enforcement of the arbitration agreement.
We prioritize the review of the arbitration clause in the sales contract. We litigate to compel individual arbitration which effectively kills the class action by preventing the plaintiffs from joining together.
Enforcing Arbitration Agreements
The Supreme Court has strongly upheld the enforceability of arbitration agreements in consumer contracts. We file motions to compel arbitration at the outset of the litigation.
We argue that the customer voluntarily signed the arbitration agreement which clearly waived their right to participate in a class action. We challenge arguments that the agreement is unconscionable. We show that the arbitration process is fair and accessible and that the dealership often agrees to pay the arbitration fees. By moving the dispute from a public courtroom to a private arbitrator we limit the exposure of the dealership and reduce legal costs.
Defeating Class Certification
If the arbitration agreement is not enforced we fight class certification. We argue that the claims of the proposed class members are not common.
In auto dealer fraud cases the interaction between the salesperson and the customer is unique to each deal. We argue that determining whether each customer was deceived requires an individualized inquiry into what they were told and what they understood. We demonstrate that a class action is an improper vehicle for resolving these highly fact-specific disputes. We attack the representativeness of the lead plaintiff by showing that their experience is not typical of the other customers.
6. Why Clients Choose SJKP LLP for Auto Dealer Fraud
We combine the industry knowledge of a specialized automotive counsel with the litigation power of a national defense firm to protect the franchise and the bottom line.
At SJKP LLP we do not view auto dealer fraud allegations as simple nuisances. We view them as attacks on the integrity of your business. We know that a settlement can encourage copycat lawsuits.
Our firm is chosen because we understand the car business. We speak the language of the desk manager and the F&I director. We know how to read a desking sheet and a recap. We have the technical expertise to audit your DMS records and prove your compliance.
We act quickly to resolve customer complaints before they become lawsuits. We negotiate with regulators to close investigations without publicity. If litigation is unavoidable we are prepared to take the case to trial or arbitration to vindicate the business practices of the dealership. When your license and your legacy are on the line SJKP LLP provides the sophisticated and unwavering advocacy necessary to drive the defense to a successful conclusion.
08 Jan, 2026
