To avoid leaving customers on the hook for thousands of dollars and potentially having their credit score damaged, dealerships would be required to resolve a customer’s trade-in loan within 15 days of accepting the trade-in under a measure sponsored by Assemblyman Paul Moriarty (D- Camden, Gloucester). The bill was approved by the Assembly Consumer Affairs Committee on Monday.
ABC’s “7 On Your Side” recently aired a story featuring two consumers who were saddled with a combined $32,093.77 in debt after their dealers defaulted on their trade-in loans instead of making the payouts.
“Consumers deserve better protection from dealers who refuse to pay off their car loan as promised,” said Moriarty. “A customer goes into a dealership, conducts a proper transaction and rides out with a brand new car believing the dealer will hold up their end of the bargain. A few months down the line, the buyer finds out the loan has not been paid and now they are responsible for two car payments. It’s unfair and, quite frankly, bad business.”
Moriarty’s bill (A-1483), which has the support of both consumers and the industry, would also require the dealer to provide proof of the payment to the customer upon request. A dealer who violates these provisions is subject to a penalty of up to $1,000 for the first offense and up to $2,000 for each subsequent offense.
“Closing the window of time for dealers to pay off trade-in loans helps both car customers and the industry,” continued Moriarty. “Customers won’t have to wait for an extended period of time for their loan to be paid off and dealers can resell these vehicles more quickly since the loan is settled. It’s a win-win.”
Additionally, the measure would require a secured party to release the title within 15 days of receipt of payment from the motor vehicle dealer. When the balance is paid by non-certified check, the secured parties are required to release the title within 15 days from the date the check is credited to their account. A secured party who fails to comply with these time requirements is to be subject to a civil penalty of up to $500 for the first offense and up to $1,000 for each subsequent offense.
It will now go to the Speaker for further review.