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Electronic contracts are meant to make things easier for the consumer. Instead of having to sign pages and pages of documents, they have the convenience of signing electronic documents instead. But some car dealerships are using electronic contracts as a way to scam unsuspecting customers.
This happened to Tanisha Coley when she filled out a computer-based credit application at a Kia dealership in 2016. The Connecticut resident was looking for a new car and wanted to know what kind of vehicle she could afford.
She didn’t knowingly purchase a car that day, but a couple weeks later, she discovered that an auto loan balance of $17,737 for a 2013 Mazda had been added to her credit report.
Coley ended up filing a lawsuit against the dealership, claiming that they loaned to her without her permission. Coley’s case was later settled, but it showcases a problem introduced by the auto industry’s adoption of electronic contracts.
The Scam Behind the E-Contract
Increasingly, consumers are bringing lawsuits against auto dealerships, claiming that the dealerships forged their signature and enacted contracts they didn’t agree to. Although e-contracts have been an acceptable way of doing business for more than 20 years, it is a more recent addition to the auto loan industry.
E-contracts present an easier, more streamlined approach to purchasing a vehicle. Just last week, RouteOne processed the first remote e-signature for Toyota Financial Services, opening the door for more dealers to begin selling cars online. However, there’s always a catch.
According to consumer advocates and attorneys like Dan Blinn, the problem with auto lenders using e-contracts is that they make it easier for dealers to scam the consumer. Some dealers will avoid printing a copy of the contract for the customer to review, making it easier for them to add in extra fees and upgrades that the consumer never agreed to.
Plus, it’s harder for the customer to prove that an e-signature isn’t theirs. Blinn, who has helped clients deal with problems resulting from e-signatures, adds that it’s difficult for consumers to pick those details out on a computer screen.
It can be hard for the average consumer to understand what to look for when signing a loan document. So how can consumers protect themselves against predatory auto lending practices?
One way is by requesting a copy of the Truth in Lending Disclosures. The Truth in Lending Act was created in 1968; it states that both the terms and expenses involved in obtaining a loan must be fully disclosed.
When it comes to auto loans, the loan documents should include Truth in Lending Disclosures. This document will include things like the annual percentage rate, the amount financed, and the total number of payments.
If the lender doesn’t offer a copy of the contract, consumers can request a printout of their contract. And of course, they should closely monitor their credit report to watch out for any fraudulent activity.
In his role at LendEDU, Mike uses data, usually from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories. Mike’s work, featured in major outlets like The Wall Street Journal and The Washington Post, provides consumers with a personal finance measuring stick and can help them make informed finance decisions.