A legislative proposal to regulate how auto dealers issue temporary tags in Maryland would protect both buyers and sellers, supporters say. But consumer advocates argue that the bill would pave the way for so-called "yo-yo" scams that target low-income customers.
The bill, scheduled for a hearing March 5 in Annapolis, would enable the state Motor Vehicle Administration to adopt regulations for temporary plates issued to buyers who take delivery before a car sale is finalized.
A consumer protection group says the move would open the door for fraudulent "yo-yo" sales, in which a car buyer purchases conditionally, often unknowingly, and is later told financing has fallen through and they must make a bigger down payment or pay a higher interest rate to keep the car. Sometimes the buyer's trade-in already has been sold.
The MVA currently does not allow temporary tags to be issued if financing is not complete.
"This bill is really a Trojan horse. It sounds very innocuous … but it rolls back 30 years of consumer protections in place in Maryland," said Marceline White, executive director of the Maryland Consumer Rights Coalition.
Despite the state's longstanding rules, some dealers have continued these practices, which victimize low-income families, said White, citing data on complaints the MVA receives.
But such incidents are "the most obscure, rare situations, that may have happened 30 years ago," said Travis Martz, counsel for the Maryland Automobile Dealers Association. "Now the Internet can put in information and verify finances, credit score and get approval from banks right away. Dealers ... want to sell cars and move on. We're not in the business of bringing people back and forth."
The bill would offer protections for dealers and buyers in cases where customers want to buy a vehicle and leave with it on the same day, he said.
In some cases, if information such as job history or fines with the MVA can't be verified immediately, "the dealer was loaning a car at their expense to the customer," Martz said. "The customer expects to come to a dealership and go through the process to fill out paperwork and expects to leave that day with a particular vehicle."
The bill would give the MVA authority to write regulations covering what the dealers call "spot deliveries," stipulating, for instance, that if sales are not finalized, buyers would return the car and have their deposit and trade-in returned to them.
"All this says is the MVA can create regulations if they want to," Martz said.
Eighteen states have statutes and regulations governing spot deliveries of vehicles.
Del. Pam Beidle, the bill's House of Delegates sponsor, said the proposal was brought to her by the dealers association, which she said had been meeting with the consumer rights group to iron out an agreement.
"Spot delivery is not forbidden by the statute," said Beidle, an Anne Arundel County Democrat. "All this bill was doing was saying Motor Vehicle [Administration] can create regulations for spot deliveries. It's not about the dealers trying to pull one over on consumers."
The consumer coalition said in a May 2013 report that 93 consumers complained to the state attorney general's office about "yo-yo" sales abuses from 2009 through 2011 and that 20 percent were resolved. Such sales cost consumers more than $240,000 from 2008 through 2012, the report said.
The MVA received 19 complaints in 2011 and 2012, and fined a third of the dealers cited, the report said.
The bill, originally scheduled to be heard by the House Environment and Transportation Committee on Thursday, was postponed until March 5, at 1 p.m.