ALBUQUERQUE, N.M. – American Indians in New Mexico and Arizona bordertowns are repeatedly the victims of car dealer scams known as churning and yo-yo sales. Indian people, especially the elderly speaking their Native languages, are deceived by mobile home salesmen, title loan transactions, payday loan schemes and tax return scams, said an attorney taking them to court.
“Bordertown business culture is more predatory than anywhere else,” said Rob Treinen, attorney with the Feferman and Warren law firm in Albuquerque. Feferman and Warren practice consumer law exclusively, suing businesses that rip consumers off.
“They target everyone. The more trusting you are, the more likely you are going to get scammed.
“We have sued many of the car dealers in Farmington and Gallup.
“Gallup has more millionaires per capita than any other town, that’s because they are making their money off people coming in from the reservations,” said Treinen, who began serving clients in Gallup as an attorney with New Mexico Legal Aid.
Gallup is a bordertown and shopping center for the Navajo Nation, Hopi Nation and Zuni Pueblo.
Farmington, in the Four Corners region, is 100 miles northeast of Gallup. Farmington is centrally located to the Navajo Nation in Arizona and Utah, Ute Mountain Ute and Southern Ute in Colorado and Jicarilla Apache in New Mexico.
Indian bordertowns are not the only place where the scams are taking place. The law firm has sued most of the major car dealers in Albuquerque and in the southern New Mexico town of Las Cruces, near the border of Mexico.
“There’s loads of different scams,” Treinen said.
One scam involves selling a previously wrecked vehicle, without revealing that the vehicle has been in an accident. The vehicle is repaired cosmetically and made to look good, but remains structurally unsound.
Sometimes air bags are replaced with those from another vehicle and may not function.
“They lie about the damage and they don’t tell people it has been in an accident. A lot of times it is an unsafe car, and it may have frame damage.
“This could mean serious injury or death for the occupants. The car might just fold up.”
New Mexico law requires car dealers to tell customers if the repairs for existing damages amount to at least 6 percent of the purchase price of the car. An affidavit describing the damage is required by law.
“We’ve never seen anyone who has been given an affidavit.
Another scam is the churning operation, currently used by car dealers to sell, repossess and resell a vehicle to customers unable to make payments.
“Churning operations are what we see in the bordertowns,” Treinen said.
For instance, a dealer takes a $2,000 down payment for a vehicle, and then schedules regular payments. The vehicle is only worth $2,000, so the additional payments are just extra cash for the dealer.
“Whatever payments they get are just gravy,” Treinen said. “The intent is not to get payments, but it is to repossess the car and resell it.
“We had a case where a Farmington car dealer bragged that he never had to buy any inventory, he just sold, repossessed, sold and repossessed.”
This dealer’s collection agency sent out a “cartoon” to Navajo customers, which definitely was not funny. It depicted the Repo men – one man with a gun, another with a baseball bat – and a victim on the ground in a garbage can with his legs sticking out wearing cowboy boots.
The caption read, “If your check is in the mail, please disregard this notice.” The jury was incensed and ruled in favor of the Navajo plaintiff.
The jury ruled that the Farmington car dealer lied about the car’s condition and mileage at the time of sale and engaged in illegal debt collection by sending the cartoon notice.
When buying a car, it is also important to be on guard when agreeing to the finance terms. “It’s high pressure sales when they get you in the car finance office,” Treinen said.
Car dealers are looking for profits. One moneymaker for dealers is credit life insurance. Some car dealers do not tell customers they have a choice as to whether they buy credit life insurance when their car
However, it is a violation of federal law to tell customers they must purchase it.
Customers do have a choice, and in some cases the car dealer is pushing the sale of credit life insurance because the dealer owns the credit life insurance company.
Another popular way for car dealers to make extra money on car sales is GAP insurance. It is designed to pay the car off in the event that the car is wrecked and the insurance payment is less than the amount owed on the car.
“The chance of this happening is slim, you would be better off buying a lottery ticket,” Treinen said.
The scams change all the time. Now there is the yo-yo sale.
A person buys a car, takes it home, shows it to their friends, buys car mats and car insurance, and then hears back from the dealer. The dealer claims the financing did not go through and he needs an additional down payment.
So the new car owner, who already has a great deal invested in the car, comes up with another $3,000 for the down payment. This might happen again and again until the person is drained of cash, unable to make car payments and the car is repossessed.
“They have you; they just try to see how much they can get out of you,” Treinen said.
The law states when a person applies for financing, the customer must be notified within 30 days, stating whether financing is approved, declined or more documents are needed.
“In a yo-yo sale, the dealer doesn’t want that notice going out, they want to keep scamming you, soaking you,” Treinen said.
Treinen said many American Indians living on tribal lands do not have existing credit and it is difficult for them to obtain financing from reputable car dealers. They become vulnerable to scam dealers.