August 14, 2009 in Business

Clunker rebate waivers criticized

Consumer advocates ask DOT to intervene
Dan Strumpf Associated Press
 

Ford increasing production

 DEARBORN, Mich. – Ford Motor Co. said Thursday it will build more of its popular Focus and Escape models and boost total vehicle production later this year to help dealers restock depleted showrooms.

 The automaker needs to keep up with demand for its Focus compact car and Escape crossover, both ranked as top sellers under the federal government’s cash for clunkers program.

Associated Press

NEW YORK – Consumer advocacy groups are calling on the Department of Transportation to crack down on dealerships offering questionable sales terms to customers participating in the government’s cash for clunkers program.

The groups complained that some dealerships have pressured customers to sign agreements forcing them to repay their clunkers rebate if the dealership isn’t reimbursed for the sale. The DOT says car buyers are not required to sign the so-called contingency forms to qualify for a clunkers transaction, but the groups said the waiver should be banned altogether.

“It involves dealers attempting to shift the risk from themselves to consumers if the cash for clunker deals don’t go through,” said Rosemary Shahan, president of Sacramento-based Consumers for Auto Reliability and Safety. “We believe it is a form of bait and switch.”

The program allows car buyers to receive a rebate of either $3,500 or $4,500 if they trade in old vehicles that get 18 mpg or less and replace it with a new, more fuel-efficient car or truck. The program has been a hit with consumers and automakers. President Barack Obama earlier this month signed a bill adding $2 billion more in funding.

But the program’s execution has had some problems. For example, dealers – who must pay for the rebates out of pocket and then wait to get reimbursed by the government – have complained it can take days or weeks to get their claims processed, leaving them worried about getting repaid.

“While problems with application submissions for the clunkers program have been significantly reduced, getting approval for dealer reimbursement requests is still facing significant hurdles, said John Lyboldt, a National Association of Automobile Dealers vice president, in a statement.

Dealerships have said they asked customers to sign the waivers as a form of self-protection. Bailey Wood, an NADA spokesman, said waivers are a way of protecting dealers from being stuck with rebates they offered but can’t get reimbursed.

“Dealers are out hundreds of thousands and in some cases millions of dollars in back cash-for-clunkers transactions,” Wood said. “It’s getting to the point that some dealers can’t afford to participate in the program.”

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