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Automobile Finance Companies – Debt Collection and Credit Reporting on Returned Vehicles


Maginnis Law has begun to investigate automobile finance companies who engage in abusive debt collection practices against debtors who return cars immediately after purchase. Our law firm has recently come across several cases where an automobile finance company does not consider a contract cancelled despite being notified of the return of a vehicle by the purchaser or the dealer, and continues its scheduled monthly billing to the consumer. And if you don’t pay – because you don’t have the car – they may attempt to collect the debt through letters, phone calls, or negative information on your credit report.

The purchase of an automobile, whether it is a brand new model or a used one from one’s favorite local dealership, is very much a fact of life in this country. Plenty of people, especially when purchasing newer, comparatively more expensive cars, due so by utilizing credit, that is to say, by acquiring the services of a third party financer which covers the cost of the car as stated by the dealer, and then bills the new owner in monthly installments over a certain period of time, most commonly from one to five years, depending on the debtor’s payment capability.

On occasion, however, people find themselves wanting to return the newly purchased car to the dealer. The state of North Carolina has legislation in place to ensure that dealerships accept returns under certain circumstances, particularly when said return occurs within a day or so of purchase, provided there is no damage to the vehicle and no significant change in mileage.

In theory, that is as far as it should go. Provided the dealer accepts the return, the financing contract, to which the dealer is also party, is cancelled and the customer can avoid incurring the aforementioned monthly expense until he or she find themselves in better financial standing to acquire a car down the line.

This situation can quickly spiral out of control when a certain, fairly common scenario plays out: The consumer, upon receiving the first billing, chalks it up as a mistake –rationalizing it as a result of backlogged paperwork, for example- and thinks nothing of it until the next month when a second billing comes along. At this point the consumer contacts the car dealer and/or the automobile loan company seeking to rectify the mistake, only to find out the alleged debt to be now delinquent and on their credit report, with all the unpleasant consequences this carries, especially if the original purchase was cancelled due to unforeseen financial difficulties in the first place.

At this point, the consumer finds him or herself affected not only by the potentially long term consequences of a default now appearing on their credit report, but by the sudden irruption into their lives of debt collectors and their many dubious practices, including frequent unwillingness to rectify the very existence of debt and their attempts to unlawfully collect interest or additional undue payments under varying, unclear concepts.

If anything in the aforementioned scenario sounds familiar, or if you or a loved one have been through such an experience, talk to Maginnis Howard today. Our experienced consumer right attorneys are here to support you with a free-of-charge case review, upon which we will recommend to you the best way of proceeding to defend your rights as a consumer against abusive companies attempting to collect on nonexistent debt.

Remember to keep a log of all forms of communication, whether they occur via phone call, text message, e-mail or physical letters. Under certain conditions, especially where affectations to your credit report have occurred, you may be entitled to sue for damages. 

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