What are my rights if I’ve been accused of making a straw purchase on an auto loan?
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What are my rights if I’ve been accused of making a straw purchase on an auto loan?
I purchased a vehicle 1 week ago. I obtained loan approval, signed papers, and left the dealership. 2 days ago, I received a “welcome call” from the loan company. They asked if I was the primary driver on the vehicle. I informed them, that my fiancé (who I have lived with for 2 years and will be marrying in 6 weeks) will also be driving the car because I purchased it as a family vehicle. The loan company has returned the loan to the dealership and has called this a “straw purchase” refusing now to honor the loan. Do I have any rights here?
Asked on March 16, 2012 under General Practice, Pennsylvania
Answers:
MD, Member, California Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
The straw purchase is a serious and illegal concept. This is common in the mortgage industry when someone qualifies for a loan with no intent to pay it themselves. They are submitting their information on loan documents for another borrower who will make the payments and be liable, but who does not qualify for the same loan terms. In some cases, they may not qualify at all.
This could be to cover for straw buyers with poor credit or without confirmable income. This should not be confused with a family member cosigning a loan with the primary borrower making the monthly payments. It is considered a straw purchase scam because the actual payer's information is not being used in the loan approval and assessment. Unfortunately, the real buyer is frequently unable to meet the terms of the loan. This could leave the straw purchaser still responsible.
The loan company is incorrect in this situation, because the lender should not care who is going to be primary or secondary driver of the vehicle as long as:
- a) the person who financed it is also driving the car;
- b) the insurance is in both of your names; and
- c) the person who is the secondary has a driver's license
In this case, you are the party qualifying to own and pay for the car in the buying process. As a family car, your child could drive it if they were old enough, and there would be no reason to have them on the loan. There is no security issue here, and this isn't just an issue of a negative buying experience. You need to file a complaint with your department of financial institutions or the entity who handles motor vehicle loan companies.
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