Lawmaker Wants FTC Inquiry Into Car 'Yo-Yo Financing'

VIDEO: Brian Ross investigates a potentially shady dealership practice.


A member of the Senate Commerce committee today requested a new federal "examination" into potentially deceptive car dealership tactics in which salespeople allegedly pressure car buyers into more expensive financing deals, including one method known as "yo-yo financing" as detailed in a recent ABC News report.

The request, made in a letter from Sen. Ed Markey, D-Mass., to Federal Trade Commission (FTC) Chairwoman Edith Ramirez, said that yo-yo financing and other practices, including secret interest rate markups, "cause significant and unnecessary increases in the cost of an automobile for average Americans and suggest that some dealers may be engaged in unfair or deceptive trade practices that may be in violation of some of the federal laws within the Commission's jurisdiction."

An ABC News hidden camera investigation in August focused on allegations of potential yo-yo financing - a practice that can occur when car buyers leave a dealership with their new vehicle even though financing may not be complete. Sometimes the consumer is told later there is a problem with their financing and that they must return the car. Critics say dealers then sometimes pressure the buyer to sign a new, and often more expensive deal.

HIDDEN CAMERA: Car Dealer Yo-Yo Practices Affect 'Must Vulnerable,' Critics Say

Malini Mithal, Assistant Director of the FTC's Bureau of Consumer Protection, told ABC News then the FTC was aware of the issue and has been working to combat potentially deceptive practices.

"Yo-yo might sound like it's making light of the term, but it really is kind of showing you the whole 'jerking of the consumer back and forth' issues we're concerned about," said Mithal. "It's very difficult for consumers to have to deal with these types of issues and the FTC is committed to protecting consumers in this area."

The National Automobile Dealers Association said in August that a vast majority of car deals go through without mistake or incident and the group "condemns fraudulent transactions of any type." The NADA said it was not aware of any evidence that indicated yo-yo transactions are "prevalent in today's marketplace."

Part of today's letter from Markey intends to find out if that evidence does exist. Among the many questions asked of the FTC in the letter, one is for "any data on how many car dealerships are using either one of these practices [yo-yo financing or secret interest rate increases]…" The letter requests a response by mid-November.

ABC NEWS FIXER: How to Avoid 'Yo-Yo' Car Deals

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