Consumer groups try to protect buyers in clunker deals

DETROIT -- Consumer groups are collecting data on cash-for-clunker deals that became clunkers for buyers and plan to bring the data to the National Highway Traffic Safety Administration to make sure buyers are treated fairly.

Auto website Edmunds.com is looking for people who traded a clunker, took home a new car and later were dunned by the dealer to pay another $4,500 when the dealer's rebate application was rejected by the government. Edmunds is asking affected consumers to e-mail the site and also is asking dealers to collect consumer information.

Under the rules for cash for clunkers — which offered up to $4,500 to trade an older, low-mileage clunker for a new, higher-mileage vehicle — buyers must have owned the clunker and had it insured and registered for the past year. Many deals have been kicked back because of a late insurance or registration payment in the year.

"The issue is that the regulations that were written were incredibly cumbersome," says Jeremy Anwyl, CEO of Edmunds.com. "There are cases where people unequivocally lived up to the law, but they are having a hard time living up to the regulations."

Anwyl says a Hyundai dealer told him about a rebate application rejected over a registration technicality: The buyer had registered the car for the past year but hadn't renewed its California smog certificate, so the state considered the registration late.

The dealer has had three deals rejected on such technicalities of the 53 reviewed so far, Anwyl says. He has another 277 clunker deals pending.

"If every dealer has a handful of these deals rejected, you could see 25,000 to 50,000 consumers getting hit by this thing," Anwyl says.

The government has processed less than 20% of outstanding rebate applications, but plans to approve or reject all by Sept. 30.

Asking for repayment if the rebate is rejected is something dealers are not allowed to do, says Lena Pons, policy analyst for Public Citizen.