Keeping the Car in an Unlawful Yo-Yo Sale

by Jeremiah Ross

I often field calls from people that have been ripped off by an Oregon car dealer in a Yo-Yo Sale. Yo-Yo Sales are also referred to as “bushing scams.” These scams start when a car dealer sells a consumer a vehicle and offers to finance the vehicle. The consumer signs financing paperwork and takes the vehicle home. Usually, the consumer is under the impression the financing is complete and the vehicle is theirs. Unbeknownst to the consumer, the dealer may have made little, if any, effort to find financing on the agreed-upon terms.  Days, weeks, or even months later, the dealer contacts the consumer and informs them financing could not be obtained at the agreed upon terms. The scam is complete when the dealer has the consumer agree to new, less favorable, financing terms for the vehicle. This often results in the consumer paying a higher interest rate, extending the loan terms, and putting an additional down-payment down on the vehicle. Dealers also use this technique to attempt to sell the consumer accessories and add-ons that the consumer initially refused to purchase. Yo-Yo Sales are all too common in Oregon and they are legal, but only if the dealer strictly complies with Oregon law.

Yo-Yo Scams put consumers in a difficult position. The consumer feels pressure to comply with the dealer’s new demands because they have become attached to the new vehicle. If a consumer pushes back and refuses to either sign new loan terms or return the car, the dealership will often threaten to repossess the vehicle or report the vehicle as stolen to law enforcement. If consumers refuse to comply with the dealer’s demands the dealership will usually re-possess the vehicle and may claim that the down payment or trade-in vehicle is being used to offset the damage or mileage on the purchased vehicle. Consumers usually eventually succumb to the dealership’s bullying tactics and end up paying much more for the purchased vehicle than they can afford. I have even represented consumers in cases where the dealerships sent employees to the consumer’s place of employment to attempt to get them to sign new documents with less favorable terms.

Once a lawyer gets involved the dealership may continue those threats and attempt to force the consumer to return the vehicle and then return the down-payment. If the consumer agrees to return the vehicle, the dealer may be at risk for an unlawful trade practices violation (ORS 646.608(1)(ss), ORS 646A.090, and OAR 137-020-0020(3)(p), (x), (y), and (z)) but the dealers will often try to make the case about damages and whether the consumer suffered an “ascertainable loss,” which the consumer must show to prove an unlawful trade practice has occurred.  The dealer sells the purchased vehicle and argues to the court that the consumer has not suffered any loss because the dealer returned the consumer’s down payment, and the consumer was able to drive around in a vehicle for a few weeks or months without a car payment. That is not a good outcome for the consumer.

However, if the dealer broke the law, the consumer can fight to stay in the vehicle by seeking  a temporary restraining order (“TRO”) and preliminary injunction after filing a lawsuit. ORCP 79 permits the court to issue a temporary restraining order or preliminary injunction to prevent illegal conduct from occurring and also in situations where it appears a party’s conduct will render the judgment ineffectual. In other words, ORCP 79 allows the court to issue a restraining order preventing the car dealership from continuing to violate the law or repossessing the vehicle and re-selling it prior to the case being resolved.

This is an aggressive strategy that puts the dealership in a difficult position at the beginning of the case. The dealer will have to explain within a few weeks after the start of the suit why they broke the law during the Yo-Yo Sale. This rapid timeline is more consumer-friendly if the consumer possesses evidence to support their case and can also assist in keeping the case out of private arbitration.

In order for the consumer to seek a TRO, the consumer will have to file a Complaint in Circuit Court. The consumer can simultaneously file the Motion for a Temporary Restraining Order and Order to Show Cause why a preliminary injunction should not enter. In Multnomah County, you must do this through Civil ex parte. A party is not required to do this at the same time as filing the Complaint, but it often makes sense to do so in these cases to prevent the dealership from selling the purchased vehicle.

A TRO may be granted with or without notice.  ORCP 79B.  However, it is best to fax and email a copy of the Complaint, Motion, and any supporting documents to the car dealer prior to appearing at ex parte. It is also a good practice to send a letter informing the dealership that you intend to appear at ex parte and provide them information regarding the time and location of the appearance and to document your efforts to provide notice in your Motion and supporting documentation.

At the hearing on the TRO, the judge can consider a “verified copy of the Complaint” and any other documents, affidavits, or declarations that you present. However, keep in mind that these hearings go very quickly, and the judge will not have much time to review the pleadings and submissions.

The consumer must emphasize in their memorandum in support of the motion and at the hearing that the TRO is needed to prevent the continuation of the Yo-Yo Sale that is in violation of the UTPA, federal statutes, or Oregon administrative rules. ORS 646.636 specifically permits the court to “make such additional orders or judgments as may be necessary to restore to any person in interest any money or property, real or personal, of which the person was deprived by means of any practice declared to be unlawful in ORS 646.607 or 646.608 or as may be necessary to ensure the cessation of unlawful trade practices.” The TRO and Preliminary Injunction is an order to ensure the cessation of the unlawful trade practices and is necessary to restore the consumer’s interest in the property. It is good to have evidence that the dealer has threatened to repossess the vehicle and how repossession would affect the consumer.

The other issue to highlight to the court is that the consumer has suffered an “ascertainable loss.” An “ascertainable loss” is not synonymous with damages. Simonsen v. Sandy River Auto, LLC 290 Or App 80 (2018) affirmed that an ascertainable loss can be more than a quantified measurement of diminished market value.  If the consumer was unable to obtain financing on the promised terms, that is an ascertainable loss.  If the consumer provided a down payment or had a trade-in vehicle that was not returned, that is an ascertainable loss.  However, there are also subtler ascertainable losses such as not being able to have the vehicle registered in their name. This loss occurs because the dealer has yet to submit the documents to the DMV.  Another ascertainable loss may be loss of use of the vehicle after having to park the vehicle in a garage or other area to prevent it from being repossessed. Moreover, any modifications made to the vehicle or repair work done on the vehicle could be an ascertainable loss if the consumer must return the vehicle.

Once you have made a prima facie case that the dealership has violated the UTPA (ORS 646.608, et seq.), then you must address the issue of “security,” usually in the form of a bond. An applicant for a preliminary injunction is required to give security, “in such sum as the court deems proper, for the payment of such costs, damages, and attorney fees as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.” I have argued successfully in these circumstances that the security should be the amount of the monthly payment that the consumer had agreed upon in the initial retail installment contract or financing agreement. The court ordered that the consumer’s monthly payment be made to the court and be held by the court until otherwise ordered. If the court refuses this type of arrangement, then security bonds can be purchased through commercial brokers.

It is good practice to bring a pre-drafted Order with you that incorporates the necessary requirements under ORCP 79B(2). If the court grants the TRO it will sign the order and set a hearing on the preliminary injunction within 10 days, unless good cause exists to extend that time. Then you must prepare for the preliminary hearing.

You must provide the dealership at least five days’ notice of the preliminary injunction hearing. The hearing on a preliminary injunction is essentially a mini bench trial and the party seeking the injunction must make prima facie showing on each element.  You must put on evidence, which may require you to subpoena a witness or documents. You should also prepare a pre-hearing memorandum explaining why a preliminary injunction is necessary. These are typically the same reasons articulated in your memorandum in support of the TRO. You may need to request discovery and will have to move the court to do so either during the hearing on the TRO or before the preliminary injunction hearing. Every case is different and will present unique tactical and strategic decisions regarding how to present evidence, the types of evidence, and how you will introduce it. Additionally, you can consider stipulating that all evidence that is received into evidence at the preliminary injunction hearing also be considered received into evidence at trial. Again, these are strategic and tactical decisions that must be made and considered.

Another thing to consider is that the legal authority on Oregon’s provisional process rules is scant. ORCP 83C prevents using the “provisional process” statute in cases arising from consumer transactions. This may be an issue that comes up at your hearing. However, it is important to remind the court that ORCP 83 and 85 are tools for the dealerships and finance companies to use when someone isn’t honoring their end of the contract. ORCP 79 is available for consumers that are victims of consumer scams and Yo-Yo Sales.

Consumers should not be forced into a difficult decision because of the dealership’s disregard for the law. TRO’s and preliminary injunctions are a way for the consumer to level the playing field, maintain the status quo, and prevent the dealership from repossessing the vehicle. They are time-consuming and they can be risky, but they also can be powerful tools to stop the dealership’s unlawful conduct.

If you or someone you know has been ripped off or is a victim of auto dealership fraud call Oregon Consumer Attorney Jeremiah Ross at 503.224.1658. Please remember that the law is constantly changing, and this is not to be considered legal advice.