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Is it Lemon Law or is it Fraud?

  Norman Taylor & Associates
  January 21, 2009

There are so many ways for dishonest dealerships to play games with the finance. Typical of these are various insurance products that the buyer is told they must have before they can purchase the vehicle, or credit scams called Yo-yo sales—which may be the most common—and forgeries of finance documents.

At the bottom of each of these examples is a lie. The purpose of the lie is to get you to buy something that has qualities, uses, characteristics, value that it doesn’t have.

In California there are two laws that cover the majority of cases involving the lemon law and fraud:

• “Lemon Law” The Song Beverly Consumer Warranty Act
• “Fraud” Consumer Legal Remedies Act

Norman Taylor & Associates handles lemon law and fraud cases every week. We can help.

Every day in the United States the consumer must deal with defective vehicles that cannot be fixed after numerous repair attempts. For this we have the Lemon Law. If you add fraud on top of this it’s a sorry state of affairs indeed. Fortunately there are more consumer protections in the U.S. than anywhere in the world. In fact we may be the only country on the planet that takes consumer’s needs seriously. In California these two laws cover the majority of cases involving the lemon law and fraud.

Today we will focus on fraud. The Consumer Legal Remedies Act (CLRA) provides California consumers with strong legal rights against unfair and deceptive business practices. It provides them with efficient and economical procedures to secure those rights. To promote these principles, the legislature designed the CLRA to be liberally interpreted, meaning that where possible, the facts will be interpreted in favor of the person making the claim.

List of Prohibited Practices or Acts

The CLRA lists twenty-three specific practices that are unlawful and will entitle you to damages or relief. Each of these are generally designed to prohibit unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.

The following six sub-sections of the CLRA are typical of those we see when handling auto fraud cases. For a more precise definition of all of the sections, you should consult a lemon law attorney or, if you prefer, look directly to the statutory text, codified in section 1770 of the California Civil Code.

• California Civil Code § 1770(a)(2), which prohibits “Misrepresenting the source, sponsorship, approval or certification of goods or services”;

An example of misrepresenting the source of goods or services might be telling buyer that he or she could get service from any authorized dealership and then having an authorized dealer in another area tell the buyer they had to have their service done where the vehicle was purchased. In our experience this is more likely to happen at a motor Home dealership than an auto dealership. With regard to goods, suppose you purchase a vehicle that is represented to be one of only a hundred specially made sport editions and you discover that it is not what the label says. Sponsorship seldom comes up in the context of automobiles. However, approval or certification of goods or services is frequently an issue, especially in these times when so many dealerships are selling what are said to be Certified Pre-Owned cars, and adding insult to injury, are selling them for a premium, only to have the consumers discover that many of the so-called inspections were not done at all.

Hopefully these few examples will give you an idea of how the following sub-sections may be applied to other fraudulent actions on the part of dealerships and manufacturers.

• California Civil Code § 1770(a)(3), which prohibits “Misrepresenting the affiliation, connection, or association with, or certification by, another”;

• California Civil Code § 1770(a)(4), which prohibits “Using deceptive representations… in connection with goods or services”;

• California Civil Code § 1770(a)(5), which prohibits “Representing that goods or services have sponsorship, characteristics, ingredients, uses, benefits, or quantities which they do not have”;

• California Civil Code § 1770(a)(7), which prohibits “Representing that goods or services are of a particular standard, quality, or grade… if they are of another”;

• California Civil Code § 1770(a)(9), which prohibits “Advertising goods or services with intent not to sell them as advertised”;

It’s typical legalese. Basically it says when you sell something, don’t lie about it.

The following is a typical CLRA case that arose out of what appeared to be a straight forward Lemon Law case. The names are withheld to protect the innocent and the guilty, as the case is ongoing.

Mr. Jones bought a Certified Pre-Owned Porsche from a well-known Los Angeles dealership. The buyer was reassured by the sales person that the vehicle was like new and free of all defects. He was presented at that time with a Certified Pre-Owned check list covering all the various parts and systems of the vehicle the dealer had so carefully checked.

Mr. Jones, a naturally cautious man, asked the sales person if the vehicle had ever been in an accident. The salesman said, “No, it has never been in an accident.” Mr. Jones asked him again, and again the salesman said it hadn’t been in an accident. Mr. Jones left with his Porsche thinking he had a very fine vehicle indeed.
The Lemon Law connection arises because we took the case after the owner brought the vehicle to the dealership over and over for an assortment of repairs, the principal defect being engine defects. He went back to the dealership for his final engine repair. This time he took it to a different dealership closer to where he worked. He had been taking the vehicle to the dealership where he purchased it.
Shortly after bringing his vehicle to the second dealership, the technician working on the vehicle came to him and said, “Mr. Jones, did you know this vehicle has been in an accident?”

Mr. Jones, quite correctly was astounded and then highly irate. The technician showed him that there was damage to both the front and rear of the vehicle. It was so obvious even the untrained eye could see where the paint didn’t match; also the frame and body components didn’t align properly. Somewhere before he got the car it had been in a serious accident.

Mr. Jones called Norman Taylor & Associates and we investigated. The facts were as presented and we moved from a straight Lemon Law case to CLRA. If you look at the 6 sub-sections of the CLRA noted earlier, you don’t have to be an attorney to see that their failure to disclose the accident was a breach of all six sub-sections. This story is not over as the case is ongoing.

The Lemon Law is not about fraud per se, except perhaps in the case of Lemon Laundering. It may however be about deception for corporate gain.

When the service writer alters your repair order so that it will appear that you haven’t really had four (4) repair attempts of your engine defects, it is unlikely that he is going to receive a check for a couple thousand dollars for this “service”. He may find his job security has improved, but receive money? That’s doubtful. Someone has instructed him how to deal fraudulently with consumers. So, is what the service writer does illegal? Maybe not. Is it morally despicable? Sure. This behavior goes all the way up the chain of command. It almost certainly includes the manufacturer, as anyone who has tried to get help from customer service has discovered. I’m sorry Mr. Service Writer, Mr. Technician, Mr. District manager, what you did was crooked.

Crook: Is a slang term for a criminal or a person of questionable morality. Specifically it refers to someone who is corrupt and uses dishonest or unethical tactics to gain money.

When people set out to commit a fraud they are sure to have all manner of justifications that make it okay to act in bad faith. Here are a few you may recognize:

• The boss says it’s okay. He must know what he’s doing.
• Customers are always whining about something.
• It’s not my fault the manufacturer makes crappy cars.
• I’d better do this (lie) or pretty soon I won’t have a job.

We could easily add another dozen justifications to this list. It doesn’t change the facts. To do what the people at the dealership did is fraud. It meets every test of the Consumer Legal Remedies Act. No matter how they justified it, it is the sort of thing a crook does. There is no way to make it right when the dealership and manufacturers, through their people, seek to defraud their customers. This is why society finds it necessary to enact laws like the Consumer Legal Remedies Act.

Norman Taylor & Associates
California Consumer Advocate

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