Consumer groups question some Clunkers deals

NEW YORK — Consumer advocacy groups are calling on the Department of Transportation to crack down on dealerships offering questionable sales terms to customers participating in the government's Cash for Clunkers program.

The groups complained that some dealerships have pressured customers to sign agreements forcing them to repay their Clunkers rebate if the dealership isn't reimbursed for the sale. The groups also said some customers have been pressured to accepting new, less favorable terms after the sale — even if no waiver is signed.

"It involves dealers attempting to shift the risk from themselves to consumers if the Cash for Clunker deals don't go through," said Rosemary Shahan, president of Sacramento, Calif.-based Consumers for Auto Reliability and Safety. "We believe it is a form of bait and switch."

Several dealership organizations have encouraged their members to ask customers to sign such waivers, although the DOT says customers are not required to sign them to be eligible for a Clunkers transaction.

Ted L. Smith, president of the Florida Automobile Dealers Association, said dealers seek the agreements because they fear they will be forced to absorb the rebates if they let buyers who are later deemed ineligible drive away with new vehicles, said

"The dealers are bearing 100 percent of the risk," Smith said. "Consumers need to remember who has the risk here."

One such form, drafted by the Minnesota Auto Dealers Association, states that "if for any reason" it is not reimbursed for a Clunkers transaction, the customer must "pay the dealership the (Clunker) incentive amount in cash or return the new vehicle to the dealership."

The program allows car buyers to receive either a rebate of $3,500 or $4,500 if they trade in old vehicles that get 18 mpg or less and replace it with a new, more fuel-efficient vehicle. The program has been a hit with consumers and automakers. President Barack Obama earlier this month signed a bill adding $2 billion more in funding.

But the program's execution has had some problems. For example, dealers — who must pay for the rebates out of pocket then wait to get reimbursed by the government — have complained it can take days or weeks to get their claims processed, leaving them worried about getting repaid.

The program is administered by DOT. A DOT spokeswoman and a spokesman for the National Automobile Dealers Association did not immediately comment.