When Dealerships Fold, Customers On The Hook For Trade-Ins
CHICAGO (CBS) -- When you trade in your old car for a new one, you think the deal is done, right? Maybe not, if your car dealership closes up shop.
Hundreds of people in Illinois have ended up with huge bills and ordered to pay off balances on cars that don't belong to them anymore.
CBS 2's Pamela Jones looks at a new law aimed at stopping that.
Patty Hoppenstedt traded in a 2003 Mercedes last year for a new car. At the time, she still had $13,000 left to pay on her Benz.
It was a bill she thought her car dealer would pay. Instead, the bank sent Hoppenstedt the bill.
"I was shocked," she said. "Because, as far as I was concerned, I had traded in the vehicle."
She called her bank, which simply sent her letters demanding the money.
She went to her St. Charles Buick dealer and found it was shut down.
"The car lot was empty. All vehicles were gone," she said.
Since 2000, Illinois Attorney General Lisa Madigan says, 60 dealerships across Illinois have gone out of business and failed to pay off the loans on trade-ins. It has left hundreds of customers with bills for cars they don't have.
"It's a lot more serious, I think, than most people realize," Madigan said.
Madigan supports House Bill 880, which would require every dealer in the state to pay $500 a year into a Dealer Recovery Trust Fund. The fund would cover consumers with trade-ins when a dealership closes.
David Sloan, president of the Chicago Automobile Trade Association, says his group is backing the bill, too. The association helped to put the proposed new law together.
"Certainly when a customer trades in a car, he/she wants to know that the car is going to be paid off," Sloan said.
At least five dealerships have closed in Chicagoland since the beginning of the year. Sloan says when that happens, dealers aren't out to cheat the consumer.
"You know that feeling when you're drowning and the water is coming up? That's the situation that the dealer is in. And so it happens very fast at the end," he said.
Hoppenstedt contacted the attorney general's office with her case. Now, she doesn't have to pay the balance on her loan.
But she is still trying to repair the damage to her credit.
House Bill 880 is on the governor's desk.
