The press ― and the government ― have stepped up scrutiny of yo-yo financing.
WMC-TV, a Memphis, Tenn.-based NBC affiliate, posted a TV report and article about the practice last week. A Washington, D.C., Fox affiliate also posted a story recently.
Here’s how yo-yo financing works: A customer makes a down payment on a used car despite not having secured a loan yet. If the consumer ends up unable to get the loan, the dealership takes back the car and keeps the down payment as repayment for any mileage racked up during the time the customer had the car.
According to an attorney quoted in the story, the practice is legal in Tennessee, but is “a major, major problem.”
Meanwhile, U.S. Sen. Ed Markey (D-Mass.) is looking into the practice, having sent a letter to the Federal Trade Commission on Oct. 23.
