WASHINGTON — Military borrowers pay higher costs and face greater financial risks than civilian borrowers when taking out credit to buy a car, according to a new report from the Consumer Financial Protection Bureau.
The report found service members tend to borrow larger sums, at higher interest rates over longer terms.
Rosemary Shahan, president of the Sacramento-based Consumers for Auto Reliability and Safety, said “yo-yo scams” are common, in which the victim signs an initial contract on good terms but then the dealer claims the financing fell through.
“Then they say, ‘If you don’t agree to sign this other contract where we’re charging you for a lot of worthless add-ons you don’t really want and a higher interest rate, then we’ll report the vehicle stolen, and it’ll ruin your career,'” Shahan explained.
The report found many service members are young and far from family members who might help them negotiate a large purchase. Last year under former President Joe Biden, the Federal Trade Commission finalized the CARS rule, which would combat dishonest sales tactics. Automakers sued and last month a federal judge put it on hold.
Shahan pointed out the CARS rule would require dealers to tell you the price up front before you even go to the lot.
“It also has additional protections for military service members,” Shahan outlined. “It prohibits car dealers from representing that they’re somehow affiliated with the military or have been approved by the military when that’s not true, and would also require them to be more honest about the price of the add-ons and actually get your affirmative approval before adding them.”
The Federal Trade Commission under the Trump administration will now have to decide whether to stand behind the rule and fight for it in court or withdraw it.
