Car dealers have long been notorious for finding creative ways to make customers part with their money.
But Tempe attorney Michael Shaw thinks he's found a new tactic. Shaw says he and his partners have uncovered a pattern of deception among many Arizona car dealers that has resulted in car buyers being cheated without ever knowing about it. Shaw's consumer-law firm, Shaw & Bybee, has already filed a class-action suit against a prominent Kingman car dealership and is planning others against Valley dealers.
Shaw says car dealers frequently overestimate the "vehicle license tax" they're required to charge when they sell a car. The VLT, which is passed on to the state, is based on the estimated value of the vehicle.
But the actual tax is often less than the amount the dealer estimated when the buyer was sitting in the sales office. And the difference is often not refunded to the customer, Shaw says.
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"It's pretty flawless if you think about it, because how many attorneys -- let alone consumers -- bother to check up on this?" Shaw says. "Nobody ever puts it together and says, 'They owe me a refund.'"
Shaw says he discovered this fraud by examining the contracts of car buyers who came to his office with other complaints. Few of them realized that they were owed a tax reimbursement.
"About 95 percent of our clients are car cases," Shaw says. "My receptionist has everybody bring a contract and their registration in -- not the temporary one, but the first one they get from MVD. The contract says how much the dealership claims they are going to pay public officials.
"Invariably, people get their registration from MVD like a month-and-a-half after the sale, and if they look -- which they don't -- they'll see that the dealership overcharged them and never refunded the difference. [Dealerships] keep that money, and it's totally illegal."
Shaw says he comes across three or four such cases a week. The amounts owed have been as high as $200 and as low as $3.50. But for Shaw, the individual amounts are secondary to the idea that car dealers are cheating buyers out of money that is rightfully theirs. "If someone will cheat you out of $3.50, they'll cheat you out of a lot more," he says.
Shaw's firm recently filed a class-action complaint against Cliff Findlay Auto Center, a Kingman dealership. The complaint alleges that Findlay violated Arizona's Consumer Fraud Act by overcharging a Kingman couple for state fees on three separate car purchases from 1996 to 1998. The total of the three overcharges is $117.
The lawsuit also seeks reimbursement for anyone who was similarly overcharged by Findlay within the last six years.
Findlay co-owner Henry Nolte -- who bought half the business last year from longtime owner Cliff Findlay -- says he's never consciously overcharged anyone.
"If we owe anybody any money, they've got it coming back," Nolte says. "This just came up about a week ago, and I'm flabbergasted. I mean, it never even was a thought for me that there was a problem. If there's a problem, believe me, I'm not going to make any money off of people's license plate or tax. We're not that kind of people. If it was even a dollar, we'd give them the dollar back."
Nolte says he mails refund checks "every single day." He attributes some of the overcharging problem to an Arizona system that requires car dealers to quickly calculate the VLT, rather than having the car owner go to the Motor Vehicle Division and pay his own registration title, and license-plate fees.
Unlike most other states -- which apply a flat license-plate fee for all newly purchased cars -- Arizona uses the VLT as a form of property tax. It's based on the assessed value of the car, and is paid annually by the car owner. Inevitably, as a car's value depreciates with each year, the vehicle-license tax also becomes smaller for that car.
Shaw disputes the notion that VLT overcharging by dealerships is accidental.
"There's a statute that tells the dealerships how much needs to be paid to MVD," he says. "The statute's quite clear. You look up the statute and you can absolutely pinpoint exactly how much it will be paid.
"There are some dealerships that'll hit it on the button every time, because it's easy enough. But there are other dealers, that always go over, they always charge people more than it's going to be."
Shaw's contention is supported by Cydney DeModica, public-information officer for the state's Motor Vehicle Division. DeModica says most car dealers purchase a fee-calculation computer program from the state. The program allows dealers to arrive at the exact VLT amount for each sale.
"The bottom line is, that money belongs to the customer, it does not belong to the dealer," says DeModica. "Whether it's $5, $50 or $100, it's the customer's money, and we mustn't lose sight of that."
One stumbling block for Shaw has been that Arizona's Consumer Fraud Act stipulates that an action must be brought "within one year from the date the claim arises." Since most victims of such overcharging are slow to realize that they are owed money, many potential claims are lost.
Shaw hopes that his lawsuits will force dealerships in Arizona to open up their records. And then reimbursements will dramatically increase.
"There are going to be thousands and thousands of refund checks being sent out by dealerships around the Valley," he says.
He also hints that the chronic unpopularity of car dealers can only work to his advantage in a courtroom. Shaw says, "I would never want to be a lawyer representing a car dealership in front of a jury."
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