Spanish Speakers Targeted for Dealer Fraud

In Texas, the Hispanic market for mobile homes is booming. Nearly half of Texas families living in mobile homes today are Hispanic families.(1) The president of one Texas retailer in Houston reports that Spanish language advertising on Spanish radio has doubled his business and increased Hispanic customers to over 60% of buyers--and that these customers are generally a good credit risk.(2)

Yet many Spanish speaking consumers reported transaction problems, in part due to misunderstanding between the sales people and the customers. Purchase and loan contracts are difficult enough for English speakers to negotiate, but Spanish speaking consumers essentially rely on the verbal promises of a salesman to get through the process because everything they sign is in English.

In Spanish, Mr. R. of Floresville wrote to the Attorney General when Conseco started billing him. According to R., the salesman told him the home would cost between $16,000 and $18,000 cash and $26,000 including financing. "When I signed the contract, I couldn't read it because it was in English and he explained that with everything including financing it would cost $26,000," wrote Mr. R. (translated from the Spanish). He did not get copies, and did not understand that he would actually have to pay $309 per month for 30 years (or about $110,000) until he got the first bill from the lender. His 13.32% APR loan included prepaid, financed points, property insurance and extended warranty, and the cash price of the home was actually $27,500.(3)

The Travis County District Attorney recently opened an investigation against Cornerstone, an Austin dealership, and subpoenaed boxes of documents after a former employee reported fraud to the Texas Department of Housing and Community Affairs. According to the search warrant affidavit, "the majority of the consumers involved were Spanish speakers who were not likely to notice the discrepancies in the paperwork, or to report discrepancies if noticed."(4)

Gilberto Amaya told investigators he paid $3,000 down for his home, although the contract claimed a down payment of $10,944. His ability to repay the loan was also misrepresented. Although his original loan application reported his income as $1,800 per month, the application delivered to Dynex Financial showed an income of $3,800 per month. Finally, Mr. Amaya's loan was packed to include charges of $2,347 for appliances and furniture he never received.

Hidalgo Alvarado got a loan from CIT when the dealer provided the lender a Release of Judgement Lien for a previous debt. According to Mrs. Alvarado, the family had not paid that previous debt themselves. Cornerstone promised to pay it for them. She also told investigators that the family gave Cornerstone only $1,000 down, although the contracts reflect a much higher down payment of $5,666.

According to the original whistle blower in this case, the dealer took small down payments from consumers, but then purchased a much larger cashiers check using dealer funds to show the lender. Once the lender was satisfied that an appropriate down payment had been made, the dealer redeposited the cashiers check in its own account.

Unfortunately, our complaint review indicates that many other Spanish speaking families have been trapped by bad deals because they did not understand the documents they signed or signed blank documents based on a salesman's promises.

A Spanish speaking consumer from New Mexico purchased a mobile home from a dealer in El Paso. According to the consumer, the dealer asked him to say he had made a down payment of $4,300. He did not have that much money, and he had significant existing debts, but the dealer ordered the home anyway. The dealer also paid off $7,400 of the borrower's debts. When the home arrived damaged, the consumer tried to reject the deal. He believed that no papers had yet been signed, but communication was poor.

"The bank called my residence, but we were unable to communicate, because no one spoke Spanish and I do not understand English. They wanted me to sign papers there in the office and that they would contact the bank for the financing, but I told them that I was not going to lie and say that I gave them $4,300 dollars as a down payment." The dealer did not respond to these allegations, but agreed to release the consumer from the home only if he repaid the $7,400 in cash spent to clear his debts.(5)

A Port Lavaca Texas consumer had an English speaking friend intervene for him when the mobile home he purchased was delivered with a few defects. When his friend asked to see the documentation from the purchase, he found that his stack of documents (all in English) did not include the actual purchase contract, title, loan contract or mandatory TILA statement. "When I looked into the matter, I found that the dealer had required him to sign a number of documents, but had not given G. a single document about this transaction or the resulting financial obligation. The dealer did not register the mobile home in his name or provide him any indication he had title."

He also looked in local papers, and the only advertisement he found for the dealership was in a Spanish paper. "They are soliciting business amongst folks that have poor English skills in order to cheat other unsophisticated buyers like they have attempted to cheat G.," he wrote to the Attorney General in January, 2000. By May, 2000, the dealership responded to the Attorney General that the title problem (the title was actually issued to a completely different person) had been resolved and there was a lawsuit pending on the case.(6)

Many of the other complainants highlighted throughout this report were Hispanic buyers shopping in dealerships from one end of the state to the other, and many of them report that they did not understand the English language contracts as they signed them. All told, about a third of the complaints filed by consumers came from families with Hispanic surnames and about 10 percent were drafted in Spanish by consumers who speak very little English. These consumers are especially vulnerable to abusive loans and confusing deals.

Recommendation

These simple changes would encourage more consumers to understand the agreement they are about to make in plenty of time to walk away with no harm done if they don't like the terms or conditions.

Footnotes, p. 35.