CarEdge Live Oct 10, 2025

CAR DEALERS COLLAPSE & SCREW Customers | LAWYER EXPLAINS | Episode 940

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28:19

Term

FTC Holder Rule

The FTC Holder Rule is a law that helps buyers if they have problems with a car they bought. It lets them take their complaints to the company that financed the car, not just the dealership.

Term

gap policy

A gap policy helps you pay off your car loan if your car gets damaged or stolen and is worth less than what you owe. It covers the difference so you aren't left with debt after losing your car.

Concept

buy here, pay here

'Buy here, pay here' means you can buy a car and make payments directly to the dealership instead of a bank. It's often used by people who might have trouble getting loans from traditional banks.

Concept

A franchise dealership is a car dealer that sells new cars from a specific brand, like Ford or Toyota. They follow rules set by the car manufacturer and are part of a bigger group of dealers for that brand.

Concept

trade-in

When you trade in a car, you give it to the dealership to help pay for a new car. The dealership gives you some money for your old car, which goes towards the cost of the new one.

Term

purchase contract

A purchase contract is a document that says what you are buying and how much you are paying for it. It includes details about any cars you might be trading in.

Concept

dealership bankruptcy

When a car dealership goes bankrupt, it means they can no longer pay their debts and have to close down. This can affect customers who traded in their cars or owe money to the dealership.

LIVE

Happy Holidays! Want to give your host a gift? Consider subscribing, rating, and reviewing the show this holiday season. It really helps the show grow. From all of us at Believe, have a Merry Christmas everyone, and a Happy Holiday!

It's noon here in Ventnor City, New Jersey, and our nation's capital, Washington, D.C., and this is Car Edge Live for Friday, October 10th, on a chilly and soon-to-be-miserable weekend here in Ventnor, New Jersey.

With your host today, me, Ray, I am in Ventnor, and well, Zach, I'm coming to a swimmer's apartment, I believe, and wearing one of the finest t-shirts and microphones he could ever find.

All right, pops, we've got a special guest for today's show, so I'm going to be quick here. Today's show is brought to you by CarEdge.com. If we can help you out with anything, folks, whether it be buying a new car, used car, or car buying services, insights, or so much more, check it out back at CarEdge.com.

The reason I'm rushing through the intro today, Dad, is because we have a special guest, a lawyer, joining us for a change. Josh Begin from suyourdealer.com. Josh, share with us a little bit about your background, your introduction here. I'm pulling up your website, though, in the meantime, because you, sir, have nailed branding to a tee.

Josh, thanks so much for joining us.

Thanks, guys. Always glad to be with you. But yeah, I'm a consumer protection attorney based out of South Florida, practice in Vermont, Florida, and Washington, D.C. And as you could guess, I love holding dealerships accountable for their misdeeds.

So let's jump right into their thoughts. I'll let you kick off the first question here. We love having Josh on the channel. And again, his website is, case you forgot it, suyourdealer.com. But Dad, why is Josh here with us today? What are we getting up to?

I don't know. I believe there's some type of smallish used car dealer group in Florida, Benji's Autos. And is it that Benji's went bankrupt and they were selling vehicles out of trust? And you're involved because so many of their customers, what's a nice way of putting this, so many of their customers got screwed?

I like to say taken for a ride.

Oh, you're way too kind.

Yeah, so what happened?

Yeah, so essentially Benji's was a medium to larger sized independent car dealer. They had two locations in Florida, one in Orlando and one in Broward County, Florida.

Kind of what you see, I mean, you know, you do this for so long, you kind of start seeing rhythms and certain patterns. But what I noticed about a few months ago is I had a number of consumers coming to me with case evaluations.

And the issues that they were experiencing weren't typical of a dealership that was doing well financially. And what I mean by that is quite often these individuals to me complaining that their trade ins weren't being paid.

Josh has frozen. So we have come to a point in our history where we have seen Florida freeze over.

There it is. We'll give Josh a second here to see if his internet will come back. But I just want to continue to set the stage here. We'll pull him off and then we'll bring him back in when he's back.

Dad, this is the reality is these car dealerships, whether they're large or small, are running into financial headaches and challenges. And I think Josh is back here, so I'm going to pull him up in a second.

But that's what we're going to talk about today is what happens when these car dealerships go out. So Josh, I think you're back on with us now. We can give it a little test here.

Oh, something tells me he's changing Wi-Fi networks. We'll give him a second to rejoin. But Dad, this is what happens when dealerships go under. They are unfortunately our consequences for customers.

You mentioned a word there out of trust. I think Josh was about to get into some of the issues with what happens when these dealerships take trade-in vehicles that they ultimately don't end up actually paying off the auto loan.

So I mean, these are some of the things that he's seeing on a case-by-case basis, but unfortunately can have really big implications and are happening nationwide.

We just saw a really large dealership group in tri-color go under, for example.

And what happens in situations like this is somebody does have a trade-in and they still owe money on the trade. And part of the transaction is showing the trade-in against the new vehicle that they're buying and then showing the pay-off amount that gets added in to the new loan.

And the dealership collects that money so that they're in a position to be able to send a check to that lender and clear that loan and get their hands on a free and clear title.

When dealerships don't do that, ultimately what happens to customers is 60 to 90 days down the road, they're getting notices that they're late on their payments on their previous vehicle that, well, they traded in and were supposed to be paid off.

It is a situation where customers end up with not one car loan, but two car loans that they're responsible for, and the dealerships either usually seek bankruptcy protection and go have a business because they don't have the funds available to do what it was that they were supposed to do,

which is A, pay off the customer's existing loan, and B, pay off the floor plan for the car that they sold to the customer. It's really an ugly situation.

Which if I'm not mistaken ends up really hurting the consumer. Dad, we've got a couple comments here and we'll continue on with the show regardless.

But Jordan's saying the dealer lawyers got to Josh. We've got here from Stu, the car dealers association. They struck, they knocked this guy off the internet.

Dealers hated to see how they took down his network with one simple trick. And Rich, I think Rich is right. Josh has made a lot of enemies, especially in South Florida, doing what he does down there.

It's a challenging place to operate, but obviously really, really important. So I'm going to pull up here actually, Dad. This was the email that Josh sent over to us recently.

Yes.

If we would give him the opportunity to join us on the show here. And here's really to your end, usual end of life story for these scummy dealers.

Vehicles taken in on train and leans not being satisfied. So let's hit on that just a little bit harder here. I see Josh is back in the wait rooms.

We'll bring him here in just a second. Josh, give me a thumbs up if you can hear us okay down there.

Oh, okay. We can add it. Josh, our community thought the local dealers association took your internet out when they saw you on Car Edge Life today.

Thankfully, no, but I will say this, that we are experiencing some very South Florida weather right now. So my internet's going in and out. So I do apologize, John.

I'll give you.

We appreciate you being here. It's all good. So we were just talking about in this case with Benjy's, but also how this can happen more broadly.

Selling vehicles that haven't actually been paid off or taking in trades and not paying off trades. Is that one of the things that you would seem going on when these consumers came to your office?

Certainly. When I first started seeing was that the inception of these issues was that a number of consumers came to the office that were complaining about the fact that they were purchasing vehicles that had preexisting leans that weren't being satisfied.

Either these vehicles were being brought in on trade through the dealership and then ultimately the dealership was not timely satisfying those trade ends and then reselling the vehicles.

Or they were purchasing them with preexisting clouds on their title from whatever source they may have been getting them from.

Ultimately, you know, a few of them came in. I started to get a little bit of an inclination that this might be a broader issue.

And then all of a sudden the floodgates opened up and then all of a sudden we started getting news stories.

One of my clients was featured on a local news station in Orlando.

And then from that point on, it just kind of evolved from there.

It's unfortunately a sign of the times in my experience.

And, you know, this isn't the first time that I've actually seen this happen.

Can I ask a... Oh, go for it, Dad.

Here, you know what? I'm going to write my question down. That's what I'm going to do.

Okay, I'm going to remember my question.

What recourse when something like this happens where a customer trades in a car and it has a loan balance

and that loan balance is included in their new loan with their new lender

and the dealership is supposed to pay off that existing loan so they can get a free and clear title?

What recourse does the customer have when the dealership doesn't do that in as timely a manner as they're supposed to or ever?

And then if the dealership goes out of business, is there anything to protect the existing customer?

Man, the weather must really be bad in South Florida today.

And let me say this, my understanding is that there's a big-ass storm for the Carolinas

and we're going to have a nor'easter here in the Atlantic City area

and we are expecting winds tomorrow and Sunday with wind gusts of between 50 and 60 miles an hour.

So it's a good thing we're doing this show today or you might be losing me where the internet could be going out.

But let's talk about that a little bit more.

So I knew you were going to ask Josh what's the recourse for a consumer

and hopefully he'll be able to join us back here in a moment and share how he is trying to proactively

or yes, it's retroactively trying to get some help for those folks that come to him.

I want to really hone in on this.

So one of the things that happens, you're a good man.

One of the things that happens is that when these dealerships go out of business,

customers get left holding the bag.

These dealerships could have theoretically and have in some cases sold cars that were traded into them

that they hadn't even paid off.

So Josh, my dad's question was around recourse.

What recourse does a customer have when this happens?

Sorry again, guys.

I just wanted to log in onto my phone this time.

Hopefully this time we get it right.

So to answer the question, in 1975 or 1976, the FTC, the Federal Trade Commission,

rolled out what is known as the FTC Holder Rule to summarize a bunch of legal jargon

into a very concise statement.

Effectively, the Holder Rule puts the lender on the hook for any claims or defenses that can be raised against the dealership.

As some of your viewers may have experienced or may have known,

or at least a few that have actually reviewed the long, long, long legal jargon in their loans,

there is a bold section in almost every single consumer lease or consumer loan agreement for that matter

that basically says the holder of this paper subject all claims and defenses that may be raised against the originator.

That language isn't there because the dealership wants it there or the lender wants it there.

It's there because the FTC Holder Rule requires it.

And effectively, it'd be really simple.

In these kind of situations, while the dealership may be gone for all intents and purposes,

while the dealership may not be collectible,

at least the FTC has shifted the risk of loss onto the lenders that accept these loans.

So at the end of the day, the lenders are on the hook.

Now, that liability is unfortunately limited.

Well, explain the limit.

Sure.

So under the FTC Holder Rule, and obviously different jurisdictions have different interpretations,

but there is a concept that the FTC Holder Rule limits the liability of the lender

to amounts that have been paid under the loan.

Certain jurisdictions have included any trade-in allowance that is wrapped into that loan.

Other jurisdictions, other courts have determined that it's only the monthly payments that the consumer has paid and their down payment.

So depending on where the consumer is located will dictate exactly the extent of the availability of recourse that they have.

I've got a question, Bob, so go for it.

Well, I just wanted to follow up quickly if I could.

So in essence, you're saying the bank is liable for the fraud that was committed by the dealership

that submitted the loan application and received the loan approval?

100%.

I am going to say something that perhaps many Americans are thinking,

but that is the most asked backwards thing I have ever heard in my life.

If the original dealer committed fraud, why should the bank be liable?

Just out of curiosity.

The theory goes, and the understanding is that the lenders are the ones that are in the best position to police these dealerships.

They're the ones that inhibit these practices by funding these loans,

and they're the ones that are on the front line of receiving these complaints when things go sideways.

So at the end of the day, they are the ones that should be responsible when they do nothing other than inhibit these practices.

In addition, at the end of the day, they're still deriving a benefit from the transaction.

They're still deriving those monthly payments.

So it's not as if all hope is lost and we're completely shifting liability on them and they get nothing out of it.

But at the end of the day, the FTC believe that is the best way to basically shift the liability onto these lenders.

So at least someone stands accountable for the misdeeds at issue.

Can we talk a little bit about the implications for the consumer?

So again, just a level set for those.

We were going a little in and out before, so I just want to really set the table for a second here.

We've got in South Florida a dealer group, an independent dealer group, independent used car dealership that is gone under.

They are no longer in business, and unfortunately, in the process of that, we've learned,

Josh has learned because he's representing folks, that they were selling vehicles that they took in on trade,

that they had never satisfied the lean on, that they never satisfied the lean on vehicles,

even that they hadn't sold, they were selling vehicles out of trust,

which means they hadn't paid their finance company to hold that inventory, all sorts of bad things.

That happens not only at Benjy's in South Florida.

That happens across the United States, so I'd love for you to talk about the scope of this.

And then let's talk about what impact that has on us as consumers.

If we do get caught up in something like this, or the people, Josh, that you're representing,

what have they been caught up in, and what are the implications there?

Certainly, as to the first question, yes, it is a widespread issue, and it doesn't just affect independent dealerships.

It doesn't occur in independent dealerships.

When I first started out about nine years ago, a prominent dealership in Palm Beach County pretty much did the exact same thing.

It wasn't only trade ins and it wasn't only payoffs that were at issue and not delivering title and not registering vehicles,

but they also failed to fund gap policies and service contracts following the sale.

And what happened was, and I got in on the very early stages of the end of this dealership,

and I had a consumer come to me that pretty much crashed their car within a few weeks of getting it as bad luck.

He went through the insurance claim, and then he made a claim against the gap policy,

and the gap policy basically said, you're out of luck, your dealer never funded this premium.

That trickled and snowballed.

Eventually, we issued a subpoena to the gap policy.

We got a list of about 100 people that were similarly situated.

We were able to assist quite a few of those individuals, but this wasn't a small buy here, pay here.

It wasn't an independent dealership.

It was a nationally recognized franchise.

Usually, when I start seeing these kind of telltale signs, it's usually the kiss of death.

When dealerships are selling vehicles, maybe once in a blue moon, somebody dropped the ball somewhere,

the FNI manager was on vacation.

Something happens, I get that.

But once you start seeing two, four, 20, 30 people coming to you with the exact same issue,

it's usually where they smoke their spire and you start to get the inclination that this dealership isn't doing well.

As it relates to how it impacts consumers, obviously, the consumer trades the vehicle in, right?

And they believe that the dealership has agreed and which they have agreed to satisfy that loan and that trade-in.

The unfortunate reality is the way that the law operates and the way that the law sees things,

there is still a contractual agreement for that consumer to maintain payments on that trade-in.

And they have to continue making those payments until the trade-in is fully satisfied.

I've had a number of consumers come to me with a mistaken belief that just because they trade in the vehicle,

it completely absolves them of any financial liability for that trade.

But that's not how that works, unfortunately, for them.

And the way that it impacts them and it has impacted my clients is it tarnishes their credit

and it's not their fault that their credit is being tarnished.

They have engaged in good faith and a transaction with third party.

That third party was supposed to step in and satisfy the loan for the vehicle.

They did it, right?

And at the end of the day, that negative reporting, while it might be truthful, it's not accurate.

And it causes people to lose out on a number of things.

Obviously, credit utilization.

Obviously, if you're applying for a loan and you have an existing line of credit or two lines of credit,

credit utilization, negative remarks on your credit, your score goes down.

You miss out on opportunities to buy a home, to buy another car.

Or in one case, although not with Benjy's but another dealership, I had a client with security clearance

that the dealership didn't satisfy their trade-in in a certain amount of time.

That account got charged off.

And my client was facing loss of the security clearance as a government contractor.

So these kind of implications are widespread, they're wide-reaching.

And every case is different, but overall, it really impacts the consumer's credit.

Yeah, go for it, Dan.

I'll keep writing down my questions.

I was going to say, and when it impacts the customer's credit,

that could end costing the customer thousands upon thousands of dollars in the future.

You said, well, it might prevent somebody from perhaps getting a mortgage.

Or they could still get the mortgage, but perhaps they have to pay a 9% rate instead of a 6% rate.

Well, that could be $100,000 over the life of a 30-year mortgage.

So the impact of the consumer is lifelong when dealerships do this.

And when Benjy's goes out of business, goes bankrupt, is there an insurance company

that covers this for Benjy's customers or Benjy's customers just literally screwed?

Remains to be seen, I would highly doubt that there is an insurance policy out there

that would provide coverage.

The only sort of recourse that I'm aware of that's mandated by Florida law, as I'm sure you just know,

is a very limited surety bond.

The penal sum of that surety bond is $25,000.

I'm almost willing to bet that that has already been depleted by now.

If not, it will be shortly depleted.

Once that is fully depleted, there's nothing left to go after.

The surety bond is again a very limited form of insurance.

And it's almost just the Florida Department of Highway Safety and Motor Vehicles doing something

to keep the general consuming public safe.

If you asked me, there needs to be a few extra zero at the end of that $25,000.

Even then, some consumers wouldn't be made whole.

But at the end of the day, I would highly doubt that there would be an insurance policy

that would cover these kind of losses.

Depending on how, even if there is a policy, depending on what the coverage may be,

they might not cover intentional acts.

And this may very well be seen as an intentional act.

So the short answer is probably not.

I want to dumb it down.

Just really, really, really dumb it down for a moment.

So imagine I am a customer.

Imagine you, viewer, are a customer of a dealership.

But you, your jargon, Josh, good faith.

I have a good faith transaction with them.

I buy a car.

I trade in my other car.

It's all part of the transaction.

And then a couple of weeks later, because the car business is going south

as documented here on CarEdge Live, that dealership goes out of business.

If I am not staying on the up and up about continuing to make payments on a vehicle

that I traded in and was on my purchase contract and everything that I traded it in,

I'm going to end up screwed because that dealership went out of business.

So if that's the framework we're operating in, where my mind goes to, Josh,

is we just saw a tri-color automotive group go out of business, went bankrupt.

And this has a ton of fraud involved in it seemingly.

It's always a mild one in the news.

But this is the seventh largest independent car dealer in the United States.

We're not talking about one or two lots in South Florida.

We're talking about, I mean, I think their current inventory was something like 30,000 vehicles.

I mean, we've got a massive number of people that probably right now bought a vehicle

from Tri-Color, had to trade in within the past month of that.

The impact of this could be pretty large, fairly substantial,

because we just saw such a large group go under.

And I think that's the point I really want to hammer home for people here,

is when car dealers collapse, customers are screwed.

Unless they were privy to the law like you were describing,

and you need to know that you need to keep making your monthly payments

even though you traded a car, which makes no sense.

No sense, but it is the law, or it is the binding of those contracts, I guess.

Indeed, indeed.

And it's really just a matter of consumer awareness.

The larger issue is a lot of consumers don't know about the existence of the FTC overrule.

Although it's been around since the 70s, we as consumer protection attorneys

try to do our best to get it out there and to get it out in the public sphere.

And that's exactly why I pitched this to you guys, because obviously,

if I only knew about it because of my experience in the law,

I highly doubted many consumers have otherwise known about it.

But I do agree that it definitely has wide reaching consequences

that a lot of consumers just aren't aware of.

Well, here's a question for you.

At this point, you can look at what's going on,

or what happened that was going on at Benji's.

And it almost seems criminal.

So my question would be, would the state of Florida look at what has transpired

and at some point bring criminal charges against those who owned and operated Benji's auto sales?

I would hope so, but my experience dictates otherwise.

So if that's the experience,

that we will allow dealers basically to do what Benji's has done,

and we will never hold them accountable to the degree that we could or should,

based on what the law states,

why would any dealership feel compelled to play within the guidelines of the law

if there's no real consequences for not doing so?

I mean, it's hard to really answer that question.

And the end of the day is there are a number of dealerships that do write, obviously,

and they play by the laws that they're bound by.

But the other question is whether any of this rises to a criminal level,

as opposed to, okay, we've run out of money and we just have to cease operations.

That remains to be seen.

I can't say one way or another that they're doing anything nefarious at this moment.

There are speculations, there is grumbling, but all of that speculation and grumbling,

I've had conversations with a confidential source that has mentioned possibly some sort of criminal investigation,

but I don't know that for a fact.

And I'm definitely not going to advance that as a fact.

But what I do see at the moment is consumers have traded in vehicles,

they haven't had the lanes paid off, and they're suffering as a result.

To the extent that there is criminal activity afoot and nefarious activity,

my experience with the Florida Department of Agriculture and Consumer Services,

as well as other governmental agencies that have been involved,

and for example, the least buyout situation where the AG's office went after a select few dealerships,

the results were relatively not that great for consumers.

I mean, they got a portion of the money back, but the dealerships weren't really held accountable.

It's almost as if, you know, no, no, no, don't do it again, give them the money back,

and then give us a little bit of money for the investigative efforts that we undertook.

So, you know, it almost seems as if the focus is on some sort of financial retribution

as opposed to criminal, you know, wrong billing or holding somebody accountable criminally.

And I think that at least for me personally in this case, it actually doesn't feel super nefarious.

It feels like we ran out of money.

Like, we can't pay off that auto loan because we're actually out of trust with our current finance guys.

So, like, to me, I don't see this as a path to, you know, boost the profits of the dealership or any individual.

It's like, it's a sign of financial hardship at the operating level.

Okay. I'll share inside baseball information.

Please.

This is what we launched.

The ship goes out of trust.

They know they're out of trust.

They know they're not paying off the vehicles that they've sold.

They know they're not paying off the loans or the trade-ins that they've taken.

They are well aware of the fact that they are not living up to their end of the obligation,

whether they have run out of money or not.

And typically, they don't stop doing it until their floor plan company comes in and sues their ass.

So, I think it's a wonderful thing to say, well, perhaps they just ran out of money.

Yeah, well, they didn't run out of creativity as they had to continue to stay in business when they didn't have the money to do it.

So, I am sorry.

I feel no compassion towards those dealerships.

They knew exactly what they were doing.

And to suggest otherwise, I don't mean this against you, Josh, but I think it's foolish.

You know, there's a certain thing that most Americans don't have.

It's called common sense.

Okay.

The problem with common sense is it's just not all that common.

But it doesn't take much to connect the dots.

When you know you don't have the money and you continue to operate that you know you're committing fraud.

So, please, let's stop with being nice to these people.

Put their asses in jail where they belong.

That was a rare.

I want to just be very clear.

Two very rare things just happened right there.

Josh, one, my dad's face color matched his sweater.

That happened very infrequently here on the car edge.

That's the first three person on the show at once, but we had to go solo screen even just for 10 seconds there because he was going off.

So, we tuned two new experiences here on car edge live this afternoon.

Josh, unfortunately, we have to end the show here.

We really appreciate you tuning in and spending some time with us.

Also, if memory serves me correctly, last time you were on the show, it was bad weather down there in South Florida.

So, I don't know, man, maybe get a place up in the Hamptons or something like that.

You can probably afford it from all the soon of the dealers you're doing, but hopefully you continue to stay busy and sharing insights with us.

We really, really, really appreciate it.

And we're very grateful that you reached out.

So, thank you, sir.

Certainly. Thank you for having me and keep up the good work, guys.

Keep on spreading that awareness.

And again, a friendly reminder, folks, if you're interested in learning more about Josh and his practice, the branding is fantastic.

Sueyourdealer.com.

Josh, have a fantastic day.

We really appreciate it.

Thanks, guys.

Dad, great show today.

I really, really, really feel grateful when we get to bring experts like that in.

Folks, if we can help you out with anything.

So, obviously, Josh has his website.

My dad and I have been doing what we're doing back at CarEdge.com for over five years, almost six years.

At least six years in December.

So, please, if we can help you out with anything, check it out back there.

And if you enjoyed today's show, please subscribe to the channel.

It's been really awesome to see more and more of you show up day in and day out with us here.

And, Dad, I'm looking forward to doing it again on Monday. How's that sound?

It's today Friday.

Today's Friday, baby.

Oh, my gosh. Oh, my, yeah.

Have a great weekend. I'm looking forward to doing it on Monday as well.

Well, we'll be back then, folks. Much love, Dad.

Thank you again to Josh, and we'll tune in on Monday. We'll see you then.

Yep. Bye-bye, everybody.

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0:00

28:19

CAR DEALERS COLLAPSE & SCREW Customers | LAWYER EXPLAINS | Episode 940

FTC Holder Rule

gap policy

buy here, pay here

franchise dealership

trade-in

purchase contract

dealership bankruptcy

About this episode

Original notes