An effort is underway to collect information from consumers who participated in the Cash for Clunkers program only to find that their deals were not approved by the National Highway Traffic Safety Administration.
Edumunds.com is seeking people who took advantage of the program to trade in their old gas guzzlers on new cars but are now being notified by the dealer that they owe up to an additional $4,500.
Edmunds.com’s CEO Jeremy Anwyl says, “The issue is that the regulations that were written were incredibly cumbersome.” Those regulations required that participants had owned, insured and maintained current registrations on their clunkers for at least one year in order to qualify for the program. Many voucher submissions have been rejected by the NHTSA because of delinquent insurance or registration payments.
Anwyl says, “There are cases where people unequivocally lived up to the law, but they are having a hard time living up to the regulations.”
He claims that a Hyundai dealer reported one such case in which an application was rejected over a technicality. The clunker’s registration had been current for the past year but the owner had failed to renew the auto’s state-mandated smog certificate. The state of California therefore deemed the registration late and the NHTSA rejected the dealer’s application for reimbursement.
The Hyundai dealer told Anwyl that, so far three of the 53 clunker deals reviewed by the NHTSA thus far have been rejected over similar technicalities. The dealer says he is awaiting the agency’s decision on another 277 applications submitted.
Anwyl estimates that the number of affected consumers could be significant. “If every dealer has a handful of these deals rejected,” he says, “you could see 25,000 to 50,000 consumers getting hit by this thing.”
The NHTSA has processed less than 20% of the rebate applications submitted by dealers so the full extent of the problem is hard to gauge at this point. However, the agency has set September 30 as its self-imposed deadline for processing all outstanding applications. To meet that goal, it has increased manpower from the original 250 people assigned to process applications when the program launched, to approximately 5,000.
Unfortunately for dealers and consumers, once an application is rejected the law provides no recourse. Lena Pons, a policy analyst for Public Citizen, a non-profit public interest organization says, “The onus was on the dealer to verify the paperwork before they completed the transaction.” Many dealers have complained that the NHTSA’s August 19 announcement that the program would end five days later created a flood of buyers and an increased potential for clerical errors. Pons says, “Many people would not have gone through that process if they knew they were going to be on the hook for additional money.”
She also claims that some disreputable dealers are contacting buyers and claiming that their applications were rejected when, in fact, the dealers received their reimbursement. Pons says, “There’s a large number of sources of fraud we’re concerned about, and we’re trying to gather information on that.”