The Dealership Promised to Pay Off Your Trade-In. They Didn’t.
Now your old lender is reporting late payments, your credit score is dropping, and you are stuck paying for a car you no longer own. This is not your fault, and Florida law is on your side.
Florida’s legal deadline for dealer payoff
Potential credit score damage
No cost for a case evaluation
How a Dealership’s Delayed Payoff Destroys Your Credit
When you trade in a financed vehicle, the dealership takes ownership of your car and assumes the obligation to pay off the remaining balance on your loan. Most consumers walk away believing the deal is done. But weeks or even months later, they discover the dealership never sent the payoff to the lender.
You trade in your financed vehicle. You sign the paperwork, hand over the keys, and drive away in your new car. The dealer agrees to satisfy the remaining loan balance on the trade-in.
The dealership delays or ignores the payoff. Instead of paying off your old loan within the legally required time frame, the dealer holds onto the money, sometimes for weeks or months, using it as operating capital or simply neglecting the obligation.
Your old lender reports you as delinquent. Because the loan remains in your name, the lender has no idea the car was traded in. As far as they are concerned, you missed your payments. Late payment entries start appearing on your credit report.
Your credit score plummets. A single 30-day late payment can drop your credit score by 100 points or more. Multiple late payments, or worse, a charge-off or collection account, can follow. You may be denied future credit, housing, or even employment opportunities.
Florida Law Requires Dealers to Pay Off Your Trade-In Within 10 Business Days
This is not a gray area. Florida statute specifically addresses this problem and imposes a clear deadline on dealers.
Florida Statute § 319.24(5)
Under Fla. Stat. § 319.24(5), a motor vehicle dealer that acquires ownership of a vehicle with an outstanding purchase money lien must pay and satisfy that lien within 10 working days of acquiring ownership.
When a dealership violates this deadline, the consumer may be entitled to actual damages, statutory damages, injunctive relief, and attorney’s fees.
Beyond the 10-day payoff requirement, a dealership’s failure to timely pay off a trade-in may also give rise to claims under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), the Fair Credit Reporting Act (FCRA), and other federal and state consumer protection statutes, depending on the circumstances of the case.
Real Case: Jury Awards $2.5 Million in Punitive Damages
This is not a hypothetical problem. Dealerships across the country have faced significant liability for failing to pay off trade-in loans.
A consumer in Albuquerque, New Mexico traded in two vehicles when purchasing a 2020 Chevrolet Colorado from Reliable Chevrolet. The dealership accepted the trade-ins but failed to pay off the remaining loan balances. The consumer was left responsible for payments on vehicles he no longer owned.
A jury found the dealership committed fraud and awarded the consumer $87,000 in compensatory damages and an additional $2.5 million in punitive damages.
Source: KRQE News 13 (Sept. 2023)
While every case is different, this verdict demonstrates that courts take trade-in payoff fraud seriously. Consumers who have suffered credit damage due to a dealership’s negligence or fraud may be entitled to substantial compensation.
Warning Signs the Dealership Did Not Pay Off Your Trade-In
Many consumers do not realize there is a problem until the damage is already done. Watch for these red flags:
You are still receiving monthly statements or payment reminders from the lender on your traded-in vehicle
Your credit report shows late payments on a car loan for a vehicle you no longer own
You were denied credit, a mortgage, or an apartment lease due to unexpected derogatory marks
Your credit score dropped significantly after trading in your vehicle
The dealership is giving you the runaround when you call to ask about the payoff status
You received a collections notice or charge-off letter related to your old auto loan
What You May Be Entitled To
If a dealership failed to pay off your trade-in and your credit has been damaged as a result, you may have legal claims entitling you to:
- ✓ Compensation for the actual credit damage you suffered
- ✓ Statutory damages under applicable Florida and federal consumer protection laws
- ✓ Correction or removal of inaccurate derogatory entries on your credit report
- ✓ Recovery of any out-of-pocket costs, including payments you made on a loan the dealer was obligated to pay off
- ✓ Attorney’s fees and costs, meaning there may be no expense to you
Many consumer protection statutes include fee-shifting provisions, which means the dealership, not you, may be responsible for paying your attorney’s fees if you prevail.
Think You Have a Case? Get a Free Evaluation.
If a dealership failed to pay off your trade-in and your credit has suffered, we want to hear from you. Our attorneys focus on holding dealerships accountable and getting consumers the relief they deserve.
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