IIADA has been informed that some buy here pay here dealers are indicating they are not charging interest on their retail vehicle sales because then they think they are not required to use the retail installment contract as a part of their paperwork. Further, their approach is to charge more for the car than its advertised price because they are financing the vehicle. This is illegal. If you have a vehicle advertised for $5995.00 and add $1500.00 to the price of the vehicle because you are selling and financing it, you are committing a deceptive practice. The legal method is to use a retail installment contract and delineate all charges to the consumer. Charging zero percent interest is not a reason to exclude you from proper compliance with Federal Truth-In-Lending Disclosures and Iowa Consumer Credit Code requirements. The increase of a purchase price, due to financing is a finance charge, triggers TILA and is interest that must be disclosed. Taking payments in more than four installments also triggers TILA, regardless of whether a finance charge is imposed or the price is increased to reflect financing. Don't listen to what you are told "on the street" by other dealers who apparently do not know what they are talking about. There is only one way to do a buy here pay here deal – THE RIGHT WAY and WITH THE PROPER PAPERWORK.
THE PENALTIES: Dealers who engage in hiding finance charges can be subject to lawsuit by the AG's office or consumers and will have to refund the hidden finance charge and a dealer who intentionally does not use a retail installment contract (RIC) could create more penalties.
TILA – TRUTH IN LENDING ACT