A recent Tip of the Week from Ignite Consulting Partners delved into the social media world your children might know well — TikTok.

Ignite recapped that during the last few weeks, a TikTok video went viral and gave consumers some “bad ideas and created even more headaches for dealers and finance companies.”

The video recommended that consumers send letters directly to dealers and finance companies, claiming a “right to rescission” regarding their retail installment sales contract (RISC) and  vehicle.

Ignite explained what a “rescission” is, noting that the law cited in these letters is rooted in Truth in Lending Act.

“Rescission is basically a written notice to terminate or cancel a contract or agreement that was previously signed, with some requirements and exceptions,” Ignite said in an industry message. “It’s a formal notice of the consumer’s intention to undo the agreement and return to the previous situation as if it never existed. All because the creditor omitted important disclosures. Sounds serious, doesn’t it?

“Not in these cases. See, the devil’s in the details,” the compliance firm continued. “And the security interest has to be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction.”

Generally, Ignite said the word dwelling means a residential structure, whether or not that structure is attached to real property. Examples include a condo unit, coop unit, mobile home, and trailer, if they are used as a residence.

“A car is not considered a dwelling under the law because it is not intended for permanent or long-term habitation. Cars are primarily designed for transportation and not equipped or intended for use as a permanent living space. Fortunately, these letters were sent in the context of a motor vehicle RISC,” the firm said.

Ignite acknowledged that if a dealership or finance company received one of the TikTok-inspired letters, it might have caused a compliance ruckus.

“Where people get tripped up is in the filler. The letter is usually combined with multiple claims of fraud, lack of disclosure, etc. You should be incredibly careful when responding to them as they are written to be confusing. A best practice is to separate each claim in the document with brackets and address them individually,” Ignite said.

“Also peppered in the letters were additional claims that the terms of the deal weren’t disclosed and that a laundry list of itemized fees from the RISC were not allowed under law and were, therefore, a hidden finance charge,” the firm continued.

“The letters all end in some version of a statement that says the car belongs 100% to the buyer and that the dealer must send them a $10,000 check for everything they have paid to the dealer, including ancillary items like CPI.  Our advice is to stay calm and dissect each claim methodically. You never know when a missed assertion could come back to haunt you. It can be difficult to respond citing the correct law that governs each claim,” Ignite went on to say.

If you need help writing a response or don’t know how to start, contact Ignite via email at info@ignitecp.com or call (817) 900-8754.