While this promotion arrangement may seem attractive to many consumers, a variety of legal problems may arise. Auto equity promotion arrangements may lead to repossession of the automobile since they are in violation of most financing or leasing contracts. The subcontractee may lose all claims to the automobile, fees paid to the promoter, and as well as monthly payments made to the original contract holder. If the subcontractee stops making payments to the original owner, the original owner is still responsible to make payments on an automobile that is no longer in their possession. If the subcontractee has an accident without adequate insurance, the original contract holder is left with legal liability to cover the damages.
Parking tickets are also the responsibility of the original contract holder.
In the case of financed cars, the original consumer runs the risk of being criminally prosecuted under New York State Penal Law by disposing of a vehicle through an auto equity agreement. In January 1997, New York State amended the General Business Law. It is now illegal to deal in auto equity promotions. What to do If you are having trouble maintaining regular automobile payments, check with your lending institution, or leasing company. Often if you explain your circumstances some arrangement can be worked out.