Believe it or not, this is actually legal in some states. Even if it isn't legal, it is practiced throughout the country. Below is a true story from "Lehto's Law" on You Tube.

A young couple with two little kids needed a new car. They went to a dealer and settled on a Hyundai. They traded in their current car, paid a downpayment, and signed the papers. Three weeks later, the dealer called and said the financing fell through, and they would have to come in and re-do the whole deal. They were given less for their trade-in, paid more as a downpayment, and had a higher interest rate.

The following week, the dealer called again with the same story. They turned him down, and he had their Hyundai towed. They had no car, yet they were still making payments on their old car because the dealer sold it but didn't pay it off. Two kids, no car, no money. They eventually went to a lawyer. After some time in court, the dealer was ordered to pay them $225,000.

https://www.youtube.com/watch?v=TtBUldCvuos