A liquidation service that linked credit unions and their repossessed cars to retail customers is closed and facing a class action-type lawsuit after a story by The Credit Union Journal reported that credit unions were not receiving payment for cars sold by the company.
According to those involved, the situation highlights the difficulty credit unions face in alerting each other to fraudulent activities, especially in cases like this, where a company switched satisfactory service for fraud and conspiracy.
For defendants Repo Ranch, James D. Schneider, and Sheila Holmes, problems allegedly began early last year when credit unions filed suit for money due on repossessed cars turned over to the Fontana-based firm for resale.
According to attorney Barry Smith, who represents five credit unions against Repo Ranch for the Los Angeles lawfirm Buchalter, Nemer, Fields and Younger, there are more credit unions out there with grievances against Repo Ranch. It's just a matter of letting them know that action is being taken.
"I believe it's just the tip of the proverbial iceberg," said Smith, who settled eight cases with Repo Ranch out of court and received numerous calls from credit unions after The Credit Union Journal's story on the downfall of the auto seller broke. "I'm sure a lot of other credit unions have been burned."
Smith categorized Schneider's Repo Ranch as a great concept with a flawed business plan. "When things slowed down he couldn't sell them," Smith said of Schneider's inventory of credit union repossessions. "His system couldn't work."
Schneider did not return several phone calls to his current place of business, Suzuki of Riverside. One credit union told The Credit Union Journal that Schneider owns the dealership. Riverside City tax records list JDS Certified Vehicles, Inc. as the owner.
Duane Tyler, of the San Diego law firm Moore, Brewer, Jones, Tyler and Wolfe, represented four credit unions in out-of-court settlements for money due on repossessed cars sold by Repo Ranch. Tyler said that Schneider is not currently making payments on the fifth and latest negotiated settlement.
And credit unions weren't the only ones burned. The Better Business Bureau in Southern California reported 57 consumer complaints against Repo Ranch in the last three years, an average of 1.58 complaints per month.
Sandi McMillan, president of Fresno Police Department CU, a $25-million, 3,500-member plaintiff credit union in Fresno, Calif., said she heard through the grapevine that Repo Ranch was trouble-after she gave them a car and its title.
"We had been promised a check and promised a check and that went on for a couple of months and we never got it," McMillan said. "We assumed that we would get our check and we never did."
Glendale City Employees FCU, at $40 million and 32,000 members, was the first credit union to sign the formal complaint for breach of contract, money due and fraud and conspiracy, among other charges. Jon Wenkalman, manager of lending and operations, said Repo Ranch sold two cars and a boat for the credit union before there were any problems.
"I don't know why but I just had a weird feeling about the last car, but they already had the car and there wasn't a whole lot I could do about it," Wenkalman related. "They said they would mail me the check but they needed the title. That's the way they have always operated, you give them the title and they issue you a check."
But holding the vehicle's title until payment was only a perceived protection. Repo Ranch also issued bad checks to credit unions, according to both attorneys. Colton School Employees FCU received a hand-delivered check from Repo Ranch in exchange for a lien satisfied title. The check was returned for non-sufficient funds, claimed Helen Dragen, manager of the $5-million, 1,200-member credit union.
"You would call there and they would never return your messages," noted Dragen, describing her attempts to reach Holmes at Repo Ranch. "She lied a lot and made up all these different excuses. These people are ripping everybody off. It has become very personal to me. I don't understand how a business can do this to credit unions or any other financial institution and get away with it."