The Federal Trade Commission filed charges and requested that a U.S. district court put a stop to the allegedly deceptive tactics of two California-based auto loan modification operations.
The FTC charges that Hope for Car Owners LLC, NAFSO VLM Inc. and Kore Services LLC (doing business as Auto Debt Consulting), and several individual defendants, deceived consumers with false promises and then did not provide refunds when they failed to obtain car loan modifications. The FTC claims the operations billed hundreds of dollars in upfront fees.
Consumers were instructed to pay fees to the companies, and to stop paying their auto lenders. Subsequently, at least one consumer’s car was repossessed, and one set of defendants told other consumers to “hide [their] car[s] to avoid repossession.”
“Now that the FTC and its partners have stopped hundreds of mortgage loan modification scams, fraud artists are moving to another loan modification scam, preying on consumers who are behind on their auto loan payments and facing repossession,” says David Vladeck, director of the FTC’s Bureau of Consumer Protection. “Despite promising to substantially lower consumers’ monthly payments, these schemes charge hundreds of dollars in upfront fees, leaving financially distressed consumers in worse shape than when they began.”
These are the FTC’s first cases against companies offering auto loan modifications.
The FTC alleged that the Hope for Car Owners defendants typically promised to reduce consumers’ monthly auto loan payments by 30 to 50%, for fees ranging from $200 to $500.
The FTC alleged that the Auto Debt Consulting defendants typically promised to reduce consumers’ monthly auto loan payments by 25 to 40%, for fees ranging from $350 to $799.
According to one of the defendants’ Web sites, “If you have engaged the services of Auto Debt Consulting for negotiating with your lender or bank on your behalf, and if for any reason you are dissatisfied with our services or we are unsuccessful in the negotiation process we will provide a 100% money back guarantee.”
The FTC alleges that both operations’ deceptive business practices violated the FTC Act.
According to the FTC’s complaints, both groups of defendants marketed their services on company Web sites, with statements like: “Join the thousands who have already SAVED! (Hope for Car Owners) and “Lower your monthly vehicle payments by as much as 40% regardless of your credit score!” (Auto Debt Consulting).
The FTC alleged that the defendants provided toll-free numbers for consumers to call so that telemarketers could sign them up. Many consumers were told to stop making payments on their auto loans, which increased the risk that their vehicles would be repossessed. But the FTC asserts that once the fees were collected, neither operation did anything to obtain the promised loan modifications, consumers who tried to get refunds were denied, and one consumer’s vehicle was repossessed by the finance company.
