The Federal Trade Commission said Wednesday it has filed charges against two California-based auto loan outfits for allegedly deceptive practices and has asked a U.S. court to halt their operations.
Agency officials said the alleged scam starts with the companies getting a hundred of dollars in upfront fees from delinquent customers, then promising money-back guarantees, a stop to repossessions and to reduce car payments.
The case targets Hope 4 Car Owners and Auto Debt Consulting along with defendants Patrick Freeman, Michael Kamfiroozie and Naythem J. Nafso.
“I was four months late and on the verge of losing my car to the repo man,” says one radio advertisement. “Hope 4 Car Owners stepped in and not only stopped the repossession, but they negotiated to reduce my payments from $1200 a month to $548.”
However, the agency found that at least one person had his car repossessed and others were told to hide their vehicles, after pay the fee and no longer paying the original loan company.
“Despite promising to substantially lower consumers’ monthly payments, these schemes charge hundreds of dollars in up-front fees, leaving financially distressed consumers in worse shape than when they began,” said David Vladeck, director of the agency’s Bureau of Consumer Protection.
These are the agency’s first cases against companies offering auto loan modifications, at time when auto repossessions remains high.
The FTC alleged that the Auto Debt Consulting defendants typically promised to reduce consumers’ monthly auto loan payments by 25 to 40 percent, for fees ranging from $350 to $799.