Auto Loan Modification Companies The Next Target to Become a Freaking Mess for Consumers

Previously I wrote about the automobile loan modification group, Auto Relief Group. I had said:

Lately I’ve noticed more advertisements and mentions of auto loan modifications or truck loan modifications in what appears to be an effort into charging consumers for a service to help them lower their car payments and avoid repossession.

Unilateral loan adjustments or reductions are tough, if not impossible to obtain. This is especially true if you have a loan secured by a car, truck, boat, plane, RV, etc. If you don’t want to pay the contractual amount due, then the lender is happy to repossess the collateral, sell it at auction and sue you for the difference between the loan and the auction sales price.

Companies promising auto loan modifications are dubious at best.

At the very heart of the issue is the fact the loan modification company has NO power over the lender or any power of law behind them. They are basically contacting the lender and saying, “We have John here as a client and he says he’s having a hardship and we’d like to see if you can lower his payment.” It’s not uncommon for most vehicle lenders to have a policy in place to absolutely not work with car loan modification companies.

The consumer falling for these services will pay hundreds of dollars for something they could have done for themselves for free. – Source

Auto Relief Group

Well just a few weeks latter the Attorney General in Florida issued the following press release after shutting down Auto Relief Group.

Attorney General Bill McCollum today announced his office has filed a lawsuit against a Broward County company alleging the company engaged in deceptive and unfair trade practices related to automobile loan modifications. The civil complaint alleges that Auto Relief Group, its subsidiaries and owners John J. Boyle and John J. Boyle III falsely represented in national television and radio advertisements that they could reduce consumers’ car payments by up to 50 percent. The Attorney General’s Office was granted an injunction yesterday to freeze the company’s assets and appoint a receiver to take possession and control of the company.

An investigation by the Attorney General’s Economic Crimes Division revealed that Auto Relief Group representatives allegedly told undercover investigators they qualified for loan modifications that would reduce their monthly auto loan payment up to 50 percent for up-front payments ranging from $299 – $375. The company also represented that they had “relationships” with lending entities which would allow them to negotiate substantial payment reductions. Investigators determined these lenders had previously notified Auto Relief Group of their non-negotiation policies, but Auto Relief Group continued to send modification requests to these lenders.

In the majority of cases when lenders agreed to modifications of car loans, the modifications consisted of only minor deferments of payments due, not reductions of the interest rate charged. The Attorney General’s Office is still working to locate victims, but the investigation indicates the company may have collected several hundred thousand dollars in up-front fees from consumers each month.

In addition to the injunction obtained yesterday, the Attorney General’s Office is seeking full restitution on behalf of all victimized consumers, civil penalties, and reimbursement for fees and costs related to the investigation. – Source

Even more now I’m increasing my watch for companies that promise to be able to modify car loans, truck loans, RV loans, boat loans, etc. This industry is going to be another advance fee for service mess with many unhappy people as customers.

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My opinion is the auto loan modification business is going to be ripe with fraud. There is little regulation of that industry at the moment.

The Sun Sentinel in Florida recently wrote about the auto loan modification marketplace. Here are some important excerpts from the article.

Florida Attorney General’s Office filed a suit that shut down Auto Relief Group, an auto loan modification operation run by a South Florida father-son team. State regulators say up to 20,000 people around the country paid $299 to $375 to get their auto payments reduced by up to 50 percent, as the Auto Relief’s radio and TV ads claimed it could do. But some customers have said they received less than they were promised.

Auto Relief Group was put in receivership. Telephone numbers for the company have been disconnected and the two principles, John J. Boyle and John J. Boyle III, could not be reached. Their attorneys declined to comment on the case.

Experts predict these auto loan ventures may attract some of the same operators who once modified mortgage loans but left the field when it became more regulated. New mortgage laws that became effective Jan. 1 came after state and federal agencies were flooded with complaints.

Some of the claims on auto-loan company websites and in their ads — “We can help you keep your car, truck, boat or RV!” “Stop repossession and make your payments affordable!” — are almost identical to the ones mortgage modifiers once made to property owners facing foreclosure. Many of those promises proved hollow, with financially strapped homeowners losing millions in upfront modification fees and sometimes their homes.

Uriah King, vice president of state policy for the Center for Responsible Lending, says the auto loan restructuring services follow the same pattern as debt settlement and mortgage modification offers. “The whole business model is to collect fees before they actually do something. And then, by in large, they can’t deliver what they promise,” King said.

The auto lending industry says consumers usually do just as well negotiating loan modifications on their own. Third-party negotiators can do auto owners more harm than good, according to the American Financial Services Association, by encouraging tactics such as stopping their payments, which can destroy credit ratings and add to debt.

“We would like to see these firms better regulated through … a formal mechanism for reporting bad actors,” said spokeswoman Karen Klugh, whose trade association serves the consumer credit industry.

Jacob Adams founded Advocates Plus, which sells auto loan modification services nationwide. In March, state insurance regulators ordered his National Mortgage Solutions firm to close because he did not have a broker’s license.

Adams said the additional licensing requirements and rules prompted him to switch to auto loan modifications. He also said there was so much “illegitimacy” in mortgage loan work, “I didn’t want to be associated with it any more.”

My prediction is that I would not be surprised to see some of the debt settlement outfits running into this line of business in light of new regulations that will be coming from the Federal Trade Commission to prevent upfront fees for debt settlement services.

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Since the typical fees for this service are in the few hundred dollar range, in order to make massive profits, operators will attempt to run large volumes of consumers through the auto loan modification companies. This will just result in a lot of unhappy consumers.

The ultimate irony is that the receiver for the Auto Relief Group is also the same guy that was the receiver for Hess Kennedy, the debt settlement company that the State of Florida closed. You can hear my interview with Dan Stermer here.


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