FTC Warns Consumers of Auto Loan Scams
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UPDATED: Apr 6, 2012
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The Federal Trade Commission (FTC) filed charges against two California-based auto loan modification operations. The FTC claimed that “Hope for Car Owners” and “Auto Debt Counseling” made false promises that they could reduce consumers’ monthly auto loan payments in return for hundreds of dollars in up-front fees.
The two organizations also advised consumers to stop paying their auto lenders, which led to at least one consumer’s car being repossessed. Other consumers reported the organizations told them to “hide [their] car[s] to avoid repossession,” reported the FTC in a release.
“Now that the FTC 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,” said 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 up-front fees, leaving financially distressed consumers in worse shape than when they began.”
According to the FTC, both of the alleged scammers marketed their services with misleading statements. Advertisements like, “Join the thousands who have already SAVED!” and “Lower your monthly vehicle payments by as much as 40 percent regardless of your credit score!” are what drew the Commission’s ire.
One woman reportedly paid Hope for Car Owners $400 in return for the advice to stop paying her auto loan payments. The woman did as she was advised, and within a month, she was notified by her lender that her vehicle was going to be repossessed.
The FTC warns consumers that scammers often request up-front fees or make promises that sound too good to be true. To provide consumers with another avenue of managing expensive auto loan bills, the FTC has recently released a publication called Ads for Auto Loan Modifications.
The FTC has asked the courts to stop the allegedly illegal conduct of Hope for Car Owners and Auto Debt Counseling while the FTC continues its investigations.