Lying For A Car Loan Is A Dead End

This is an article that was published in the Miami Herald last weekend. It's another 'let's scare the heck of the consumer' article that seems to pop up every so often.

Posted on Sun, Jan. 25, 2009
Miami Herald.com

BY PATRICK DANNER

No job and no salary was no problem for Pat Callahan when she agreed to buy a $36,000 Ford Expedition.

Callahan, a Homestead retiree on Social Security, says the dealership persuaded her to lie on her credit application by claiming a nonexistent job.

When the finance company phoned to verify the salary, an employee of the dealer answered and pretended to be her boss, she says in a lawsuit.

Callahan got the loan, but lost the car. It was repossessed.

Mortgage brokers aren't the only ones with a propensity to fib on credit applications. Staff in dealerships' finance departments, sometimes with the customer's wink-and-nod consent, have played the same game -- with similar results, according to various auto industry insiders.

And unlike mortgage brokers, they are unregulated by the state, even though they have access to some of your most intimate financial secrets and can make a mess of your credit.

The state has considered requiring background checks and fingerprinting of car dealer employees who handle financing, but nothing is imminent, says Terry Straub, finance director for the Florida Office of Financial Regulation.

The scope of the problem is hard to gauge.

Duane Overholt, a former car dealer turned consumer advocate, runs the website StopAutoFraud.com that gathers complaints from car buyers and dealership employees.
''We have gotten more complaints from Florida than any state in the union,'' he says.

According to Moody's Economy.com, auto loan delinquencies rose 12 straight quarters in Miami-Dade County -- to just under 6 percent of all loans -- before dipping slightly in the last quarter. But the faltering economy is clearly a factor in that.

The practice of falsifying credit applications is ''widespread in the more desperate stores in our market, where they are looking for volume any way they can,'' says Craig Zinn, who own nine South Florida new-car franchises. ``It's something we are watching internally, constantly.''

He says there is a van that makes the rounds to dealerships that offers to produce phony tax forms, phone bills and pay stubs -- essential ingredients of a fudged credit form.

To simplify the deception, some dealers have the customer sign a blank credit application so the dealer can fill in the information as they please, consumer lawyers say.

Luis Lopez ended up going to court, his credit smudged, after buying a 2002 Mercedes-Benz CL500 from Auto Trend in Hallandale Beach. According to his lawsuit, which went to arbitration, the finance company first approved, then rescinded the auto loan -- after discovering the finance application included a phony W-2 form that misspelled his employer's name and inflated his annual income by $125,000.

The car was repossessed.

In a deposition last year, the dealer denied his employees were involved in the fabrication. In the end, an arbitrator awarded Lopez $2,907 -- about a third of what he sought -- plus costs. Lopez remains upset.

''I don't understand if I won the case, why I am getting peanuts back?'' says the 29-year-old Pembroke Pines man. Auto Trend's phone number is no longer in service, and its lawyer could not be reached.

David Alejandro Lopez, former finance director at Maroone Chevrolet in West Miami-Dade, is suing the dealer, alleging it routinely falsified customers' incomes so they could qualify for car loans. The dealership is owned by Fort Lauderdale's AutoNation.

Lopez claims finance managers, working under him, would either fabricate or obtain fake pay stubs, tax forms and utility bills to support the inaccurate applications. He says he got fired after rebelling against the practice.

''AutoNation did nothing about it,'' says William Amlong, a Fort Lauderdale lawyer who is representing Lopez in the whistle-blower suit in Broward Circuit Court.

In an e-mail, AutoNation spokesman Marc Cannon says the company conducted its own investigation and found no evidence to support Lopez's charges. He says Lopez was fired for ``valid reasons.''

''The company is committed to maintaining high standards of business ethics and conduct and will vigorously defend its position in this case,'' Cannon says.

Jack Tracey, executive director of the National Automotive Finance Association, which primarily represents subprime car lenders, concedes there are incidents of fraud but nothing widespread.
''When people read about it, they think it's going on all of the time,'' Tracey says. ``My experience with financing sources is that . . . if they find a dealer doing it, they just cut them off.''

George Fussell, chairman and CEO of Fort Lauderdale's Southern Auto Finance, believes the level of fraud peaked in the boom times before the auto industry hit the skids this past fall.

''Right now, all lenders have their tail between their legs and they are looking very deep into these credit applications to see if there's anything wrong, and if there's a hint of anything wrong, they're not making the loans,'' Fussell says.

Southern Auto says it does its own rigorous investigations to determine the veracity of credit applications and has discovered various wrinkles.

For instance, Fussell says a dealer might claim that it accepted a $3,000 down payment when in reality a portion of that $3,000 was fronted to the buyer by the dealer in the form of a loan. In egregiously deceitful cases, Southern Auto will make the dealer take back the loan, relieving Southern of its risk.

As for Callahan, the Homestead retiree who couldn't handle the $713 monthly payments on the Expedition, she's suing the dealer, Armstrong Ford of Homestead, over the aggravation she says she endured. The dealer did not respond to calls from The Miami Herald.

''I feel like I was pressured into something I didn't want to do,'' Callahan says. Her suit in Miami-Dade Circuit Court seeks unspecified damages.

The Expedition is gone. Today she drives a Hyundai that her daughter bought.

© 2009 Miami Herald Media Company. All Rights Reserved.http://www.miamiherald.com

Car Repo Men Had Busiest Year Ever

Posted Jan 08 2009, 07:06 PM by Karen Datko
http://blogs.moneycentral.msn.com/smartspending/

Vehicle repo men were in overdrive last year, picking up a record 1.67 million cars and trucks.

According to Automotive News, that figure is from Tom Webb, chief economist at Manheim Consulting, and represents a 12% increase over 2007.

In the only bright note in this story, Webb expects an overall increase of only 5% for all of 2009, with an actual decrease in repos coming in the second six months of the year.

Other factlets from the story:

• Big unsold inventories of new vehicles depressed the value of used cars, Arlena Sawyers of Automotive News reports. The Manheim Used Vehicle Value Index last year experienced the biggest annual decline of its 13-year history.
• Just as the price of gas-guzzlers fell during the summer of $4 gas, they're worth more now that gas is much, much cheaper, and the value of compact cars has dropped.
• Not only that, but our partner blog ConsumerAffairs.com reports that only half of the buyers of small cars feel "extremely happy" with the purchase, much lower than the average rate of new-car glee. Market research firm Mintel, which conducted the survey, speculated that small cars on the market now don't have enough amenities to satisfy many buyers.

"The transition from expensive, gas-hogging SUV to cheaper, fuel-efficient compact will feel like less of a sacrifice if the smaller car offers similar luxury features," Mintel senior analyst Mark Guarino said.

And Another One Goes Down For the Count!

Seems like we're running out of lenders these days. Nuvell/National closed there doors today, giving their people 6 months severance pay or a chance to apply for a job at GMAC. Based on the agreement that GMAC had to make in order to become a bank holding company, it seems doubtful that they are in an expansion move, so I guess we'll just add a few more folks to the ranks of the unemployed.

I have friends who work for Nuvell/National, and worked for National nine years ago as their south Florida Area Sales Manager. I have tried to do business with them since I've been back in the seat, and while it hasn't been easy, we have managed to fund a couple of deals with them each month. The truth is, I've try to fund deals fund deals with every one of my lenders. I firmly believe in NOT putting all my eggs in one basket, and as such, when one lender shuts down, or tightens up, I'm not stuck without someplace else to go with a deal.

No doubt business is getting harder these days. HSBC, Triad, Wells Fargo, and now Nuvell/National have all fallen by the wayside. It started last year, when AmeriCredit and Wells Fargo upped their minimum criteria for applications, and followed by HSBC and Triad pulling out. Funding slowed down with some of my other lenders, but they warned us ahead of time, and we were prepared to ride out the rough times along side them. Lenders have long memories, and I'm confident that my patience will pay off several times over in the long run.

My friend a Nuvell/National told me yesterday that it all came down to their cost of funds, and the inability to remain profitable as that cost increased. It probably won't be the last time we hear this story. Lenders and dealers who are in a position to ride out the storm will undoubtedly came out stronger and more profitable. Hang on tight, and look for smoother waters ahead. It's all we can hope for these days!