While a lot of focus has been put on scammers who trick homeowners into costly schemes by promising to reduce their mortgage payments, people are also being taken in by bogus businesses that claim to help with auto loans.
Earlier today, the Federal Trade Commission filed charges against two California-based auto loan modification operations that are alleged to have bilked customers out of large up-front fees by making misleading promises about reducing the amount of their car payments and helping them avoid repossession.
According to the FTC, customers of the two separate companies — Hope for Car Owners and Kore Services LLC (doing business as Auto Debt Consulting) — were not only hit with hundreds of dollars in up-front fees, but were told to stop making payments to their auto lenders.
The companies each ran ads touting that car loans could be reduced by up to 40-50% and included customer testimonials about how much money had been saved. But the FTC claims that after getting the hundreds of dollars in payments from customers, the two companies took no action to actually get customers’ loans reduced. And when the promised loan modifications did not materialize, the FTC alleges that these businesses did not provide the refunds the ads had guaranteed.
This is the FTC’s first venture into going after auto loan modification services.
“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,” 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.”