Strident television commercials, aside, how do you spell "relief"?
In matters financial, unfortunately, walking away from an indebtedness is the all-too-popular option, and it has opened the doors, locally, to a slick rip-off in the automobile market that has law enforcement agencies, financial institutions and leasing companies as infuriated as they are frustrated.
At the heart of it are double-barreled ads in Southern California advertisement-tabloids blatantly appealing to the debt-strapped. Sample: "Protect your credit! Owe more than your car is worth??? We will assume your lease or contract payment at no cost to you."
And, playing the other side of the same street: "Drive the car of your choice! Only in America! No qualifying, no credit financing, nooo problem! Many fine autos and trucks to choose from!" Or: "No credit check! Take over payments plus equity!"
Two apparently satisfied customers: a car buyer, hopelessly over his head in debt, is suddenly relieved of the major drain on his pocketbook; and a new buyer who, in the words of one bank loan officer, "wouldn't qualify for a bag of popcorn on the strength of a standard credit check," drives off in a late-model car.
The big winner: the "financial service" company putting the deal together. The big losers: the same buyer and seller mentioned above and the leasing company or legitimate financial institution that bankrolled the car purchase or lease in the first place.
While bankers are traditionally loathe to admit being victimized, the size of the scheme--which began surfacing here last summer--is suggested by the same loan officer, who requests that his name not be used: "We've lost at least a dozen late-model cars to these 'financial service' companies from just the bank branch where I work. Statewide, our losses may be many times higher." And, he adds, a friend in a similar position with the branch of another bank reports about "30 to 40 losses" from his branch.
Among auto leasing companies, however, there's no such reticence. "Our members are out between 200 and 300 cars so far," according to Bill Nerenberg, executive director here for the National Vehicle Leasing Assn. (NVLA), a trade group with more than 700 member companies in 37 states and having $30 billion in assets.
"And I'm just talking about Southern California--primarily the Los Angeles area. So far, it's the only place in the nation where the scam is being used."
Here, the bank loan officer says, is what happens when a buyer yields to the "financial service company" ad to "take over payments and equity" on a late-model car without having to undergo what would otherwise be a disqualifying credit check.
"He pays $2,000 or $3,000 for the 'equity' that the financial service company simply pockets--the seller never sees a dime of it." The banker adds: "And then the company jacks up the monthly payments that the buyer is taking over. If the payments are supposed to be $200, it will raise them to $275."
The procedure is the same for leased cars, Nerenberg adds, "and the financial company may actually make the payments for a few months, pocketing the $75 difference--as long as the sub-lessee makes payments, that is--but always by cashier's check or money order so that the lessor has no way of knowing whether the payments are being made by the true lessee, or not."
Sooner or later, however--given his past credit history--the new buyer or lessee fails to make his payments to the financial service company, which in turn stops making payments to the leasing company or the bank holding the note.
Suddenly, the original owner who has thought himself safely off the hook when the financial service company obligingly "took over his payments" is being dunned by the bank, credit union, finance company or lessor for its money. And then a notice of repossession goes out for a car that he hasn't had for months.
"This scam came to our attention last November," according to Guy Wirsig, director of consumer services for the local Better Business Bureau, which has been acting as the coordinator between the various Los Angeles and Orange County law enforcement agencies working on these cases.
"I've had 13 or 14 victims come to me about this," Wirsig says, "but what can I say? I tell them: 'Well, you violated your sales contract, or lease, by turning the car over to these people. You'll have to see a lawyer.' "
Completely ignored by the car buyers falling for the "we'll take over your payments" scheme, the local bank-loan officer says, is a standard paragraph in all sales and leasing contracts.