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August 28, 2010

BBB: Beware of deceptive auto loan modification offers

Special to the Progress Jacksonville Daily Progress

JACKSONVILLE — Ads on TV may promise to modify car loans and stave off a visit from the repo man, but some companies fail to carry through on their promises.

Better Business Bureau recommends that cash-strapped consumers save their money by trying to work out a deal with the lender directly before paying out hundreds in upfront fees to a loan modification company.

High unemployment in the country means that many families are struggling to make ends meet and the number of repossessed cars continues to rise.

More than 1.9 million cars were repossessed by lenders in 2009 according to Manheim Auctions.  

Some businesses are seeing an opportunity in the increased number of repossessed cars and claim that, for a large up-front fee, they can work with the lender to modify the terms of the loan for the borrower.

“Auto loan modification companies are following in the footsteps of unscrupulous mortgage modification companies which have long targeted struggling families who are just trying to stay above water,” said Mechele Agbayani Mills, President & CEO of BBB Central East Texas “Some companies may make it look like they are tossing out a life preserver, but they end up pulling many borrowers deeper underwater.”

BBB has received complaints from across the country against one Florida-based company, Auto Relief Group (ARG).

Complainants say they paid hundreds of dollars in advance fees in exchange for the promise that ARG would significantly reduce the monthly payments on their car loans.

Complainants wanted their money back after the company was unsuccessful in modifying the car loan.  

ARG has also caught the attention of the Florida Attorney General who has filed a lawsuit against the company for deceptive and unfair trade practices

If you’re having a hard time making payments on your auto loan and are considering assistance from a loan modification company, BBB recommends that you:

Start with your lender.

Many complainants to BBB stated that their lender told them they didn’t need to pay a company to help modify their loan and they could have worked something out together.

Lenders are often eager to work out a more convenient payment plan because it’s in their best interest to keep you paying your bill.

Do your research.

If you are planning to enlist the help of a third party to modify your loan, always research the company with your BBB first.

The business’s BBB Reliability Report will tell you how many complaints BBB has received, if the company has responded to complaints and if there are any government actions or lawsuits against the business.   

Beware of Advance Fees.

Large fees in advance should be considered a red flag even if the company claims to offer a money-back guarantee if they are unsuccessful.

Some states do not allow companies to charge customers in advance for financial services including loan modification.

Get it in writing.

Ask for documentation from the company.

Be sure it discloses the services they will provide and their terms including refund policies and any money-back guarantees.

Complain to BBB.

If you feel you’ve been misled by a loan modification business, file a complaint with your BBB online.  

Even if the business is unwilling to resolve the issue, your complaint will serve as a warning to other consumers about that business.

For more advice on managing personal finances, visit us online at  www.bbb.org/us/consumer-tips-finance.

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