About The Consumer Law Office of Steve Hofer

Steve Hofer has been practicing consumer law in Indiana for more than 20 years. He is the Indiana State Chairperson of the National Association of Consumer Advocates, a national organization of attorneys striving for fairness in the consumer marketplace. Contact me by phone at 317-662-4529 or via email at hoferlawindyATgmail.com. You can also leave a message through my website at www.hoferlawindy.com.

Friday, October 13, 2017

The Relationship between Nextgear and Manheim Auctions - Dealers Are Complaining

I have fielded a number of complaints about the interaction between dealer floorplanning company Nextgear Capital and Manheim Auctions.  Both Nextgear and Manheim are units of Cox Enterprises, Inc.

To give you some perspectives: in the modern-day car business, buying and selling vehicles at auctions is essential.  Because of the marketplace nature of auctions, once an auction becomes entrenched in an area, it is a natural monopoly.  Even the largest markets might have only one or two working auctions.   According to Wikipedia, Manheim is the largest vehicle auction company in the world, with 145 locations worldwide.

Nextgear Capital, the dealer financing division of Cox Enterprises, doesn't hold the same dominant position as Manheim, but in localized areas may be the only financing alternative, and whether it is the only option available to a dealer, once the dealer signs up, the dealer can be utterly dependent on having a functional relationship with Nextgear.

Because my firm defends dealers who are sued by Nextgear, I hear a lot of complaints by dealers who are unhappy with Nextgear's policies and practices.  They have complained about the fees, complained that vehicles were floorplanned that weren't requested, complained that inventory was repossessed without default, and several have complained that when there is a dispute with Nextgear, the dealership gets frozen out of the auto auctions, especially Manheim, but not even limited to Manheim.  Of course, I realize in the course of fielding these complaints, I am hearing only one side of the story.  There may be facts that I don't even know about. That being said, Nextgear filed over 1,000 suits in Hamilton County, Indiana in the past year.  If you are a dealer who is behind with Nextgear, and you can't get things resolved with their collection department, it is a reasonable guess that you will be sued in Indiana.

I started with a working theory that IF Nextgear, a company that probably would not be considered to have monopoly power for purposes of antitrust law, conspires with Manheim, a company which might be held to yield monopoly power, to refuse to let a dealer participate in an auction, that could be conceivably be an illegal vertical tying arrangement pursuant to antitrust law.  After coming up with that theory, I reached the conclusion that as a private attorney, it doesn't look like even if the facts can be proven, and that's a big if, neither my firm, nor my clients would be able to finance a private antitrust action.  I'm putting this theory out in a public forum for anybody who reads it to look into the facts and into the law, and go further if warranted.This theory may have some bugs and has not been tested in court

What that means is that if you are a dealer who is reading this and has a complaint about an unfair trade practice with Nextgear, you should consider making a formal complaint with the Federal Trade Commission, the federal agency with jurisdiction over the antitrust law.  You can file your complaint here.  If the FTC doesn't think the complaint is meritorious, it will go nowhere.  If the complaints build up, and if the FTC thinks there could be a violation, the FTC could take action.

By the way, even if Nextgear does not violate antitrust law, that doesn't mean that any action taken by Nextgear would be shielded from any scrutiny.  Unfair and deceptive acts are also regulated under the Federal Trade Commission Act as well as some state UDAP laws.  There is a covenant of good faith and fair dealing in every contract under the Uniform Commercial Code, and if a company intentionally and unjustifiable acts to prevent a company from dealing with a third party, there is a tort called intentional interference with business relations.  In addition, if you are a dealer whose vehicles are repossessed and those vehicles are resold in a commercially unreasonable way, you may have a defense to deficiency claims by the floorplanner.  If you are sued by Nextgear, you should not necessarily assume that everything Nextgear claims from you is owed, no matter how high the claimed balance, and you shouldn't assume that there is nothing you can do to get the balance down.  My firm regularly defends dealers from lawsuits brought by Nextgear in Indiana.  We will talk to you on the phone with no obligation to hire us.  317-662-4529.  

Good News and Bad News Relating to CFPB Payday Loan and Auto Title Loan Regulation

The CFPB has proposed a final rule that prohibits a lot of the worst practices in the Payday Loan industry as well as practices involving Auto Title Loans and other abusive loans.  These regulations are primarily intended to get people out of the "debt trap" that happens when you are forced to roll over payday loans.  The regulations include limits on roll-over, includes a provision that the lender must consider the borrower's ability to pay, and it includes a provision that subsequent loans must be in a declining amount.  There are other provisions that prohibit multiple attempts to deposit dishonored payment checks, a practice which can generate ridiculous NSF fees. 

All of that is good news. Now the bad news: The rule doesn't go into effect unitl July 2019 at the earliest. In the current political climate that means that lender funded special interest groups have over a year and a half to go after the rule in Congress.

In the meantime, payday loans are covered to the greater or lessor degree by state legislation. Indiana (my home state) actually has a pretty good law.

Here is information on the CFPB Payday Loan Rule from National Consumer Law Center.  If you are stuck in a bad situation regarding payday loans or other high interest loans, find a consumer attorney near you through the National Association of Consumer Advocates here

Sunday, October 1, 2017

Body Attachments for Small Claims Court Cases - Are they allowed?

One of the most troubling cases that I've seen in a long time involved a report of a mistaken identity body attachment arising from a small claims court case in Gary City Court, a small claims case in Lake County, Indiana (near Chicago). We have seen bench warrants issue in Gary City Court for debts as trivial as failure to return a rented videotape.  What is a body attachment? Effectively, a body attachment is an arrest warrant. Can you be sent to jail for not paying a small claims judgment?

Both federal and state law prohibits imprisonment over a civil debt. In the federal law, 28 USC 2007 prohibits imprisonment for failure to pay a debt. In state law, Article 1, Section 20 of the Indiana Constitution states:

Debts--Imprisonment ExemptionThe privilege of the debtor to enjoy the necessary comforts of life, shall be recognized by wholesome laws, exempting a reasonable amount of property from seizure or sale, for the payment of any debt or liability hereafter contracted: and there shall be no imprisonment for debt, except in case of fraud.

Despite these laws, people are arrested for failure to pay civil debts fairly frequently. This is done under the auspices of civil contempt. Contempt is an ancient doctrine allowing, among other things, people to be detained if they fail to show up to court proceedings as ordered.  In the context of civil debts, "body attachments" or a court order to seize a person, are sometimes issued when a civil judgment defendant fails to show up for a "proceeding supplemental", that is a scheduled court hearing to determine what assets are available to pay a judgment.  Consequently, the order of arrest is not for failure to pay the debt. It is for failure to show up in court.  This may be a distinction without a difference though in cases where the judgment defendant doesn't get the order to appear, doesn't understand the order to appear, or can't get to the place they are ordered to appear. 

Rarely does the court send someone out to get you if you have a body attachment ordered over a civil judgment. Instead, what is more likely to happen is the order gets logged into the computer system of a local law enforcement agency, and if they stop your or arrest you for something else, the outstanding bench warrant pops up, and the next think you know, you are detained in jail for that video you didn't return, or MAYBE didn't return, 5 years ago.  You can be detained up to 48 hours not-counting weekends and holidays that the court is closed.  In the case of a three-day weekend, this can mean up to a 5 day stint in jail. 

Though body attachments may be legal in enforcing civil judgments, often creditors and debt collectors, including attorneys, often threaten body attachments in circumstances where the threat is false or misleading. Consequently, if you receive a communication from a debt collector, and your are located in Indiana, or if it relates to an Indiana judgment, we would love to hear from you. Call us at 317-662-4529.  FALSE THREATS OF BODY ATTACHMENTS MAY VIOLATE THE FAIR DEBT COLLECTION PRACTICES ACT, AND MAY GIVE YOU THE RIGHT TO SUE FOR DAMAGES - EVEN IF YOU OWE THE UNDERLYING DEBT.  There may be other laws that are violated as well. 

If you are outside of Indiana, contact the attorney referral service of the National Association of Consumer Advocates  to find a consumer attorney near you.

You should be aware that even if you owe a judgment, every state has exemptions relating to property or wagest that can't be seized (or garnished) by creditors.  For more information about exemptions in Indiana, here is a brochure put out by Indiana Legal Services

You should also be aware that in many cases filing bankruptcy can stop a garnishment or proceeding supplemental in its tracks.  You can find a consumer bankruptcy attorney near you through the National Association of Consumer Bankruptcy Attorneys (NACBA), and their referral page is here

Sunday, September 10, 2017

Does Equifax Deserve the Death Penalty?

This week it was disclosed that Equifax had its database hacked and the hackers ran off with personal information, including social security numbers of 143 million Americans, roughly half the adult population in the United States.  Not only that, but Equifax hid the breach for several days, and executives sold stock before the disclosure, thereby benefiting from inside information.

To make matters worse, once Equifax disclosed the breach, it tried to shaft consumers again. If you want to check to see if your information is affected, you have to give Equifax the last 6 digits of your social security number and give up your right to sue.

As the New York Times points out in an editorial, Equifax had one job, one job that it failed miserably.  The credit bureaus say that their computer systems can track each time a consumer's credit file is accessed.  The hackers here got into 143 million files ove ra two week period.  That's roughly 10 million per day.  If that didn't raise red flags at Equifax, it should have.

If I had anything to do with it, I would shut Equifax down completely - the corporate death penalty. Nothing else will suffice for a breach like this.

Tuesday, August 1, 2017

We Just Won an Award!

We just won an award - Worlds ugliest blog.

Okay, I made that up.  Sorry, nothing to see here.  Move along.

Monday, July 31, 2017

Report of Wells Fargo Charging 800,000 Customers for Unneeded Car Insurance

If you are a Wells Fargo Bank customer, I have one question for you: WHY?  Why are you still a customer of this bank which has gotten in trouble for cheating it's customers repeatedly.

In September 2016, Wells Fargo was fined $185 million for opening millions of accounts without customers' knowledge or permisssion.  (This incident was imortalized in a Saturday Night Live skit below - until the link breaks.)

In June 2017, Wells Fargo was accused of making improper changes to customer Mortgage accounts in bankruptcy.

In 2016, Wells Fargo was included in a group of 14 banks implicated in a scheme to rig the LIBOR interest rate benchmark to which some of its variable rate loans were tied.

These are just scandals over the last two years involving conduct that Wells intentionally engaged in to line its pockets to the harm of its customers.

There's a new one though.  I want to put it in perspective.  In a month the Big 10 football season will start. This year there eleven home games in the opening week in the conference, with a total attendance of around 800,000 spectators. Now, imagine those 11 filled football stadiums. THAT'S HOW MANY CUSTOMERS WELLS FARGO CHARGED UNNECESSARY FORCED PLACED AUTO INSURANCE ACCORDING TO RECENT ALLEGATIONS.  Wells has announced a plan to repay $80,000 to 570 million customers.  Repaying the insurance after getting caught isn't the big problem. The biggest problem is perhaps 25,000 customers had their vehicles repossesed where the repossession was traced to delinquencies caused by the improper lender placed insurance.  To be fair, Wells Fargo places the repossession count caused by the problem at 20,000.  Now to put that in perspective, 20,000 people would almost fill up Madison Square Garden.  25,000 is Madison Square Garden's seats filled plus 4,000 crowded onto the basketball court.  Each of these people lost their transportation and maybe their jobs in some cases because of Wells Fargo's contempt for its customers.

My office has opened one case involving a repossession of a Wells Fargo loan where the borrower was charged for lender-placed insurance.  If you are an Indiana resident, we would be happy to evaluate your case please contact my office at 317-662-4529.  If you live outside of Indiana, I suggest you find an attorney through the National Association of Consumer Advocates "Find an Attorney" webpage, linked here.

Friday, July 28, 2017

There's No Magic Solution to An Underwater Car Loan

Do you owe more money on your vehicle than what it's worth?  There's no magic solution to the problem. If you don't beliee me, believe Jalopnik.

If you have a vehicle that you need to get rid of and you owe less than $5000 more than what it's worth (wholesale), you might be able to finance the negative equity into a new caar loan.  Very important:  shop only for new cars if you are going to do this, and you might have to settle for a car that is in very low demand, the kind of car that you could get $5,000 off MSRP.  Last year, I would have said the primary contender would be the Chrysler 200 (but that car is discontinued now).  I don't know what vehicle is rotting on dealer lots now.  The Chrysler 200 wasn't really a BAD car, it just wasn't as good as the competition.


If your finanical situation is really bad, and you are a wage earner, you can look at a Chapter 13 bankruptcy. In a chapter 13 bankruptcy, your car loan can be written down to the actual value of the car.  Chapter 13 bankruptcies aren't free though, so there are a lot of factors to consider. This blog post is no substitute for bankruptcy advice from a bankruptcy lawyer.