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.

Monday, February 19, 2018

More Proof Trump's CFPB pick is working against consumers - New Policy on Car Loan Rates

For years consumer lawyers were telling authorities that banks were working with car dealers to fleece minority buyers, fleece them by charging minority group buyers more for interest than non-minority buyers.  Ally Financial was tagged to pay $98 million in a settlement regarding overcharges in 2013.  (Don't feel bad for Ally, they got $16 BILLION in the bailout.) 

The way this worked is that lenders gave dealers flexibility in determining the "sell rate" on an auto loan they originated, with a fixed "buy rate" charged by the bank.  Some unscrupulous dealers used this as a tool to charge buyers of color (and others they determined were gullible) higher interest rates than they would otherwise qualify for and higher rates than others with similar credit were paying for the same loans.  The CFPB was installing a system with a "fixed reserve" so that dealers would up-charge by a standard amount for each loan. 

According to Auto News, even ahead of a formal change in policy, lenders are reinstating flexible margins on their loans, thereby making it open season on consumers again.  

Tuesday, December 26, 2017

Memories of a 20-year-old subprime auto case

When researching for a current case, I found a Chicago Tribune article from 1997 about a case I was working on back then concerning finance charges hidden in the price of subprime auto contracts.  Subsequent court decisions has made this type of case much harder to bring, but the practice still continues at dealerships across the country.  You shouldn't be charged a higher price for merchandise when purchased on credit than cash buyers - or if you are, the credit premium should be disclosed as a finance charge.

Be on the lookout for car dealers that have a separate inventory just for buyers with problem credit.  The reason this inventory is separate is the prices are much higher, and the reason the prices are higher is to get around statutory interest rate caps.  Because it is hard to bring these cases successfully, your only remedy may be to not get into the deal in the first place.  A contract to buy these cars at inflated prices can plunge you into debt that you can't get out of and choke the financial life out of you.

Beware, the minute you come inside a dealership that advertises it can help you with your credit, you will be targeted by professionals who know how to take your money.  If you pay three times what a vehicle is worth, for the entire contract period you are really depending upon that vehicle being trouble-free. All too often the vehicle konks out, and you will have to swallow all the negative equity. Often this is too much, and bankruptcy is the unavoidable result. 

Thursday, November 9, 2017

Analysis of Two Months of Nextgear Filings - Only 7% of defendants hired an attorney

We just completed an analysis of two months of suits filed by Nextgear Capital, Inc. in Hamilton County, Indiana. Nextgear filed 127 cases.  Of those cases, only 9 defendants hired an attorney. Six hired an assortment of other attorneys, and three hired us.  Only seven percent of Nextgear defendants hired an attorney. Of the cases where attorneys weren't hired, Nextgear started moving for default judgments roughly 6 weeks after the suits were filed.  We believe that ultimately, Nextgear will move for default judgments in all the cases where they received service of process but where the defendant didn't answer the complaint or file an answer.

This analysis reaffirms our conclusion that it it is imperative for a dealer sued by Nextgear to hire an attorney and answer the complaint.    Simply by hiring an attorney, you place yourself in the top 10% of defendants, and you take yourself off of the fast track to judgment.  I believe that no matter what attorney you choose, you are likely better off than not hiring an attorney t all.  I believe, however, that Keith Hagan and I have the most experience in handling defense claims to Nextgear cases.  We have attempted to price our services so that dealers can afford them.  Call us at 317-662-4529 if you are sued by Nextgear Capital, Inc.

Thursday, October 26, 2017

The case of Great Seneca's Ghost Continues

A year ago, my co-counsel Keith Hagan and I were interviewed by WRTV-6 reporter Kara Kenney regarding the case we filed against Asta Funding et al, a case that internally we call "The Case of Great Seneca's Ghost", alleging the defendants are attempting to collect judgments in the names of dead companies.

Kara did an excellent story on the case under a short deadline. Here's the link.


Apparently ABC affilliates share the videos of their local stories, because Action News in Tampa Bay Florida picked up the story, used the WRTV video, but they also looked and confirmed that there are cases in the Tampa area involving the same thing.


We are currently investigating cases in Florida and Hawaii involving renewed judgments in the names of the dead (dissolved) companies.

If you have a judgment against you in the names of any of the companies below, be advised that you might have a defense against payment, in some cases (but sadly not all), even if you have paid or the funds have been garnished, you might have the right to get some or all of the money returned to you.   Here is the list of companies:

Great Seneca Financial Corporation
Platinum Financial Services Corporation
Monarch Capital Corporation, Colonial Credit Corporation
Centurion Capital Corporation
Sage Financial Corporation
Hawker Financial Corporation

You may have received, or you may receive a notice that your wages are being garnished or yoru bank account has been attached based on a judgment by these companies. You may find that you get a notice saying one of these companies is trying to renew an old judgment.  If any of this happens to you, call my office at 317-662-4529.  We can give you information over the phone, and if necessary, we can give you a referral to an experienced NACA consumer lawyer.

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