Consumer Protection Series of Scam Alerts:

Consumer Protection Alert:  Auto Service Contract Fraud
--Attorney General Koster forms task force to help find answers--

Attorney General Chris Koster said today his office is creating a task force to look at sales practice guidelines designed to stop auto service contract fraud, the number one complaint to the Attorney General’s office in 2009. 

“Senator Scott Rupp and I have invited business people and regulators with a stake in this issue to serve on the Missouri Auto Service Contract Task Force,” Koster said.  “We created this panel to discuss issues that have arisen from marketing service contracts and to develop industry guidelines to eliminate consumer deception and confusion in the sale of these products.”

Koster said the Department of Insurance, Financial Institutions & Professional Registration began regulating service contract providers and administrators in 2008, but some independent marketers are not licensed and have continued to run roughshod over consumers.  He said his office filed or settled 12 cases involving independent service contract marketers in 2009.

Koster said these marketers have used misleading letters, postcards, and telephone sales marketing to lure consumers into purchasing service contract coverage without providing basic information about that coverage.  This was done with such tricks as misleading consumers to mistakenly believe their current vehicle warranties were about to expire and confusing some consumers into believing that they were extending the manufacturer’s coverage.  He said while consumers believed they were extending auto warranties, they were actually purchasing service contracts or automotive additives.  Customers later realized that the low limits to their coverage rendered the service contract virtually worthless, but due to delays or restrictions on cancellation they were unable to get a refund.

Koster said some direct marketers using the auto additive scam would send customers a bottle of fluid, with instructions to immediately add it to their vehicle.  Customers were instructed to install the additive in order for the warranty to be valid.  But they later were denied a refund and told the purchase is non-refundable if the product has been used.

“This is a classic ‘bait and switch’ scheme that preys on consumers’ fears of not having adequate vehicle warranty coverage,” Koster said.  “These businesses lure vulnerable consumers into purchasing ‘auto warranties,’ and then switch to sell them into service contracts and auto additive warranties with inferior or negligible repair coverage, while making it almost impossible for the consumers to cancel the contract or get refunds.”

 Koster said the task force will hold its first meeting April 16 in St. Louis.  Members are:

·         Senator Scott Rupp (R-Wentzville)
·         John Huff, Director, Department of Insurance, Financial Institutions & Professional Registration
·         Michelle Corey, President, Better Business Bureau of Eastern Missouri and Southern Illinois
·         Rebecca Howard, CEO, Paylink Payment Plans, LLC
·         Doug Ommen, Chief Counsel, Attorney General’s Consumer Protection Division
·         Jim McAdams, General Counsel, Department of Insurance, Financial Institutions & Professional Registration
·         Bill Schicker, McMahon Ford Company
·         David Mungenast, Jr., St. Louis Honda
·         Sam Barbee, Missouri Automobile Dealers Association
·         Matthew Weil, Corporate Counsel, American Guardian Group of Companues

Koster is issuing a “scam of the day alert” each day this week as part of National Consumer Protection Week.

Consumer Protection Scam Alert:  Credit Repair
--Attorney General Koster warns, ‘no quick fix’--

Attorney General Chris Koster said today difficult economic times have created profitable opportunities for credit repair scam artists.

Koster said credit repair scammers target consumers with credit problems and charge big up-front fees with the promise to clean up their credit file.  He reminded consumers that it is against the law in Missouri to require payment before these types of services have been provided.

“The fact is, no one can clean up your credit report if it’s accurate,” Koster said.  “Companies that tell you they have an ‘in’ with credit bureaus, know about secret loopholes, can convince a creditor that you don’t owe a debt, or can get you a new, clean credit report are simply being untruthful.  If there are genuine errors on your credit report, you can get those removed yourself at no cost.”

Koster said he is filing a lawsuit today against Credit Repair and Counseling Specialists, LLC, and Brenda Lynne Coday in Springfield, charging fraud, deception and failure to comply with statutory requirements placed on firms offering credit repair services.  According to the lawsuit, the business did not perform all the services for customers it promised, and did not provide refunds for services not provided.

Koster is asking the court to issue a permanent injunction requiring Credit Repair and Counseling Specialists and Coday to comply with the law; require the defendant to provide full restitution to victims; pay a civil penalty of $1,000 per violation; pay the state 10 percent of the total restitution; and pay the cost of investigative and prosecution fees.

Koster suggested that consumers having credit problems get counseling through their local Consumer Credit Counseling Service, which provides help for free or at a very low cost.  If consumers have discovered errors on their credit report, they can contact the credit reporting agency directly.

 

Consumer Protection Scam Alert:  Grandparent Rip-Off

Attorney General Chris Koster today warned Missouri senior citizens about a scam aimed at swindling grandparents out of their savings.  He said since the scam started, his office has received 82 complaints, and consumer losses for Missouri seniors have reached more than $180,800. 

Koster said the scammers call unsuspecting senior citizens, posing as their grandchild.  The caller will say he has been in an accident, is in jail—most often for drunk driving—or that he is in some other kind of trouble.  Koster said the caller often says he is in Canada and asks the grandparent to wire money.  Koster said one anxious Missouri grandparent wired more than $20,000 after receiving a call from her “grandson” saying that he had been arrested for DWI in Canada and needed her to send money.

Koster said that consumer complaints to his office indicate the callers have an uncanny amount of personal information about the family and use that information to convince the grandparent that the call is authentic.

 Koster traveled to the South Side Senior Center in Springfield Tuesday, to warn senior citizens about the grandparent scam as well as other scams going around Missouri.  Wednesday morning, the Attorney General’s office received a call from a grandfather who saw a report about the visit on a Springfield television station, and recognized that he had just been a victim of the grandparents scam.  Fortunately, the grandfather was able to stop the wire transfer of $2,500 before the money was picked up by the scammers on the other end.

“It is unconscionable that these scammers pull on a grandparent’s heartstrings to con them out of thousands of dollars,” Koster said.  “I urge anyone receiving such a call to check with family members to confirm whether the call is a hoax.  And be very cautious if asked to send money to Canada or overseas – that should send up an immediate red flag.  If you feel suspicious at all, report the call to the police and call Attorney General’s Consumer Hotline at 1-800-392-8222.”

Foreclosure Rescue -- Attorney General Koster cautions homeowners to beware of foreclosure scams--

Attorney General Chris Koster said today the nation’s financial crisis has led to rampant growth of foreclosure-rescue scams.  Since he took office in January 2009, the Attorney General’s Office has had 321 complaints of foreclosure fraud, compared with just 25 complaints in 2007 and 2008 combined, a more than one-thousand percent increase.

“There is no doubt that our nation’s tough economic times have given rise to scammers preying on those at risk of losing their homes,” Koster said.  “In Missouri we will continue to have a zero tolerance stance against these scammers who try to take advantage of people who are in dire financial straits.”

Since he declared a “zero tolerance” campaign against these types of mortgage fraud in April 2009, Koster’s office has taken legal action against eight businesses involved in foreclosure rescue or mortgage modification scams, and is continuing to investigate others. 

Today, Koster joined with Kansas Attorney General Steve Six, the Federal Trade Commission and local organizations to highlight a major campaign against foreclosure-rescue scams.  Kansas City is one of a number of cities participating in the NeighborWorks America Campaign to help at-risk homeowners avoid and report loan-modification scams. 

Koster alerts consumers that businesses marketing foreclosure relief often demand up-front fees from consumers.  Koster said it is illegal in Missouri for these types of businesses to charge up-front fees before providing services, and consumers should never pay such a fee.  He also said that these businesses also often tell consumers to stop making their mortgage payments to their lender, a practice which leads to long-term damage to the consumer’s credit rating and hundreds or thousands of dollars in additional fees and debt for the consumer. 

Koster said foreclosure rescue firms use a variety of methods to find distressed homeowners, such as going through public foreclosure notices or public files at government offices.  He urged consumers to be cautious of an individual or company representing itself as a “foreclosure rescuer,” “foreclosure service,” or “mortgage consultant.”  He said consumers always should be wary of anyone guaranteeing to stop their foreclosure and should never sign any document they haven’t had time to read or do not fully understand.

“The old adage ‘if it sounds too good to be true, it probably is’ is an apt statement where foreclosure rescue scams are concerned,” Koster said.  “If you are facing foreclosure or are having other difficulties with your mortgage payments, work through a non-profit, HUD-certified counselor or an experienced attorney.  And if you are the victim of a foreclosure rescue scam, call our consumer protection hotline at 800-392-8222 or to go online at www.ago.mo.gov to file a complaint.”

Koster is issuing a “scam of the day alert” each day this week as part of National Consumer Protection Week.