Category Archives: scams against military

Trump throws military under car dealer bus

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What is “GAP” insurance, and why would the Trump Administration seek to allow car dealers to gouge our nation’s military heroes and their families when they buy cars, by selling them high-priced “GAP” insurance that is often worthless?

According to car dealers, the purpose of GAP, or “Guaranteed Asset Protection” insurance, is to cover you if your car is stolen or totaled before you pay off the loan. The “GAP” is the difference between the amount of the loan and the worth of the car.

Anyway, that’s the shtick. But in reality, the main purpose of “GAP” — when it is sold at car dealerships, and added into the price of a car loan — is to line the pockets of greedy car dealers.  You can actually get a much better deal if you simply buy GAP protection from your own insurance company. Regular insurers usually charge as little as $20 or $30 to add GAP coverage to your existing policy.

However, car dealers often charge $1,000 or more. Plus when it is added into your loan, it can cost you far more than that, in added interest that goes to the lender, for the entire life of the loan.  Making matters worse, some dealers pocket the money for GAP and never even activate the policies. So if your car is stolen or totaled, you could be in for a rude awakening. Some dealers have scammed many customers this way, then left the state and declared bankruptcy, evading any legal liability.

It’s bad enough when car dealers cheat civilians this way. But according to National Public Radio (NPR), as reported by VOX,

“the Trump administration has also proposed changes that could open up service members to predatory practices when they buy cars. The administration has proposed easing restrictions on “gap insurance,” an add-on to car insurance that covers the difference between the amount a car owner owes on the car and the car’s actual cash value.

Gap insurance is typically available from regular insurance companies for a very low price, as little as $20 to $30 a year, but car dealers often mark it up by hundreds of dollars. Current rules effectively block auto dealers from tacking on overpriced gap insurance to military service members, but the administration has sent a proposal to the Defense Department looking to revise the rules. (If the proposal does eventually make it out of the Defense Department, it will ultimately require the approval of the Office of Management and Budget, which [Trump appointee Mick] Mulvaney also heads.”

As Americans, we all have a stake in protecting our military Servicemembers from scams like this.  Among other reasons — when they are cheated in this way, it increases the risk they may lose their security clearance, and their ability to perform their vitally important mission, of protecting our nation from enemies foreign and domestic.

Especially at a time when our nation faces unprecedented threats from enemies abroad and cyber-attacks from enemies who have penetrated our power grid and are messing with our elections, we cannot afford to lose the services of highly-trained military personnel, who are desperately needed to protect our nation.

Our nation’s military should not have to fight on this front, simply to preserve the protections they already have. They deserve a Commander in Chief who has their back, not one who is stabbing them in the back.

This is an update of a prior post, “Avoid GAP insurance rip-offs”

 

 

 

“Regional” auto safety recalls place military families at risk

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The refusal by Takata and some manufacturers to expand the safety recall of defective, exploding air bags to cover the entire nation is jeopardizing the safety of many of America’s military families.

If you are a member of the Armed Forces, under Federal law, you are allowed to register your car in your official state of residence. Regardless where you are stationed, or the state where you and your family members are actually driving your car.

Auto manufacturers use data from RL Polk to identify owners of recalled vehicles and send them notices. But that data is based on where their vehicles are registered.

So if you are serving  in the military, and register your car in New York, but are stationed in a high-humidity state like Florida, you may not receive the safety recall notice for your car.  Even though  Honda, Toyota, and other manufacturers, as well as the air bag supplier Takata, now acknowledge the air bags should be recalled in high-humidity states like Florida.

That’s because, as far as RL Polk and the manufacturer are concerned, cars that are registered in New York are being driven in New York. They fail to account for the fact that if you’re serving in the military, you may have registered your car in New York, but be stationed for years in a high-humidity state like Florida.

Florida is home to at least 29 Navy, Marine, Air Force, and Coast Guard bases, with over 50,000 active duty personnel.  No doubt many of them have chosen to register their cars in their official state of residence, where the taxes may be lower, or it is simply more convenient.

What are Takata and auto manufacturers who installed the potentially deadly air bags in their cars doing to protect military families?  It appears that the answer is nothing.

We hope that Members of Congress and the National Highway Traffic Safety Administration will pressure the manufacturers to ensure that members of the Armed Forces and their families are alerted to the hazards, and their cars are repaired, regardless where they are stationed, or where their cars are registered.

Better yet, all auto manufacturers and Takata should make the safety recall national, so all owners and their families can have the safety recall repairs performed, without having to pay out of pocket for the mistakes made by Takata and the manufacturers — and without being injured or killed by flying shrapnel from the defective air bags.

Car title loans — who pays, who makes a killing?

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High-cost car title loans are illegal in most states. That’s because they’re so risky for borrowers, often ruining lives. Particularly when people lose their cars — usually their only way to get to work — and then their jobs.

In 2004, in response to a two-part series of front-page reports by David Lazarus in the San Francisco Chronicle, exposing the seedy but growing car title lending business, California legislators vowed to put a stop to title loans.  Fast-forward almost a decade, and what’s changed?  Nothing — except the shady, predatory businesses continue to expand and cost more consumers triple-digit interest, and often their vehicles.

How high is the default rate for car title loans? At a hearing before the California Assembly Banking Committee, Oscar Rodriguez, CEO of LoanMart, testified on behalf of the leading trade association for car title lenders operating in California.  When asked, point-blank, he admitted that while some lenders have default rates of 14-15%, others have rates up to 40-50%. This is astronomical, and powerful evidence that the loans are predatory — not designed to aid the borrowers, but to strip them of their only valuable material possession — their car.

California caps the interest rate on some loans below $2500. So title lenders skirt the law by talking consumers who seek smaller loans into getting loans over the $2500 threshold. Consumers naturally assume that must mean that they qualify to borrow more, based on their income or creditworthiness. In reality, their credit has nothing to do with the loan amount. As long as the lender can seize their car, and it’s worth much more than the loan, there’s no risk for the lender.  Of course, the bigger loan increases the risk for the borrower.

As the Attorney General of Florida warns: “Remember that a title loan is not risky for the lender but it may be very risky for you.”  How to protect yourself: title loans

So who benefits from car title lending? Award-winning journalist Gary Rivlin’s portrait of who’s living high off the hog thanks to high-cost loans, including car-title loans:

Portrait of a Subprime Lender

What can you do to avoid the car title lending trap?  If at all possible, save up instead of getting a loan. If that’s not possible, find other, less-risky ways to borrow money.  Some lower-risk options: Join a credit union. Seek loans from family members. Sell your car and buy a less-expensive one. Usually, you’re much better off selling it yourself than having it repossessed by a car title lender.

Read more:

Auto-title loans drawing scrutiny — Sacramento Bee, by Personal Finance Columnist Claudia Buck

‘Car-title loans’ a road to deep debt  — San Francisco Chronicle, by Business Reporter Carolyn Said

How to protect yourself: title loans — What else can you do in a pinch, that’s less risky? Advice from Florida’s Attorney General

 

 

 

Scams target military — where to complain

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Dear Servicemembers:

Have you been scammed by a company that claimed you were not in the military, when you were actually on active duty? Or that cheated you in some other way?

Such scams may be a violation of the Servicemembers Civil Relief Act, or other state or federal law. If this has happened to you, please let us know, or complain to the Consumer Financial Protection Bureau.

The CFPB includes the Office of Servicemember Affairs, headed up by Holly Petreaus, wife of U.S. General David Petreaus — with the sole mission of protecting servicemembers and their families from financial scams.

Here’s where to complain:

Consumer Financial Protection Bureau