Hit by the Fallout of a Bankruptcy
The April 28 bankruptcy filing of Jammella Cowley, operator of Jim’s RV, a Van Nuys rental firm, shows that 230 customers failed to get refunds on the $500 deposits they made on vehicles last summer and fall.
They are never likely to get much, if any, of their money back now. This is a Chapter 7 liquidation bankruptcy and the assets, as described by Cowley under oath, total $15,125, while liabilities are $144,543.
Besides, the customers are holding unsecured non-priority claims, subordinate to the Hyundai automobile company and the Internal Revenue Service. Together, Hyundai and the IRS are owed $11,627.
If the customers ever get anything, it will be slow in coming. Bankruptcy proceedings take time.
At first blush, the case of Jim’s RV--another failed small business--may not be all that exceptional, but it involves wider problems worth examining.
Why did fewer than 10% of the customers who were out-of-pocket complain to the Better Business Bureau, L.A. County’s Consumer Affairs Department, or the attorney general’s office?
Why were the responses to those who did complain so discouraging? Why didn’t these consumer protection agencies do more to help before the bankruptcy filing put the complaints beyond remedy?
A Sherman Oaks couple, Valerie and Arpad Bottlo, alerted me to the situation. They rented an RV for three days last October. The rental ran $380.63. With the deposit, the Bottlos spent $880.63.
They won a judgment against Jim’s in Small Claims Court, but couldn’t collect.
I visited the firm’s premises three times. There were about 15 RVs there, but the office was padlocked.
Cowley was out of reach. The firm that prepared his bankruptcy filing said it didn’t know where he was. The landlord’s phone number was on the door, but he didn’t return calls.
Two sheriff’s deputies, trying to deliver a summons, said they had been unable to find Cowley.
“In this Valley, there’s no shortage of scams,” one remarked.
But was it a scam? The Bottlos are certain it was. Valerie Bottlo, citing months of excuses, has been organizing other customers to push for a fraud prosecution.
But Timothy Bissell, assistant director of the county’s consumer agency, doubts that is feasible.
It would be very hard to prove in court that Cowley knew in advance he would never be able to refund the deposits, he told me.
Bissell said his agency contacted Cowley when it got six complaints. The investigator concluded, however, his was simply a business gone bad.
Why had so few filed complaints? (The Better Business Bureau got 17 and the attorney general confirmed just two. Some aggrieved customers complained to all three agencies.)
Bissell said he wasn’t surprised. “A lot [of consumers] don’t know where to complain,” he said. “Studies have shown that only 5% to 10% of those ripped off ever file a complaint.”
But maybe, I thought, this is because there is so little response to a complaint.
The letter from the attorney general’s office had a very negative tone.
“It is against the policies of this office to discuss the existence or status of pending investigations with consumers,” it said.
“Please be assured that your complaint is receiving the attention that it deserves,” it added, without saying just how much attention anyone felt was “deserved” in this case.
The county’s Department of Consumer Affairs said little other than that Jim’s RV was unwilling to make the refund requested.
“Your complaint will remain on file . . . and be reviewed for formal action should additional complaints be received,” its letter added.
The Better Business Bureau replied, “We rate this company as having an unsatisfactory business performance record,” and noted a pattern of customer complaints of difficulties in obtaining refunds on deposits for rentals.
But it promised no action.
All three of the agencies pleaded that they are submerged in complaints, and said legal problems impede action on their part.
The Department of Consumer Affairs has a declining budget. Eight years ago, it had $1 million annually to operate. Now, it only gets $500,000. It can afford only six full-time investigators.
Assistant Director Bissell said experience has shown that juries frequently disdain criminal prosecutions, often accepting testimony from defendants that the government is harassing them.
It would be difficult with Jim’s RV, he said, to prove the vital intent to commit fraud.
Civil prosecutions require less proof, he said, but the department does not bring them unless it believes the assets exist to pay judgments.
Fern Collins, supervising investigator, defended the tone of letters sent to complainants.
“There has to be a base of reality,” she said. “It is difficult to give them bad news, but it’s important for them to know it.”
Bill Maile at the attorney general’s office said his agency gets more than 100,000 complaints of all kinds annually, but initiates fewer than 200 consumer investigations or lawsuits each year.
Judging from press releases Maile forwarded, the office, when it does move, goes after big outfits, not small ones like Jim’s RV.
Gary Almond, general manager of the Better Business Bureau in four urban Southland counties, said it has no “capabilities” to take legal action against businesses.
The best protection it provides is prevention, he said. “A pre-call would have saved the Bottlos a lot of grief,” because in 51 cases in which people called about Jim’s RV, they were told in strong terms about its poor business record and its failure to refund deposits.
The Better Business Bureau, for small fees, handled more than 500,000 calls last year.
I relayed all this when I stopped by the Bottlos to return papers.
But Valerie Bottlo wasn’t satisfied. She said she would continue to push for prosecution.
“It has nothing to do with the $500,” she said. “I go to Las Vegas and lose money. But I can’t accept losing it this way.”
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Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060, or by e-mail at ken.reich@latimes.com
