FTC sues three California firms offering car loan modifications

Three California companies offering auto loan modifications were sued by the Federal Trade Commission, which accused them of deceiving consumers with false promises.

Hope for Car Owners in Folsom, Kore Services in San Diego and Nafso VLM in Roseville charged clients hundreds of dollars in upfront fees to obtain car loan modifications, according to the FTC. But the firms allegedly did not fulfill their agreements to get the modifications and refused to give full refunds as advertised.

The FTC also sued Hope for Car Owners manager Patrick Freeman, Nafso VLM owner Naythem J. Nafso and Kore Services manager Michael Kamfiroozie. Kore conducted business as Auto Debt Consulting, the FTC said.

The action, split into two separate lawsuits, is the FTC’s first against auto loan modification claims, according to court documents made public Wednesday. The two complaints asked the U.S. District Court in Fresno for temporary restraining orders to shut down the companies while the FTC pursues the cases.

On Monday, Freeman countered by asking the court to deny a temporary restraining order, saying that Hope had taken down its only active website,, and was planning to dissolve itself. He blamed lenders who were “no longer willing” to work with the company and consumers whose expectations “had become increasingly unreasonable.”

In the filing, Freeman said that “contrary to the claims made by the plaintiffs of extreme amounts of ill-gotten gains,” both his and Hope’s bank accounts “have long since been depleted” and are likely to result in a bankruptcy filing. He denied any wrongdoing.

The FTC alleges that consumers were allegedly told by Hope and Kore counselors to stop paying their auto lenders and pay fees to the loan modification companies instead.

Hope allegedly promised to lower monthly payments 30% to 50% for clients who paid fees of $200 to $500, lured by ads that stated: “Join the thousands who have already SAVED!” according to court documents. The company, operational since at least November 2008, solicited customers online and through telemarketing.

Kore, as Auto Debt Consulting, promised 25% to 40% reductions in exchange for fees of $350 to $799, “regardless of your credit score!” the agency said. If the modification was unsuccessful, at least one of the company’s websites pointed to a 100% money-back guarantee, according to the suit.

But once the companies collected the fees, they rarely tried to make their customers’ loans more affordable, often not even attempting to contact the lenders, the FTC alleged.

When consumers tried to claim the promised refunds for the unsuccessful modifications, they were turned away, the suit said. Instead, some consumers were told to hide their cars to avoid repossession — at least one client’s vehicle was repossessed after she had paid $400 to Hope, according to the suit.

The schemes leave “financially distressed consumers in worse shape than when they began,” David Vladeck, director of the FTC’s Bureau of Consumer Protection, said in a statement.

FTC officials said they didn’t know how much the companies allegedly bilked from consumers but expect to find out in the discovery process.