Arizona used car buyers caught in default, loan programs have little protection

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Used car buyers caught in a title and loan regime have filed claims against the dealer’s insurance policy to cover financial losses.

It was a last-ditch effort to recoup thousands of dollars for the vehicles Onyx Motorsports in Tempe took in trade and never paid off.

It failed.

The surety they thought would protect them from botched loans didn’t cover them, clients learned. And even if it did, the $ 100,000 that policy dealers are required to carry under Arizona law quickly dried up as claims poured in.

The Onyx Link helps illustrate how little understanding many consumers have about the car buying process – and the lack of protection in Arizona when the experience goes awry.

Authorities at the Arizona Department of Transportation, which licenses and regulates the state’s auto dealerships, have confirmed there is little they can do to unwind loans or get money back for consumers. Disagreements over loans are treated as contractual disputes.

Title disputes can also be difficult to resolve, with multiple buyers claiming to be the rightful owner of the same car.

Client faces an unpaid loan of $ 9,000

An investigation by The Arizona Republic found that Onyx had resold cars without paying off existing loans and properly transferring title. This left some customers with two auto loans – one for the vehicle that was supposed to be paid off, another for the new vehicle.

Lisa Virrey is one of an unknown number of Onyx customers facing a vehicle repossession and damaged credit for unpaid loans.

THE NIGHTMARE OF USED CARS:Arizona dealer failed to refund transactions, transferred title to buyers

“I’m currently trying to get some of the ($ 9,000) I lost through the bond,” said Virrey, of Prescott. “But since the bond doesn’t cover all claims, the surety company turned it over to court.”

Other customers discovered that they owned cars registered in someone else’s name.

“If there is more than one person who thinks the vehicle is theirs, then someone is going to lose,” said Dave Warkentin, executive director of the Arizona Independent Automobile Dealers Association.

An investigation found that an Arizona dealership resold cars without repaying loans or transferring title.

The association is a trade organization representing 300 of Arizona’s 1,900 used car dealers.

Warkentin said many customers mistakenly think the bonds are in place to protect buyers of classic automobiles. He said they actually cover dealerships in cases where title disputes arise after a sale.

International Fidelity and Insurance Company, which issued the bond for Onyx, briefly outlined its position to clients:

“IFIC has received several claims against this bond that exceed the bond amount of $ 100,000,” company officials said in emails. “A court will pay bond funds to able-bodied claimants it deems appropriate.”

AG does not take any action on complaints

The Arizona attorney general’s office declined to comment on Onyx. But he sent letters to customers in March saying he couldn’t take any further action on their complaints because Onyx was bankrupt.

Onyx owner Farhad Kankash said he never sought to defraud clients and was forced to file for bankruptcy. He confirmed that his company had not repaid its loans and had not issued title deeds on the vehicles.

The Republic discovered that the directors of Kankash and Onyx are linked to a chain of used car dealers in Phoenix and Scottsdale, including Main Auto Group and RPM Motors in Phoenix and Luxor Auto Group and Creative Bespoke in Scottsdale.

Legal finance companies claim Kankash took millions of dollars intended to secure inventory at its dealers and used the money for personal expenses before declaring bankruptcy.

Onyx Motorsports and certain employees were linked to several used car dealerships in Phoenix and Scottsdale.

Similar lawsuits and charges have been brought against the owners of Luxor and Creative Bespoke.

Warkentin said that neither Onyx nor any of its affiliates are members of the dealership association.

He said the association offers certain protections by holding dealers accountable and facilitating negotiations between buyers and sellers.

“Sometimes no protection will protect you from bad actors,” he said. “If we hear of resellers harming consumers, I will give them back without a second wind.”

What buyers can do to protect themselves

Lt. Scott Gamble of ADOT’s Inspector General’s office said car buyers need to take steps to protect themselves. Here is what he offers:

  • Look for the car dealership. Make sure it is licensed or owned by commercial organizations.
  • Look at customer reviews to see what people are saying.
  • Be extremely careful when buying a car from an online market.
  • Do not trade in vehicles. Sell ​​a vehicle for cash and use the cash as part of your down payment.
  • Check online car reports for mechanical breakdowns and accident history, which are followed by vehicle identification numbers.
  • Take cars for test drives.

Gamble and other ADOT officials said they could neither confirm nor deny the existence of an Onyx investigation. But bringing criminal action against a reseller for fraud doesn’t necessarily help consumers get reimbursed for losses, Gamble said.

Gamble said he sympathizes with buyers caught up in financial disputes with dealers. He said ADOT detectives can’t take sides in an issue, but they can help consumers figure out where to report a business or whether they can take action in small claims court.

“For the victims, we realize this is a huge inconvenience,” Gamble said. “It’s a lot of stress, and often they just want answers. Where can i go? What can I do ?

Virrey, who said he worked with ADOT detectives investigating Onyx, said the reality is consumers are on their own.

“So besides losing money, I’m trying to navigate the legal system on my own,” Virrey said. “It has all been a huge learning experience.

Need help? The call to action can help

Have you been the victim of a scam? Do you have a complaint against a business or government agency? Arizona Republic / azcentral.com and Call For Action may investigate. We are #HeretoHelpAZ.

Since the partnership began in 2019, Call for Action has saved consumers over $ 280,000.

Fill out this form online, text HereToHelpAZ to 51555, or call 602-444-2255 from 11 a.m. to 1 p.m. Tuesday through Friday to speak with a Call to Action volunteer.

Robert Anglen investigates consumer issues for The Republic. If you are a victim of fraud, waste, or abuse, contact them at [email protected] or 602-444-8694. Follow him on twitter @robertanglen

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