Auto giveup scam gone very wrong

silveradoArsenio Freitas of Billerica, Mass. grew tired of making payments on his 2008 Chevy Silverado so he allegedly asked his cousin Eduino to help him take the vehicle down to his favorite fishing hole and make the Silverado disappear. As the truck slowly submerges in the water, the pair flee the scene. A few minutes later, a passerby notices the truck and calls 911, thinking this could be a tragic accident with lives at risk. According to a report in a local newspaper:

The blue and red lights slash the darkness at the Ashland Reservoir’s Spring Street edge. Spotlights search the water for anyone, everyone, who might be trapped, drowning or dead. Firefighters, police, EMTs, the chiefs assemble to perform the tasks they’ve drilled so many times. Six towns coming together to do whatever it takes to save a single life.

A Southborough ambulance stands ready to rush the victim or victims to the hospital. Divers from Ashland, Holliston, Hopkinton, Northborough, Sherborn and Southborough make their way through the cold, dark water as reporters wait for word on what is found.

The tow truck moves to the edge of the boat ramp to pull out the Silverado. Something goes wrong. A tow line snaps. A piece of the buckle breaks. An EMT is loaded into the ambulance.

This happened in November. The injured EMT, firefighter Robert Gianopoulos, still hasn’t been cleared to return to work. He’s undergone numerous procedures to heal the injuries he suffered that night. “It’s not just the insurance company getting hurt here,” town manager John Petrin was quoted in the local newspaper.

The cost to taxpayers to respond to this alleged scam was more than $10,000, not counting Gianpoulos’ medical costs. Arsenio Freitas now faces a host of charges and a few years in jail, if convicted.

People who are tempted to ditch their cars in lakes or burn them in deserts need to understand they place people lives in jeopardy. Perhaps a stiff sentence in this case will help people understand that.

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Thanks for former IASIU president Dan Fitzgerald for bringing this case to our attention.

Clunkers and giveup scams

clunkerThe U.S. Senate likely will spend another $2 billion by the end of the week to entice owners of gas guzzlers to trade up to more efficient models. Could the “Cash for Clunkers” program give desperate car owners a way to get rid of unwanted vehicles rather than dumping them, essentially selling them to the insurance company?

Go back 12 months when the auto giveup trend first got hot. It wasn’t the economy that was the driving force as much as high gas prices. Fuel costs are nowhere near mid-2008 levels, but they are creeping up again and perhaps making some low-mileage vehicles too expensive to operate for people on the edge.

Plus, those vehicles likely have higher-price car loans — if they are still financed — since rates have fallen greatly in the last few years. This could provide further incentives for people to trade in their vehicle rather than dump them.

In any event, the “Cash for Clunkers” program gives people another option instead of committing insurance fraud.

Then again, the program may get a lot of people into pricey new cars that they won’t be able to afford in the next year or two if the economy fails to recover — and we might get a “double-dip” giveup trend.

Time will tell.

Upside down on car loan? Here’s some advice

GMAYesterday Good Morning America aired a good segment on auto giveups, which included an interview with coalition spokesman Jim Quiggle.

Consumer reporter Elisabeth Leamy offered some solid advice to anyone who can no longer afford their car payments:

Avoid repossession at all costs. When your car is repossessed you still have to pay the loan off, plus your credit is ruined for up to seven years.

Contact Lender. Instead, immediately contact your lender and try to work out a deal with lower monthly payments.

Trade car in. You could also try to trade your car in for a much cheaper one. This is tough if you owe more on your car than it is worth, but it will work if you choose a much more modest vehicle.

Short sale. Another option is a short sale in which you sell the car yourself and give the money to the lender and they agree to write off the difference without dinging your credit.

Transfer lease. And finally, if you lease your car, you may be able to transfer your lease to somebody else, as long as your lender allows this.

On the Good Morning America webpage, a handful of car owners posted comments about their experiences in trying to get lenders to give them a break. This is one posted story:

I called my bank. They pretty much said tough luck for you. I have good credit. Lost my job 6 months ago. I can’t find another job. I had the car for about a year before I lost my job. I’m in my 40’s and this is my first car loan. I have never been late or anything. but it is really bad where I live and I can’t find a job. My bank said there was nothing they could do for me. they can’t lower my interest rate because I can’t refinance becasue I don’t have a job. It’s getting harder and harder to pay this. It’s been up for sale since I lost my job. Not even 1 call. So much for “call your bank”. a lot of good that did me. I might as well of told them just to come get the car. Not everyone is willing to work with you apparently, some banks don’t care.

Most banks repossess vehicles as a last resort. Perhaps they’re hoping that borrowers will dump the car and pay off the loan with insurance money.

Anyone have any other advice for people in these desperate situations?

Dumping cars is just dumb — and dangerous

Car fireBy almost all measures, car dumping is now a full-blown national trend. Reports from insurers, law enforcement, fire fighters and the media point to a new national pastime of getting rid of your vehicle (car, truck, motorcycle, ATV, whatever) if you’re in financial stress. Vehicles are burned, buried, pushed in lakes and rivers, chopped up and stashed away in a friend’s garage. And a lot of people are getting caught.

A year ago when the Coalition Against Insurance Fraud warned about this potential trend, we were seeing one or two cases a week. Today, it’s one or two each day. Yesterday, it was a volunteer firefighter in Ohio and a Harley owner in Florida. The day before it was a couple in Massachusetts, and the day before that officials in Charlotte, N.C. said they have had 45 suspicious car fires in just the last six months.

Last week, a Pennsylvania car dealer died of a heart attack reportedly while he was burning vehicles in his lot. Also in the keystone state, a body shop owner was charged with hiring someone to burn his Mercedes. Then there’s the cops in Chicago and Louisiana, the school principal in New Jersey and on and on and on.

The New York Alliance Against Insurance Fraud issued a report yesterday saying auto give-ups have increased 35% last year.

Now let’s review for anyone thinking about ditching their car. It’s a bad idea. Consider:

(1) There’s a good chance you’re going to get caught. Insurers and law enforcement are on high alert. And even if you’re not arrested, your insurance company may have enough evidence to deny your claim.

(2) If you are arrested, the penalties can be steep. Just ask Spencer Machek of Twin Falls, Idaho who’s spending the next eight years in state prison for arranging to have his car torched.

(3) If you get caught, you’re still on the hook to pay off the car loan.

(4) And even if you don’t go to jail, you no longer have any wheels — and no money to buy new ones.

Plus, if you burn a car, you’re putting firefighters’ lives in danger (as well as you’re own!). One fire department in Canada is now charging fraudsters for their services in putting out car fires. Great idea. Courts in the U.S. should do the same.

The bottom line is this: If you’re in financial straits or just don’t like the color of your car, don’t take this desperate step. It’s better to just mail the keys back to the lender, take a hit on your credit score and go on with your life.

Dumping cars for insurance money

Car giveupsCar theft has plateaued or is declining across the country, according to experts speaking at a vehicle theft summit held in Washington, D.C. yesterday. Thanks to insurers, technology and the work of state auto theft prevention authorities, stealing cars is less of a pastime and avocation in the country than it has been in recent years.

It’s still a huge problem, but overall it appears to be not getting any worse.

Except in one area: people who are intentionally dumping their cars for insurance money. There is a growing consensus among auto theft experts that vehicle giveups are rising across the country. One executive was spot on in lamenting that in desperate times, decent people sometimes do desperate things.

Burning a car or dumping it in a lake certainly is a desperate act. And also a dumb one. More people are getting caught. They not only face jail, but they still will be left with a car loan to pay off and now they don’t have a car!

Several state auto theft authorities say they have beefed up training programs to teach local police how to spot phony auto theft reports. And a couple of states are gearing up to create public awareness programs on the issue. That’s a good start. But there’s great concern with the uncertainty of this economy that the problem of auto giveups likely will get a lot worse before it gets better.

A local TV news show did a nice segment on the topic yesterday:

Burning desire to be car(e)less

Car fireThis morning I’m taking a van shuttle from my neighborhood to BWI airport. At first it’s only the driver and me. Then another passenger gets on who’s apparently an acquaintance of the driver. After a few minutes of chit-chat, which is impossible not to overhear, the driver asks what their mutual friend, Eddie, is up to these days.

“He just burned his truck for insurance money,” the passenger replied matter-of-factly. No response from the driver.

I didn’t believe what I had just heard. Then it sinks in that neither one shows any emotion about a criminal act that is becoming all too common. A few seconds later they switch to another topic.

I’ll be checking the local police report upon my return to determine if there were any recent suspicious truck fires.

But in the meantime, my personal experience today is magnified on an almost daily basis as more and more reports come in about the increasing incidence of auto giveups around the country.

As the economy coninues to crumble and people become more desperate, more vehicles will be burned or hidden or dumped in lakes and rivers. Intense deterrence efforts need to be undertaken quickly to get the word out that getting rid of a car is a dumb way to solve a financial problem.

Why Toyota is encouraging fraud

Toyota ad image The new Toyota commercials showing people dumping their cars so they can get new ones are amusing, clever and most likely very effective in marketing new cars. They also encourage fraud.

With more people than ever “upside-down” on their car loans — and already having an incentive to ditch their vehicles — subtle suggestions that it’s OK to take this drastic step doesn’t help.

No one believes that these commercials alone will entice car owners into criminal behavior. But there is a growing body of research that suggests an environment that tolerates acceptance of unethical behavior does influence some people to act unethically. And these commercials add to that negative environment.

Toyota ad imageThe latest research by the coalition shows public tolerance of fraud alarmingly high and growing. We need stronger outreach to convince people to reject fraudulent behavior, not reinforce it.

I’ve written to the president of Toyota and appealed to him to abandon this campaign. We’ve also asked for a meeting to solicit Toyota’s support in a campaign to discourage auto give-ups.

I can understand why Totota’s ad agency came up this campaign. The underlying message is nobody likes insurance companies anyway, so why not get them to help you buy a new car. But what I don’t understand is why a car company would want to encourage a practice that makes it more expensive for their customers to use their product.

If we meet with Toyota executives, perhaps we can find out.

P.S. Let Toyota know how you feel about this advertising campaign. You can e-mail the company at its website.

Update – December 19, 2007: The Boston Globe ran a great story on this issue today. Pressure is building on Toyota to abandon these ads.

Update II – December 19, 2007 – Here’s Toyota’s response to one state fraud bureau director’s letter. Rather weak.

Update III – December 21, 2007 – The Republican-American newspaper out of Waterbury, Conn. published an outstanding editorial this morning. They understand how some people will be influenced in our culture:

Given people’s attitudes on fraud and the proclivity of some to “try this at home” — the Jackass Syndrome, if you will — insurers should not be surprised to see a spike in the number of claims for totaled vehicles.

But this may be the best line in the editorial:

The industry would be wise to keep track of those claims, but rather than add the cost to everyone’s premiums, it should send the bill to Toyota with a short note: “You asked for it, you got it, Toyota.”

Explosions in U.K. tied to elaborate ‘give-up’ scam???

From this morning’s Daily Mash (warning: the following contains profanity):


DOZENS of cars blown-up across the UK in the wake of the failed terror attacks are part of an elaborate insurance scam, the Daily Mash has learned.

carCar owners, unable to sell their old vehicles, are paying up to £50 to have them destroyed in controlled explosions. The owners then claim the write-off value of the car from their insurance companies who agree to pay-out because the car has been blown-up.

Wayne Hayes, an insurance expert, said: “Why pay £20 to have it stolen by some bobble-head drug addict who’ll then make an arse of it? “Pay a little bit more and the car will be totally fucked-up by professionals with absolutely impeccable credentials.

“Insurance companies are hardly likely to start poking their noses in at a time like this. It would be unpatriotic.”

One unamed explosives official said: “With rising interest rates, the odd cash-in-hand job is very welcome. “If blowing up a Saab 900 means a nice pair of shoes for my Angela, then I’m happy to oblige.

“And as insurance companies are all complete shits, it’s a victimless crime.”

Are “upside down” car loans encouraging insurance fraud?

upside down car
People on the financial edge with subprime mortgages are losing their homes because of rising interest rates. Is the same thing happening with auto loans? Apparently, according to a recent column by financial writer Michelle Singletary:

In the first quarter of 2007, 29 percent of consumers were upside down on their vehicles, Kelley Blue Book reports. Additionally, on average, people traded in cars on which they still owed more than $3,600.

And what do these buyers do with that loan balance when they want another car? They roll that negative equity – the $3,600 and often much more – into yet another vehicle loan.

“It is a pandemic,” says Jack Nerad, executive market analyst for Kelley Blue Book.

It is also financial lunacy. And making matters worse are risky lending practices similar to what we’ve been seeing in the mortgage industry.

Rolling the negative equity into a new car loan isn’t the only things these people do. They ditch the cars — they hide them, burn them and drive them into rivers, canals and lakes, in essence, transfer the upside-down loan to the insurance company.

With more than a quarter of car loans currently upside down, it’s no wonder false thefts of automobiles are on the rise. With rising interest rates and the high cost of automobiles, the problem for fraud fighters likely will get worse before it gets better.