Current Events in August 2003

Illinois Attorney General Lisa Madigan has charged a southside Chicago auto dealer and a Kane County car salesman with violating a number of consumer fraud laws that have left dozens of Illinois consumers with unpaid car loan balances, vehicles without clear titles and incomplete warranties.

Because of the defendants alleged practices, consumers have been hounded by collectors, threatened with repossession of vehicles they no longer have because they traded them in, risked their credit ratings and have been forced to spend time trying to unravel the tangled web of half-truths and flat-out lies from the dealers to find out the true status of their financial transactions, she said.

Buying a car is hard enough without being taken for a wild ride of lies and deceit, Madigan said. Trading in your old vehicle is a common practice that in these cases took on nightmarish challenges for consumers.

Madigan today charged Williams Chevrolet/Geo Inc., 8650 S. Commercial Ave., in Chicago, with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. Most of the charges are associated with the dealerships failure to pay off unpaid loan balances on autos consumers trade in as partial payment for new vehicles. One amount left unpaid was more than $17,000.

According to the complaint, filed in Cook County Circuit Court, the defendant:

• failed to pay off the unpaid loan balance on consumers trade in vehicles;
• falsely represented to consumers that the defendant would pay off the unpaid loan balances on consumers trade in-vehicles;
• submitted pay off checks to financial institutions for consumers trade-in vehicles that were mislabeled with an incorrect account number, causing the non-payoff of a consumers account; and
• misled consumers into believing that payoffs on their trade-in vehicles had been made by providing them with copies of payoff checks that defendants never sent to the payer or financial institution.

In the case against Williams, Madigan seeks a permanent injunction, restitution to all consumers victimized by the defendants actions, a civil penalty of $50,000 for each violation of the Consumer Fraud Act and an additional penalty of $50,000 for each act the court finds was committed with the intent to defraud.

In a filed in Kane County Circuit Court, Madigan charged Dominic Cece, president and owner of Prestige Motors, Inc, and his company with violating the Illinois Consumer Fraud and Deceptive Business Practices Act.

According to the complaint, Cece:

• failed to pay off or pay off in a timely manner unpaid loan balances or outstanding lease payments on trade-ins, thus jeopardizing credit ratings of consumers and causing them to make payments on vehicles they no longer own;
• sold vehicles to Illinois consumers without title and with outstanding balances on loans or lease agreements;
• sold extended warranties but failed to forward consumers payment and registration to the warranty company; and
• sold vehicles on consignment but did not pay off liens on the consigned vehicles that, again, adversely affected consumers credit ratings.

The consumer fraud complaint filed in Kane County Circuit Court against Cece seeks a permanent injunction, restitution to consumers victimized by Ceces actions, a civil penalty of $50,000 for each violation of the Consumer Fraud Act and an additional penalty of $50,000 for each act the court finds was committed with the intent to defraud.

Side airbags that include head protection are reducing deaths by about 45 percent among drivers of passenger cars struck on the near (driver) side. Side airbags that protect the chest and abdomen, but not the head, also are reducing deaths, but they're less effective (about 10 percent).

These are the major findings of an Insurance Institute for Highway Safety study of the real-world effectiveness of side airbags. It's the first such study to estimate the effectiveness of this type of occupant protection.

Each year more than 9,000 passenger vehicle occupants die in side impacts. Head injuries are a leading cause. The new research findings mean the toll should be reduced in the future.

"The need for head protection in side impacts has been obvious for some time," says Institute president Brian O'Neill. "Before head-protecting airbags were available there was virtually nothing to prevent people's heads from being struck by intruding vehicles or rigid objects like trees and poles in serious side impact crashes. Now we know side airbags can change this and do a good job of protecting heads."

When occupants' heads are in the window areas of vehicles they're especially vulnerable to being struck by intruding vehicles or objects. O'Neill points out that "the increasing number of high-riding vehicles on the road these days increases this risk, making it more likely that the front end of a striking vehicle in a side impact will hit the heads of occupants in the struck vehicle. This is why side airbags with head protection are so important."

Side airbags that protect the torso only don't represent as fundamental a safety improvement. They're an alternative way to protect the chest and abdomen in a side impact, but not the only way. Padding the vehicle interior also can protect occupants' torsos.

Sufficient supplies of flu vaccine should be available during the coming influenza season. The Centers for Disease Control and Prevention (CDC) predicts that everyone wanting to get a flu shot to avoid influenza, regardless of age or health status, should be able to get vaccinated as soon as vaccine becomes available in October.

CDC estimates that vaccine manufactures will produce approximately 85.5 million doses of influenza vaccine during the 2003 influenza season. This projection represents 9.5 million fewer doses than were produced last year. However, influenza vaccine production is expected to exceed the estimated 79 million doses that were actually sold to providers in 2002.

"Influenza vaccination is the best way to prevent influenza and its severe complications," said Dr. Walter Orenstein, director of the CDC National Immunization Program. "The best time to be vaccinated against influenza continues to be October and November. However, vaccination in December or later can still be beneficial."

Although anyone who wishes to avoid influenza should be vaccinated, CDC strongly recommends influenza vaccination as soon as vaccine is available for any person who is 6-months old or older and is at increased risk for complications from influenza.

Those at highest risk for complications from influenza include people 65-years old and older, those with chronic, long-term health problems such as heart or lung disease, kidney problems, diabetes, asthma, anemia, HIV/AIDS or any other illness that suppress the immune system. CDC also recommends vaccination for people age 50 to 64 years because this group has an increased prevalence among those with high risk conditions. In addition, healthcare workers and others in close contact with those at high risk should be vaccinated in order to reduce the possibility of transmitting influenza to those at high risk.

Because young children also are at increased risk of influenza-related complications, vaccination of children 6 to 23 months old, their household contacts and out-of-home caregivers are encouraged to be vaccinated against influenza.

"Protect yourself and those you love against influenza," Orenstein said. "Get your influenza vaccine."

A lawsuit filed by a California couple claims a discount health-care company collected fees but didn't deliver the medical services it promised.

In the suit, filed Aug. 14 in Los Angeles County Superior Court, Juan and Manuela Zermeno of Northridge contend that they expected to receive medical services at a discount when they enrolled in the Care Entree Total Care medical services plan, but that the advertised discounts, savings and services never materialized.

The company, headquartered in Grand Prairie, Texas, did not comment on the suit.

In the suit, Manuela Zermenos charges that she contacted two dental offices listed as Care Entree providers to make an appointment. One told her it was not participating in any discount program and the other said it did not recognize the Care Entree name, she charged.

The couple is suing for $549.50 in monthly membership fees and is asking the court to prohibit the company from operating in California.

The overhead cost of operating the United States health-care system is more than three times that of running Canada's on a per capita basis, and the gap is getting bigger, according to a study published today in the New England Journal of Medicine.

Savings gleaned from a national health insurance system like Canada's would be enough to provide medical insurance for the 41 million Americans who now lack coverage, the researchers said.

The study puts the administrative cost of the U.S. system at $294 billion per year, compared to about $9.4 billion in Canada. That translates to a per-person cost of $1,059 in the U.S. and $307 in Canada. A similar study, conducted in 1991, put per-capita costs in the U.S. at $450 and Canadian costs at one-third of that.

The study by Dr. Steffi Woolhandler of the Harvard School of Medicine found that Americans spend more on administrative costs because of the many private companies supplying insurance coverage. The multitude of companies create increased paperwork while Canadian doctors send their claims to a single insurer, the government.

"What we've got now under the current health-care system in the U.S. is a giant food fight between doctors, hospitals, patients and insurance companies as to who gets stuck with the bill," Woolhandler said.

Also, the study noted, private insurers spend large sums on marketing and underwriting, costs that the Canadian system doesn't have to bear.

However, in an editorial the Journal said that Woolhandler's study may be overestimating the gap between the two nations. Editorial writer Dr. Henry Aaron, an economist with the Brookings Instition in Washington, said the authors have overestimated the cost of the U.S. system by about $50-billion.

Julio of Ramsey NJ (8/16/03):

I have purchased Ford vehicles for the past twenty years. In 1998 I purchased a 1998 dump truck and in 2000 I purchased a pick-up truck. From the day these vehicles were purchased I had nothing but problems with them.

I sufered an electrical fire in the dump truck. An insurance investigation determined the fire to be a result of a manufacturers defect. Needless to say the insurance company refused to honor my claim and unfortunately the dealer and Ford Motor company claimed no responsiblity. As a result of this lack of interest or reimbursement I was forced to put this vehicle out of service even though it cost me greatly in lost revenue. A loss in revenue I might add, that made it impossible for me to make loan payments on a timely basis.

I reached out to Ford on many occasions, but they would not react to my problem. I'd like to point out at this time that even though this truck was useless to me I continued to live up to my commitment and made my payments. It would be hard for me to calculate the amount of business I lost as a result of this truck fire and because I am a small company I needed this piece of equipment in order to keep operating. Therefore I borrowed $10,000.00 and had the truck repaired. Once again I reported this situation to Ford Motor Co. and advised them that my payments would be late. Although on the phone they pretended to be working with me, they harrassed me constantly.

With regards to the Ford pick-up, from the day I picked it up from the dealers showroom I had problems with it. There was definitely a problem with the steering and I kept taking it back to the dealer, but they refused to acknowledge that there was anything wrong with the truck and told me that the steering problem I was complaining about was normal for this type vehicle. Day after day it got harder and harder to steer the truck. Making turns of any kind were actually painful. I developed tendinitis in my arm and shoulder. My greatest fear was that I would get into an accident.

I went from one Ford dealer to another and the story was always the same, there is nothing wrong with the power steering. At the suggestion of a friend I took the truck to three independent mechanics and all agreed that not only was there a problem with the power steering, they found a part that was definitely not factory-issued. Again I went beck to my dealer and he agreed to fix the problem, but was quick to advise that the warranty had run out and it would cost me a considerable amount of money to repair.

We kept calling Ford customer relations to ask them for their assistance in this matter. We also advised Ford credit that until we heard back from customer service we would be delaying payments. Although they claimed to have no problem with our position in this matter they continued to dunn us by phone and mail. We finally heard from customer relations and they in essence refused to give us any assistance.

Now for my lastest fiasco with Ford. A few months ago I went "window shopping" for a vehicle with a friend. The dealer saw my pick-up and was very impressed. I had added a lot of extras when I bought it and if I do say so myself, the truck was spectacular. I proceeded to tell him about all the problems I was having with the steering and he suggested that I trade it in and get a new truck. He told me he could give me a great deal on a new truck. Well this quite frankly was music to my ears. I thought about it for a few weeks and went back to see the dealer.

After speaking with the sales manager I thought it would be in my best interests to sell the truck myself. I told him as much and then he proceeded to write a NEW truck order. I asked him if there would be any credit problems and he advised that the current loan would be transferred to the new vehicle, but that I would have to come up with a "substantial" deposit. Within a few days I had the power steering problem repaired. My secretary spoke with a collection rep. at Ford credit to let them know that we were going to sell the truck in question and that a new truck was on order. She asked it they anticipated any problems with the sale and he indicated that it was a very easy and standard practice to transfer the loan to the new vehicle and that this was someting the dealership would handle for us.

He was advised that I expected to sell my truck very quickly and would be paying off the loan and until then would not be making any payments. My secretary was told that they could not wait forever and that if we anticipated any unusual delays we should get in touch with them. As expected, I had a buyer for my truck within a day or two of putting it up for sale. I called the dealership to let them know that I was about to sell the truck and would be in to see them with the deposit for the new truck. The sales manager advised that it would be easier to have Ford handle the sale. It would be better for the buyer and better for me.

Since the young man buying my truck was very anxious to take ownership as quickly as possible I asked him if he would mind going through Ford and he indicated that he had no problem with them handling everything. We met at the dealership and the sale was finalized. The truck was sold. The dealership made a fee. The buyer got a good loan rate and a warranty and I had a credit balance towards my new truck in the amount of approximately $4,000.00. My new truck arrived at the dealership the week of 8/12/03. On Friday, 8/15/03 I went there to finalize everything and to give them a $10,000.00 deposit.

I was shocked when I was told that Ford credit refused my loan and they could not sell me the truck. I asked why this wasn't determined when I came in and purchased the new truck or when I brought the buyer of my old truck to them to handle the sale. Although they agreed that they should have checked the credit when the order was placed they claimed that since my secretary spoke with Ford credit there wouldn't be a problem?

I told them that I wanted the $4,000.00 from the sale of my old truck or at least a receipt and they told me not to worry that I would either get a receipt or a check in the next few days. Needless to say I am devastated. I sold my truck, I'm not getting my new truck and I'm out $4000.00. I just don't know what to do?

Hundreds of thousands of American motorists are holding worthless extended warranty policies following the bankruptcy of National Warranty Insurance Co.

The question now is what the dealers who sold them the Smart Choice extended warranties do when consumers seek service under the extended warranty. If they fix the vehicle, they will have to eat the cost; if they tell the consumer the warranty is worthless, they risk angering customers, setting off a public relations nightmare and possibly facing a rash of small claims court actions.

The Grand Court of the Cayman Islands declared the large insurer of independent service contracts for auto dealers insolvent earlier this month. The court decided that the company could not survive its financial troubles and that its assets should be liquidated.

According to court-appointed auditors, National Warranty has almost a million contracts outstanding. The auditors' report estimates that losses could exceed $100 million. National Warranty is based in Lincoln, Neb., but is incorporated in the Cayman Islands. The company insured vehicle service contracts sold through about 5,000 dealerships nationwide.

The company began offering the Smart Choice extended warranties in 1984. Sales recently were around 15,000 policies per month.

Coverages range from one to 10 years under the contracts, which cover repairs and parts for vehicles out of factory warranty. Dealers say they sell an average three- to five-year service contract for $800 to $1,500.

Exactly how the outstanding contracts will be resolved had been undecided since June 6, when National Warranty requested and obtained a Cayman Islands court order protecting it from creditors.