ATTORNEY GENERAL SALAZAR ANNOUNCES $1.1 MILLION RESOLUTION OF CASE AGAINST USED CAR DEALER

Denver-- Attorney General Ken Salazar announced today that a court decree has been entered concerning International Motors, Inc., a Colorado Springs used car dealership, and its principals resolving a lawsuit brought by the Attorney General's Office in 2002 against the business (State ex rel. Salazar v. International Motors, Inc., et al., Case No. 02CV0666, El Paso County District Court).

As part of the consent decree approved by the El Paso County District Court, the defendants credited some 2,000 consumers from Colorado Springs and Southern Colorado a total of approximately $1.1 million in unlawful financing charges. The Consent Decree also prohibits defendants from committing any of the unlawful activities and violations of Colorado's Uniform Consumer Credit Code (UCCC) and Consumer Protection Act (CPA) as alleged and described more fully below. Defendants will also pay the Attorney General's Office $125,000 to reimburse it for its costs and attorneys fees incurred in the lawsuit, restitution, and for consumer education efforts. The defendants do not admit to any wrongdoing.

Consumers who paid excess charges had their outstanding debt balances reduced accordingly. For those customers who had already paid in full and are owed a refund, the Attorney General's Office will attempt to locate them and provide restitution.

"This is the largest consumer credit case and settlement brought by the Attorney General's Office against an auto dealer," Attorney General Salazar said. "Remember that, for the most part, these were destitute consumers who often could not finance an automobile through other financing sources so this dealership was their last resort. Faulty recordkeeping, improper charges of every kind, and over-the-top, unjustified repossession activity put them in even more difficult circumstances."

"This lawsuit and settlement sends a message that auto dealers must treat all consumers, even the most vulnerable ones, fairly and within the bounds of Colorado's laws," Salazar continued.

Following an investigation, Attorney General Salazar's Office filed a consumer protection lawsuit in February 2002 against International Motors and its principals, Michael W. Parrish, Richard N. Spreier, and Robert Herzfeld. The complaint alleged that defendants unlawfully charged and collected fees and engaged in other activities, including repossession of vehicles, in connection with their sales and financing of used motor vehicles in violation of the UCCC and CPA. The allegations of unlawful activity included:

Charging:

• A $250 “contingency fee” to those consumers defendants believed were a credit risk;
• Duplicative or excessive filing fees;
• "Collateral protection” fees when consumers failed to maintain insurance on their collateralized vehicles;
• Improper insufficient fund (bad check) fees;
• Improper default rate of interest charges; and
• Improper late charges.

Selling motor vehicle service contracts (extended warranties) without having statutorily required insurance or providing consumers required disclosures in violation of the CPA.

Improperly repossessing vehicles by doing such things as:

Engaging in unconscionable debt collection practices by such things as:

• Contacting third parties, including consumers’ families or employers, about the consumers’ debts;
• Using aliases, badges, letterhead, or otherwise giving the appearance or misrepresenting themselves as law enforcement agents;
• Collecting debts in other than International Motors’ own name, suggesting a third party was collecting the debt;
• Threatening consumers with the use of criminal process or falsely asserting that criminal action had been taken;
• Improperly contracting for and purporting to fix the venue for legal action in El Paso County, in direct violation of the UCCC.

In the course of the litigation, the district court determined as a matter of law that, as plaintiffs alleged, defendants (1) violated the UCCC by charging the various unlawful excess charges, and (2) violated the CPA in their sales of extended warranties. The parties subsequently settled the action by entering into the Consent Decree.