The loan application for a Honda minivan showed that Jeannette Dorestin pulled in a salary of $2,600 a month from a company called Interealty.
The problem was, there was no company called Interealty, and the pay stubs that accompanied the loan application at Maroone Honda of Hollywood were fraudulent.
In St. Petersburg, Sandia McKay's application to buy a Hummer indicated she made $80,000, a figure that also was supposedly backed up by pay stubs.
McKay made about half that amount as a professional foster parent; the documents were faked. But she still drove away in a $52,000 vehicle.
Both cases involve obvious fraud, shaky loans, and Fort Lauderdale-based AutoNation, the largest car dealer in the United States.
AutoNation blames the customers for the fraud. Both buyers dispute that. Both have sued the company, claiming it ripped them off with unfair deals.
Similar cases involving AutoNation dealerships have popped up in San Francisco and Las Vegas. All epitomize the recent era of excess that led us into this recession: easy money, irresponsibility, and a willingness to cheat.
Worse, these cases may be just the tip of a large, treacherous iceberg. The number of auto loan defaults has been growing, and many financial gurus now predict the auto subprime mess will serve as act two of America's current economic tragedy.
"It's similar to what's happening with home mortgages," says David Stivers, a former car dealership finance manager. "And the problem is getting bigger."
AutoNation spokesman Mark Cannon bristles at the comparison. His company has seen "a slight uptick" in loan defaults, he said, "but the auto industry has been much different than the housing market."
Perhaps, but you'll probably hear more about this problem as the year wears on and the national credit crisis slowly unwinds.
Cannon says the blame for whatever problems there are is shared equally between the dealerships and the customers. "I'm not saying that dealers don't make mistakes, but let me tell you, there's not as many as you think there are — and customers make mistakes too."
In the two cases thumbnailed above, the buyers certainly share some blame. If all customers were diligent, we probably wouldn't be living through a credit-driven recession right now. But as the outrageous end of the Dorestin trial shows, the odds are stacked in favor of wealthy dealerships like AutoNation.
AutoNation dealerships allegedly used predatory practices in both cases, with inflated costs and ridiculous interest rates. The chain, founded by South Florida business mogul Wayne Huizenga, is huge, with 272 dealerships nationwide. It also seems to come up more than others in these bad-loan cases, some industry experts say.
"It appears to be a pattern, and it appears to be something that management within the [AutoNation] dealerships knows is happening," says Stivers.
Stivers was an expert witness for Dorestin, 42, an unemployed mother of four who never made it out of the ninth grade. Her husband made $20,000 a year working for a bakery. She wanted a minivan for her family. Michael Clark, a relative's friend, steered her to AutoNation's Maroone Honda of Hollywood.
She didn't know it then, but Clark was a "bird dog" for Maroone Honda, paid to steer buyers to the dealership.
Court records detail the deception once she walked in. The salesman kept switching vehicles and purchase plans on her, with prices going up each time. Maroone Honda told her that one vehicle had 19,000 miles on it when in fact it had 31,000 miles. The dealership even persuaded Dorestin to pay $429 for a 50 percent discount on Geico insurance that turned out not to be a discount at all.
In the end, she signed a contract to buy a Honda Odyssey for $12,500. She put $4,000 down and traded in her old car, believing she would have to finance only $6,700. Instead, the dealership coerced her into a loan of more than twice that, including a $1,380 service contract.
To qualify for the loan, Dorestin said, Maroone falsified her application to show that she made more than $30,000 at the fictive Interealty Inc. The interest rate for the loan was more than 25 percent.
"It was the worst experience I ever went through," Dorestin said in a deposition.
The case was tried in the Broward County Courthouse in September. A jury found that Dorestin was complicit in the application fraud, but it also determined that AutoNation had ripped her off.
Maroone Honda, the jury found, "fraudulently induced" Dorestin to sign a bad contract and violated the Florida Unfair and Deceptive Trade Practices Act. Dorestin was awarded $6,380 in actual damages, paving the way for more substantial punitive damages.
That is, until Judge Miette Burnstein sided with AutoNation. Punitive damages weren't applicable, he ruled. Then Burnstein set aside $5,000 of the actual damages, leaving Dorestin with $1,380 while AutoNation got off all but scot-free. (Dorestin is appealing.)
The outcome seemed to confirm what many consumer attorneys contend: The deck is stacked against the little guy when it comes to fighting large car dealerships.
"These are hard cases, they are complicated, and somebody like AutoNation is going to fight you tooth and nail," says St. Petersburg attorney David Gruskin, who is representing Sandia McKay in her case against the company. "A lot of lawyers, judges, and lenders are going to believe AutoNation instead of the customer."
Gruskin alleges that the fraudulent loan application in the McKay case was ginned up by the finance manager at AutoNation's dealership in Clearwater. Not only that, but he claims the contract for the Hummer was forged by the dealership.
AutoNation's Cannon counters that a handwriting expert has concluded the signature is McKay's and blames another independent broker, or bird dog, for the application fraud.
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A jury is expected to decide the truth at trial in the coming months. Meanwhile, AutoNation and other dealerships are still issuing high-interest sub-prime loans. Cannon, the company's spokesman, claimed that the number of sub-prime loans is "tiny."
That's not quite what Mike Maroone, the longtime South Florida car dealer who is AutoNation's president, told financial analysts at the company's February 7 earnings call.
"Our prime is generally 80 percent or more; subprime is 20 percent or less," Maroone said. "It does vary greatly by market. There is still subprime financing out there... I don't mean to insinuate that the faucet has been shut off... It's just a little bit more conservative than it was."
That may be the best we can hope for.