Entries in Loan (6)


'Sexual-Scandal Blackmail' Alleged to Collect on Car Loan

Hemera/Thinkstock(CHICAGO) -- A Chicago man who fell behind on his car payments claims that his lender deliberately tried to ruin his marriage, then threatened a "sexual-scandal blackmail" scheme to collect, causing his wife and children to leave him.

Borrower Larnell Pillow now is suing Prestige Financial Corp of Salt Lake City, claiming intentional infliction of emotional distress. He claims an agent for the lender deliberately left a phone message that his wife intercepted, mentioning his secret girlfriend.

The agent's malicious phone call to his wife, Pillow says, "turned my world upside down. I'd lost my job. Then I lost my wife and kids. It's just a domino effect."

It all began innocently enough with his auto lender, Prestige Financial, which specializes in borrowers with poor credit. Pillow, 42, told ABC News that his relationship with Prestige was "beautiful. Everything was current."

So friendly was his relationship with his local agent that the two men shared family information. This information, says Pillow, was candid -- to the point that Pillow, a married man, confided to the agent that he had a girlfriend "on the side," whom he now calls Jane Doe. Every now and then, he says, Jane helped him make payments on his car. She thus became known to the agent. Pillow says he expressly told the agent never to mention Jane Doe to Pillow's wife.

Then Pillow lost his job as an overhead crane operator and fell behind on payments. The agent, to bring pressure on Pillow to pay, eventually phoned Pillow's home, leaving a voice message that mentioned Jane Doe, using her real name. Pillow's wife intercepted that message.

Shortly after, Pillow's wife left him, taking with her the couple's two kids.

Asked where his marriage stands today, Pillow says his wife hasn't yet filed for divorce. "I'm trying to get her to come back home."

Pillow says that when he protested to the agent about the phone message, the agent allegedly responded: "Now we know a pressure point to use on you." It's for this reason that David Boyd, Pillow's attorney, calls the agent's actions "sexual-scandal blackmail."

Unscrupulous debt-collection practices are nothing new. The Federal Trade Commission says it gets more consumer complaints about debt-collectors than about any other industry -- despite the fact that 1978's Fair Debt Collection Practices Act (FDCPA) was intended to protect consumers from abuse.

"The law is frequently ignored," explains Delicia Reynolds, legislative director with the National Association of Consumer Advocates. "A lot of us joke that the debt collection industry is based on violation of the law."

So common are abuses that law enforcement finds itself overwhelmed, she says. And so significant are the profits to be made from illegal strong-arm tactics that a collector may reasonably view the cost of potential prosecution as insignificant. In Reynolds' words: "It's more profitable to break the law than to comply."

Another problem, say experts, is that the FDCPA did not anticipate new technologies that make it easier now for collectors to harass borrowers. They can and do use Facebook, for example, and other social media, to threaten consumers and to contact their families and employers.

Other technologies make it harder for law enforcement to locate unscrupulous collectors, who use voice-over-Internet phone services to make their calls all but untraceable. Some collection companies, to escape prosecution, have moved offshore and operate, say, from offices in India.

Even against this backdrop, however, experts say Pillow's case qualifies as extraordinary.

Asked by ABC News for comment, Prestige responded by email through the chief counsel for its parent company. His statement reads in part: "Prestige Financial Services has not yet been served with a copy of the complaint and is not in a position to address the merits of the lawsuit. Prestige does not comment on pending litigation."

Complicating things for Pillow is the fact that that the Fair Debt Collection Practices Act does not apply to original lenders, only to collection companies and to buyers of bad debt. Since Prestige was the original lender, Pillow cannot sue under federal law and must go a different route. Hence Boyd's suit for intentional infliction of emotional distress.

Copyright 2011 ABC News Radio


Energy Secretary Defends Loan Made to Now-Bankrupt Solyndra

David Paul Morris/Bloomberg via Getty Images(WASHINGTON) -- Energy Secretary Steven Chu offered a spirited defense Thursday of the administration's decision to provide now-bankrupt solar panel company Solyndra with a $535 million loan guarantee in 2009.

Republicans on the House Energy and Commerce Committee kept pressing Chu to admit that political favoritism was the ultimate factor in approving the loan since Solyndra's biggest investors were backed by George Kaiser, a major contributor to President Obama.

Despite four hours of hard questions from the GOP lawmakers, Chu held his ground, repeatedly stating that politics had no role in Solyndra acquiring over a billion dollars from his department despite trepidation by some within the administration that the company was not financially solvent.

Resisting calls for his resignation, Chu said he took responsibility for the loan.  Given the benefit of hindsight, he admitted it was "extremely unfortunate" and "regrettable."

As far as knowing that Solyndra was a risky bet, Chu told lawmakers, "The range of predictions being made by financial analysts ... the average of those were not expecting [solar panel] prices to plummet.  These companies and others got caught in a very bad tsunami."

But Chu refused to offer an apology for what he did or the eventual outcome even while acknowledging that there was virtually no chance that the government would recover its money.

Copyright 2011 ABC News Radio


Emails: Obama White House Monitored Huge Loan to 'Connected' Firm

Ken James/Bloomberg via Getty Images(WASHINGTON) -- Newly uncovered emails show the White House closely monitored the Energy Department's deliberations over a $535-million government loan to Solyndra, the politically-connected solar energy firm that recently went bankrupt and is now the subject of a criminal investigation.

The company's solar panel factory was heralded as a centerpiece of the president's green energy plan -- billed as a way to jumpstart a promising new industry. And internal emails uncovered by investigators for the House Energy and Commerce Committee that were shared exclusively with ABC News show the Obama administration was keenly monitoring the progress of the loan, even as analysts were voicing serious concerns about the risk involved. "This deal is NOT ready for prime time," one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.

"If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY," wrote Ronald A. Klain, who was chief of staff to Vice President Joe Biden, in another email sent March 7, 2009. The "West Wing" is the portion of the White House complex that holds the offices of the president and his top staffers. Klain declined comment to ABC News.

Beginning in March, ABC News, in partnership with the Center for Public Integrity's iWatch News, was first to report on simmering questions about the role political influence may have played in Solyndra's selection as the Obama administration's first loan guarantee recipient. Federal auditors had flagged the loan, saying some applicants had benefitted from special treatment.

The emails were uncovered by investigators for the House Energy and Commerce Committee, which will hold hearings on the Solyndra loan Wednesday. The Republican-led House has been investigating the Obama administration's green energy loan program for months. That probe took on new urgency two weeks ago, when Solyndra abruptly shut its doors and laid off 1,100 employees. Last week, the FBI raided the factory as part of a joint investigation with the Energy Department's inspector general.

"This is not right. This is not good," said Rep. Fred Upton, R-Mich., who chairs the House committee that is examining the loan. "It makes you sick to your stomach. This is taxpayer money."

As federal authorities examine whether Solyndra misled the government about its true financial state, the Obama White House is fielding fresh questions over why it pushed so hard for Solyndra. Officials with DOE and the Office of Management and Budget are expected to testify Wednesday. Executives with Solyndra, invited to appear as witnesses, will not attend Wednesday's hearing but have told the House committee they will voluntarily appear next week.

Obama's DOE has said it backed Solyndra as a potential game changer in the clean tech movement, but the company's collapse came after clear warning signs the venture was a high risk from the start.

The White House has argued that any effort to finance startup businesses in a relatively new field like solar energy is bound to include risky ventures that could fail. They reject the notion being pushed by Republicans that Solyndra was chosen for political reasons. One of the largest private investors in the deal, Oklahoma billionaire George Kaiser, was also a prominent fundraiser for Obama's 2008 presidential campaign.

White House officials said the emails shared with ABC News Tuesday do show White House interest in the timing of the Solyndra decision -- only because the president was considering announcing the decision himself while on a trip to California.

"I think that it is clear that folks understood at DOE that they were supposed to make their decision on the merits and do whatever they were supposed to do to kick the tires on the decision," an administration official told ABC News. "Folks were interested in being updated as to whether the decision-making process was completed."

The White House also noted to ABC News that the Bush administration was the first to consider Solyndra's application and that some executives at the company have a history of donating to Republicans. The results of the congressional probe shared Tuesday with ABC News show that less than two weeks before President Bush left office, on January 9, 2009, the Energy Department's credit committee had voted against offering a loan commitment to Solyndra.

Even after Obama took office on Jan. 20, 2009, analysts in the Energy Department and in the Office of Management and Budget were repeatedly questioning the wisdom of the loan. In one exchange, an Energy official wrote of "a major outstanding issue" -- namely, that Solyndra's numbers showed it would run out of cash in September 2011.

There was also concern about the high-risk nature of the project. Internally, the Office of Management and Budget wrote that "the risk rating for the project sponsor [Solyndra] … seems high." Outside analysts had warned for months that the company might not be a sound investment.

Peter Lynch, a New York-based solar energy analyst, told ABC News it took only a cursory glance through Solyndra's prospectus to see there was a problem with their numbers.

"It's very difficult to perceive a company with a model that says, well, I can build something for six dollars and sell it for three dollars," Lynch said. "Those numbers don't generally work. You don't want to lose three dollars for every unit you make."

In 2008, Solyndra, then just three years old, pushed ahead with its application for government backing to build a new plant to produce its unique solar panels. An outside rating agency, Fitch, gave Solyndra a B+ credit rating that August. Two months earlier, in June 2008, Dun & Bradstreet issued a credit appraisal of the company. Its assessment: "Fair."

Those are not top-of-the-line scores, Fitch Ratings spokeswoman Cindy Stoller told the Center for Public Integrity's iWatch News, which has been investigating the deal in partnership with ABC News since March. She could not discuss the Solyndra review specifically, but said of a B+ rating: "It's a non-investment grade rating." She provided a company ratings definition, showing that B+ falls between a "highly speculative" B and "speculative" BB.

Asked about those ratings, and how significantly the department viewed the risk, energy officials said Monday the department conducted "extensive due diligence" on the application, which included consideration of the Fitch rating.

"We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative startup companies," said Damien LaVera, an Energy Department spokesman.

"The Department conducted exhaustive reviews of Solyndra's technology and business model prior to approving their loan guarantee application," LaVera said. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."

Copyright 2011 ABC News Radio


Chrysler Returns $7 Billion in Government Loans

Bill Pugliano/Getty Images(STERLING HEIGHTS, Mich.) -- Chrysler on Tuesday celebrated the payback of the $7.6 billion dollar loan the automaker received from taxpayers to help keep the company afloat.

Chrysler CEO Sergio Marchionne and White House advisor on manufacturing Ron Bloom made the announcement during a visit to a Sterling Heights, Mich., auto plant Tuesday.

Just two years ago, the automaker was forced to file for bankruptcy.  But last week, Chrysler entered into a loan and bond deal with private banks making it possible for the company to repay taxpayers sooner than expected.

In a statement, President Obama hailed the company's payback as a "significant milestone for the turnaround of Chrysler and the countless communities and families who rely on the American auto industry."

"This announcement comes six years ahead of schedule and just two years after emerging from bankruptcy, allowing Chrysler to build on its progress and continue to grow as the economy recovers," the president said.

"While there is more work to be done, we are starting to see stronger sales, additional shifts at plants and signs of strength in the auto industry and our economy, a true testament to the resolve and determination of American workers across the nation."

Copyright 2011 ABC News Radio


Chrysler to Announce Bailout Repayment Tuesday

PRNewsFoto/Chrysler Group LLC, Jim Fets(DETROIT) -- Chrylser is expected to formally announce Tuesday the repayment of the $7.5 billion bailout loan it received from taxpayers, the Wall Street Journal reports.  

Chrysler chief executive Sergio Marchionne and White House advisor on manufacturing Ron Bloom will make the announcement during a visit to a Sterling Heights, Mich. auto plant Tuesday.  

Just two years ago, the auto maker was forced to file for bankruptcy.  But last week, Chrysler entered into a loan and bond deal with private banks making it possible for the company to repay U.S. taxpayers sooner than expected.

The deal includes $3.2 billion in bonds, $3 billion in a term loan and a $1.3 billion revolving credit facility, according to the Wall Street Journal.  Italian auto manufacturer Fiat will help to complete the payment with $1.3 billion cash to Chrysler.  

Chrysler reportedly paid $1.2 billion in interest on the loan last year, but WSJ reports the new deal will allow the company a new rate below 10 percent, saving it $300 million a year.

Copyright 2011 ABC News Radio


'Son, Can You Spare a Signature?' Kids Co-Sign for Hard-Up Parents

Photo Courtesy - Getty Images(MIAMI) -- "Son, can you co-sign for my car?" That's the kind of question more adult children have heard from parents hit hard by the great recession.

Evidence of such an increasingly popular arrangement has popped up in a few places. Although the number of parents co-signing for adult children has risen to 11 percent from 9 percent in the past two years, the number of adult children helping parents with a car lease has increased more than 30 percent, according to, an online car-leasing website.

The adult children, defined as people ages 20 to 29, have been assisting parents who are 40 to 55.

Foreclosures, unemployment and the overall health of consumer credit may be "forcing adults to make this decision and take this alternative approach," says John Sternal, vice president of marketing communications at Miami-based

But the financial alternative comes with pitfalls when a co-signer becomes liable for the full loan if a parent fails to pay.

"One of the problems of co-signing is you usually don't know there's a problem until the loan is in default," says Rick Kahler, a financial planner at Kahler Financial Group in Rapid City, S.D.

"If a payment is missed, you're one of the last to find out."

A collection agency will go after a co-signer as aggressively as the original debtor. And, unfortunately, unlike a bank, a co-signer cannot repossess an auto loan if parents fall behind on a financial obligation. A parent's failure to make timely payments could also result in higher interest for credit cards and other lines of a credit, and could affect mortgage approval rates.

What's more, co-signing on a loan turns a familial relationship into a business one.

"You have to be ready to pay off that loan," Kahler says.

"If you think it's a wise thing to do, then, of course, go for it but you still must say, 'I'm going to be just fine if I have to step in and make this good because that's the bottom line.' The bottom line is you've got to be ready to pay off that note."

Copyright 2010 ABC News Radio

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