A complaint was filed December 10, 2009 with the California Department of Justice regarding Automotive Finance Corporation (AFC) unlicensed lending in California from 1999 to 2007.
More than 500,000 loans are alleged to have been made in violation of California's usury laws.
AFC, a flooring lender for used car dealers, was accused of providing false information to the Department of Corporations when they submitted an application on 1/27/2007. Automotive Finance Corporation claimed that AFC CAL, LLC had just formed on January 23, 2007 in there filing with the Secretary of State signed by attorney-in-fact Mark T. Gillett of Morrison Foerster, LLP.
AFC also falsely stated that all loans were commercial and in amounts of $5,000 or more. In fact, thousands of loans were for amounts of $1,000 to $3,500, thus subjecting them to the restrictions of personal loans. Charges on these short term loans could exceed 500% APR and was never fully disclosed to the borrowers.
Automotive Finance Corporation is owned by ADESA, a subsidiary of KAR Auction Services, Inc. (KAR). A S.E.C. filing in 2008 stated "AFC is subject to laws in certain states and in Canada which regulate commercial lending activities and interest rates and, in certain jurisdictions, require AFC or one of its subsidiaries to be licensed".
ARTICLES OF ORGANIZATION OF AFC CAL, LLC filed 1/23/2007