Bankrupt Hertz is still wrongly accusing customers of stealing its cars, lawsuit claims

This story originally erred in saying that the renter of a Ford Mustang had returned the car before his arrest. In fact, he was arrested in the vehicle. The charges were later dropped. This article also includes updated statements from Hertz.

John Ayoub’s nightmare began when he rented a pickup truck from Hertz. By nightmare’s end, he had lost his tools, his business, his house, and his freedom.

Ayoub, a South Jersey contractor, needed the Dodge Ram for work in March 2019. For each of the seven weeks that followed, he says, he called Hertz to extend his rental contract. He has phone records and recordings that document the calls.

But as May drew to a close, Hertz reported the truck stolen and accused Ayoub of grand theft auto. Police arrested Ayoub at his home in Deptford and seized the pickup. The arrest sent him to jail for four months. The time behind bars left him broke.

“I have not been able to work,” said Ayoub, 39. “I take on odd jobs. I live with my parents. I don’t even have a vehicle right now.”

Hertz claimed that it did not have a record of the rental extensions or that several of Ayoub’s extensions were not approved. Ayoub has an e-receipt stating he paid Hertz $2,309.44 for the rental on May 29, 2019, after Hertz told him it planned to go to the police but before he was arrested. After learning of that payment, prosecutors in Delaware and New Jersey dropped the criminal case against him. Ayoub is among 20 former Hertz customers who have joined to sue the car-rental giant for allegedly filing false police reports. The suit, filed in U.S. Bankruptcy Court in Delaware, also names the company’s senior executives as defendants.

Hertz vigorously disputes the complaints. “We gave customers numerous opportunities to do the right thing and return the car before law enforcement got involved,” a firm spokesperson said

Hertz is not the only major rental company to file stolen-vehicle reports with police. In an interview, Walt Zaliski, a former security director for the Avis Budget rental company, said such reports were needed to combat fraud. In particular, he said that fraud was sometimes marked by a customer’s use of a debit card tied to a bank account. That way, the fraudsters limit their financial exposure. “They’ll take it for two days and just not return it,” he said.

On the other hand, Zaliski said, Avis Budget did sometimes file improper police reports because of communications breakdowns among employees. “Mistakes are made,” he said.

Hertz, founded in 1918, filed for bankruptcy in late May, seeking a judge’s permission to restructure its business and free itself from $19 billion in debt. The COVID-19 pandemic left Hertz with a mostly idle fleet of 700,000 cars.

Whether the suit recovers any damages for the customers is up to the court. Hertz is obliged to pay off other creditors — primarily carmakers ― first.

Ayoub’s lawyer, Francis A. Malofiy of Media, asserts that Hertz has wrongfully accused hundreds of its customers of stealing the cars they lawfully rented.

The alleged victims are scattered across the nation — Malofiy’s clients hail from California, Florida, Illinois, Indiana, Ohio, New Jersey, and Pennsylvania. They are disproportionately Black, brown, or recent immigrants, Malofiy said. Ayoub, whose given first name is Hanna but prefers to use John, is American-born of Palestinian descent.

Hertz settled a similar case with Malofiy in 2017. The lawyer believes that the company should have learned its lesson then. But Malofiy claims Hertz finds it less expensive to pay settlements than fix a computer tracking system that he says lands dozens of its customers in jail.

“They essentially use the police as a taxpayer-funded repo service,” Malofiy said. “It’s cheaper for them to do it that way.”

In his 2017 case, the rent-a-car behemoth had reported Kelly A. Grady of Delaware County for the alleged 2013 theft of a GMC Yukon. Grady was locked up for 12 days in Burlington County Jail, where, her lawsuit alleged, she was assaulted by another inmate. At the time of her arrest, her lawyer says, Grady already had paid Hertz $4,200 for the SUV rental.

The jury awarded Grady at least $100,000 in compensatory damages as a victim of malicious prosecution. According to court records, Hertz settled the case rather than face a jury decision on any punitive damages for the company’s conduct.

Despite losing the case, Hertz has continued to file improper theft reports against other renters, said Malofiy, who earned some degree of fame for unsuccessfully suing Led Zeppelin for allegedly plagiarizing “Stairway to Heaven.”

”Hertz routinely files false or incomplete stolen-vehicle reports even after their customers had paid for the rentals in full,” Malofiy said. “The company has a broken computer system, and they’re not having corporate security personnel verify the thousands of theft reports it makes every year.”

The 20 plaintiffs in the Delaware case said that they presented evidence to the company documenting their payments, but that Hertz has refused to withdraw the stolen-vehicle reports.

A Hertz spokesperson said that payments or even the eventual recovery of the car did not wipe away what it views as the original theft.

Hertz can’t un-ring the bell. The stolen-vehicle report “was valid when it was made,” the spokesperson said. “It’s up to law enforcement to decide what to do with the case.”

Industry experts say theft is fairly common in the world of rental cars, where an estimated 30,000 are stolen every year, according to the National Insurance Crime Bureau, a trade organization that combats fraud.

People often rent cars but don’t return them, the Hertz spokesperson said. In the industry, the term for this is “theft by conversion.”

Prosecutors must determine whether a customer intended to steal the car. Many of the plaintiffs, such as Ayoub, were repeat Hertz customers. Most of Malofiy’s clients have evidence that they called Hertz several times either to extend their rental agreements or assure Hertz that they were returning the cars.

“That’s not something you do if you intend to steal a car,” Malofiy said.

Frank Scafidi is director of public affairs for the National Insurance Crime Bureau. A former deputy sheriff in Los Angeles and FBI agent, Scafidi said determining a customer’s intention is difficult.

“When I was a cop, I wouldn’t take a stolen-vehicle report from a car-rental company unless I could find something to convince me it wasn’t a late return,” Scafidi said. “It’s hard to establish intent. There’s a lot of gray in that sky.”

In a statement to The Inquirer, Hertz said its lawyers have “extensively reviewed the claims in the lawsuit” filed by Malofiy and believe that the customers had every intention to steal the cars.

“The vast majority of the claims involve renters whose arrests resulted from their failure to return rented vehicles for weeks past their due date, in violation of the rental agreement and despite our repeated attempts to communicate with them about the status of the vehicle,” Hertz said.

Hertz says that when its staff determines that a car is overdue, it sends robocalls to the customer. Then it escalates to emails, personal phone calls, and certified letters. If it doesn’t get a response, it hires a repossession company to find the car. If the repo servers don’t find it, Hertz says, only then does it file a report with the police.

The company spokesperson said there is “not a systemic problem or some breakdown on a company-wide basis.”

He said that if overdue customers are involved in an accident, Hertz could be liable for damages. “To cut the liability off, we report the car stolen,” he said.

On occasion, Hertz reports some of its best customers.

Brent Williams, 46, a salesman from Bethlehem, rented a Ford Mustang convertible in late 2007. He drove it for two months in the Florida Keys until he was arrested in 2008. Hertz disputed that he had paid.

Williams returned to Florida a few weeks later to contest the charges. He had proof that he had paid $600 for every week he had had the car. But no lawyer from Hertz showed up at the court hearing, he said.

“I thought the matter had been dropped,” Williams said. “It never made any sense. How would you get a rental car if you didn’t pay for it? I rented dozens of cars from Hertz. I spent tens of thousands of dollars with them.”

Williams was wrong. Although he had paid $5,569.09 in rental fees for the Mustang and had given Hertz his bank statements showing proof of payment, the warrant remained active.

Eight years later, he was stopped in another car for a traffic violation by a state trooper near Allentown. The trooper discovered that there was an outstanding warrant for Williams in the theft of the Mustang.

After his arrest near Allentown, police “put me in jail, and I sat there for 30 days waiting for transport. That trip took 10 days to go from Pennsylvania to Florida,” he said. “They kept me shackled the entire time. It’s almost like being kidnapped.”

When Williams arrived in Florida, he said he overheard the prosecutor say, “I can’t believe we just transported this guy.” The charges were dropped, according to court records. Hertz made no apology.

Both Ayoub and Williams had used debit cards to secure their initial rentals. Both then extended their contracts by phone. None of Malofiy’s clients used conventional credit cards, which is more typical among car-rental customers.

“The triggering event is always an issue with the bank card,” Malofiy said. “They run a check to see if there’s enough money on the card. Sometimes it’s just a simple glitch.”

A key problem, Malofiy said, is that Hertz deletes any records it may have of the rental extensions.

A spokesperson for Hertz denied that the company “intentionally purged” any evidence that could absolve its customers. The spokesperson said the company has rented out millions of vehicles over the years and can’t keep every voice recording, text, and email for every rental agreement. Malofiy said that should have been company procedure.

“We maintain significant documentation relevant to the law enforcement referral, including the rental contract, payment history, and a summary of communications with the customer,” the spokesperson said.

According to Hertz’s contracts with customers, renters with payment disputes must settle them through arbitration. Hertz can escalate a case by filing a stolen-vehicle report, with the potential of involving police. There is no mention on the rental contract that a late car could lead to jail time.

Hertz has no mechanism to withdraw a criminal referral because, the company spokesperson said, it has to maintain a relationship of “integrity and responsibility” with law enforcement

From time to time, Hertz’s relationships with the authorities have soured.

In 2015, the regional airport in Louisville, Ky., put a limit on the number of theft accusations it would accept from Hertz, according to documents supplied by Malofiy. In 2016, Indianapolis Airport police also began to turn down Hertz complaints. Hertz said those issues were addressed.

Sometimes, Hertz rents out cars it has already reported stolen.

Brian Steinberg, 62, of Brigantine, N.J., was on vacation in Las Vegas in 2018 when he rented a Toyota Corolla from Hertz. The next morning Steinberg, a retired community college instructor, parked at the Flamingo Casino to pick up a pair of Wayne Newton show tickets.

When he returned to his car, he found police waiting.

“I was detained for three hours,” Steinberg said. “They treated me like I was a criminal.”

Six days before Steinberg rented the Corolla, real car thieves had broken into a Hertz office in nearby Henderson, Nev., and made off with 25 sets of keys and five cars. A Hertz employee reported the Corolla stolen along with the others. It hadn’t been taken. Apparently, staffers did not check all the rental bays. Steinberg had been given the Corolla.

“I was given no explanation, no apology,” Steinberg said. “How could a company this big, which claims to put customer service as its No. 1 priority, let this happen?”

In that case, Hertz “made a human error,” the company spokesperson said. But this “wasn’t an overdue rental. It was nothing like someone ignoring calls and emails.”

Hertz said Shontrell Higgs ignored calls and emails. A nurse, Higgs was on her way to work in a rented Jeep Wrangler on April 9, 2019, when she was arrested by Miramar, Fla., police near her home.

“I said, ‘Is this some kind of joke? This can’t be stolen, I pay for this every week.’” She, too, had used a debit card to pay for the rental.

Higgs gave the officer her record of calls and messages with Hertz. She texted with Hertz earlier that day to let them know she had extended her contract, was paid up, and would be returning the car April 10. A copy of that text is attached to the Delaware lawsuit.

“I showed [the officer] the text message from my phone,” Higgs said in an interview with The Inquirer. “He said it happens all the time. He showed me on the computer where Hertz issued the report on April 5 of it being stolen.”

Still, Higgs said, “the officer said he had to take me. I was shocked. Then I started crying. I had clients I was supposed to see, a job where I was supposed to show up.”

Hertz maintains that Higgs had promised to return the Jeep by March 20.“She didn’t return the car as promised,” the Hertz spokesperson said.

Because she was on probation for an unrelated theft conviction, Higgs was held in jail for 37 days. Finally, Higgs said, she was forced to plead no contest to the stolen-vehicle charge so that she could return home to her two young children more quickly. She still served several more months.

She tried to withdraw the plea last month, but a judge rejected her request.

“I get frustrated when I see that Hertz is claiming they are broke and bankrupt,” she said, “and are still filing false police reports.”