State says repair shops in Des Moines, Clive improperly took cars from customers who didn't pay

Midas Auto Systems Experts Inc. this month agreed to stop misusing an Iowa lien law and taking possession of customers’ vehicles illegally when they can't pay their repair bills.

According to allegations by Iowa Attorney General Tom Miller in a legally binding agreement with the company, Midas filled out paperwork suggesting vehicles with unpaid repair bills had been sold to the company for nothing, but that no legal sale had actually taken place.

The attorney general alleged — and Midas denied — that the company had violated Iowa's Consumer Fraud Act.

Alan Mahrt, chief operating officer of the company, said Midas wasn't trying to defraud customers; it was trying to get rid of vehicles abandoned at shops after authorized repairs.

"Obviously we missed a step," he said. "But we didn’t do this intentionally or fraudulently. With all of these vehicles, we lost money."

Midas Auto Systems is based in Denver but has a corporate office in Davenport. It has locations in Iowa, Illinois, Kansas, Missouri, Nebraska and Oklahoma.

Lynn Hicks, a spokesperson for the attorney general, said under Iowa law, repair shops are allowed to keep a vehicle until they are compensated for work a customer has authorized.

Iowa’s artisan’s lien statute allows the repair shop to eventually sell the vehicle after appropriate notice is given to anyone who has a financial interest in it, and then use the proceeds to recoup the agreed-upon value of the repair work.

The shop and the purchaser are supposed to go to the county treasurer’s office and fill out the appropriate paperwork to transfer the vehicle’s title into the purchaser’s name. The balance of the proceeds from the sale, if any, are supposed to be returned to the person or people who owned the car. 

But Hicks said Midas shops in Clive and Des Moines are among some repair shops that lately have not been following the process correctly. 

“Instead of selling the vehicle, repair shops have been going to the local county treasurer’s office and falsely claiming they sold the vehicle to themselves for zero dollars and then filling out the paperwork to title the vehicle in their own name,” he told Watchdog.

Some repair shops have kept the vehicles, given them away to people the owners know or sold them for less than they may be worth without notifying the person or people who owned the car, he said.

In such scenarios, the parents or spouse of the person who brought the car to the repair shop could hold title to the car, but not be given a chance to pay the outstanding bill and get it back.

In Midas’ case, a Polk County treasurer’s employee noticed paperwork was suspicious and informed the Iowa Department of Transportation, which notified the attorney general.

Investigators discovered the Clive, Ingersoll, and Euclid Midas locations had fraudulently acquired titles to seven vehicles, Hicks said. Three are in the process of being sold properly, per the terms of the legal agreement.

Hicks said the other four vehicles already had been sold or given away. Under the lien law, two of the consumers are due a combined $2,350 reimbursement from those sales.

Hicks said Midas gave one of the cars away — he didn't know to whom — and sold the other for $500.

"These were old cars, and the shops didn’t do a good job of documenting values on the liens. But we made an estimate of the values of the cars and determined that the consumers should have been owed money," he said.

Mahrt said if county officials noticed a problem, they should have told Midas workers they were transferring ownership of the vehicles the wrong way.

The transportation department is working with the attorney general to update the artisan’s lien form to make sure repair shops enforce liens legally, Hicks said.

Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@dmreg.com or 515-284-8549. Follow her on Twitter at @leerood and on Facebook at Facebook.com/readerswatchdog. Our subscribers make the Reader's Watchdog possible.

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