Trading in Car With Money Still Owed on It Leads to Financial Nightmare for Maryland Couple

A Maryland couple went through a financial nightmare after trading in a car on which they still owed money.

Frank Katende wanted to do something special for his wife, Mary, so on June 20, he bought her a Mercedes by trading in his older model vehicle at Chase Auto Group in Dumfries, Virginia.

The balance owed on his trade-in, according to the sales contract, was $8,400.

But shortly after trading in his car, Katende got a call from Flagship Credit, the loan company that financed it. Flagship was looking for his payment on the car.

“I was frank with him, I said, ‘Hey, I traded the car. I don't have it," Katende said.

The phone calls from the loan company kept coming, and according to Katende, they were getting impatient.

“They were calling me at work, my phone like three to four times,” he said.

Then he received a notice of intent to repossess the car, which was posted for sale on the dealer's website.

The dealership told NBC4 Responds it sent Flagship a check July 29.

But Flagship said it had no record of receiving a payoff from the dealership and in a statement said, "In an attempt to assist Frank in resolving the balance due, Flagship participated in a three-way conference call with Mr. Katende and Chase Auto Group on July 19."

Flagship said during that conversation the dealer was provided with a payoff quote, "however, as of Sept. 1, 2016, no payment has been received by flagship."

The statement went onto say, "Unfortunately, since flagship had no involvement in the transaction with the dealer, Mr. Katende remains responsible for the outstanding balance."

“I did not want to put my family through what they went through,” Katende said.

Chase Auto Group’s general manager said they initially held off paying the loan because the couple owed the dealership a balance of $500 for the deposit, which the couple disputes.

After NBC4 Responds got involved, the dealer and flagship connected once again. On the evening of Sept. 1, Chase Auto Group paid off the car loan.

In addition, Flagship is reversing any negative marks on Katende's credit as a result of the delay in the loan being paid off.

Chase Auto Group told NBC4 Responds it believes Flagship eventually found the check the dealer said was sent July 29 based on their bank statements. NBC4 Responds requested a copy of those documents but hasn't received them.

There is no law on how long a dealer has to pay off a loan on a trade-in, according to the National Independent Automobile Dealers Association, to which this dealer belong, however it's encouraged that it be no more than 10 days.