Some 165 Hertz Car Rental customers have filed claims in bankruptcy court saying they were stopped, detained, and even spent months in jail because the car rental company filed stolen car reports on vehicles they had rented and paid for. Hertz has responded by questioning the truthfulness of some plaintiffs' unabashedly flamboyant lawyer. But with so many customers around the country reporting similar experiences over more than a decade, it seems clear that at least some of these incidents really did happen.

Why did they happen? Does the issue result from actions or policies on Hertz's part? Are they part of a misguided attempt to reduce costs at the extreme expense of some customers? Whatever the answers, Hertz is setting an example every business leader should be careful not to follow. 

Perhaps the most damning complaint comes from Hanna "John" Ayoub, who was jailed for months after renting a truck from Hertz and paying $2,309 to extend the rental. Another renter reported being forced to walk backward with his shirt lifted up toward two police officers whose guns were trained on him. Once they saw the rental contract, he says, the officers let him go and phoned Hertz to complain.

When asked for comment, a Hertz representative sent this statement to Inc.:

Hertz cares deeply about our customers, and we successfully provide rental vehicles for tens of millions of travelers each year. Unfortunately, in the legal matters being discussed, the attorneys have a track record of making baseless claims that blatantly misrepresent the facts. The vast majority of these cases involve renters who were many weeks or even months overdue returning vehicles and who stopped communicating with us well beyond the scheduled due date. Situations where vehicles are reported to the authorities are very rare and happen only after exhaustive attempts to reach the customer.

Admittedly, Francis Malofiy, who represents some of these plaintiffs, is not your run-of-the-mill attorney. He's best known for bringing a plagiarism lawsuit against Led Zeppelin over the iconic guitar introduction of "Stairway to Heaven" (which is indeed strikingly similar to part of the Spirit song "Taurus," released three years earlier). So it's no surprise that Hertz might attempt to deflect the issue by questioning Malofiy's reputation. But the accusations against Hertz don't seem to be baseless at all.

Ayoub told CBS News that after he requested and paid for an extension of his truck rental, he was told all was in order. He has a recording of a Hertz agent saying, "Yup, you're all set." Nevertheless, a few days later he was arrested for "theft" of the truck. The four months he spent in jail left him broke and living with his parents, he says.

Hertz customer complaints that they were falsely accused of stealing legitimately rented vehicles go back to at least 2008, and  Hertz has lost previous lawsuits over this issue. In one bizarre case, customers say they were stopped because Hertz had rented them a car the company didn't actually own. And despite Hertz's assertion that such cases are "extremely rare," Fritz Jekel, the attorney in an earlier case, told the Delaware News Journal he has received a Hertz internal database of false arrest and false theft accusations by customers going back to 2008, which suggests these are not one-of-a-kind events.

Emerging triumphant from bankruptcy

In 2020, the pandemic cratered the car rental industry, and Hertz filed for bankruptcy. It emerged triumphantly this past July, thanks to the current sellers' markets for both car rentals and used cars. In October, it announced a purchase of 100,000 Tesla vehicles. Elon Musk tweeted that Tesla had more demand than it could fill and Hertz would have to pay full price for any cars it bought. Nevertheless, the announcement raised the share prices of both companies.

Because a bankruptcy discharges outstanding debts, Hertz has argued that at least some of the suits against it are now moot, Malofiy told Inc. But that argument failed to convince bankruptcy judge Mary Walrath, who ruled earlier this month that the suits could go forward.

Why would a car rental company put out stolen car reports on cars that people have legally rented? Malofiy told Inc. that it amounts to a cost-saving measure. Plagued by outdated technology, he says, "They can't keep track of their inventory. So when they lose or misplace a car, they report it stolen." Whenever a car goes missing, Hertz is supposed to conduct an investigation into its whereabouts, he said. But that would take both time and money. Reporting a car as stolen is quicker, cheaper, and easier, Malofiy said, and effectively outsources the investigation to the police.

Whether Malofiy is right about any of this, it's obvious that Hertz is doing something wrong. It should be customer service 101 that you don't put customers in jail for crimes they didn't commit. Hertz was once the undisputed leader in U.S. car rentals, but got overtaken by Enterprise years ago. Car share membership services like Zipcar and peer-to-peer rentals like Turo threaten to eat into Hertz's market share even further. In the short term, Hertz is benefiting from market events that are lifting its revenue. Will it stay out of bankruptcy for the long term? That may depend on whether it rethinks its practices.