Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: New York auto dealerships agree to $13.5M settlement for inflating car prices, (Jun 17, 2015)
By Michael Menzhuber, J.D., LL.M.
Three car dealerships—Paragon Motors of Woodside, Inc., Worldwide Motors Ltd.; and Civic Center Motors Ltd. (collectively, “Paragon”)—have agreed to a settlement which will return more than $13.5 million in restitution to consumers, New York Attorney General Eric T. Schneiderman announced today.
The settlement is part of the attorney general’s wider initiative to end the practice of “jamming,” unlawfully charging consumers for hidden purchases by car dealerships. Under a consent order agreement, the company will also pay $325,000 in penalties, fees and costs to New York State.
Paragon Dealerships. The Attorney General’s investigation into the three Paragon dealerships, all of which are owned by the same individuals, found that, between 2010 and 2014, they used deceptive sales tactics. These tactics included charging consumers for credit repair services and other “after sale” items without their knowledge or by misrepresenting that the services were free. According to the investigation, Paragon entered into an arrangement with Credit Forget, Inc. (CFI) to sell its customers CFI’s credit repair and identify theft protection services, in violation of state and federal laws banning upfront fees for these services.
The settlement agreement requires Paragon to pay $6 million into a restitution fund administered by a third-party administer to be distributed to Paragon consumers with CFI contracts and to provide each of the about 15,000 affected consumers with a $500 “settlement card” that can be applied to one or more of the following from Paragon:
the purchase or lease of any new or used vehicle;
certain services or maintenance, such as oil changes, tire rotations, tire repairs, and wheel alignments; or
certain accessories, such as mats and replacement windshield wipers.
The settlement also prohibits Paragon from:
selling, offering to sell, or marketing credit repair and identity theft services in connection with the sale or lease of a vehicle;
selling, offering for sale, or providing to consumers any after-sale product or service unless, prior to such sale, certain material terms, including price, are disclosed verbally and in writing;
misrepresenting the price of the vehicle in final lease or sale contracts;
negotiating any terms of a sale or lease with a consumer in a language other than English without providing a translation of certain material documents in the language in which the terms were negotiated before the consumer signs these documents; and
failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price.
Credit Forget, Inc. (CFI). A consent order was also obtained that shut down CFI, a New York company, that sold unlawful credit repair and identity theft prevention services to car dealerships that turned around and sold those service contracts at a higher price. The consent order with CFI, and its two principals, Damien Bullard and Michael E. Morgan:
enjoins it and its principals from marketing, promoting, selling, or engaging in the “credit services business”, in violation of the law, or from misrepresenting the services they offer;
requires CFI and its principals to instruct all dealerships to whom they distributed contracts for credit repair services for sale to consumers to stop selling these services and to remove all promotional materials and contracts from their dealerships;
orders the dissolution of CFI; and
requires CFI and its principals to pay $2 million if they do not comply with these terms.
L.I. Autoworld, Inc. The Attorney General’s Office also reached a $41,000 settlement with L.I. Autoworld, Inc., d/b/a Generation Kia in Bohemia, Suffolk County, after an investigation found the company fraudulently sold CFI services and other after-sale products. Pursuant to the agreement reached earlier in the year, Generation Kia, made $16,000 in payments reimbursing 24 consumers for the profits that the company made related to the unlawful CFI contracts that they sold. The company also paid more than $20,000 in restitution to a dozen other consumers who were subjected to deceptive business practices and a $5,000 penalty. The settlement also requires Generation Kia to stop using deceptive and misleading sales tactics and to provide documents and disclosures required by law, including the itemization of the cost of after-sale items in sale and lease agreements.
News: ConsumerProtection NewYorkNews