This week, New York’s attorney general reached four separate settlements connected with 22 different rooftops in the New York City area for packaging credit repair and identity theft protection services into the vehicle installment contract; a similar practice that landed other Big Apple stores in legal trouble a year ago to the tune of more than $6 million.
The newest settlements with attorney general Eric Schneiderman are designed to return nearly $2 million in restitution to almost 5,000 consumers and $174,000 in penalties and costs to the state. The dealerships included in the settlement are Koeppel Auto Group, Plaza Dealerships and Manfredi Auto Group as well as the three-store chain under the umbrella of Huntington Honda. The settling dealer operators have locations in Staten Island, Brooklyn, Queens, Long Island and Westchester.
Schneiderman charged the dealerships with unlawfully selling what he called “after-sale” products and services, including credit repair and identity theft protection services that “often added thousands of dollars to the purchase price of the vehicle.”
“Consumers deserve to be treated honestly by car dealerships, and shouldn’t be hit with hidden fees that inflate the price of the vehicle,” Schneiderman said. “My office will continue to make it a priority to crackdown on these deceptive business practices that target unsuspecting consumers.”
These latest settlements are part of the Attorney General’s wider initiative to end the practice engaged in by many dealers of “jamming,” or unlawfully charging consumers without their consent or knowledge for purchases.
Last year, as part of the wider investigation, Schneiderman obtained a consent order that shut down Credit Forget (CFI), a New York company that sold the unlawful credit repair and identity theft protection services to these and other dealerships. It is a violation of state and federal law to charge upfront fees for services that promise to help consumers restore or improve their credit, and contracts that violate the law are void.
The attorney general’s investigation found that, between 2010 and 2015, these dealers used fraudulent, deceptive, and illegal methods to sell CFI contracts to approximately 5,000 consumers.
The investigation determined the costs of these items were often bundled into the vehicle sale price and not separately itemized. The investigation showed that for some dealers consumers were totally unaware that they had received these services. In many other cases, consumers thought that the services were free.
“As a result, often unbeknownst to the consumer, the price of the car stated on purchase and lease documents was inflated by the amount of these after-sale items,” the attorney general’s office said.
The attorney general found the dealerships failed to provide required disclosures such as consumers’ rights to cancel the credit repair services contract. In addition, when the negotiations were conducted in a language other than English, the Koeppel dealerships provided sales documents only in English and not in the language in which the negotiations were conducted.
As part of the settlement stemming from a lawsuit brought in January, Koeppel must provide a translation of certain material documents in the language in which the terms were negotiated before the consumer signs these documents.
The settlements prohibit the dealerships 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
—Failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price
Last June, the Attorney General reached a similar agreement with the Paragon dealerships, located in New York City and Westchester that required Paragon to pay $6 million into a restitution fund administered by a third-party administrator that was distributed to 13,582 Paragon consumers who received the CFI contracts. Paragon also paid $325,000 in penalties, costs and fees.
In addition, previous settlements were reached with four other dealer groups providing for $233,000 in restitution to 1,238 consumers and $36,000 in penalties and costs.