Hudson Offers Advice as Attorney General Actions Against Dealers Heat Up

After seeing the penalty the Washington attorney general levied on an independent dealer last week, attorney Tom Hudson said he's seen an uptick in these cases recently and that the operation “got off relatively lightly.”

Hudson stressed dealers can avoid what happened to RGH Marketing and its owner Robert Hubbard Jr., a former manager of Interstate Auto Liquidators in Vancouver, Wash.

Washington attorney general Rob McKenna originally filed a lawsuit in 2009 against RGH Marketing and Hubbard, alleging both violated Washington’s Consumer Protection Act, Promotional Advertising of Prizes Act and Dealers’ Licenses Act.

Now, Hubbard and RGH must pay more than $128,000 in penalties and attorneys’ fees.

“This dealer actually got off relatively lightly,” Hudson told Auto Remarketing on Wednesday.

“We’ve seen a lot of these actions by AGs around the country lately — I’d say a couple of dozen in the last year or so — and settlements of $200,000 to $300,000 are not uncommon,” added Hudson, one of the founding partners of the law firm Hudson Cook, a nationwide provider of legal compliance services for the automotive and financial industries based in Hanover, Md.

What Got the Dealer into Trouble

Washington’s attorney general recapped why Hubbard and the store ended up with legal problems.

McKenna accused the defendants of misleading customers by falsely claiming that vehicles were being sold under distressed conditions by using advertising terms such as “Pre-Auction Auto Sale,” “Repos,” and “Bank Asset Sale” when in fact, the vehicles came from the dealer’s regular inventory.

The AG also indicated the dealership’s ads included promises of vehicle discount offers that did not exist, such as “50-percent off the MSRP” on used vehicles, when MSRP is generally a term describing new models, not used units.

“Illegal advertising not only harms consumers, it gives dishonest auto dealers an unfair advantage over businesses that are playing by the rules and already struggling during this difficult economy,” McKenna declared.

According to assistant attorney general Mary Lobdell, advertising statements implying that customers could finance and drive home any vehicle of their choice, regardless of a consumer’s credit rating, were also misleading.

“Although consumers were led to believe credit would be available to everyone at these sales, the dealership could not prove that consumers, regardless of creditworthiness, received financing offers,” Lobdell stated.

A judgment was entered in Clark County Superior Court against Hubbard and RGH Marketing.  The defendants must pay the $66,228.00 judgment, $36,228.00 in costs and attorneys fees, and $28,000 in civil penalties.

What Dealers Can Do Differently

Since this case in Washington wasn’t the first to appear on Hudson’s legal radar, the attorney began his advice to dealers with what he called a few simple things.

“Dealers need to assure that every statement in an ad is truthful,” Hudson told Auto Remarketing.