The attorney general in the Empire State found reason to bring more allegations against franchised dealership accused of illegal selling products and services through the F&I department.

New York attorney general Eric Schneiderman this week announced a lawsuit against several Queens dealerships, including Koeppel Nissan, Koeppel Subaru, Koeppel Mazda, Koeppel Auto Group, and Koeppel Volkswagen.

The lawsuit, filed in New York Supreme Court, alleges that the Koeppel dealerships, all owned by the Koeppel family, unlawfully sold “after-sale” products and services, including credit repair and identity theft protection services to 1,426 consumers that sometimes exceeded a cost of $2,000 per consumer.

The attorney general also announced new settlements with dealerships in Nassau and Suffolk counties for selling credit repair and identity theft protection services to consumers.

According to the lawsuit, the Koeppel dealerships used deceptive sales tactics, including charging consumers for services while concealing such charges from the consumers, or by misrepresenting that the services were free.  In fact, law enforcement indicated consumers did not receive the credit repair and identity theft protection services for which they were charged.

The court papers also alleged that the Koeppel dealerships collected more than $1 million from consumers between January 2013 and November 2014 for the credit repair and identity theft protection services alone using such deceptive tactics. The suits seek a court order prohibiting the Koeppel dealerships from engaging in these kinds of practices in the future and directing them to refund all illegally obtained overcharges to consumers.

Schneiderman’s office said the Koeppel dealerships arranged with an independent company, Credit Forget It, to sell Credit Forget It’s credit repair and identity theft protection services beginning no later than early 2013. Officials indicated 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. 

“Contracts that violate the credit repair laws are void,” Schneiderman’s office said.

The court papers further alleged that the Koeppel dealerships added on charges for other after-sale items like VIN etching and key replacement services, without clearly disclosing what they were charging for such services.  Officials said the costs of these services were often bundled into the vehicle sales price and not separately itemized. 

“As a result, unknown to the consumer, the price of the car stated on purchase and lease documents was inflated by the amount of these after-sale items,” Schneiderman’s office said.

In addition, the Koeppel complaint alleged that the dealerships sometimes negotiated purchase and lease terms with consumers in Spanish and then only provided contracts and documents in English.  New York City law requires that when the terms of an installment agreement are negotiated in Spanish, the seller must provide documents translated into Spanish.

“When consumers shop for a car, they should not be misled by deceptive dealerships looking to make a quick buck off New Yorkers,” Schneiderman said.

“Unfortunately, some dealers pad their pockets with fees for products and services that unaware consumers don’t need, and don’t want,” he added.

Other settlements in NY

The attorney general also entered into a separate settlement with Westbury Jeep Chrysler Dodge and Fiat of Westbury — related dealerships in Westbury, N.Y., that also sold CFI credit repair and identity theft services.

That settlement requires the dealerships to stop selling illegal credit repair products and using deceptive and misleading sales tactics.  It also requires the dealerships to itemize the cost of after-sale items in its sale and lease agreements.

Officials indicated Westbury will refund more than $100,000 to consumers, which represents the full profits it received from selling credit repair and identity protection. The store will also pay $5,000 in penalties and $5,000 in costs.

The attorney general also settled with Security Auto Sales, which operates Security Dodge in Amityville, N.Y., for similar practices.

In addition to injunctive relief, Security Dodge will refund more than $18,000 to consumers, which represents the full profits the dealership received from selling credit repair and identity protection.  The store will also pay $5,000 in penalties. 

“The office is continuing to investigate a number of other New York auto dealers that sold or sell after-sale services without the knowledge and consent of consumers,” officials said.

Past actions by Schneiderman’s office

Officials explained these lawsuits and settlements are part of the attorney general’s initiative to end the practice that automobile dealers call “jamming,” or charging consumers for hidden purchases. 

Last year, Schneiderman announced a settlement with Credit Forget, the company that purported to provide the credit repair and identity theft protection services. The attorney general also settled with a trio of dealers — Paragon Honda, Paragon Acura, and White Plains Honda, located in Queens and Westchester Counties — that Schneiderman’s office determined had also fraudulently sold these same Credit Forget It contracts.

Paragon agreed to pay restitution potentially totaling nearly $14 million.