What law enforcement considers to be deceptive advertising associated in part with vehicle financing is continuing to hit New York dealerships in the pocketbook.
New York attorney general Eric Schneiderman announced two separate settlements on Tuesday involving 23 franchised dealerships and financial penalties surpassing $340,000.
The larger of the two agreements is requiring 22 dealerships in Nassau and Suffolk counties to pay $310,000 in restitution and penalties to resolve false advertising claims. Schneiderman said the dealerships, all affiliated with Atlantic Automotive Group based in West Islip, N.Y., “persistently defrauded” consumers with “misleading” promotions and “fraudulent” sales tactics.
In total, the attorney general’s Nassau and Suffolk regional offices received more than 250 complaints regarding the dealerships and their advertising and sales practices.
Schneiderman indicated Atlantic Automotive Group generated advertisements to be mailed to thousands of Nassau and Suffolk County consumers, with approximately 500,000 promotional items in total distributed by direct mail. The advertisements contained a scratch off game card, a pull tab game card, or a “Triple Diamond” game card where consumers could win a cash prize, a free vehicle, a flat-screen television or an Apple iPad.
A winning ticket contained three like symbols but it did not explain what, if anything, the consumer won. Instead, consumers were instructed to bring the game card to the dealership during event times in order to claim their prize.
“The game cards were deceptive and had the capacity to mislead consumers to believe that they were guaranteed winners of valuable prizes. In fact, virtually all of the consumers did not win a prize at all,” Schneiderman’s office said.
The Empire State attorney general declared Atlantic Automotive Group also misled consumers through various other deceptive practices by:
— Publishing print advertisements which contained misleading or illegal features in violation of the attorney general’s auto advertising guidelines and a previous assurance of discontinuance entered into with two dealerships in the Atlantic Automotive Group.
— Obtaining signatures on contracts of sale and financing agreements from consumers who mistakenly believed that they were filling out paperwork for vehicles they had won as part of the “Triple Diamond”, “scratch-off game card”, or “pull tab game card” promotions.
— Offering false monetary discounts off the sales price of a vehicle, by selling the vehicle at a high retail sales price which had the effect of nullifying the value of the discount offered.
—Charging consumers for extended warranties, vehicle maintenance contracts, and administrative fees related to the purchase of vehicles that consumers did not want, had no knowledge of, or were told there was no charge for these products.
—Providing consumers with blank documents or partially blank documents for their signatures and later filling out the documents with figures and terms other than what was agreed upon by the consumers.
—Failing to give all necessary documents to consumers at the time of purchase.
—Making various false or misleading statements to consumers during high-pressure sales transactions.
—Encouraging consumers to apply for loans that they could not afford.
—Refusing to refund deposits that had been made by consumers.
The dealerships included are:
— Millennium Honda, located at 286 N. Franklin St., Hempstead
— Millennium Toyota, located at 257 N. Franklin St., Hempstead
— Millennium Hyundai, located at 220 N. Franklin St., Hempstead
— Advantage Hyundai, located at 440 Plainview Road, Hicksville
— Advantage Toyota, located at 400 W. Sunrise Hwy, Valley Stream
— Advantage Honda, located at 1260 Northern Blvd., Manhasset
— Atlantic Volkswagen, located at 555 Sunrise Hwy, West Islip
— Atlantic Audi, located at 251 Sunrise Hwy, West Islip
— Atlantic Nissan, located at 193 Sunrise Hwy North Service Road, West Islip
— Atlantic Hyundai, located at 193 Sunrise Hwy North Service Road, West Islip
— Atlantic Chrysler Jeep Dodge Ram, located at 130 Sunrise Hwy, West Islip
— Atlantic Toyota, located at 200 Sunrise Hwy, Amityville
— Atlantic Chevrolet Cadillac, located at 1350 Sunrise Hwy, Bay Shore
— Atlantic Honda, located at 1391 Sunrise Hwy, Bay Shore
— Lexus of Rockville Centre, located at 700 Sunrise Hwy, Rockville Centre
— Lexus of Massapequa, located at 4950 Sunrise Hwy, Massapequa Park
— Audi of Lynbrook, located at 843 Sunrise Hwy, Lynbrook
— Huntington Chevrolet, located at 370 Oakwood Road, Huntington Station
— Huntington Toyota, located at 1030 E. Jericho Turnpike, Huntington Station
— Mid-Island Hyundai, located at 1815 Middle Country Road, Centereach
— South Shore Hyundai, located at 360 W. Sunrise Hwy, Valley Stream
— Massapequa Nissan, located at 3660 Sunrise Hwy, Seaford
“New Yorkers have a right to navigate the car buying process without being targeted by false and misleading promotions and sales practices,” Schneiderman said.
Hyundai store settles separate action
In another announcement also released on Tuesday, Schneiderman said his office reached a settlement with Hyundai of White Plains. An investigation by the attorney general’s office found that the dealer used deceptive and misleading advertising practices in both its print and online ads.
Among its deceptive practices, officials indicated the dealership widely promoted sale and lease prices that were illusory because they included discounts or rebates that were not available to most consumers, and thus, did not represent the actual sale or lease prices.
Tuesday’s announcement showed the dealership has agreed to reform its advertising practices and pay $32,500 in costs and penalties to New York State.
Schneiderman stated Hyundai of White Plains regularly advertised prices which included discounts or rebates such as:
— A “military” rebate, which was available only to certain current or former military personnel
— A “college graduate” rebate, which was available only to recent college graduates
— A “loyalty” rebate, which was available only to customers who had purchased a new vehicle within the last six months
— An “HMF” discount, which was available only to consumers who financed their purchase.
In some cases, Schneiderman calculated the discounts and rebates totaled as much as $4,500, so the actual price of the vehicle for many consumers was significantly more than advertised.
He added the only disclosure that the advertised prices included these rebates and discounts was in tiny footnotes at the bottom of the advertisements.
The attorney general's investigation also cited Hyundai of White Plains for other problems with its ads, and the settlement requires the dealership to reform those practices as well. These problems included:
— Using footnotes or asterisks that contradict, confuse or materially modify a principal message of an ad
— Failing to clearly and conspicuously provide certain required disclosures for lease or finance terms, such as the amount or percentage of any down payment
— Restricting a rate or price to a “qualified buyer” or “qualified lessee” without disclosing such qualifications
— Failing to disclose the duration of sales and promotions that were time-limited.
“When shopping for a car, New Yorkers deserve to be dealt with honestly and fairly — not misled by false advertising,” Schneiderman said. “My office will not tolerate car dealerships that mislead consumers with ads featuring inaccurate, artificially low prices.”
Pattern in New York
Tuesday’s announcements arrived only about a month after Schneiderman’s office raked in a multi-million dollar settlement with three dealerships in a development associated with the alleged unlawful sale of credit repair and identity theft prevention services, and other “after-sale” items.
Back on June 17, officials explained that agreement, which returned more than $13.5 million in restitution to consumers, concluded an investigation into a trio dealerships for the alleged sale of finance office products to 15,000 consumers — items that in some cases added more than $2,000 in “hidden costs and fees” onto the sale or lease price of a single vehicle.
When SubPrime Auto Finance News spoke with Dealertrack Technologies associate general counsel Randy Henrick about that development, he cautioned New York dealers about how Schneiderman’s office is approaching this area.
“I think the message he’s sending is clear: If New York auto dealers violate the law, particularly if they violate it in ways that are indefensible, they’re going to pay a hefty price and it’s not going to be just a cost of doing business,” Henrick said in a previous report about how the impact of developments in New York could ripple elsewhere.
Henrick recently conducted a webinar where he dissected the Federal Trade Commissions latest actions involving dealer advertising and how dealerships can avoid deceptive ad practices. A recording of that session is available here.