Federal and state regulators continue pursuing dealers for including junk fees in vehicle sales and leases. Recent settlements have dealers spending six and seven figures in fines, penalties, and reimbursement costs. In addition to being financially draining, these actions can damage a dealer’s reputation with lenders, manufacturers, customers, and communities. Here are three recent examples of state enforcement actions against dealers that included claims of charging junk fees.
Eight New York dealers settle for more than $3.2 million for allegedly overcharging on lease buyouts
The New York Attorney General settled with eight dealerships for allegedly overcharging customers who were trying to buy out their leased vehicles. The AG claims the dealers added “dealership fees”, “administrative fees”, or inflated vehicle prices so that customers paid more than the lease buyout price in the lease agreement. The investigation stemmed from consumer complaints. As part of the settlement, the dealers must change their lease buyout practices, return a combined $2.8 million to 1,761 customers, and pay the AG $398,314 in penalties.
A Pennsylvania dealer group agrees to a $130,000 settlement for allegedly engaging in deceptive sales practices, including adding additional products without customers’ consent
A Pennsylvania dealer group settled with the commonwealth’s Attorney General in August. Among other things, the AG claims the dealer group added products to customer purchases without their knowledge or consent, misled customers on how to cancel those products, and delayed processing product cancellations. The dealership agreed to pay $130,000, $100,000 of which will go to impacted customers, improve their sales practices, hire a compliance officer, and offer warranties on certain vehicles.
A Maryland dealer agrees to pay $3 million to state AG and reimburse customers for allegedly failing to sell vehicles at the advertised price, improperly including add-on products, and other allegations
The Maryland Attorney General’s office announced a settlement with a dealer, claiming that, among other things, it failed to sell the vehicle at the advertised price. The AG claims the dealership improperly charged “sales commission” fees, failed to appropriately disclose the dealer processing fee in its advertising, and included dealer-added equipment in the deal without the customers’ knowledge. In addition to a $3-million-dollar penalty to the AG, the dealership must also refund customers an amount the AG estimates could be “several million dollars.” The dealer must also stop engaging in practices that violate Maryland’s advertising and sales laws.
Common issues to avoid
State and federal regulators continue to focus on dealer advertising and sales practices, with settlements reaching into the millions. These cases have several common issues that dealers should consider.
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Charges: Any required fees, charges, or add-on product charges should be reviewed with a dealer’s counsel to confirm they are allowed, properly disclosed, and compliant.
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Complaints: Regulator investigations often start with customer complaints. Dealers should have robust customer complaint processes to help identify and solve problems early.
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Consent: Enforcement actions often allege that customers did not agree to purchase additional products. Dealers should review their sales practices to ensure customer approvals are documented.
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Surprises: Customer complaints often involve surprise at having to pay additional costs beyond what they expected. Dealers should ensure their advertising and sales practices comply with state and federal advertising laws and UDAP (unfair and deceptive acts and practices) requirements to help avoid costly surprises.
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