Auto dealers to pay $3.6m over disputed deception claims

A group of auto dealers have agreed to return $3.6 million to consumers to settle a legal row with authorities, although they continue to dispute the allegations. 

The Sage Automotive Group, comprising nine Los Angeles-based auto dealerships, plus their holding and management companies, and two individuals, have agreed to return the money to settle Federal Trade Commission (FTC) charges.

These allege that it used deceptive and unfair sales and financing practices, deceptive advertising, and deceptive online reviews.

The proposed settlement order will prohibit the defendants from making misrepresentations relating to their advertising, add-on products, financing, and endorsements or testimonials.

It will also bar the defendants from engaging in other unlawful conduct when a sale is cancelled, such as failing to return any down payment or trade-in or seeking legal action, arrest, repossession or debt collection unless the action is lawful.

The order relates to the FTC’s first-ever legal action aimed at tackling so-called ‘yo-yo’ financing tactics, which it claims are unfair and coercive.

The label relates to alleged attempts to make customers accept a different deal after they have signed contracts and driven off the forecourt.

The FTC alleges the auto dealerships enticed consumers, particularly financially distressed and non-English speaking buyers, into their dealerships with adverts that made an array of misleading claims.

These included allegedly stating consumers were buying a car, when in fact they were lease offers, and that the dealership would pay-off consumers’ trade-in vehicles, despite the fact that consumers are ultimately responsible for paying off any amount owed on the trade-in.

In a statement, Sage said: “Sage fully co-operated with the FTC over the course of many years and the review of thousands of pages of advertising and other documents.

“Though Sage considered the FTC’s allegations to be without merit and over-reaching, to avoid the overwhelming cost of protracted litigation, Sage agreed to settle the action with an agreement to stand by the company’s commitment to follow the law and to pay, to consumers and not to the government, approximately $276,000 per named entity, which amount is consistent with FTC settlements reached with other targeted auto sector enterprises throughout the country.

“Despite the FTC’s allegations, Sage Automotive Group believes that it has always met its regulatory responsibilities and looks forward to continuing to provide outstanding sales and service to its customers.”