Good to see the FTC cracking down on deceptive dealers. In the first case in Illinois, the FTC action seeks 20 million dollars a new record high, sure to send shivers down the spines of crooked car dealers everywhere.
First Case: Record-High Settlement
In the first case, the Federal Trade Commission and Illinois are taking action against an automotive group for overcharging and deceiving consumers through add-ons, junk fees and fake reviews. The case involves a group of 10 car dealerships doing business as Leader Automotive group, and their parent company AutoCanada. As a result of a lawsuit by the Federal Trade Commission and state of Illinois, Leader Automotive and its parent company will be required to pay a proposed $20 million dollars to settle allegations they systematically defrauded consumers looking to buy vehicles. The proposed monetary judgement is the largest the FTC has secured against an auto dealer and the money will be used to refund harmed consumers. Additionally, the proposed settlement would require the companies to make clear disclosures of the car's offering price - the actual price any consumer can pay to get the car excluding only required government charger, and get consent from buyers for any charges,.
“Working closely with the Illinois Attorney General, we are holding these dealerships accountable for unlawfully extracting millions of dollars from consumers through a textbook bait-and-switch scheme, and bolstering their poor reputation with fake reviews,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We will continue our work to ensure that consumers are not being overcharged for cars, and that honest dealers do not need to compete with firms that cheat.”
“This dealership network engaged in bait-and-switch tactics by luring consumers into their dealerships with lower prices only to either require consumers to purchase allegedly pre-installed add-on products or charge consumers for those products without their knowledge or permission,” said Illinois Attorney General Kwame Raoul. “I appreciate the collaboration with the Federal Trade Commission to ensure bad actors are held accountable and our consumers are protected from deceptive business practices.”
In a complaint filed by the FTC and the Illinois Attorney General, the agencies charge the companies, along with former vice president of U.S. operations James Douvas with violating federal and state laws. The complaint alleges the defendants have deceived consumers about the price and availability of vehicles, charged them for expensive add-ons without consent, tacked on unwanted junk fees to purchases, posted fake reviews, and failed to disclose that U.S. customers were buying cars imported from Canada, along with other unlawful conduct.
Read the full FTC press release detailing the case here.
Second Case
In the second case, the FTC joined forces with the Maryland Attorney General to stop a dealer from falsely touting low prices and overcharging consumers for unwanted fees and add-ons. The FTC says Lindsay Automotive Group systematically deceived and overcharged car-buying consumers for years, costing them millions of dollars in junk fees and unwanted add-on products.
In its press release, the FTC says the complaint also alleges that Lindsay refused to honor advertised prices, and also falsely claimed consumers needed to obtain financing through Lindsay. The agencies’ complaint alleges that three Lindsay dealerships and their management company, along with the company’s part-owner and president Michael Lindsay, COO John Smallwood, and the dealerships’ former general manager Paul Smyth, engaged in pervasive unlawful conduct.
“Auto dealers who trick consumers with bait-and-switch advertising, financing sleights of hand, and unwanted add-ons should expect to hear from the FTC,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC and its state partners will continue working to combat this illegal conduct.”
“Buying a car is a significant financial investment. Marylanders deserve to know upfront how much they will actually pay for a vehicle and should not be surprised by hidden charges that they did not budget for,” said Attorney General Anthony G. Brown. “Our Office will not let car dealerships profit from unfair and deceptive practices.”
According to the complaint, Lindsay regularly advertises deceptive prices on its website and in its advertising, promoting vehicles for sale at a price that is not actually available to the vast majority of consumers. Lindsay employees continue the deception when consumers call, claiming the advertised price is real.
The FTC says that it's not until consumers get to the dealership that they learn that the price is hundreds or even thousands more than advertised because they do not qualify for a raft of rebate programs, or because they must pay thousands of dollars in additional fees. One dealership manager cited in the complaint told a consumer that the price on the website “was not realistic” and that “no one would qualify for it because it was nearly impossible to qualify for all the rebates to get to that price.” In fact, Michael Lindsay told Smallwood and others, “we never deliver the vehicle anywhere near the stated price.”
Read the full FTC press release detailing the case here.
Graphic Credit: Scott Maxwell LuMaxArt/Shutterstock.com.