The Division of Consumer Affairs of the New Jersey Attorney General’s office has reached a $1.8 million settlement with eight New Jersey motor vehicle dealerships, all under common ownership, to resolve multiple claims of deceptive business practices that were discovered during the Division’s investigation.  The settlement also provides for restitution for certain identified consumers affected by the dealers’ deceptive practices.

The settlement resolves New Jersey’s investigation of these eight dealerships related to several alleged deceptive sales practices such as failing to disclose existing mechanical defects or prior damage or prior use of used vehicles, charging consumers for extended service contracts, GAP coverage and credit life insurance without customers’ consent, and failing to honor the negotiated or advertised prices for vehicles.  The Division’s investigation also confirmed that the dealerships failed to refund deposits in a timely manner after consumers either canceled the sales or were denied financing; advertised cars without including required information such as vehicle identification numbers, thereby preventing consumers from being able to check the vehicle’s history of damage and use; and failed to provide consumers with motor vehicle titles and registrations in a timely manner.  The investigation was sparked by numerous complaints made to the Division of Consumer Affairs regarding these dealerships by consumers who documented a host of allegations against the dealerships.

While the settlement involved a large number of disparate practices, perhaps of most significance is the guidance it provides related to complying with New Jersey’s requirement that prior use and prior damage of a vehicle be disclosed to consumers, particularly with regard to the Division’s view of the extent to which a dealer is required to investigate the prior history of a vehicle to determine its prior use or prior damage.  The settlement specifies that the investigated dealers may satisfy their duty by undertaking a good faith search of the vehicle by using a service, such as CarFax or AutoCheck, to discern the prior use (including rental history) and accident/damage history.  Pursuant to the terms of the settlement, the dealers will not be held responsible for any failure to disclose due to inaccuracies or deficiencies of such reports unless the dealers “were aware or should have been aware” of such inaccuracies or deficiencies.

For any dealer, the settlement also highlights the value of addressing consumer complaints at the time they arise, as escalation of a significant number of consumer complaints to regulators often will trigger an investigation.  Further, in this time of heightened regulatory scrutiny, dealers should be systematically analyzing their complaints to determine their root case, so as to address any patterns or practices that may be generating a large number of complaints.