New York Attorney General Eric Schneiderman announced two settlements with motor vehicle dealer groups that provide for over $900,000 in restitution to approximately 6,400 New York State consumers. The settlements also require the dealers to pay $135,000 in penalties and costs to the state for the unlawful sale of credit repair and identity theft protection services to consumers who bought or leased vehicles.
Schneiderman alleged that the dealerships had unlawfully sold “after-sale” credit repair and identity theft protection services that often added considerably to the purchase price of the vehicle. Both state and federal law prohibit charging upfront fees for services that promise to help consumers restore or improve their credit, and contracts that violate these laws are void. In the past several years, there has been increasing scrutiny by regulators, at the state and federal level, of the sale of add-on products by dealers and disclosures relating to these products.
The AG’s investigation revealed that the after-sale items were often bundled into the vehicle sale price and were not separately itemized. As a result, many consumers were totally unaware that they had purchased these services, and some consumers thought that the services were free. The price of the vehicles stated on purchase and lease documents was inflated by the amount of these after-sale items, generally by hundreds or thousands of dollars.
In addition to the payment of consumer restitution, penalties, and costs, the settlements prohibit the dealerships from engaging in the following:
- Selling, offering for sale, or marketing credit repair and identity theft services with the sale or lease of a vehicle;
- Selling, offering for sale, or providing to consumers any after-sale product or service unless, prior to such sale, certain material terms, including price, are disclosed verbally and in writing;
- Misrepresenting the price of the vehicle in final lease or sale contracts; and
- Failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price.
In its press release, Schneiderman’s office explained that these settlements are part of its broader initiative to end the practice engaged in by many dealers of “jamming,” or unlawfully charging consumers for purchases without their consent or knowledge. The New York Attorney General’s office has been especially active in investigating motor vehicle dealers, and we expect this trend to continue.