FTC Sues Los Angeles Auto Dealerships for Fraudulent Business Practices

11-29-2016
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This past month, the Federal Trade Commission charged nine Los Angeles area auto dealers with using a wide range of deceptive and unfair sales tactics and financing practices. The lawsuits especially point out the use of “Yo-Yo” financing tactics in which a dealer would sign a contract with the consumer that included financing terms without officially assigning it to a bank or credit union. The dealer would then call the customer back, falsely claiming that the financing fell through, and that the customer must sign a new financing agreement with less advantageous terms. If the consumer refused to sign the new contract, the dealer would unlawfully claim the down payment or trade-in as forfeit, and in some instances threaten criminal prosecution. In reality, if financing falls through, the dealer either has to find another party to accept the terms, or request the consumer return the vehicle, and give them their down payment or trade-in back. The lawsuits also accuse the dealers of including extra, unauthorized charges for “add-on,” or aftermarket products and services, using deceptive advertising practices, and posting phony online reviews to convey a false company image and combat negative reviews. One defendant claimed that an ad boasted a Nissan Versa for “$38 a month,” and “$38 down,” but neglected to mention that the $38 monthly payment only applied to the first 6 months, and that the contract demanded nearly $3,000 for a down payment in fine print. The dealer also neglected to disclose that the contract was for a lease, not a sale. The dealership also employed a deceptive marketing tactic in which the ‘deal’ was offered in Spanish, but the fine print was in English, creating a major misunderstanding for people who did not speak English well. Employees were often encouraged to pose as customers, by posting false glowing reviews. The lawsuit alleges violation of the FTC Act, the Truth In Lending Act, and the Consumer Leasing Act, and names the following dealerships: Universal City Nissan, Kia of Downtown Los Angeles, Glendale Nissan/Infiniti, Mercedes-Benz of Valencia, West Covina Toyota/Scion, West Covina Nissan, Sage Covina Chevrolet, Sage Pre-Owned, and Sage Hyundai, as well as brothers Joseph, Leonard, and Michael Schrage, Sage Holding Company Inc., and Sage Management Company.

If you or a loved one have fallen victim to unlawful and fraudulent business tactics, the lawyers at Hodes Milman Liebeck are there for you in your time of need. Contact us today online at hmlm.com or call 866-730-1976 for a complimentary case evaluation.

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