Add-on fees, fake reviews, Canadian cars, bait-and-switch tactics alleged
of ConsumerAffairsA group of 10 Illinois car dealerships are facing a $20 million fine, the largest ever levied against a car dealer by the Federal Trade Commission. The money will be used to make refunds to customers.
The dealer group, doing business as Leader Automotive Group and their parent company, AutoCanada, operate the following dealerships:
- North City Honda;
- Crystal Lake Chrysler Dodge Jeep Ram;
- Hyundai of Lincolnwood;
- Kia of Lincolnwood;
- Bloomington Normal Auto Mall (Mercedes-Benz of Bloomington, Lincoln of Normal, Volkswagen of Bloomington Normal, Volvo Cars Normal, Subaru of Bloomington Normal, and Audi Bloomington Normal);
- Autohaus Motors (Mercedes-Benz of Peoria, Porsche Peoria, Volkswagen of Peoria, and Audi Peoria);
- Chevrolet of Palatine;
- Hyundai of Palatine;
- Toyota of Lincoln Park; and
- Toyota of Lincolnwood.
The fine followsa lawsuit by the FTCand state of Illinois.
In addition to paying $20 million, which will be used to refund harmed consumers, the proposed settlement also would require the companies to make clear disclosures of a cars offering pricethe actual price any consumer can pay to get the car, excluding only required government chargesand 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 FTCs Bureau of Consumer Protection.
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.
Junk fees, fake reviews, Canadian cars
The agencies' 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.
Leader has frequently advertised new and used cars online with low prices designed to entice consumers into their dealerships, but those prices are often false, according to the complaint.
When consumers arrive at a Leader dealership, salespeople often tell them the car has preinstalled add-ons like protective coatings (often under the name Xzilon) and theft protection (under the name LoJack) that cost thousands of dollars, and that these add-ons are required despite not being included in the advertised price of the car.
According to the complaint, the add-ons have been wildly profitable for Leader, with dealerships at one point reporting more than 99% profit on them. Leader salespeople have been paid a commission for these add-on products, in many cases making more from the sale of the add-ons than the commission they are paid for selling the car itself.
A survey of Leader customers showed that nearly 80% of them were charged for at least one add-on without authorization or because they were falsely told the add-on was required. The unwanted add-ons also included items tacked on in the financing process like guaranteed asset protection (GAP) coverage and service contracts.
Add-on charges
The complaint charges that, even after learning that the FTC was investigating, Leader kept tacking on add-on charges, resulting in consumers paying thousands more than the advertised price. Leader allegedly required the Xzilon add-on for all new and used cars they sold starting in 2021.
According to the complaint, Leader has also regularly failed to actually install or apply the add-on products for which they charged consumers without their consent.
Leaders low-price advertising was designed to get [customers] through the door, according to a message from a company executivecited in the complaint. In many cases, however, Leader has advertised cars that have already been sold.
When consumers arrived at the dealership, they were directed to more expensive cars, often ones with junk fees and surprise market adjustments added to the price. The complaint cites another message Douvas sent to employees saying that once consumers get to the store, theyre not leaving without buying a car.
Leader has also regularly advertised cars as being certified pre-owned, and available at a specific price but then charged consumers hundreds or even thousands of dollars in additional certification fees.
In many cases, despite advertising the cars as being certified and charging consumers undisclosed fees for that certification, Leader has failed to actually do the certification work required by the manufacturer of the car, leaving consumers without the extended warranty that makes certified pre-owned cars attractive in the first place.
Even on non-certified used cars, Leader has charged exorbitant reconditioning fees, which one former sales manager described as fake fees, according to the complaint.
Canadian cars, bogus reviews
Leader also has sold cars in its U.S. dealerships that were manufactured for the Canadian market without disclosing that to consumers, according to the complaint. Even when done legally, importing these cars into the U.S. typically voids their manufacturers original warranty. Leader still deceptively advertised many of these cars as being covered by those warranties.
In addition, the complaint alleges that employees were required by management to post fake positive reviews about their dealerships on Google and other review sites.
Managers have threatened to withhold bonuses and other compensation from employees who dont post fake reviews, and have paid employees bonuses for posting fake reviews, according to the complaint.
One email from a managerencouraging more reviews said: Those of you with a low review score and low volume of reviews its [sic] an easy fix. If you have 10 employees and they have 5 family members or friends you can have 50 reviews right away.
The complaint also alleges that dealerships have bullied and pressured consumers into posting five-star reviews, citing one instance in which a dealership refused to give a consumer the keys to a car she purchased until she posted a positive review.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-12-20 18:44:54
