The Federal Trade Commission charged nine Los Angeles-based dealerships with the agency’s first ever “yo-yo” financing tactics charge levied against auto dealers, according to a press release issued yesterday.
The commission defines the practice as, “using deception or other unlawful pressure tactics to coerce consumers who have signed contracts and driven off the dealership lots into accepting a different deal.” Charges also include allegations that the dealers packed extra, unauthorized charges for “add-ons,” aftermarket products, and services, into car deals financed by consumers.
The FTC’s formal complaint claims the defendants used faulty advertising to entice “financially distressed and non-English speaking consumers” into believing they could buy vehicles for low prices, finance with low monthly payments, and make low down payments. The allegedly false advertising also claimed consumers would be financing the purchase of a vehicle — when in fact the deal was a lease — and claimed the dealers would pay off consumers’ trade-in vehicles, despite actually saddling the consumer with the amount owed on the trade in.
False advertising also took the form of phony online reviews, the FTC charges. Employees and agents allegedly posted positive five-star reviews and tampered negative comments.
The alleged deception goes beyond advertising and into the financing process. The FTC charges that the dealers pushed add-ons — such as extended warranties, guaranteed auto protection (GAP), and maintenance or service plans — without consent from the consumer, or falsely stating that the add-ons were required or free.
“The car-buying process is a two-way street,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in the release. “The FTC expects dealers to honor their contractual obligations, and will pursue those who use yo-yo financing tactics and pack unwanted costly add-ons onto consumers’ contracts.”
The defendants also charged, which do business under other names, include: Universal City Nissan Inc., Sage Downtown Inc., Glendale Nissan/Infiniti Inc., Valencia Holding Co. LLC, West Covina Auto Group LLC, West Covina Nissan LLC, Covina MJL LLC, Sage North Hollywood LLC, and Sage Vermont, LLC. Joseph and Michael Sage of Sage Holding Company Inc. and Sage Management Company Inc.
The FTC filed complaints in the U.S. District Court for the Central District of California and is seeking to end the practices and return money to the consumer. To read the full complaint, click here.
