The Federal Trade Commission today charged the Sage Auto Group with using deceptive and unfair sales and financing tactics.
Eight new-vehicle dealerships and one used-car store practiced what the industry commonly calls “yo-yo” financing tactics on their customers as well as charged them for products and services without their consent, the FTC said in a press release.
The dealerships used “deception or unlawful pressure to coerce consumers who have signed contracts and driven off the dealership lots into accepting a different deal,” according to an FTC statement.
In some cases, after the customers signed the agreed-upon contract, dealership employees told them they were required to sign a new contract with different terms. Or employees told customers that the completed finance contacts were canceled but the dealership was permitted to keep the down payment or trade-in, the FTC said.
Dealership employees, according to the FTC, also tacked on charges for aftermarket products and services without their permission or falsely claimed the products were required or complimentary.
The complaint, filed in the U.S. District Court for the Central District of California, aims to end the dealerships’ unlawful business practices and return money to customers, the statement said.
The Los Angeles-area dealerships charged are Universal City Nissan, Kia of Downtown Los Angeles, Glendale Infiniti-Glendale Nissan, Mercedes-Benz of Valencia, West Covina Toyota, West Covina Nissan, Sage Covina Chevrolet, Sage Hyundai and Sage Pre-Owned. The owners have also been charged.
Attempts to reach Sage Auto Group for comment were not immediately successful.
In addition to those charges, the complaint charged the dealerships and their owners with violating the Truth in Lending Act, Regulation Z, Consumer Leasing Act and Regulation M, for failing to clearly disclose required credit information and lease information in their advertising.
“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,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in the statement.
The dealerships drew customers into the dealership with deceptive claims that vehicles were available for the advertised terms and that customers could buy them at a low price, finance with low monthly payments or make low down payments. The FTC said many of those who came to the dealerships based on these ads were financially distressed or non-English-speaking customers.
Lease vs. finance
The misleading advertisements also portrayed lease offers as finance deals and falsely claimed that the dealership would pay off customers’ trade-ins.
The dealerships also misled customers through their online reviews. They posted fake online reviews to build up the dealerships’ reputation and discredit negative reviews that outlined unlawful practices, the FTC said.
The legal complaint against the dealership group can be found here.