Crack-Down on Car Dealer Fraud: Credit Repair and Identity Theft Scheme

The Attorney General of New York has reached a $14 million settlement with three car dealerships and plans to sue several others in a crackdown on the sale of unlawful credit repair services and other after-sale items that impose hidden or illegal fees on car buyers. The deal with jointly-owned New York City-area dealers, Paragon Honda, Paragon Acura and White Plains Honda provides consumers $13.5 million in restitution and concludes the state AG office’s investigation into the dealerships’ sales tactics and alleged sale of illegal credit repair and identity theft prevention products to car buyers. “When consumers shop for a car, they deserve to be dealt with honestly and fairly — and not to be misled by auto dealers who use deceptive tactics to fleece their own customers,” Attorney General Schneiderman said. “New York consumers must beware: Car dealerships sometimes pad their pockets by charging for worthless after-sale items, which inflate the price of their car. These items are often ones that consumers don’t need, did not ask for and often are not even told about.” Under the settlement, the three dealerships will also pay $325,000 in penalties, fees and costs to New York State. The settlement funds meant as restitution for the 15,000 consumers the AG says purchased the unlawful credit repair and identity theft products — it is a violation of state and federal law to charge upfront fees for services that promise to help consumers restore or improve their credit — will be placed on $500 settlement cards that can be used at Paragon toward buying or leasing a car, services and maintenance or car accessories.
According to the Attorney General, his office’s investigation into the three Paragon dealerships found that not only were the products the dealers sold illegal, but so were their sale methods. The investigation found that they used deceptive sales tactics, by charging customers for after sale items without their knowledge or misrepresenting their cost between 2010 and 2014, he said.
The Attorney General’s investigation further found that the dealerships failed to provide required disclosures, such as a consumer’s rights to cancel the credit repair services contract. In addition, the dealerships sometimes negotiated purchase and lease terms with consumers in Spanish and then only provided contracts and documents in English when New York City law requires that when the terms of an installment agreement are negotiated in Spanish, the seller must provide documents translated in Spanish, the AG said.