Thursday, July 17, 2008

NY car dealer hit with $150K fine for bait-and-switch promotion

Customers thought they had won valuable prizes until they read the fine print

The New York Attorney General wants a car dealer to pay customers for persistently using misleading promotions intended to lure them into the dealership. The customers, once inside the dealership, were also subject to other fraudulent and unfair sales practices, according to Consumer and the North Country Gazette.

Five Towns Mitsubishi must pay $115,000 in restitution to consumers and $35,000 in penalties and costs to the state.

The authorities received more than 50 complaints regarding the dealership’s business practices.

Five Towns was charged with mailing advertisements to thousands of consumers featuring a scratch-off ticket called Dash-for-Cash in which a consumer could win a cash prize, a free vehicle, a vacation, a free gas voucher or a $1,000 shopping spree. A winning ticket contained 3 like symbols in a row but it did not explain, what, if anything, the consumer won. Instead, they had to bring the ticket to the dealership in order to claim the prize.

Once at the dealership, customers found that nearly all of them had won the vacation or $1,000 shopping spree. However, the vacation and shopping spree prizes had minimal value due to either blackout periods or expenditure requirements, including shipping and handling costs.

In addition, the dealership was charged with:

–Obtaining signatures on contracts and finance agreements when customers mistakenly believed that they were filling out paperwork for vehicles they had won as part of the Dash for the Cash sweepstakes

–Offering false discounts off the sale price of a vehicle by selling it at a higher retail sale price, which essentially nullified the value of the discount offered

–Having customers sign documents with blank sections for figures and terms, and then later filling them out with terms that were not agreed upon

–Promising consumers that they could refinance at a better interest rate after making several car payments, or promising to pay one or more months of the insurance payments for the vehicle – and then reneging on those agreements

–Inserting additional cost items without consumers’ knowledge or consent, including VIN etching, service warranties, theft deterrent systems, GPS devices and other options.


AFI's take on this:

I was just thinking about how else could you sell a Mitsubishi (bad thoughts), and was reminded of Gill Van Over's latest article in Dealer Magazine: Outside Sales Commit Inside Jobs. (June '08). It is about the compliance issues associated with hiring outside sales promotion companies.

Yes it seems that this dealership has a huge ethics issue. I wonder how the F&I department is run - signing bank contracts when they thought they were getting a free vehicle and packing all the back end products on top of that. No wonder car dealers seem to be thought of as no better than pond scum with stories like this continuing to break.

Shouldn't the vendor who supplied the scratch - off tickets bear some of the responsibility? Gil said in the article: "Like it or not, transgressions are your responsibility. It is your dealership; you simply are using contractors, not employees".

Sends shivers up my spine.

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