Sage Auto Group Charged with Using Deceptive and Unfair Sales and Financing Tactics
Nine auto dealerships and their owners have been implicated
The Federal Trade Commission (FTC) has charged the Los Angeles-based Sage Auto Group with using numerous deceptive and unfair sales and financing practices.
The agency filed charges in the U.S. District Court for the Central District of California in the hope of ending the practices and refunding affected consumers.
The is the first legal action filed by the FTC against an auto dealer for using so-called "yo-yo" financing tactics, i.e. the use of deceptive or other illegal pressuring tactics for the purpose of coercing consumers who have already signed contracts and driven off the dealership lots into accepting a different deal.
The agency further claims that Sage included extra and unauthorized charges for "add-ons"—aftermarket products and services—into consumer-financed vehicle deals.
"The car-buying process is a two-way street," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "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 FTC alleges that the members of Sage attract customers—particularly those who are financially distressed as well as those who do not speak English—into coming into their dealerships with ads in print and on the internet, radio, and television. These ads make numerous misleading claims, such as that vehicles usually are available for the terms advertised and that consumers can purchase them for low prices, finance them using low payments per month, or make low down payments. Allegedly the defendants also make other misleading claims, such as the claim that customers can finance a vehicle purchase when in reality they are being made a lease offer, and that the dealers will finish paying off vehicles traded in by consumers when in fact it is the customer who is ultimately responsible for paying off any amount still owed on the trade-in.
The defendants are also accused of using fake online reviews to promote their dealerships and to discredit any negative reviews highlighting their illegal practices. The defendants and either their employees or their agents, claims the FTC, post positive, five-star reviews online pretending to be from objective or independent reviewers without disclosing their connection to the dealerships.
The FTC also alleges that several of the financing tactics used by the defendants are deceptive and unfair. As part of the sales and financing process used by the defendants, such add-ons are offered to consumers as extended warranties, guaranteed auto protection, and plans for maintenance or service. Sage, claims the FTC, violated the FTC Act by charging consumers for such add-ons without their authorization or falsely claiming that they were free or required in the transaction.
The complaint further states that in some cases after the consumers had already signed contracts, Sage falsely represented that they had to sign a new contract containing different terms from the originals. At other times, the representatives falsely told consumers who had filled out finance contracts that those contracts had been cancelled and that the representatives were allowed to keep the down payments made by consumers or the vehicles they traded in. Whenever the customers requested that the terms of the previous contact be honored or refused the demands made by the defendants, the latter, in some cases, falsely represented to customers that they would be liable for legal action such as lawsuits, repossession, or criminal arrest for a stolen vehicle.
The defendants are also charged with violating the Truth In Lending Act and Regulation Z, as well as the Consumer Leasing Act and Regulation M, for not clearly disclosing necessary credit and lease information in their advertisements.