FOR IMMEDIATE RELEASE:
Wednesday, May 24, 2017
Abigail Lootens / Christine Gianakis
Department of Consumer Affairs
Department of Consumer Affairs Files Charges Against Brooklyn Used Car Dealerships for Deceptive Financing and Illegal Sales Practices
For the First Time, Consumer Affairs Seeks Consumer Restitution from Financing Companies who Provided Loans through the Used Car Dealerships
NEW YORK, NY –The Department of Consumer Affairs (DCA) Commissioner Lorelei Salas today announced charges against multiple used car dealerships in Brooklyn, which are all under the same ownership, and their owners for engaging in deceptive and unlawful trade practices that preyed on New Yorkers. Three of the dealerships—USA1 Auto Sales, Inc., Lenden Used Car Sales, Inc., D&A Guaranteed Auto Sales, Inc.— are currently in operation in East New York and two others—Linden Used Cars, Inc. and Mosulei Group, Inc.—have DCA secondhand auto dealer licenses but are not currently in operation. DCA’s complaint document, which will be heard at the City’s Office of Administrative Trials and Hearings (OATH), alleges numerous violations and wide-ranging consumer harm, and seeks nearly $1.2 million in fines and restitution ($600,000 in fines and $577,000 in restitution) for 75 consumers. DCA is also seeking to revoke all of the dealerships’ licenses. In response to the growing auto lending crisis, DCA will also for the first time be seeking consumer restitution from the financing companies—Credit Acceptance Corp., Clover Commercial Corp, and Westlake Financial Services—that were involved in the subprime lending that saddled the dealerships’ consumers with interest rates as high as 24 percent.
“There are used car dealerships that have been using illegal and deceptive practices in order to take advantage of unsuspecting consumers and prey on their need for a car…all so they can turn a profit,” said DCA Commissioner Lorelei Salas. “The charges filed today send a clear signal to used car dealerships that the City will not tolerate these predatory financing and sales practices. We are committed to ensuring a more just marketplace for all New Yorkers and will continue to educate consumers on their rights.”
“Shock waves are being felt throughout the used auto industry,” said Council Member Rafael Espinal, Chair of the City Council Committee on Consumer Affairs. “Under the leadership of Commissioner Salas, DCA has put fraudulent and predatory used auto dealers on notice by taking swift investigative and legal actions against these actors. DCA has also shown great authority in actively protecting consumers and I am proud to have been there every step of the way; including through sponsoring comprehensive legislation to codify these protections into law throughout the city of New York for all future consumers.”
"For too long, many of our city's used car dealerships have incorporated deception into their business model -- and today's bold action should put the entire industry on notice" said Council Member Dan Garodnick. "Together with the Consumer Bill of Rights that I authored to better protect purchasers of second-hand vehicles, DCA's enforcement actions like this one will help to bring an end to the predatory dealerships that prey on innocent New Yorkers."
“I’m proud to co-sponsor a bill that will impact thousands of consumers, who are targets of predatory practices by unscrupulous used car dealerships like the ones that are being brought up on charges today,” said Council Member Jumaane D. Williams, Deputy Leader. “Low income and immigrant New Yorkers are especially affected by these deceptive practices. Making money off the back of struggling New Yorkers is shameful and is the responsibility of legislators and officials to put an end to it. I commend the Administration for their work on this issue."
The dealerships’ deception includes:
- Misleading Consumers about the Price of Automobiles
These dealerships advertise low prices for used cars online, but then refuse to honor the advertised prices when consumers show up, and end up selling the cars for much higher prices. One consumer saw an online advertisement offering a 2007 Volvo XC90 for $6,900 and called the dealership to confirm its availability before she traveled to see the vehicle. When she arrived at the dealership, a salesperson informed her that the car cost $12,900. The dealership then changed the price again on the sales contract, but the consumer did not notice because they rushed her through signing and did not give her a copy of the contract. In the end the actual price of the car totaled $14,500—more than double the advertised price.
The businesses also do not conspicuously post the prices of their cars at the dealership as required by law, allowing them to charge whatever price they think they can get away with.
- Selling Unsafe Vehicles
The dealerships also sell defective and unsafe cars. The dealerships prevent consumers from test-driving cars before they buy them. They do not inspect their cars as required by New York State law, but simply attach inspection stickers to the cars at the time of sale. They often do not certify their cars as safe, as required by law, and when they do, it is without proper examination. The dealerships have even reported that the cars passed inspection when their check engine lights were on.
These deceptive and hazardous practices leave unsuspecting consumers with unsafe or damaged vehicles—everything from bald tires and illegally tinted windows to dying transmissions. These practices endanger both the consumer and the public at large. For example, one consumer had her car catch on fire and another had her car stall on the Verrazano-Narrows Bridge.
- Failing to Disclose (and Even Concealing) Financing Terms
The dealerships conceal and misrepresent the terms of sale and financing, including the actual sale price, even refusing to give consumers copies of their sales documents until weeks after the sale so they can conceal the price and high interest rates from consumers. One consumer was quoted a price of $8,000 for a 2004 Nissan Pathfinder Armada, only to find out later that the dealerships had secretly written $12,999 on the financing agreement, and then charged her an additional $1,730 for an extended service plan that she had already expressly declined.
The dealerships conceal the increased prices—which include exorbitant interest rates—by rushing consumers through the paperwork, physically obscuring important terms during the signing process, and evading consumers’ questions. The end result is that consumers are left with unusable cars and loans that they may not be able to afford.
- Failing to…
- Provide the City’s “Important Notice to Buyer” that informs consumers of their rights if their car is not in a safe condition.
- Provide copies of signed documents to the consumer.
- Maintain a record of every used car purchased or sold.
With auto loan debt being the fastest-growing household debt (Federal Reserve Bank of New York
), DCA is also pursuing new approaches, like seeking restitution from the financing companies involved in the used car lending, in order to make consumers whole. Seeking restitution from the financing companies, which, by contract, takes on any consumer claims against the dealerships, could provide greater assurance to consumers that they will be made whole after the losses they suffered from the dealerships’ deceptive practices.
DCA encourages any consumer who feels that any of these companies misled them about the price of their car or sold them an unsafe automobile to contact the agency by calling 311, or by filing a complaint at nyc.gov/dca
DCA currently licenses 784 used car dealerships, and it has received more than 5,500 complaints about the industry since mid-2013, including more than 1,100 since July 2016, the start of the current fiscal year. Since July 2013, DCA has conducted nearly 3,000 inspections
) of used car dealerships and issued nearly 1,700 violations, most of which are for unlicensed activity, failing to post required signage, and parking vehicles on the sidewalk or roadway. As a result of the mediation of consumer complaints, investigations and settlements, DCA has secured more than $2.65 million in consumer restitution and assessed $1.7 million in fines against used car dealerships over the past three years.
From October 2013 through April 2017, DCA received 5,400 complaints from consumers about used car dealerships. The complaints range from instances of forgery on contracts to a lack of material disclosures by dealership staff and are concentrated in boroughs outside of Manhattan where most of DCA’s licensees are located and customers are more likely to rely on automobiles for transportation.
In March 2017, DCA announced charges against Major World
, one of the largest local used car dealerships in the city with multiple locations, for using deceptive financing and sales practices that resulted in predatory lending targeting immigrants and New Yorkers with low incomes. DCA alleges that Major World has been submitting false information on consumers’ credit applications and failing to inform consumers of the precise terms of the financing agreement, such as interest rates, finance charges, and the number of required payments.
Enforcement is one prong of DCA’s efforts to combat predatory practices in the used car industry, which also includes education and advocacy. Since April 2017, DCA has participated in 24 outreach events and 17 predatory lending workshops to educate consumers on DCA initiatives and the protections available to them. On the advocacy approach, in April 2017, DCA Commissioner Lorelei Salas, Council Member Rafael Espinal, Jr., Chair of the Council Committee on Consumer Affairs, Council Member Dan Garodnick, and Council Member Jumaane D. Williams announced a package of legislation to combat predatory practices in the used car industry. The legislation would require used car dealerships, which DCA licenses, to post a Consumer Bill of Rights and disclose information about financing and pricing, provide all required notices to the consumer in whatever language the dealerships and consumer used to negotiate the contract, and provide consumers with the option to cancel their contract within two days of the sale. Council held a hearing on the bills on April 26, 2017.
“Shock waves are being felt throughout the used auto industry, said NYC Council Member Rafael Espinal. “Under the leadership of Commissioner Salas, DCA has put fraudulent and predatory used auto dealers on notice by taking swift investigative and legal actions against these actors. DCA has also shown great authority in actively protecting consumers and I am proud to have been there every step of the way; including through sponsoring comprehensive legislation to codify these protections into law throughout the city of New York for all future consumers.”
DCA offers an online guide to Getting Your Finances in Gear to Buy a Used Car
, which is available in English, Spanish, Arabic, Bengali, Chinese, Haitian Creole, Korean, and Russian. The guide informs New Yorkers of their rights when arranging financing for their used car purchase and provides general tips about used car dealerships. DCA also offers a comprehensive Used Car Buyer Guide
with tips about shopping for a used car. Any New Yorker who is trying to get their finances in order before buying a car or who is struggling with debt, can make an appointment for free, one-on-one financial counseling at one of the City’s Financial Empowerment Centers by calling 311.
The NYC Department of Consumer Affairs (DCA) protects and enhances the daily economic lives of New Yorkers to create thriving communities. DCA licenses more than 81,000 businesses in more than 50 industries and enforces key consumer protection, licensing, and workplace laws that apply to countless more. By supporting businesses through equitable enforcement and access to resources and, by helping to resolve complaints, DCA protects the marketplace from predatory practices and strives to create a culture of compliance. Through its community outreach and the work of its offices of Financial Empowerment and Labor Policy & Standards, DCA empowers consumers and working families by providing the tools and resources they need to be educated consumers and to achieve financial health and work-life balance. DCA also conducts research and advocates for public policy that furthers its work to support New York City’s communities. For more information about DCA and its work, call 311 or visit DCA at nyc.gov/dca or on its social media sites, Twitter, Facebook, Instagram and YouTube.