Two luxury car dealerships located in Mount Kisco have been ordered to pay more than $1 million in refunds and penalties after it was found that they had unfairly charged customers junk fees, state Attorney General Letitia James announced recently.
DARCARS of Railroad Avenue, Inc., aka DARCARS Lexus, and MT Kisco Automotive, LLC, aka DARCARS BMW, imposed a 2 percent charge on consumers that was “deceptively presented as a sales commission, even though it was not paid directly to the salesperson, was completely optional, and provided no benefit to the consumer,” James said.
The dealerships, both located on Kisco Avenue, also charged customers for “an expensive and needless add-on package by presenting it as a mandatory part of their lease or purchase agreement,” the attorney general said, adding that these “misleading tactics” cost customers thousands of dollars when they leased or purchased a car.
As a result of the investigation, DARCARS Lexus will pay a total of $892,671.26 to reimburse all consumers who were charged the sales commission fee between Oct. 23, 2021, and May 30, 2022.
Both DARCARS dealerships will also pay additional reimbursements totaling nearly $282,000.
Consumers who were charged after May 2022 will also be eligible for restitution through a claims process, potentially resulting in millions of dollars in total consumer refunds, the Attorney General's office said.
“New Yorkers save up for years to buy a car, and they deserve fair prices without junk fees that drive up the cost with useless add-ons,” James said. “DARCARS took advantage of hard-working New Yorkers, charging them thousands of dollars in misleading fees. My office is making sure that every New Yorker who was defrauded by these dealerships gets their money back.”
The OAG stepped in in February 2022 after receiving a complaint from a consumer claiming that DARCARS Lexus had added a more than $700 “sales commission charge” to their purchase without telling them.
A subsequent investigation revealed that DARCARS Lexus began charging a sales commission fee in October 2021 and DARCARS BMW began charging the fee in August 2022.
While sales commission fees are typically understood to be paid directly to the salesperson, the fees that the DARCARS dealers charged never went to the employee making the sale. DARCARS included the fee as a pre-printed line in agreements used to sell or lease vehicles to consumers.
Although the fee was listed as “not required by law,” the dealerships did not disclose to consumers that the fee was voluntary and not required to buy or lease a car, OAG investigators found.
When consumers asked DARCARS employees about the charge, they were met with “inconsistent, vague, conflicting, or misleading explanations, further obscuring the true nature of the fee.”
Consumers were told the charge was a “standard dealer fee” or that it directly compensated their salesperson, both of which were false, the OAG said.
In other cases, the dealerships falsely told consumers that the fee was required to “offset costs and commissions” paid to employees, according to the investigation.
On their respective websites, DARCARS Lexus and DARCARS BMW advertised sale and leasing prices that excluded the sales commission fees, making them appear competitive with other local dealerships, the OAG found. By applying the 2 percent fee to nearly every sale and lease, the dealerships were able to generate millions of dollars in additional revenue by misleading consumers who believed they were paying a fair price.
In addition, DARCARS “misleadingly” added a bundled aftermarket product known as “DARCARS Assurance” to its sales and lease agreements without properly informing consumers, according to James.
This bundle included products and services, such as a collision credit and a stolen vehicle credit, that had little value to consumers, she said.
For example, the advertised collision credit claimed to offer up to $2,500 to reimburse an insurance deductible in the event the vehicle is deemed a total loss. However, this payout was only available if the consumer purchased or leased another vehicle from the same DARCARS dealership within 60 days of receiving their insurance settlement—essentially a “loyalty coupon” that provided no immediate financial relief to consumers involved in a crash, the OAG found.
Investigators determined that DARCARS failed to disclose that this product was optional to customers, giving the impression that DARCARS Assurance was a mandatory component of the vehicle purchase or lease rather than a costly, elective add-on.
As a result of the settlement with OAG, thousands of customers who purchased or leased cars from these DARCARS dealerships will be eligible for restitution.
DARCARS Lexus will pay $892,671.26 to reimburse all consumers who were charged the sales commission fee between Oct. 23, 2021, and May 30, 2022.
Both dealerships will pay $116,849 back to customers who were misled into paying for DARCARS Assurance and complained to OAG.
Additional consumers who informed OAG about the dealerships’ deceptive sales commission fee will receive around $165,000 in refunds.
Other consumers who paid these fees will be mailed claims forms, and the dealerships must also pay restitution to any consumer who submits a valid claim, which may result in millions of dollars in refunds being distributed, James said.
In addition to having to reimburse customers, DARCARS has been permanently banned from charging the deceptive sales commission fees and will clearly disclose all future fees and any add-on products or services to consumers, James said.
As a term of the settlement, DARCARS is also banned from offering or selling DARCARS Assurance or any similar bundle or package at any New York dealership.
All employees, including sales and finance personnel, and those involved in marketing and advertising, will be subject to annual training on fair business practices. DARCARS will also pay $700,000 in penalties, James said.
James, who previously secured settlements with 15 Nissan dealerships in New York City and on Long Island for their deceptive practices, urged those who may have been affected by deceptive or fraudulent lease buyout practices to submit a complaint online through the New York Attorney General Consumer Complaint Portal at ag.ny.gov/file-complaint/consumer.
The investigation was handled by Assistant Attorney General Sandra Giorno-Tocco, along with Investigators Peter Schottenfeld and Ralph Dorismond and Supervising Investigator Michael Christian under the supervision of Assistant Attorney General in Charge of the Westchester Regional Office Andy Aujla.
The Westchester Regional Office is a part of the Division of Regional Affairs, which is led by Deputy Attorney General Jill Faber.
The Division of Regional Affairs is overseen by First Deputy Attorney General Meghan Faux.
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