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UnitedAuto Group Settles Suit About Reserves

May 10, 2004

BlOOMFIELD HILLS, Mich. -- UnitedAuto Group reportedly settled a class action alleging that five of its dealerships excessively marked up interest rates without disclosure. One of the dealerships is Covington Pike Toyota, whose practices were targeted by the recent "60 Minutes" exposé on dealer reserves.

UnitedAuto didn't admit guilt. It promised to disclose to consumers that loan interest rates are negotiable and that the dealer may be compensated for arranging financing, reported Automotive News. The National Automobile Dealers Association and American Financial Services Association have encouraged all dealers to provide this voluntary disclosure.

UnitedAuto also promised to give $500 discounts on a future purchase to customers who visited these dealerships between 1998 and 2004. Customers can sell or give away these discounts if they don't want to use them. If the markup a plaintiff paid was more than $500, he or she can apply to the court for the difference in cash.

"We always felt and continue to feel that we had strong defenses to the allegations in the case," said Rob Kurnick, attorney for UnitedAuto. "We believe that resolving the case on the terms we settled for made good business sense." The settlement could cost UnitedAuto as much as $28 million, according to Automotive News.

"Dealers have a duty to tell the customer if they are paying for something, what it is they are paying for, and how much is being charged," said Jim Andrews, attorney for plaintiffs. The attorneys in the class action will receive $1.65 million in legal fees as a result of the settlement.

Andrews said he plans to target other dealership chains and force them to disclose their actual F&I profit.

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