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Two Pennsylvania Dealerships to Pay $250,000 for Deceptive Advertising

January 15, 2008

HARRISBURG — The Attorney General's Bureau of Consumer Protection has announced a $250,000 settlement resolving a civil lawsuit against two Southeastern Pennsylvania car dealerships and a New Jersey couple accused of using false and misleading advertising, selling defective vehicles and failing to honor guarantee and warranty agreements in the sale of new and used vehicles at two Value Kia locations in Southeastern Pennsylvania. The lawsuit was prompted by complaints from consumers in Philadelphia, Bucks, Chester, Delaware and Montgomery counties.

Attorney General Tom Corbett said the agreement requires the defendants to pay restitution in the amount of $150,000 to be distributed to eligible consumers who have filed complaints or who come forward with complaints within the next 60 days, along with $40,000 in civil penalties and a payment of $60,000 to be used for public protection and education purposes.

The settlement resolves allegations that the defendants violated Pennsylvania's Unfair Trade Practices and Consumer Protection Law and Automotive Industry Trade Practices in the advertisement and promotion of the sale of new and used vehicles on the Internet, as well as in print, radio and television ads. Investigators said the ads falsely promised rebates, incentives and free gifts.

Corbett said the ads included claims such as:

--"Free Vehicle with any vehicle purchase"

--"Up to $12,000 off new cars"

--"YOU CHOOSE! $1,500 cash with any vehicle purchase or 60" color projection television just $1 with any vehicle purchase."

Other ads offered consumers a five carat diamond tennis bracelet, up to 60 percent off new cars, and free gas for one full year with every new and used vehicle sold.

"These ads were designed to lure prospective car buyers to their showrooms with promises of great deals and prizes, however the defendants failed to make good on many of the sales incentives," Corbett said. "Consumers arrived at the dealerships expecting to receive the free gifts or deals only to be told that they had to meet a host of conditions to qualify for the offers. Very rarely, if ever, were car buyers able to meet all or even some of the conditions to purchase the cars and trucks as advertised. In fact, some of the rebates that the defendants combined to reach the advertised price were neutrally exclusive, such as 'buyer loyalty' (second-time KIA buyer) and 'first-time buyer'."

The lawsuit accused the defendants of:

--Failing to disclose exact conditions of sale incentives in ads or promotions.

--Failing to honor sales incentives including rebates, free gifts and price reductions even if consumers meet the qualifying conditions.

--Failing to sell vehicles at the advertised prices.

--Failing to pay set price advertised for trade-ins.

The Commonwealth also claimed that the defendants falsely represented that a vehicle was roadworthy at the time of sale. In some cases, the defendants sold vehicles with a variety of defects including faulty brakes, engines and transmissions. After the problems were identified, the defendants failed to adequately repair the problems. In several instances when repairs were made, the defendants charged consumers for work that should have been covered under the warranty.

In addition, the defendants on numerous occasions, failed to supply consumers with proper registration and permanent license plates in a timely manner. Other allegations included claims that the sales taxes and transfer and registration fees were not turned over to the proper Commonwealth agency within the time limit allowed by law.

Defendants also failed to pay off the balances owed on consumers' trade-in vehicles in a timely manner thus jeopardizing consumers' credit for defaulting on monthly payments due on the trade-in vehicle. In one instance, defendants engaged in a repossession scheme in which a consumer's vehicle, a "trade-in", was allowed by defendants, after being left in the defendants' possession, to be repossessed by a bank, without the understanding or authorization of the consumer, who was over the age of sixty. The consumer believed he had "traded" his vehicle toward his purchase of a new vehicle from defendants. The vehicle was sold at auction by the bank and the consumer is now responsible for the deficiency between the auction sales price and the amount still owed on the vehicle, which is over $18,000.

The terms of the settlement:

--Permanently enjoins defendants from violating Pennsylvania's Consumer Protection Law and Automotive Industry Trade Practices.

--Requires the defendants to pay restitution in the amount of $150,000 to be distributed to eligible consumers who have filed complaints or who come forward with complaints in the case within 60 days.

--Requires the defendants to pay civil penalties in the amount of $40,000.

--Requires the defendants to pay $60,000 to be used by the Commonwealth for public protection and education purposes.

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