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New York dealerships to pay more than $300,000 in deceptive advertising, fraud settlement

The New York Attorney General’s Office reached a settlement Tuesday requiring 23 dealerships in the New York area -- the Atlantic Auto Group’s 22 stores and Hyundai of White Plains -- to pay restitution and penalties to resolve false advertising claims, many of which related to vehicle financing.

The dealerships in the Atlantic Automotive Group, of West Islip, N.Y., defrauded consumers with misleading promotions and fraudulent sales tactics, Attorney General Eric Schneiderman said in a media statement. The dealerships will pay $310,000 in restitution and penalties.

Separately, Schneiderman’s office reached a settlement with Hyundai of White Plains, which was accused of using deceptive and misleading advertising practices in its print and online ads. The dealership has agreed to reform its advertising practices and will pay $32,500 in costs and penalties to New York State.

“Purchasing a car is one of the biggest financial decisions many families will make,” Schneiderman said in the statement. “New Yorkers have a right to navigate the car buying process without being targeted by false and misleading promotions and sales practices.”

Game cards

Atlantic Automotive is Long Island’s largest chain of car dealerships. Its founder and CEO is John Staluppi Sr.

In total, the Attorney General’s Nassau and Suffolk Regional Offices received more than 250 complaints regarding Atlantic Automotive dealerships and their advertising and sales practices.

The Attorney General’s Office said Atlantic Automotive mailed advertisements to thousands of Nassau and Suffolk County consumers, with nearly 500,000 promotional items.

The advertisements contained a scratch-off game card, a pull-tab game card or a “Triple Diamond” game card that offered consumers the chance to win a cash prize, a free vehicle, a flat-screen TV or an Apple iPad. A winning ticket did not explain what, if anything, the consumer won. Instead, consumers were instructed to bring the game card to the dealership to claim their prize.

But virtually all of the consumers did not win a prize at all, the Attorney General’s Office said.

Direct-mail campaign

The dealership group said the investigation into its activities was the result of a direct-mail campaign “run through” a third party, with which Atlantic Automotive no longer does business.

The last time Atlantic ran the campaign was about three years ago, said Michael Brown, co-owner of Atlantic Automotive.

The agreement with the attorney general covers a five-year period, John Gentile, general counsel for Atlantic Automotive, told Automotive News. He also noted the group sells 70,000 new and used vehicles a year across its 22 dealerships.

“The number of complaints [that investigators] received over that time represents less than one-tenth of 1 percent of our business,” said Gentile. “The amount of issues involved here were modest.”

Other fraud

But Atlantic Automotive also misled consumers in other ways, the Attorney General’s Office said. Those included:

• Publishing print advertisements that contained misleading or illegal features in violation of the Attorney General’s Auto Advertising Guidelines and a previous Assurance of Discontinuance entered into with two dealerships in the Atlantic Automotive Group.

• Obtaining signatures on contracts of sale and financing agreements from consumers who believed that they were filling out paperwork for vehicles they had won as part of the game-card promotions.

• Offering false discounts by selling vehicles at a high retail sales price, which had the effect of nullifying the value of the discount offered.

• Charging consumers for extended warranties, vehicle maintenance contracts and administrative fees that consumers did not want or had no knowledge of, or that consumers were told there was no charge for.

• Giving consumers blank documents or partially blank documents for their signatures and later filling out the documents with figures and terms other than what was agreed upon.

• Failing to give all necessary documents to consumers at the time of purchase.

• Making various false or misleading statements to consumers during high-pressure sales transactions.

• Encouraging consumers to apply for loans that they could not afford.

• Refusing to refund deposits that had been made by consumers.

Making changes

Brown said the company is making changes to assure compliance in all areas going forward. Two years ago, it hired an advertising compliance officer and also a director of auditing.

“The attorney general was very helpful and assisted to show us where we might have had some exposure. We had a couple rogue employees that weren’t following the process, and we were able to pinpoint it and get rid of them,” Brown said.

He characterized the fine as “miniscule” because it amounts to about $14,000 a store.

“We’re not happy with having to pay a settlement, but when things got by us, we addressed it, and we see it as an opportunity to get better,” Brown said.

The 22 dealerships that reached the settlement are five Hyundai stores; four Toyota stores; three Honda stores; two Audi stores, two Nissan stores and two Lexus stores; and one Volkswagen store, one Chrysler-Jeep-Dodge-Ram store, one Chevrolet-Cadillac store and one Chevrolet store.

Hyundai of White Plains

The Attorney General’s Office said Hyundai of White Plains widely promoted sale and lease prices that included discounts or rebates that were not available to most consumers.

But the general manager said the store has made many changes.

“We were caught up in an environment where a lot of dealerships do the wrong thing, and the Attorney General’s Office is very strict and has no room for error,” said Melvin Abreu, general manager and partner. “But we did not intentionally violate any laws. This was the result of us hiring an out-of-state marketing company that was unfamiliar with New York advertising rules.”

The incident happened two years ago. The marketing company has since been fired, and “they’re paying for the entire fine,” Abreu said.

The dealership fired the general manager two months ago, hiring Abreu to replace him. Abreu insists the store has a good reputation.

‘A mishap’

“It was not a violation of laws. It was a mishap with someone not doing the due diligence with advertising. It was rushed and wasn’t checked by the general manager of the dealership, and obviously, it was a mistake,” Abreu said. “Our dealership has a reputation of having very happy customers.”

Abreu said the store now does in-house marketing campaigns and is minimizing its use of outside marketing firms.

But Schneiderman said in some cases, the discounts and rebates totaled $4,500, so for many consumers, the actual price of the vehicle was significantly more than advertised. The only disclosure that the advertised prices included these rebates and discounts was in tiny footnotes at the bottom of the advertisements.

The attorney general’s investigation also cited Hyundai of White Plains for other problems with its ads, such as “using footnotes or asterisks that contradict, confuse or materially modify an ad’s message.”

The settlement requires the dealership to reform those practices as well.

You can reach Jamie LaReau at jlareau@autonews.com -- Follow Jamie on Twitter: @jlareauan

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