Resource Dealer Group, a Chicago-based finance and insurance provider, and an affiliate company have agreed to pay more than $1.4 million to settle charges of payment packing in Washington state.
Resource Dealer Group, formerly Pat Ryan and Associates, and Associate Dealers Group, its affiliate in Bellevue, Wash., did not admit wrongdoing as part of the settlement.
'The decision to settle with the state of Washington was one of simple practicalities. That was to halt the expense, inconvenience and distraction of continued litigation,' says Clayton Friedman, a spokesman.
Payment packing occurs when a dealer inflates monthly installments for car loans to make room for F&I products without informing customers they are being charged for those extras. The state attorney general sued the companies in June 1997, claiming they trained dealers to pack payments in order to boost sales of credit insurance and extended service plans.
'If the cost was $250 a month to buy the car, auto dealers would quote $300 and use the difference to hide the actual cost of the extra products,' says Christine Gregoire, attorney general. 'They made customers believe those extra products were all part of the deal, when in reality they were unknowingly paying for them.'
Resource Dealer Group and its affiliate say they train dealerships to have customers sign disclosure forms listing the products purchased and the price of each.
Nevertheless, the companies face $400,000 in restitution for consumer education, $350,000 in legal costs and $150,000 in civil penalties in connection with a suit filed by the state attorney general. The companies also must pay a $150,000 fine to the state insurance commissioner in lieu of action against their insurance licenses.
The companies also will pay $350,000 to settle a suit they filed against the attorney general challenging the payment packing charges.