Walser Automotive Group, the second largest dealership group in Minnesota, has agreed to tape-record service contract sales to avoid a civil fraud suit.
Walser, a Minneapolis chain with $250 million in annual revenues, also agreed to pay to arbitrate consumer complaints as part of a May settlement with the Minnesota attorney general's office. The state had intended to file charges against the company.
Last year, the state began an inquiry into service contract sales at several of Walser's 13 dealerships after receiving more than 140 written complaints from customers.
Customers allege that Walser employees rolled the price of a service contract into their vehicle loans without telling them, told customers they could not purchase a vehicle without a service contract, told customers the price of a service contract was included in the price of a car and overstated the coverage of the contracts.
Walser did not admit to wrongdoing as part of the settlement.
Under the settlement, Walser must send tape-recorded transactions to the attorney general's office for four months. The company must record transactions indefinitely and keep the recordings on file for three years.
"Taping the transactions was something we offered up to the state," said Paul Walser, CEO and owner of the Walser chain. "When the door (to the finance office) gets closed, we don't control those conversations. There are a couple of individuals in our organization that are not adhering to our policies."
The dealerships also must obtain written and spoken consent from customers before they buy service contracts.
And Walser must offer arbitration to all consumers who bought service contracts on used vehicles since Jan. 1, 1999, at several of its dealerships. For Walser Inver Hills Mazda, Walser must offer arbitration to customers who purchased service contracts from July 12, 2000, to May 1, 2001.
The Walser case is part of a broader crackdown on service contract sales at dealerships. The state has received hundreds of customer complaints about other dealerships besides the Walser stores, said Leslie Sandburg, a spokeswoman for the Minnesota attorney general's office.