DETROIT -- A consumer in New York is seeking class-action status for a lawsuit accusing Penske Automotive Group Inc. of not passing along the money received from a scrappage company for a vehicle traded in under the cash-for-clunkers program.
The lawsuit could pave the way for other consumers to seek payments from dealers in excess of the government-funded rebate checks given out in the program.
The suit said that on Aug. 14, Penske Automotive Group's Westbury Toyota Ltd. of Westbury, N.Y., estimated the 2000 Chevrolet Astro van that Philip Allegretti of Seaford, N.Y., was trading in for a 2009 Toyota Tacoma pickup had a scrappage value of $125.
By law, the dealership was allowed to keep $50 of that for administrative costs. But, the lawsuit alleges, the dealership kept the entire $125.
If the lawsuit is granted class-action status, other consumers who purchased vehicles under the cash-for-clunkers program from any of the156 dealerships in the United States operated by Penske Automotive Group of suburban Detroit could join the suit.
The lawsuit was filed in New York District Court on Oct. 8 by the law firm of Horwitz, Horwitz & Paradis of New York.
A spokesman for Penske Automotive could not be immediately reached for comment.
Consumers who purchased vehicles under the program received federal rebates of $3,500 or $4,500 to trade-in their old vehicles for new, more fuel-efficient models. The law called for a clunker's engine to be destroyed, then for the vehicle to be sold to a scrap company or dismantler.
The law required a dealer to give a customer an estimate of how much the dealership would receive from a junkyard or other salvage company for the vehicle. It also specified that a dealer could keep $50 of that payment to cover costs. But the law did not say -- in the event the salvage company paid more than $50 -- whether the extra money should go to the dealership or the consumer.
Most consumers nationwide appear to have taken the rebate and did not ask for any of the salvage company payment.
Because of delays in receiving payments from the government, many dealers are still shipping the clunkers they received as trade-ins to junkyards. Many of those scrappage companies are backed up as well. As a result, some dealerships are only now in the position of deciding whether to keep any scrappage payment beyond the $50 or to return it to the customer.
Some dealerships already have begun sending any payment beyond the $50 to the customer.
For example, the Ron Tonkin Family of Dealerships in Portland, Ore., is sending checks averaging $325 each to about 700 customers who purchased new vehicles at the group's stores under the federally funded program.
The amount being refunded by the 14-store Tonkin group covers the scrap value of the trade-in, minus the $50 spelled out under the law, said Brad Tonkin, vice president of the dealership group.
Legal opinions sought
Tonkin said his dealership group sought opinions from the Oregon state dealer group and the National Automobile Dealers Association about how to handle the money generated from scrap vehicles.
Referring to the government's official Web site, Tonkin said his family-owned group concluded that people who purchased vehicles under cash-for-clunkers are entitled to the salvage value of their trade-ins and decided to surprise their customers with checks.
The group also wanted to avoid any possible legal issues down the road, Tonkin said.
“At the end we said we did well under the program and think how delighted and surprised our customers are going to be when they receive a check in the mail and a letter that said, ‘Thanks for your business,'” Tonkin said.
Greg Remensperger, vice president of the Oregon Automobile Dealers Association, said the attention generated by the Tonkin group's refunds created problems for “a couple” of Portland-area dealers who did not send their customers separate checks to cover the value of their trade-ins.
He said those dealers and others he spoke with gave clunker money to consumers at the time of the transaction and kept no more than $50. He contends that dealers could choose to keep the money.