"Consumers should not have to worry that they are being scammed into adding on bogus products and services when they purchase a car," New York Attorney General Eric Schneiderman said in the release. "Buying a car is already a major investment for many families, and tacking on thousands of dollars extra can become a significant financial burden."
The settlement is part of Schneiderman's broad push to end the practice of unlawfully charging consumers for products and services without their knowledge or consent, also known as "jamming."
In this case, customers were also led to believe they would receive a guaranteed credit of $3,000 or $5,000 toward the purchase of a new vehicle if theirs was stolen. But the numerous conditions and limitations rendered the credit essentially useless. For example, the credit would not be applied if it eliminated the dealership's profit on the sale. Only one consumer received a credit through the Total Loss Protection program.
As all of this was happening, Panarella and the dealership's upper managers were in the dark, Panarella said.
"I didn't know anything was going on until there was a problem," he said. "Things don't get to our level until the horse is already out of the barn."
Panarella has been in the auto industry for many years, but had not owned a dealership before Nissan of New Rochelle. For eight years before buying the store, he was general manager of Nissan of Queens in New York City's Ozone Park neighborhood, he said.
Panarella said he cooperated fully with the investigation when the attorney general's office alerted him to the problem about 18 months ago.
A consumer complaint had been filed in August 2015 against Nissan of New Rochelle prompting an investigation into fraudulent sales of an after-sale product, the release said.
Investigators found that the dealership had sold hundreds of consumers the Total Loss Protection product, charging them amounts ranging from $215 to more than $5,000. In many cases, the fee was added to the final sales price without the knowledge or consent of the consumers, the release said. The final price the customer paid was inflated by the amount charged for the after-sale product.
The attorney general also found that Nissan of New Rochelle failed to clearly disclose the nature of the product to customers. The Total Loss Protection or Total Loss Protection Guarantee product was advertised as a "permanent etch or engraving of the vehicle's VIN, or a registered serial number, on the windows of the vehicle," said the release.
But investigators found that Nissan of New Rochelle did not etch the VIN onto the vehicle's windows. On some vehicles, the dealership put sticker decals with assigned registration numbers on the inside of the door or doorjamb where no one could see them, providing no theft deterrent. For other vehicles, the dealership provided no stickers or decals.
Under the agreement, Nissan of New Rochelle will refund $276,127 to 298 consumers charged an add-on fee for the Total Loss Protection product.
In addition, the dealership will pay $22,084 in penalties, fees and costs to the state of New York.
According to the release, the dealership has agreed to improve its sales practices by:
— Fully disclosing that all after-sale services or products are optional and that the price is negotiable.
— Clearly explaining to each consumer all after-sale services or products offered.
— Adding an after-sale service or product to the final bill only with the knowledge and full consent of the consumer.
Panarella said he has made drastic changes to the compliance process, including hiring a compliance company to improve the process and train employees better. He also has installed a human resources department to ensure employees are vetted better. He declined to say how much the changes cost him, saying: "I think it's priceless because given the reputation car dealerships have around the country, this shows we're moving forward."