A nationwide crackdown on auto dealers has turned up widespread evidence of false ads, deceptive loans and fake odometer readings, the government said Thursday.
The investigation led by the Federal Trade Commission and law enforcement resulted in 252 enforcement actions and $2.6 million in consumer refunds and fees.
It was the second time that the FTC has gone after the car industry. Last year, the agency announced 10 cases of deceptive advertising and loans. Officials say the more recent investigation in U.S. and Canada involved the Justice Department and state prosecutors.
"The clear message is that across this country, and indeed internationally, law enforcement agencies are on the lookout for deceptive and illegal practices by auto dealers, and will take whatever action is necessary to protect consumers," said Jessica Rich, director of the FTC's Bureau of Consumer Protection.
In one case, a company called the National Payment Network Inc. in San Mateo, Calif., set up car buyers with an automated payment program that was pitched as a way to save money. But regulators said the fees associated with the program were so heavy that they canceled out any savings. For example, a standard five-year auto loan would charge $775 in fees.
Matt Blatt dealerships, which have multiple locations in New Jersey, worked with National Payment Network to sell loans and received commissions for the more than 1,000 consumers they enrolled, according to the FTC.
As part of a settlement, National Payment Network will refund $1.5 million to consumers and waive $949,000 in fees to current customers. Matt Blatt Inc. and Glassboro Imports will pay $184,000.
Both companies on Thursday denied any wrongdoing. Matt Blatt Inc. believed that it had clearly explained the terms and benefits of the payment program in question but agreed to settle with the FTC to avoid "protracted and expensive litigation," a company statement said.
Likewise, National Payment Network said it "strongly disagrees" with the FTC and presented "considerable evidence, including consumer satisfaction surveys, training materials for dealership personnel and other documents that support its position and demonstrate the value" of the payment programs in question.
"NPN has decided, however, that a settlement is in the best interest of its customers and auto dealer channel partners," the company said.
The FTC also accused three auto dealers of false advertising and violating truthful lending laws. According to the agency, Cory Fairbanks Mazda of Longwood, Fla., Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte have agreed to settle charges that they advertised sales, as well as lease or finance options, without disclosing relevant terms, such as required down payments. In the end, the FTC said any value of the offers was canceled out by "fine-print disclaimers."
Telephone calls to each of the three dealerships were not immediately returned Thursday.
Several other cases handled by the Justice Department involved odometer fraud and inflating a car buyer's income to qualify them for a loan. Other cases pursued by state attorneys general found that some car dealerships failed to disclose mechanical defects and charged customers supplemental warranties without their consent.