Seattle - September 18, 1997 - The Office of the Insurance Commissioner and the Office of the Attorney General today announced major action has been taken to improve the way auto-related products including credit insurance and service contracts are sold to consumers.
Lawsuits were filed under the Consumer Protection Act against two major service contract and credit insurance sales consulting companies. Agreements were reached with four dealers and two other insurance consulting firms to promote the use of fair and non-misleading tactics in the sale of automobile related products.
According to Attorney General Christine Gregoire, an investigation was launched after it was
alleged that various sales tactics were being used during negotiations to buy a car as a way to conceal that the payment quoted contained more money than needed to actually purchase the vehicle. The extra money was then used to cover the costs of additional products and services such as auto-related credit insurance and service contracts.
Insurance Commissioner Deborah Senn and the Attorney General resolved the investigations when the six companies signed settlement agreements which include claims process and payment of insurance fines, attorney fees and costs and to promote fair and non-deceptive selling practices in quoting payments to consumers.
"These companies fully cooperated with the State's investigation," said Gregoire. "As a result they have agreed to make sure consumers are fully informed about the products they buy and their costs."
Those businesses are:
- Red Ralls dealerships in Aberdeen and Port Angeles, without admitting any wrongdoing under their settlement will pay $50,000 insurance fine and $50,000 in costs and fees.
- Hannah Motor Group of Vancouver, has agreed to pay $50,000 in costs and fees under an agreed order, while acknowledging a variety of practices which have the capacity to mislead a substantial number of consumers.
- Agent Based Services, Inc. of Washougal, Washington has agreed to pay $50,000.00 in insurance fines under an agreed order, while acknowledging a variety of practices which have the capacity to mislead a substantial number of consumers
- Larson Automotive Group of Pierce County, reportedly the largest dealer group in the state, without admitting any wrongdoing will pay $125,000 in insurance fines, $50,000 in costs and fees, and a civil penalty of $250,000 (with $75,000 suspended conditioned upon compliance with the Consent Decree). The Larson Consent Decree prohibits other alleged deceptive sales and leasing practices.
- Simpson dealerships in the Tri-Cities without admitting any wrongdoing have agreed to pay $100,000 in insurance fines, $75,000 in costs and fees, and in $50,000 in suspended civil penalties.
- American Financial and Automotive Services, Inc. of League City, Texas, without admitting any wrongdoing has agreed to pay $50,000 in fines, $50,000 in fees, and contribute $100,000 to the Legal Aid for Washington (the "LAW" Fund) and Consumer Credit Counseling of Washington to benefit low income consumers/debtors.
The lawsuits were filed in King County against Associate Dealers Group (ADG) of Bellevue, Washington, Inc. and Resource Dealer Group (RDG) of Illinois (Cause No.97-2-15754-4 SEA) and Universal Underwriters Life Insurance Company and Universal Underwriters Service Corporation (both of Missouri) (Cause No. 97-2-15752-8 SEA)
The practices which are the subject of the RDG/ADG lawsuit are known in the automobile industry as "packing" or "loading" the payments. Under the alleged tactics, the defendants encouraged auto dealers' staff to use certain sales techniques in combination with the "packed" payment to reduce the likelihood consumers would object to the inclusion of extra products based on cost. Words such as "protected" payment; or "it's included"; or "it's provided"; were allegedly used to imply that the product was included free or at a reduced cost. Universal allegedly advocated for the use of packed payments by some of its dealers in Washington.
Consumers coming out of hours of lengthy negotiations may have failed to focus on the additional cost for the optional products, even when disclosed in writing, because the payments they were quoted throughout the negotiations never changed.
"If it cost $270 a month to buy a car, dealer personnel might quote $300 and use the difference to hide the actual cost of extra products making the customer believe it was all part of the deal," said Gregoire.
"The practice of 'packing' in the car industry must be eliminated and resolving these cases will be a major step toward making sure that happens," said Gregoire. "Consumers have the right to expect and dealers have the responsibility to accurately quote monthly payments."
Insurance Commissioner Senn expressed concern about the widespread misquoting of payments in the automotive industry and their capacity to mislead so many consumers.
"Consumers should always question the cost and benefit of all products, but be very cautious when buying credit insurance," said Senn. "If you don't know the details of the coverage and the price, then don't buy it."
All of the auto dealerships signing consent decrees and settlements have agreed to establish complaint handling procedures. Consumers who want more information or who would like to file a complaint should call the Attorney General's office at 1-800-551-4636 or visit the AG homepage at www.atg.wa.gov or call the Insurance Commissioner's Office at 1-800-562-6900.