New York Attorney General Eric T. Schneiderman recently announced a $1.6 million settlement with two auto dealerships, SG Hylan Motors and Best Auto Outlet, Inc., who were found to have engaged in jamming schemes between 2010 and 2014. “Jamming” is the deceptive practice known in the auto-dealership industry whereby dealers unlawfully charge consumers for hidden after-sale purchases. The 2016 lawsuit alleged that the involved dealerships unlawfully sold credit repair and identity theft protection services to unwitting consumers who neither needed nor wanted these services. The settlement requires the dealerships to pay $1.5 million in restitution to the consumers as well as more than $100,000 in penalties to the state.
This is not the first time auto dealerships have been in the New York A.G.’s crosshairs. Since 2015, A.G. Schneiderman recovered more than $17 million for 22,000 consumers who were illegally charged under similar jamming schemes.
Takeaway: Companies should clearly and conspicuously disclose all costs associated with the purchase of their products, including the purchase of accessories, warranties, and other post-purchase items. Automotive dealers typically should continuously review their OEM guidelines regarding the proper disclosure of such optional items.