Attorney General Neronha reaches settlement with Rhode Island car dealerships totaling more than $1 million

Attorney General Neronha reaches settlement with Rhode Island car dealerships totaling more than $1 million

Published on Thursday, August 15, 2024

Attorney General Peter F. Neronha announced today that the Office has reached a settlement agreement with the owners of six car dealerships located in East Greenwich, Middletown, Narragansett, and Westerly for alleged deceptive sales practices. As a result, the dealerships will pay more than $1 million between refunds to customers and payments to the State.

In the Assurances of Voluntary Compliance, filed in Rhode Island Superior Court on July 29, 2024, the Attorney General alleges that Flood Ford of East Greenwich, Flood Mazda of East Greenwich, Flood Ford of Narragansett, Valenti Subaru of Westerly, Valenti Toyota of Westerly, and Saccucci Honda of Middletown automatically charged, or attempted to charge, purchaser fees for an add-on warranty that was not included in the vehicles' advertised price. As alleged, these fees violated the Deceptive Trade Practices Act (DTPA) and the Rhode Island DMV's Rules and Regulations, which require dealers to honor prices they choose to advertise and prohibit dealers from charging customers fees for products without first obtaining their express, informed consent.

This settlement follows a similar July 2023 agreementwith three other Rhode Island motor vehicle dealerships to cease their practice of allegedly charging for an add-on product not included in the advertised price and other deceptive advertising practices. That agreement provided for more than $450,000 in refunds to consumers who were charged for a paint protectant and an associated warranty.

"Today's settlement is another strong step forward in our Office's fight to promote a fair, transparent, and competitive marketplace for all consumers, workers, and businesses," said Attorney General Neronha. "Rhode Islanders should be able to trust that that price they see at the beginning of a transaction is the price they end up paying at the end. And businesses should compete and succeed based on their ability to offer the best products, service, and price rather than on how creatively they can tack on fees. This settlement will return hundreds of thousands of dollars to Rhode Island auto consumers while making sure motor vehicle dealers play by the rules. And until every business competes fairly and openly for business, my Office will continue to prioritize protecting Rhode Islanders from having to bear the cost of deceptive sales practices."

Under the DTPA and the DMV's Rules and Regulations, dealers can only advertise the price for which they actually intend to sell a vehicle, while allowing narrow exceptions for dealers to charge customers sales tax and negotiable title and documentation fees. As alleged, each of the aforementioned dealers charged or attempted to charge each purchaser between $169 and $199 for a theft deterrent warranty that was not included in the advertised price of the motor vehicle. Additionally, the Office also found that some dealers allegedly suggested that their asking price was the manufacturer's suggested retail price (MSRP) when in fact it was thousands or potentially tens of thousands of dollars more. While dealerships may charge more for vehicles than the manufacturer suggests, this practice of describing a different, higher price as the listed MSRP violates the DTPA.

Combined, the dealers will pay more than $1 million, including $874,958 in refunds to thousands of affected consumers. Each consumer who paid this fee since January 1, 2021 will receive between $53 and $83- or approximately the profit each dealer made on the sale of the warranties -while also retaining the benefit of the warranty. Consumers will receive their checks approximately 60 days after the settlement is approved by the Court.

Each Assurance also requires that the dealers (1) refrain from charging or attempting to charge customers for products without their express, informed consent, (2) refrain from any misrepresentations related to fees or pricing, and (3) comply with DMV rules regarding fees and advertising.

The Office began investigating dealership sales practices in 2021 following the vehicle shortage that occurred during the pandemic and its subsequent effects on the auto market.

Auto dealer initiative

This matter is part of Attorney General Neronha's industry-wide effort to crack down on unfair and deceptive practices in the auto sales industry. The Attorney General seeks to put an end to practices like dealerships advertising one price on their website and window sticker, and then either refusing to honor that price or tacking on unwanted fees and services once a customer decides they want to buy the car. To that end, the Office has published a "Buyers Guide"to help consumers navigate the types of fees they can expect when purchasing a new or used vehicle in Rhode Island. The page also highlights the Office's recent work to crack down on illegal and junk fees in the auto industry.

The Attorney General's work includes issuing notices to every auto dealer in Rhode Island about illegal price advertising, co-authoring an amicus briefin support of Federal Trade Commission rules regarding price transparency in the auto industry, reaching a consent agreementwith a formerly Newport-based dealer for deceptive pricing tactics, and actively investigating several other dealers for similar practices to those described above. Similarly, the Office recently filed a lawsuitagainst a Bristol-based dealer for selling and advertising for sale vehicles that had not passed a state safety inspection in violation of the DTPA.

Deceptive Trade Practices Act

In 2021, Attorney General Neronha worked the General Assembly to pass legislation that restored the authority of the Office of the Attorney General to protect Rhode Island consumers against violations of the DTPA. Since then, the Attorney General has protected solar panel customers, halted schemes that target business owners, defended consumers against deceptive contractors, and prevented the sale of unsafe vehicles, among other actions.

Assistant Attorney General Stephen Provazza, Chief of the Consumer & Economic Justice Unit, and Investigator Tayla Martins handled the matter on behalf of the Office of the Attorney General.

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