March 14, 2017
Today, the Federal Trade Commission announced that nine Los Angeles-based auto dealerships, their holding and management companies, and two individual owners have agreed to pay more than $3.6 million for return to consumers in order to settle charges that they used deceptive and unfair sales and financing practices, deceptive advertising, and deceptive online reviews.
The FTC originally alleged that Sage Auto used "yo-yo" financing tactics (i.e., using deception or other unlawful pressure tactics to coerce consumers who had signed contracts and driven off the lot into accepting a different deal) and packed extra and unauthorized charges for add-ons or aftermarket products and services into the deals. The FTC's complaint also alleged that Sage Auto used phony online reviews to tout their dealerships and to discredit negative reviews about the company's advertising, sales, and financing practices.
The proposed settlement order will prohibit the dealerships and owners from making misrepresentations related to their advertising, add-on products, financing, and endorsements or testimonials. The proposed order will also bar the defendants from engaging in other unlawful conduct when a sale is cancelled, such as failing to return any down payment or trade-in or seeking legal action, arrest, repossession or debt collection unless the action is lawful and the defendants intend to take such action. Finally, the proposed order prohibits the defendants from violating the Truth in Lending Act and Regulation Z, as well as the Consumer Leasing Act and Regulation M.
The corporate defendants are Universal City Nissan, Inc., also d/b/a Universal Nissan; Sage Downtown, Inc., also d/b/a Kia of Downtown Los Angeles; Glendale Nissan/Infiniti, Inc., also d/b/a Glendale Infiniti and Glendale Nissan; Valencia Holding Co., LLC, also d/b/a Mercedes-Benz of Valencia; West Covina Auto Group, LLC, also d/b/a West Covina Toyota and West Covina Toyota/Scion; West Covina Nissan, LLC; Covina MJL, LLC, also d/b/a Sage Covina Chevrolet; Sage North Hollywood, LLC, also d/b/a Sage Pre-Owned; Sage Vermont, LLC, also d/b/a Sage Hyundai; Sage Holding Company Inc. and Sage Management Company Inc. The individual defendants are Joseph Schrage and Michael Schrage. One owner originally named in the complaint is not a party to the proposed settlement order.
The Commission vote approving the stipulated final order was 2-1, with Acting Chairman Ohlhausen dissenting.