New York Attorney General Letitia James announced Wednesday that $1 million in refunds have been secured for New York residents who were charged hidden fees by two Westchester County car dealerships.
James said Mount Kisco-based DARCARS of Railroad Avenue Inc., known as DARCARS Lexus, and Mt. Kisco Automotive LLC, known as DARCARS BMW, charged customers a 2% fee that was "deceptively presented as a sales commission," even though it was not paid directly to the salesperson, was optional and provided no benefit to the consumer.
What did DARCARS charge customers?
According to the Office of the Attorney General (OAG), a consumer complaint filed in February 2022 alleged that DARCARS Lexus added a "sales commission charge" of more than $700 to a customer's purchase without telling them.
The fee appeared as a preprinted line item in vehicle sales and lease contracts.
An investigation found that DARCARS Lexus began charging the commission fee in October 2021, while DARCARS BMW began charging the same fee in August 2022.
Despite being described as a "sales commission fee," the OAG investigation determined that the money never went to the employee who made the sale.
When customers asked about the charge, employees gave "inconsistent, vague, conflicting or misleading explanations," according to the OAG. Customers were told the fee was a "standard dealer fee" or that it went directly to the salesperson. Both explanations were untrue, the OAG said.
The dealerships also did not tell customers that the fee was voluntary and was not required to buy or lease a vehicle. The sales commission fee was not included in the advertised sales and lease prices on the dealerships' websites.
James said that by applying the 2% fee to nearly every sale or lease, the dealerships "were able to generate millions of dollars in additional revenue."
What is DARCARS Assurance?
The investigation also found that the dealerships charged customers for an "expensive and needless" add-on package called "DARCARS Assurance," presenting it as a mandatory part of vehicle purchase and lease contracts.
The package included services such as a collision credit and a stolen vehicle credit. The collision credit offered up to $2,500 in reimbursement for an insurance deductible if a vehicle was declared a total loss in an accident.
However, the collision credit reimbursement was available only if the customer purchased or leased another vehicle from the same dealership within 60 days of receiving an insurance settlement. According to the OAG, the benefit did not appear to provide financial assistance to customers involved in a crash unless they returned to the dealership to purchase or lease another vehicle.
James said DARCARS did not disclose that DARCARS Assurance was optional and instead led customers to believe it was a mandatory part of the purchase or lease contract.
"New Yorkers save up for years to buy a car, and they deserve fair prices without junk fees that drive up the cost with useless add-ons," James said in a statement Wednesday. "DARCARS took advantage of hard-working New Yorkers, charging them thousands of dollars in misleading fees. My office is making sure that every New Yorker who was defrauded by these dealerships gets their money back."
How much will DARCARS customers receive?
The OAG is requiring DARCARS Lexus to pay $892,671.26 in reimbursement to customers who were charged the extra sales commission fee between Oct. 23, 2021, and May 30, 2022.
Both DARCARS dealerships also will be required to pay $116,849 to customers who were misled into paying for DARCARS Assurance. The dealerships will pay an additional $700,000 in penalties.
Customers who informed the OAG about the deceptive fees will receive a total of $164,998.72 in refunds.
Those who were charged the sales commission fee after May 2022 also will be eligible for restitution through a claims process, which could potentially result in millions of dollars in additional consumer refunds.
What will DARCARS be required to do?
James said the DARCARS dealerships will be required to disclose all future fees and any add-on products or services to consumers.
The dealerships are banned from offering or selling "DARCARS Assurance or any similar junk bundle" at any New York dealership.
All employees, including those in sales, finance, marketing and advertising, will be subject to annual training on fair business practices.
How can New Yorkers file a complaint?
New York residents who may have been affected by DARCARS' hidden fees or deceptive lease and vehicle sale practices can file a consumer complaint online.
This article originally appeared on Rockland/Westchester Journal News: NY attorney general secures more than $1M in refunds from Westchester car dealerships
