A large group of Los Angeles auto dealers has been “yo-yoing” auto customers for years, according to the US Federal Trade Commission.
The yo-yo is an illegal dealer tactic that attacks people with bad credit. After being attracted to advertisements offering low prices and low financing costs, customers are allowed to take the vehicle home before the financing is complete. Then they are sent back to the dealership and told that their credit is bad, so they will have to pay more to keep their new vehicle.
A lawsuit filed Thursday by the FTC in US District Court also accuses the Sage Auto Group of several other “deceptive and unfair business and financial practices.” The group includes Universal City Nissan, Downtown Los Angeles Kia, Mercedes-Benz Valencia, Sage Hyundai and Sage Covina Chevrolet. The costume also includes West Covina Toyota.
In response, Michael Sage, part owner of the dealership group, told The Times his company was “very aware of our demands and our responsibilities” with the FTC, the state and the automakers.
“We can’t wait to defend ourselves vigorously. We will fight against this, ”he said. “When you are at the top of the pyramid, you are going to be attacked by everyone. We’re No. 1. We keep hitting him.
Beyond the yo-yo, the FTC said, dealerships use “bogus online reviews” posted by employees posing as customers, charge some customers for add-ons such as extended warranties without their consent, and do not disclose the required credit and rental advertising information, according to the complaint.
One of the many examples detailed in the deposit: A customer is attracted to an ad for a Nissan Versa available for “$ 38 down.” The small print indicates that the amount required for signing is $ 2,695.
The tactics, according to the complaint, are aimed “in particular at financially troubled and non-English speaking customers.”
In response, Michael Sage said, “We have fulfilled all of our regulatory responsibilities with all of our advertising. Everything is legal and clearly written.
The complaint seeks an injunction to “prevent future violations” and restitution, refunds and “restitution of ill-gotten monies” for unspecified amounts.
The dealers as well as Sage Holding Company, Sage Management Company, Michael Sage, Leonard Sage and Joseph Schrage, “a / k / a Joseph Sage” are named in the lawsuit.
One Sage dealer has not been named: Sage Lotus in West Covina.
The FTC acquired new enforcement power over auto dealerships in federal Dodd-Frank legislation of 2010 and the agency modulated it.
In 2014, he made deals with nine auto dealers after accusing them of misleading advertising in what he called Operation Steer Clear. The dealers – including Norm Reeves Honda Superstore in Cerritos and Honda of Hollywood in Los Angeles – have agreed to avoid misleading advertising for 20 years or face fines of up to $ 16,000 per day.
In 2015, the FTC expanded beyond advertising to encompass fraud in loan applications and deceptive add-on practices, such as charging for underpants without the buyer’s consent.
The Sage case marks the first time the FTC has addressed yo-yo fundraising tactics.
The tactics are unscrupulous but have been common practice at some dealerships for a long time, said Michael Semanie, who represents the auto dealers as a partner at Killgore Pearlman law firm in Orlando, Florida.
In a typical yo-yo, Semanie said, a dealership will “un-horse” a customer: make a trade-in, let the customer drive the new car home and tell them later, in fact, you’ll have to pay more or be. without a car.
Much more common, he said, is what is called “conditional sales”, where the customer wants a car right away and they are made clear that if the loan is not approved, they will have to return. the car. This, he said, is perfectly legal and, in his opinion, a respectable arrangement.
However, “you had to differentiate between that, and knowing that they won’t be approved and let them take the car anyway and then tell them to pay more money,” Semanie said. It will be interesting to see how the FTC approaches the case, he said.
The FTC, like the Securities and Exchange Commission, often reaches out-of-court settlements with defendants. Some dealers have complained that fighting a costume is not worth the expense.
The Sage group was founded in 1969 by family patriarch Morrie Sage, whose father immigrated to Cuba from Poland during the Hitler era. After Fidel Castro’s revolution in Cuba, Morrie immigrated to the United States.
The company’s website said his sons – Michael, Joseph and Leonard – had run the business since Morrie died in 2011.
The website noted that Morrie Sage “has become well known for his maverick and revolutionary approach to automotive advertising.”
Twitter: @ russ1mitchell
12:40 p.m .: This story has been updated to include comments from car dealer and defendant Michael Sage.
3.20 p.m .: This story has been updated with information about the FTC app and comments from an attorney who represents car dealerships.
This story was originally posted at 8:50 a.m.