N.Y. AG Goes After Dealer for Credit Repair Sales
STATEN ISLAND, N.Y. — After three months with no response, Attorney General Eric T. Schneiderman filed a motion seeking to compel Manfredi Auto Group to comply with an investigatory subpoena issued by the AG’s office in March. The subpoena requested that the dealer group produce documents related to its sale of credit repair service contracts, a product Schneiderman called “frequently worthless to consumers.”
According to the documents Schneiderman filed on June 3, the attorney general’s office began an investigation in February 2014 of a large network of car dealerships that allegedly engaged in a pattern of “illegal and deceptive behavior” from 2009 to early 2014. Among those dealers was Manfredi Auto Group, which sold more than 1,500 credit repair contracts at an average cost of $302 per contract per customer in that timeframe.
“… The credit repair services contracts violated specific federal and state credit repair laws designed to protect consumers from abusive practices in this area,” the court documents read, in part. “These laws prohibit the collection or receipt of upfront fees for credit repair services and require certain upfront disclosures intended to advise consumers of their rights under the law. Yet many dealerships, including [Manfredi], appear to have violated every single requirement of these laws.”
The contracts were provided by a third-party company called Credit Forget It (CFI), which entered into a consent order with Schneiderman’s office in March. The firm provided dealers like Manfredi with contract templates for its credit optimization services, even though the company was not authorized to engage in credit repair services and “did not have the expertise to provide the services represented.”
The attorney general’s investigation, spurred by concern over CFI’s business practices, has also uncovered a “common and widespread industry practice” of dealerships charging car buyers for F&I products without informing them, according to court documents.
Credit Forget It sold its plan to approximately 37,000 consumers in New York and other states, and at least 75% to 80% of those consumers did not receive any services. The consent order prohibits the company from marketing, promoting, offering or selling credit repair or identity theft protection services to consumers.
“… CFI instructed staff never to mention to consumers that they were paying for CFI’s services but rather to mislead them by saying that the plan was ‘included in the price of the car’ and referring them back to the dealer,” according to court documents. “In fact, the account manager testified that managers spoke openly about how car dealerships were ‘jamming’ CFI’s contract into the vehicle sales and leases.”
In November 2014, Schneiderman’s office sent a letter to Manfredi Auto Group requesting the number of CFI contracts sold and the total revenue generated by those sales. The dealer group said it had generated $445,667 from those sales, but when asked to voluntarily produce all documents related to those sales, it failed to do so.
The AG’s office spent four months unsuccessfully attempting to obtain the requested documents before serving the dealer group with a subpoena on March 11. The dealership has yet to comply with the subpoena.
“When consumers shop for a car, they deserve to be dealt with honestly and fairly — not misled by dealers trying to make an extra buck using deceptive tactics,” Schneiderman said in a statement. “Consumers should know that companies that claim they can improve your credit for a fee are selling you a bill of goods. Beyond that, car dealers should stick to selling cars, not padding their pockets with fees for unrelated and worthless services that a consumer doesn’t need, doesn’t want, and doesn’t even know they bought.”
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