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HomeMy WebLinkAbout01-05594} COMMONWEALTH OF PENNSYLVANIA ACTING BY ATTORNEY GENERAL D. MICHAEL FISHER, IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff v. CIVIL ACTION -EQUITY SPANKEY'S AUTO SALES, INC 701 EAST LOCUST STREET No. EQUITY 2001 - S~S4'~/ MECHANICSBURG, PA 17055 Respondent ASSURANCE OF VOLUNTARY COMPLIANCE WHEREAS, the Commonwealth of Pennsylvania, acting by Attorney General D. Michael Fisher, through the Bureau of Consumer Protection ("Commonwealth"), has caused an investigation to be made into the business practices of Spankey's Auto Sale, Inc. ("Respondent"), pursuant to the Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1-201-9.3 ("Consumer Protection Law"), and the Automotive Industry Trade Practices Regulations, 37 Pa. Code §§ 301.1-301.6 ("Auto Regs"); and WHEREAS, the Respondent, Spankey's Auto Sales, Inc., is a business incorporated under the laws of Pennsylvania which engages in and has engaged in trade and commerce within the Commonwealth through the ownership and operation of motor vehicle dealerships and has a principle place of business located at 701 East Locust Street, Mechanicsburg, PA 17055; and WHEREAS, based upon its investigation, the Commonwealth asserts that the Respondent engaged in conduct violative of the Consumer Protection Law, 73 P.S. §§ 201- 1-201-9.3, and the Auto Regs, 37 Pa. Code §§ 301.1-301.6, as more fully set forth herein: 1. From October, 1998, through January, 1999, the Respondent sent an advertisement via direct mail to more than 15,000 consumers. The advertisement claimed: "AUTO LOAN PRE-APPROVAL" and "YOU ARE APPROVED." The advertisement claimed that the consumers had been selected to receive a "unique" loan package from Evergreen Automotive Acceptance. The advertisement is attached hereto as Exhibit A. 2. The Respondent's advertisement stated that the loan offer was limited to vehicles purchased from Spankey's Auto Center. 3. The Respondent's advertisement also claimed that each person had been approved for a loan of up to $17,000.00. All the consumer had to do to obtain the loan was present the advertisement to the Respondent and meet the qualifications listed in a box printed on the side of the letter. Those qualifications included a valid driver's licence, proof of income, proof of employment, proof of residency, a current phone bill, and title for the trade- in vehicle. 4. The Respondent's advertisement stated in a Post Script printed under the signature and name of J. Rainey, Vice President of Underwriting, that failure to respond by the dates listed therein would result in, "the cancellation of your $17,000 loan approval. You may qualify for more." 5. The Respondent's advertisement also appeared as though it had been stamped in red ink with a stamp reading "APPROVED" and citing an approval number. 6. The Respondent's advertisement was accompanied by a document intended to resemble a loan check from Evergreen and the Respondent which stated "Approved up to $17,000." -2- The Respondent's advertisement contained other restrictions in much smaller print at the bottom of the letter. These restrictions included certain equity requirements and an obligation to purchase full coverage insurance on the new vehicle. 8. The Respondent's inconspicuous disclaimer also revealed that consumers were really only approved for a loan of $1,000.00. The Respondent's disclaimer contradicted the more prominent claims that consumers were approved for or up to $17,000.00. 9. The Commonwealth alleges that the Respondent's advertisement misrepresented and caused a likelihood of confusion and misunderstanding as to whether Evergreen had pre- approved credit up to $17,000.00 or more if they were able to meet the above-stated preconditions in violation of the Consumer Protection Law as defined at § 201-2(4)(v) and (xxi). 10. The Commonwealth alleges that the Respondent's advertisement used different type and location to obscure or make misleading material facts by referring consumers to the conditions printed in a box to the side of the advertisement and then placing additional conditions and limitations in small print at the bottom of the advertisement in violation of the Auto Regs as set forth at 37 Pa. Code § 301.2(1) and the Consumer Protection Law as defined at 73 P.S. § 201-2(4)(xxi). 11. The Commonwealth alleges that the Respondent advertised with the intent not to sell as advertised when it represented that consumers who met the stated preconditions had received pre-approval for a loan from Evergreen in violation of the Consumer Protection Law as defined at 73 P.S. § 201-2(4)(ix). -3- 12. From at least November, 1998, through April, 1999, the Respondent engaged in a referral program in order to attract new customers. 13. Under this program, the Respondent offered $100 to anyone who physically brought another person into the dealership. The Respondent also offered $50 to consumers who had a potential customer come into the dealership and present one of the Respondent's business cards on the consumer's behalf. The referral payment was predicated upon the person referred to the dealership buying a caz and was advertised to consumers prior to the time of sale. The program resulted in the Respondent paying 26 referrals in either the $50 or $100 range during the aforementioned months in violation of the Consumer Protection Law as defined at § 73 P.S. § 201-2(4)(xii). 14. During the 2000 Christmas season, the Respondent offered to give consumers Toys-R-Us gift certificates with the purchase of a car. In 2001, the Respondent offered "free" tax prepazation with the purchase of a car. According to Federal regulations, "[i]f a product or service usually is sold at a price arrived at through bargaining, rather than at a regular price, it is improper to represent that another product or service is being offered `Free' with the sale." 16 CFR § 251.1(g). Even if a seller uses a word or term other than "free," which tends to convey the impression to the consumer that the item is in fact "free," such as the Respondent's offer to give gift certificates with the purchase of a car, it is nevertheless considered a violation of Federal regulations. 16 CFR § 253.1(1). Violations of these Federal regulations are regarded as a per se violations of the Consumer Protection Law as defined at 73 P.S. §201-2(4)(xxi). -4- WHEREAS, the Respondent desires to comply with these civil laws of the Commonwealth of Pennsylvania; and WHEREAS, the Commonwealth is agreeable in this matter to accept this Assurance of Voluntary Compliance, pursuant to § 201-5 of the Consumer Protection Law, in lieu of commencing proceedings pursuant to § 201-4 of the Consumer Protection Law; and WHEREAS, under the Consumer Protection Law, this Assurance of Voluntary Compliance shall not be considered an admission of a violation for any purpose. NOW THEREFORE, while engaging in trade or commerce within the Commonwealth of Pennsylvania, the Respondent agrees for itself, its officers, successors, partners, agents, present and future corporations, representatives, employees and all other persons acting on its behalf, jointly or individually, directly or indirectly, or through any corporate or business device, as follows: I. The Respondent shall comply with any and all provisions of the Consumer Protection Law and the Auto Regs, and is permanently enjoined from violating the Consumer Protection Law or Auto Regs in a same or similar manner as set forth above. II. The Respondent shall be permanently enjoined from using the advertisement in Exhibit A and from making any similar claims about financing for consumers unless such claims are true and not misleading. The Respondent shall clearly and conspicuously disclose any criteria or qualifications for obtaining financing or savings in any and all future advertisements, solicitations, or any other sales or promotional materials or communications which make such claims. -5- III. In making any disclaimers in future advertisements, solicitations, or any other sales or promotional materials or communications, the Respondent shall be permanently enjoined from using different type and location to obscure or make misleading material facts. IV. Upon signing this Assurance of Voluntary Compliance, the Respondent shall pay $5,000.00 to the Commonwealth as civil penalties. V. Upon signing this Assurance of Voluntazy Compliance, the Respondent shall pay $15,000.00 to the Commonwealth as costs of investigation and/or for future public protection purposes. VI. All monies owed by the Respondent under this Assurance shall be paid by certified check, cashier's check or money order, made payable to the Commonwealth of Pennsylvania, and delivered to the Bureau of Consumer Protection, 301 Chestnut Street, Suite 105, Harrisburg, PA 17101. VII. This Court shall maintain jurisdiction over the subject matter of this Assurance of Voluntary Compliance and over the Respondent for the purpose of enforcing this Assurance of Voluntary Compliance. VIII. Provided that nothing contained herein shall be construed to waive any individual right of action by a consumer or a local, state, federal, or other governmental entity. NOW THEREFORE, without making an admission of any violation for any purpose, the Respondent agrees by the signing of this Assurance of Voluntary Compliance that it shall henceforth abide by each of the aforementioned provisions and that the breach of any one of these terms of this Assurance of Voluntary Compliance shall be sufficient warrant for the -6- Commonwealth of Pennsylvania to petition this Court to assess the penalties provided for under §§ 201-8, 201-9, and 201-9.1 of the Consumer Protection Law and to order any other equitable relief which the Court deems necessary or proper. This Assurance of Voluntary Compliance shall have the same force and effect as a Permanent Injunction issued pursuant to § 201-4 of the Consumer Protection Law. Witness the following signatures this LZ-~ day of August, 2001. FOR THE PLAINTIFF: FOR THE RESPONDENT; BY: D. MICHAEL FISHER BY: L~~ ~~ D. MICHAEL FISHER DON LEGGE ,CEO ATTORNEY GENERAL SPANKEY'S AUTO SALES, INC. BY: FRANK T. DONAGHUE BY: FRANK T. DONAGHUE LAWRENCE R. WIEDER, ESQ. CHIEF DEPUTY ATTORNEY GENERAL McNEES, WALLACE & NURICK 100 PINE STREET P.O. BOX 1166 BY: ,~v~ HARRISBURG, PA 17108-1166 M CHAEL A. AN D PUTY ATTORNEY GENERAL ATTORNEY I.D. N~. 6 ~ ^8 BY: D'DI L. FLITTON EPUTY ATTORNEY GENERAL TTORNEY I.D. No. 58131 OFFICE OF ATTORNEY GENERAL BUREAU OF CONSUMER PROTECTION 301 CHESTNUT STREET, SUITE 105 HARRISBURG, PA 17101 717-787-7109 D: \MyFiles\FORM S\AV C\Spankey s. wpd 101300 -7- EXHIBIT A ~° Morv u;to fa>; ao~ ~n.a aeari „u.t t~,,: Cangr~tulatiorls! '['his Teter will serve as notif^.adon of an a,tt:, fin.an~er ariang~anteant being ntacie:tv3ilable to a sele~f t~,a~r uE ~ of individuals. A unique town package is':mu~ig uiferec: to you exc)usively by Evergreen Automoi9ve Acreptanre. Thie lim.'.ted offer is beu;f; made i7 conjunccion +Nirh Spartkey's The Used Car Gia?tt located at ti%(12 Flarrisburg Pike, Carlisle, PA, t8.s:dc the Fcnben) T;vs is tl:e>:pjX dealer aulhurizert to fulfill `his offer on or bfrfore Thursda}; October 1S, ai?)fi,''ricau. (?ctut•~r.16, . . 199'd: Saturday. October 19, !9tJr, and iy[onda}n October 19,1998 from 10:I)U a.m. to .:00 p.tn Lwti°. this ]e•tter and compltan~v.' ~-i~.h. the sinapU: qualifications lisird to the side; you are apprrri ec] :Cr an auto loan of up to Sl?,~I1ROO toward the pur.:has~ o! a vehicle in stock. For incruixies and(or appeintrtc~ni.s, phone ~~l f79?) 21.2410. Q~~~l x Regard:;, ~'~• ~.~ '~,~ '~ `B V.P. Underwriting ~9 rj,\ ' P.S. 1'ltis wiL+'Ue thc> onl+,• notice vau wilt receive. pailure to respond on or before the li<ted da:t>s' will. result. rn ti>rmination and canceilarion i>f your 5~7.?,CCh7.f1C fihvc2 -...~ ~~ ~~ ~~ 1 i ~a~' ~y~C~ -• ga }+ ~'4,epYPCE,A NNMa / Ptea;e pres:nt fire encl~%se,t parchase r,+;nu:hr.r upwt en;cw9tK the rleulershin. 8~ prr.~p;rrea to aueyt Irrbme:(iute rfaliner•t/ of tcvtn'.necu or u.eu aehit(e•atrft brie{q rite rollo:x;in~-doct.nzent~ to cantp(ete Vottr tratiskct~nr • Titre of trade • ~ urn~a'and t%a'~id driver's ticerse r Pt'onf of income (i.e., CItL'C1C 5tUfJ; 4V•2, t~< rettarns cr any cicreument which cart b~: +.eeified by your employer) • Proof of ertp]ayment with current employer fur ante y~=ar, or two years in ~` related fir;ld. ~ Gn„ }•2ar re~idcrat •.~erificaticrn • C'a;rent telephone Y.+ill ' You moat have or ba prepared to purchaseru0ceveragr ss~uar v. un your vehicle. Eqw-.y,egWre.~rema wt6 apply. Yau an: npprovni lcrum~inlrnun+n•-itu Wamatv.wii nr S1,tY:0.U0; however, you :nay qual:h~ lot r[ore. Yo.r nee, :ar pa yr.,enr carurol ,aoxd 2(r;~ of •H:ur ~"oS5 v came, nor may ycru net~• eat payn,enl rumbined with your ether un86ata,~s exceed 50^4 of yrnu g.n»~ L~tome. NI bankrur iced must ur ~8sd?a:'i;ed. This wilt be the only notice you u~ia rcc eive. Failure to resxnA nn or hN'ore da-ea below will result in ternti•talioo and cunccllaoon o£your loan approval. You may qualiW fnr a krigher loan nn+ouo+. NON NEGOTIABIa NON Td,1AYl6tN6~E.?~enpp e.a arcJlil S, :na aYel .u m, ur'rc:E irm bm rau+.lemu.'I lh/21~1J RECEIPT dG"& ~Eti'BRVR~.~~ o Spankry's iNVAYMLNiiORY:(ErOLWlVTN01TFM1(3~ OC 'Tde Ltsed Car Gitntf yn7id October 15-79, 2998 Dale Amount .9 nrov+o Hpv.AC<ep lm:az (717) 247-2410 4)Re-199s RPPAOVED liP ~ Aporwal Number: Loanappsovat sl ~,non.aa TO TH>; SUM OF ~ Z ~~ OQQ• ®~ t9a2~ s Disbursement Hdd Pending Registration ~iiudt3 IItus! be validated upon entering and Frmcntatiori of Final llcro~mcnh TO ih~ dealCrahip TIE r TOTdL OF1.EMS ORDER Las__''/e Discoum L,nss~ __ ~F - t.pverxv of Vndeewriti-a D<dut!ions TFIIS IS NOTACHECK! TA'fAl, St :,000.00 FINAL PROOF O.K. TO PRINT >~~ _ ia~S-mil ~ DATE ~` t k. 'F~ ~`:'v~St4a"Ally'~:r~WavY'...aE.M:Rb4't+Y'1!'~~F~vi'W9Mhrt,.. ~E~_:fe.v~`., n ~ }ai_~.~3~E iNfs_~*.Pt,%- - 'd~'tSUAi~FEM'~WA6y'~NV ~ ...®x`ittY~aAed _ ll) ~ 1 ~yl I... ll D ~ d `,~ ~~, ~ -J ~ ~~ P~ ~ y ~ t3 <Y ti ~1] T T ,r -, '~~ a ,~~ ..;, ,.