Million Dollar Settlement Will Mean Refunds For Car Buyers Cheated By Westchester Dealerships: AG

WESTCHESTER COUNTY, NY — Car Buyers who were misled by Westchester car dealerships are entitled to refunds, according to New York Attorney General Letitia James.

The AG announced today that her office has secured more than $1 million in refunds for New Yorkers who were unfairly overcharged by two Westchester car dealerships, DARCARS of Railroad Avenue, Inc. (DARCARS Lexus) and MT Kisco Automotive, LLC (DARCARS BMW).

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According to an investigation by the Office of the Attorney General (OAG) found that the DARCARS dealerships, both located in Mount Kisco, imposed a two percent charge on car buyers that was "deceptively presented as a sales commission, even though it was not paid directly to the salesperson, was completely optional, and provided no benefit to the consumer."

The dealerships also charged customers for an expensive and needless add-on package by presenting it as a mandatory part of their lease or purchase agreement, according to the AG, The dealerships used the misleading tactics to overcharge customers thousands of dollars when they leased or purchased their car, according to investigators.

As a result of investigation, DARCARS Lexus will pay a total of $892,671.26 to reimburse all consumers who were charged the sales commission fee between October 23, 2021 and May 30, 2022. Both DARCARS dealerships will also pay additional reimbursements totaling $281,847.72. Consumers who were charged after May 2022 will also be eligible for restitution through a claims process, potentially resulting in millions of dollars in total consumer refunds, according to the AG.

"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, announcing the settlement. "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."

The AG's office said it opened the investigation into DARCARS in February 2022 after receiving a consumer complaint claiming that DARCARS Lexus had added a more than $700 "sales commission charge" to their purchase without telling them.

Investigators say DARCARS Lexus began charging a sales commission fee in October 2021 and DARCARS BMW began charging the fee in August 2022.

While sales commission fees are typically understood to be paid directly to the salesperson, the fees that the DARCARS dealers charged never went to the employee making the sale, according to investigators. DARCARS, instead included the fee as a pre-printed line in agreements used to sell or lease vehicles to consumers, according to the AG. Although the fee was listed as "not required by law," the dealerships did not disclose to consumers that the fee was voluntary and not required to buy or lease a car, investigators reported.

Consumers were told the charge was a "standard dealer fee" or that it directly compensated their salesperson, both of which were false, according to the New York Attorney General's Office, In other cases, the dealerships falsely told consumers that the fee was required to "offset costs and commissions" paid to employees, the AG said.

On the dealerships' websites, DARCARS Lexus and DARCARS BMW advertised sale and leasing prices that excluded the sales commission fees, making them appear competitive with other local dealerships, investigators concluded. By applying the two percent fee to nearly every sale and lease, the dealerships were able to generate millions of dollars in additional revenue by misleading consumers who believed they were paying a fair price, the AG said.

In addition, investigators said DARCARS misleadingly added a bundled aftermarket product known as 'DARCARS Assurance" to its sales and lease agreements without properly informing consumers. This bundle included products and services, such as a collision credit and a stolen vehicle credit, that had little value to consumers, according to regulators.

For example, the advertised collision credit claimed to offer up to $2,500 to reimburse an insurance deductible in the event the vehicle is deemed a total loss. However, this payout was only available if the consumer purchased or leased another vehicle from the same DARCARS dealership within 60 days of receiving their insurance settlement, essentially a loyalty coupon that provided no immediate financial relief to consumers involved in a crash.

The OAG's investigation found that DARCARS failed to disclose that this product was optional to customers, giving the impression that DARCARS Assurance was a mandatory component of the vehicle purchase or lease, rather than an elective add-on.

As a result of the settlement with OAG, thousands of customers who purchased or leased cars from these DARCARS dealerships will now be eligible for restitution.

DARCARS Lexus will pay $892,671.26 to reimburse all consumers who were charged the sales commission fee between October 23, 2021 and May 30, 2022. Both dealerships will pay $116,849 back to customers who were misled into paying for DARCARS Assurance and complained to OAG.

Other customers who informed OAG about the dealerships' deceptive sales commission fee will receive a total of $164,998.72 in refunds. Other consumers who paid these fees will be mailed claims forms, and the dealerships must also pay restitution to any consumer who submits a valid claim, which may result in millions of dollars in refunds being distributed.

In addition to reimbursement of fees, DARCARS has stopped charging sales commissions and will clearly disclose all future fees and any add-on products or services to consumers, according to the agreement, DARCARS is also banned from offering or selling DARCARS Assurance or any similar "junk bundle" or package at any New York dealership.

All employees, including sales and finance personnel, and those involved in marketing and advertising, will be subject to annual training on fair business practices. DARCARS will also pay $700,000 in penalties.

Attorney General James asks any consumers who may have been affected by deceptive or fraudulent lease buyout practices to file a consumer complaint online.