Attorney General Jerry Pappert today announced the filing of a multi-state lawsuit and consent agreement following an investigation into claims that consumers were charged inflated costs for early termination of their car or truck lease contracts. The alleged illegal business practice affected nearly 7,000 Pennsylvanians who are eligible for restitution.
Pappert identified the defendants as Ford Motor Credit Company based in Dearborn, Michigan and 111 Ford or Ford, Lincoln-Mercury dealers throughout the Commonwealth. The defendants are accused of violating Pennsylvania's Unfair Trade Practices and Consumer Protection Law.
According to Pappert's lawsuit, the defendants from 1991-1994 arranged for consumers to enter into car lease agreements to be handled by Ford Motor Credit Company (FMC). The agreements were part of Ford's "Red Carpet" leasing program created by FMC. Once these lease agreements were finalized by the dealers, FMC managed and maintained consumers' financial records and accepted the monthly payments on the lease contracts.
Pappert said consumers who decided to terminate their car leases early were instructed by FMC personnel to return to the original Ford dealers to obtain the final lease "payoff" figures. Consumers said they were unaware of the exact amount of the early lease "payoff" charges.
"The investigation determined that the car dealers would pad or inflate the early lease 'payoff' charges, remit to FMC the actual balance owed on the leases, and then keep the extra funds," Pappert said. "Our settlement not only returns money to consumers unknowingly victimized in the alleged scheme, but requires the defendants to disgorge the profits illegally obtained and permanently bars them from conducting business in violation of the state's consumer protection laws."
The Commonwealth's lawsuit was resolved in a consent agreement that was also filed today. Under the terms of the agreement, FMC is required to pay consumer restitution, the costs of the refund program and $13,000 to the state for investigation expenses. The 111 car dealers are required to forfeit nearly $449,000 to the state for costs and other public protection purposes.
Pappert said, "While FMC did not directly benefit from the alleged illegal practices, it was in its best interest to direct customers back to the dealers who could then persuade consumers to sign new leases or purchase Ford cars or trucks."
Pappert said nearly 7,000 Pennsylvanians who were allegedly overcharged for early lease termination fees from 1991-1994 will automatically receive a questionnaire and release form in the mail to obtain their $100 refund.
Other Ford customers who paid early lease termination charges since 1995 may also be eligible and can apply for a refund by contacting the settlement administrator at 1-800-221-3312 or accessing the following website www.gilardi.com/fordcreditrclagsettlement. Consumers have until February 2005 to apply for restitution.
Under the terms of the consent agreement, the defendants admit no wrongdoing and are also required to:
Permanently cease any vehicle leasing practices or procedures that violate the state's Consumer Protection Law.
Change its "Red Carpet" lease contract language to clearly explain a consumer's rights when terminating the lease agreements early.
Permanently cease making any untrue or misleading statements in connection with the early termination of lease contracts for any motor vehicle.
In addition, the agreement requires the settlement administrator to collect all funds and documents necessary for the distribution of restitution to consumers, plus provide Pappert's Office with regular reports on the progress of the restitution program.
The Commonwealth's lawsuit and consent agreement was filed in Dauphin County Court. The agreement is final pending court approval.
Pappert said Pennsylvania and 37 other states are involved in the multi-state settlement. The national settlement requires FMC to pay the states a total of $500,000 in fees and consumer restitution. The 1,362 car dealers will pay the states a total of nearly $5.9 million.
