On December 19, 2024, the Federal Trade Commission (FTC) and the Illinois Attorney General Kwame Raoul announced a landmark settlement of $20 million with Leader Automotive Group, a company that runs 10 dealerships in the Bloomington, Illinois area. The settlement comes after allegations that the company engaged in deceptive and unfair practices in violation of Section 5 of the FTC Act and state laws. This settlement marks the largest monetary recovery the FTC has achieved in its efforts to address fraudulent sales tactics in the automotive industry, setting a significant precedent for future enforcement actions.
Defrauded customers will be paid out of the settlement
“This dealership network engaged in bait-and-switch tactics by luring consumers into their dealerships with lower prices only to either require consumers to purchase allegedly pre-installed add-on products or charge consumers for those products without their knowledge or permission,” said Raoul.
Raoul’s complaint alleges that the dealer group would falsely advertise and lure customers to their dealerships before increasing their prices by “hundreds to thousands of dollars more,” by “charging for additional, undisclosed junk fees” and for optional “add-ons, either by falsely claiming that they are required or by sneaking them into transactions without consumers’ knowledge or consent.”
The compliant has also alleged that the dealership has faked their online image by having their staff post fake online positive reviews about their services to “conceal truthful negative reviews” left by actual customers. Further, the group sold vehicles originally intended for the Canadian market without informing buyers that the manufacturer’s warranty would be voided upon importation into the United States.
Dealership agrees to payout $20 million
The proposed settlement and stipulation presented by the parties alongside the complaint requests that the federal court issue a permanent injunction preventing the dealer group and its associated dealerships from engaging in similar practices in the future. The dealer group has agreed to a $20 million settlement, with $200,000 designated for the people of Illinois and the remaining funds to be allocated to the FTC for consumer refunds and other forms of relief.
The following dealerships are the ones affected in Peoria and Bloomington:
- Bloomington Normal Auto Mall, which includes Mercedes-Benz of Bloomington, Lincoln of Normal, Volkswagen of Bloomington Normal, Volvo Cars Normal, Subaru of Bloomington Normal, and Audi Bloomington Normal
- Autohaus Motors, which includes Mercedes-Benz of Peoria, Porsche Peoria, Volkswagen of Peoria, and Audi Peoria.
FTC continues to work to prevent fraud
The FTC has continued to work to prevent fraudulent business practice across the U.S. According to the FTC, imposter and other social engineering scams were the most frequently reported by customers in 2023. An estimated $10 billion was lost by individuals in 2023 to scams. The FTC is consistently highlighting the importance of engaging in safe business practices as well as ensuring that you take steps to protect your own identity from being stolen. A frequent car scam consumers find themselves in is insurance scams. Make sure that your insurance is legitimate and uptodate to avoid losing our.
Over the past year, the FTC has been advocating for the implementation of its “Combating Auto Retail Scams” (CARS) Rule, aimed at curbing deceptive advertising and sales practices by new car dealers. The rule would require clear upfront disclosures and ban misleading claims in new car sales. Initially introduced in December 2023, the CARS Rule’s scheduled effective date in July 2024 was delayed due to an appeal filed by the National Automobile Dealers Association (NADA) and another industry group with the U.S. Court of Appeals for the Fifth Circuit.
NADA presented its case to a panel of three judges in October 2024, but a ruling has not yet been made. It remains uncertain whether the CARS Rule will retain the backing of a majority of FTC commissioners, particularly following the expected confirmation of a new commissioner to replace Lina Khan, whose term expired in September 2024.
It is important to ensure that you remain vigilant when engaging in business activities, as well as any activity you do online.
