Two New York City-area dealership groups have agreed to make $911,088 in restitution to about 6,400 purchase and lease customers who bought identity-theft protection and credit-repair services that the state alleged were illegal.
The civil settlements announced Oct. 11 also require the dealership groups to pay New York $135,000 in penalties and costs. The dealerships did not admit to any violations.
The stores are Potamkin Hyundai and Potamkin Mitsubishi in Manhattan and three former Value City Auto Group stores: Volkswagen of Huntington in Huntington Station, Nissan of Huntington in Huntington Station and Garden City Nissan in Hempstead.
The agreements follow an investigation into whether the stores violated state and federal consumer protection and false advertising laws, including the Truth in Lending Act and Regulation Z.
According to the settlements, the dealerships contracted with Credit Forget It Inc. to sell the plans and collected "upfront fees, frequently of $1,000 or more, without itemizing or informing consumers of the price of the plan, and frequently after affirmatively misleading consumers into believing the plan was free or came 'included' with the vehicle."
The New York attorney general's office said in a statement announcing the settlements: "Often unbeknownst to the consumer, the price of the car stated on purchase and lease documents was inflated by the amount of these after-sale items."
According to the settlements, most customers "were unaware they had purchased the plan and never received any credit repair or the identify theft protection services from CFI. Indeed, CFI never contacted many of the dealerships' customers," and CFI employees, who had been hired without credit repair or budget counseling training, "lacked the experience and training to provide the services represented."
Credit Forget It settled with the state in 2015 and shut down, the attorney general's office said. It said the new agreements bring to 13 the number of dealerships settling Credit Forget It-related claims affecting almost 29,000 customers.
New York City lawyer Russell Shanks, who represents Value City Auto Group, said the investigation should have concentrated on Credit Forget It rather than on the dealerships.
And he said, "Once CFI agreed not to do business and was not servicing the plans," his clients felt they had no choice but to settle with the state and pay restitution.
The two Potamkin stores are paying $345,000 in restitution and $55,000 in penalties to the state. Value City Auto Group is paying $566,088 in restitution and $80,000 in penalties.