The owner of Mercedes-Benz of Valencia will pay more than $3.6 million to customers to settle federal charges that it used deceptive and unfair sales and financing practices.
The settlement order issued by the Federal Trade Commission will prohibit Sage Automotive Group “from making misrepresentations relating to their advertising, add-on products, financing, and endorsements or testimonials,” the FTC said in a statement. The commission enforces federal antitrust and consumer protection laws.
Sage “considered the FTC’s allegations to be without merit and overreaching,” the company said in a statement, but decided to settle the action “to avoid the overwhelming cost of protracted litigation.”
The charges named the company’s nine Los Angeles-area dealerships, a holding company and a management company as business entities and Sage co-owners Joseph Schrage and Michael Schrage as individuals.
The settlement resolves the FTC’s first-ever action against an auto dealer for “yo-yo” financing tactics – using deception or other unlawful pressure tactics to coerce consumers who have signed contracts and driven off the dealership lots into accepting a different deal.
According to the FTC, Sage packed extra and unauthorized charges for aftermarket products and services into car deals financed by consumers.
Sage said the amount of the settlement “is consistent with FTC settlements reached with other targeted auto sector enterprises throughout the country,” and, that despite the FTC’s allegations, the company “believes that it has always met its regulatory responsibilities and looks forward to continuing to provide outstanding sales and service to its customers.”
In addition to Mercedes-Benz of Valencia, dealerships named in the complaint are Universal City Nissan, Kia of Downtown Los Angeles, Glendale Nissan/Infiniti; West Covina Toyota and Scion, West Covina Nissan, Covina Chevrolet, Sage Pre-Owned and Sage Hyundai.
The FTC’s order takes effect once approved and signed by the U.S. District Court for the Central District of California.
At that point, the agency will engage “a redress administer to secure money and identify victims, usually from defendants’ records, and then figure out if there’s enough money for redress and how much each victim will get,” said Frank Dorman, a spokesperson for the FTC in Washington. That can be the same amount per person or could vary depending on how much each individual lost, he said, adding that the process is open ended.