State Settlement With Suffolk County Auto Dealership Provides Refunds For Consumers

Attorney General Spitzer today announced a settlement with a Smithtown auto dealership that failed to refund consumers deposits on car leases, in violation of the law. The settlement will change the way the dealership handles requests for refunds of deposits, and will compensate those consumers who were improperly denied refunds.

The investigation began as a result of a complaint by a local consumer, who ordered a Honda Accord from AAA Autoease in November of 2000. After placing the order, the consumer was told that he needed to pay a $500 deposit to secure the order. When the consumer attempted to cancel the transaction, the dealership refused to provide a refund. The lease order contained language that claimed "deposits on factory orders are non refundable."

After an extensive investigation, which began in May of 2002, the Attorney General's office determined that AAA Autoease violated the law governing deposits by advising consumers that they were not entitled to a refund of their deposit and by refusing to return deposits.

"Before a dealer can legally refuse to return a deposit to a consumer, the formal lease agreement must be signed," Spitzer said. "The dealer in this case has agreed to change its leasing material so that consumers placing a deposit on a vehicle will be fully aware of their rights. The dealer also has agreed to comply with the law requiring refunds in the event of a cancellation."

Improper refusal to return the deposits violates the Motor Vehicle Retail Leasing Act, which requires a dealer grant a deposit refund request at any time prior to the signing of the actual lease. On several occasions, AAA Autoease refused to return deposits after the consumer ordered a car, but before the final lease documents were signed.

The language in the lease order provided by the dealer incorrectly advised consumers that they were not entitled to refunds and falsely advised them that they had no right to the return of their money.
As part of the settlement, consumers who are entitled to a refund will now be refunded their money. In addition, the dealer has agreed to adopt a new policy to refund deposits where required by law and to fully inform consumers regarding their right to a refund. Finally, the dealer has agreed to pay a fine of $2,500 to the State.

This investigation was handled by Assistant Attorney General Alan Berkowitz and supervised by Denis McElligott, Assistant Attorney General in Charge of the Suffolk Regional Office, and Juan Merchan, Assistant Attorney General in Charge of Public Advocacy for the Long Island Region, with the assistance of Legal Assistant Debra Seigler and Senior Investigator Stephen Boyle.