Florida investigates complaints of ‘hidden’ car rental buyout fees

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As complaints mount accusing Florida auto dealerships of charging undisclosed and possibly illegal fees to consumers seeking to purchase their leased vehicles, Florida’s top law enforcement official is seeking information from three dealerships and to three auto finance companies about their policies.

Attorney General Ashley Moody issued subpoenas to the six companies on Nov. 2 and gave them until Nov. 16 to comply. Subpoenas request documents related to fees charged when customers purchase their vehicles at the end of their lease.

Consumers have filed about 120 complaints about it with Moody’s office since 2021. In addition, numerous lawsuits have been filed in state and federal courts accusing Florida auto dealers and manufacturers’ finance companies of violating the federal Consumer Leasing Act of 1976, which prohibits dealers from charging undisclosed fees in the buyout clauses of auto lease agreements.

Subpoenas were sent to: Gunther Volkswagen of Fort Lauderdale, Homestead Hyundai, Lexus of Clearwater, VW Credit Leasing, Toyota Motor Credit Corp. and Hyundai Capital. They are looking for a long list of documents related to post-leaseback buyouts, including “excess charge” disclosures, documents indicating policies, guidelines, account statements, customer complaints, and related lawsuits and arbitrations.

WPLG-Ch. 10 first reported on the subpoenas as part of a series of stories that began last spring. In a Nov. 14 report, the station quoted Moody acknowledging that the investigation is looking into possible “deceptive and unfair business practices” that violate Florida civil laws.

Each of the subpoenas states that they were issued as part of an official investigation under Florida’s Deceptive and Unfair Trade Practices Act.

In a statement Friday, Moody’s spokeswoman Kylie Mason acknowledged, “We are actively investigating hidden fees charged to certain consumers who purchase car leases. The survey focuses on gathering information about statewide industry practices, as well as state or federal laws that might dictate jurisdiction over these matters.

The bureau’s consumer protection division has been researching the matter for the past few months and contacting state and federal entities that “may have a role in regulation or enforcement in this area,” Mason said. Moody’s office, she said, will explore potential enforcement and regulatory issues “and whether or not the laws need to change to better address this issue.”

The number of consumers exercising their options to buy their leased vehicles at the end of their lease has exploded since 2021, as the shortage of new cars has driven up used car prices. Consumers nearing the end of leases signed before the pandemic are realizing that the price of their buyout option, identified in lease agreements as the residual value of a vehicle, may be several thousand dollars lower than that. what the car would cost in today’s retail market.

Auto dealers are realizing it too, critics say, and have developed strategies to profit from buy-back deals.

A sample of consumer complaints submitted by Mason to the South Florida Sun Sentinel included five complaints against Fort Lauderdale-based Gunther Volkswagen.

Jonathan Kane of Hollywood wrote that when he went to the dealership in February to buy his car at the end of its 36-month lease, Gunther and Volkswagen Credit told him he had to get it ” certify” and “pay what they deemed necessary”. to certify the vehicle.

Plus, they demanded a dealer fee of $989. “None of these items are listed or addressed in the original contract,” complained Kane.

Elizabeth Pelevin of Aventura wrote that she returned to Gunther in June to buy her vehicle back and was charged $1,000, “which was never agreed to in my rental agreement”.

Nicole Vernon, of Fort Lauderdale, said when she went to Gunther, ‘they ‘appraised’ my vehicle, then told her she would have to pay $1,301 more than the remaining lease balance plus fees dealer fee of $989 – for a total of $2,290 on the residual balance of the lease contract. “We have a contract they refuse to honor and now they refuse to answer me,” she wrote.

A lawyer for Gunther did not immediately respond to a request for comment on the subpoena and complaints.

Most rental agreements require consumers to enter arbitration in the event of a dispute, but this requires consumers to hire attorneys.

Joshua Feygin, a Hollywood attorney who said he represents about 80 consumers with similar complaints, filed a lawsuit against Coral Springs Honda on Nov. 10 on behalf of rental customer Christopher Allen Roldan.

The lawsuit says Roldan signed a 36-month lease with the dealership in June 2019.

The contract stated that he could purchase the 2019 Honda Accord at any time during the lease for the residual value of $15,178 “plus required taxes and fees.” If he exercised the option before the end of the lease term, the residual value would be recalculated to an “adjusted lease balance” plus “any taxes or fees required by law”.

But when he went to the dealership to exercise his option to buy, the dealership charged him a “pre-delivery service fee” of $992 and an “e-registration filing fee” of $449 which were not disclosed in the lease, the suit says. In total, Roldan was billed $1,141 in undisclosed fees, the suit says.

Coral Springs Honda did not respond to a request for comment on the case, nor did the company file a response to Roldan’s claim.

In complaints filed with the Attorney General’s office, in online forums, and in phone calls and emails to the Sun Sentinel, consumers said they were told by their automakers’ finance companies that a Florida prohibited financial companies from selling directly to customers.

In his complaint to the attorney general’s office, John Baker said the company servicing his loan “stated that since I live in Florida, it is necessary [that the] lease purchase must be made through a dealership. »

The Sun Sentinel contacted the Florida Department of Highway Safety and Motor Vehicles, which regulates auto sales in the state, and the Florida Automobile Dealers Association, and asked if they were aware of such a law.

The auto dealers association did not respond and a spokeswoman for the Department of Road Safety and Motor Vehicles said it does not regulate leasing companies.

Allison Reed, spokesperson for JP Morgan Chase, which has pledged to provide financing to Subaru customers, said Chase has no legal obligation to send its lease customers to dealerships if they want to buy their vehicles. .

End-of-lease options are offered “directly from Chase,” she said.

GM Financial Jake Stevens said the company does not require customers to visit a dealership to exercise the purchase option. Customers can contact GM Financial’s end-of-lease team and get a payment quote, then mail a check to complete the transaction without visiting a dealership, Stevens said.

Honda Finance Corp. U.S. spokesman Chris Martin said his company and Honda customers are bound by the terms of the lease agreements, which “may require the rental vehicle to be returned to an authorized Honda dealer. “.

In 2021, “can” became “will,” Martin said. The reason, he said, was “the tight supply of new and used cars”.

Several national online services, including LeaseEnd.com, Tresl Auto Finance (MyTresl.com) and MyAutoLoan.com, offer to process lease buyouts without requiring visits to dealerships.

The companies say they deal directly with finance companies and help consumers avoid paying high dealer fees.

In online forums, leasing customers say finance companies sometimes suggest they shop around with various dealerships to find one that won’t charge exorbitant fees.

The undisclosed fee controversy has prompted warnings to dealers from some manufacturers’ financial arms and the National Automobile Dealers Association.

In a letter to dealers in June, the association urged dealers to “use care to ensure that the price offered to the lessee on purchase, and any fees the dealer charges the consumer related to the purchase of the leased vehicle” comply with the provisions of the lease agreement and the law on consumer leasing.

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These provisions, the letter states, “generally require that the purchase option price of the lease be honored – including the cost of the consumer exercising the purchase option.”

Statements to the Sun Sentinel from several other automaker-owned finance companies affirmed similar policies.

“We expect Infiniti retailers to honor the lease agreement,” Infiniti said. Its sister company, Nissan Motor Acceptance Corp., sent a nearly identical statement.

GM Financial spokesman Stevens said his company shared NADA’s letter with dealerships to remind them of tenants’ contractual rights.

Ford Credit in May urged dealerships not to hit redemption customers with additional fees.

The company’s policy, the letter states, “is that the customer be charged only the purchase option price stated in the rental agreement, plus any applicable fees (title and registration) and taxes. “.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.

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