2 more auto settlements with Massachusetts AG approach $8M
It might be a different elected official serving as the attorney general in Massachusetts, but the top member of the commonwealth’s law enforcement establishment took two swift actions in the automotive space within the space of four days last week.
Massachusetts attorney general Andrea Joy Campbell announced a settlement reached with Toyota Motor Credit Corp. to resolve allegations of certain illegal auto finance collection practices, securing more than $7.6 million, including approximately $5.5 million in debt relief.
More than 500 borrowers across the state are expected to be eligible for relief under the settlement.
And earlier in the week, Campbell announced that her office has reached a $350,000 settlement with Hometown Auto Framingham to resolve allegations that the company engaged in the unfair, deceptive and discriminatory pricing of “add-on” products sold to Black and Hispanic consumers.
According to a news release, the assurance of discontinuance, filed on Jan. 17 in Suffolk Superior Court, alleged that Toyota Motor Credit failed to give certain consumers sufficient information about the calculation methods for deficiencies left on their installment contracts after their vehicles were repossessed.
The settlement also alleged that Toyota Motor Credit made excessive collection calls to certain consumers, in violation of the AG’s debt collection regulations.
“Consumers facing repossession and collection actions on their vehicles deserve clear and transparent information from auto lenders,” Campbell said in the news release. “It is our hope that the debt waiver and funds secured through this settlement will assist hundreds of residents in getting the relief they need and deserve — and build on our efforts to provide economic opportunity to families across Massachusetts.”
The development associated with Toyota’s captive is the latest in a string of settlements with finance companies and the Massachusetts AG.
The AG’s Office previously pursued Credit Acceptance Corp. for failing to provide similar information to after auto repossession; a claim was part of a much broader suit against the subprime auto finance company relating to unfair lending, collection and securitization issues.
In August 2020, the AG’s office sued Credit Acceptance and announced a settlement in September 2021 for more than $27 million in cash as well as debt forgiveness and credit repair for affected consumers.
Last year, the AG’s office entered into a $5.6 million assurance of discontinuance with Santander Consumer USA relating to its alleged failure to provide post-repossession information to consumers.
Meanwhile, Campbell has led the charge against dealerships in Massachusetts, too, according to another news release.
Another assurance of discontinuance, also filed in Suffolk Superior Court, alleged that Hometown Auto, which operates two dealerships located in Wellesley and Danvers, charged Black and Hispanic consumers higher prices for “add-on” products in comparison to white consumers.
In 2018, the AG’s office began an investigation into discriminatory pricing of “add-on” products at Massachusetts auto dealerships, including Hometown Auto. The AG’s office determined that Hometown charged higher prices to its Black and Hispanic consumers for the same “add-on” products sold to white consumers.
The AG’s office alleged that Hometown’s conduct violated the state’s Consumer Protection Act, which prohibits unfair or deceptive acts and practices in trade or commerce.
Under the terms of the settlement, Hometown has agreed to pay $350,000, with $200,000 to be allocated to provide restitution to harmed consumers. The dealerships also must enact several business practice changes in order to decrease the likelihood of pricing disparities in the future. Some of these changes include:
—Providing staff training on implicit bias and the obligation not to discriminate when pricing products.
—Requiring disclosure of “add-on” product pricing to provide transparency on the price of any add-on product offered to consumers.
—Improving oversight of “add-on” product pricing by implementing a standardized pricing policy for “add-on” products that limits when and why staff may deviate from such prices and requires documentation and oversight for pricing deviations.
—Providing compliance monitoring information to the AG’s Office concerning future “add-on” product sales.
This matter is part of an ongoing investigation into Massachusetts dealerships concerning the pricing of “add-on” products.
In September, the AG’s office announced a lawsuit against Jaffarian Volvo Toyota of Haverhill, for charging Black and Hispanic consumers hundreds of dollars more, on average, than white consumers for “add-on” products.
“Consumers need to know that their race or ethnicity will have absolutely no effect on the type of service they receive from Massachusetts auto dealerships or the prices they will be charged,” Campbell said in the other news release.
“My office is committed to protecting consumers from predatory and discriminatory practices that stand in the way of upward mobility, and we will continue our advocacy to ensure all consumers are being charged for services equally and fairly,” she went on to say.