HARRISBURG, Pa., June 10, 2004 – LAWFUEL – Attorney General Jerry Pappert
today announced the filing of a multi-state lawsuit and consent agreement
following an investigation into claims that consumers were charged inflated
costs for early termination of their car or truck lease contracts. The
alleged illegal business practice affected nearly 7,000 Pennsylvanians who are
eligible for restitution.
Pappert identified the defendants as Ford Motor Credit Company based in
Dearborn, Michigan and 111 Ford or Ford, Lincoln-Mercury dealers throughout
the Commonwealth. The defendants are accused of violating Pennsylvania’s
Unfair Trade Practices and Consumer Protection Law.
According to Pappert’s lawsuit, the defendants from 1991-1994 arranged for
consumers to enter into car lease agreements to be handled by Ford Motor
Credit Company (FMC). The agreements were part of Ford’s “Red Carpet” leasing
program created by FMC. Once these lease agreements were finalized by the
dealers, FMC managed and maintained consumers’ financial records and accepted
the monthly payments on the lease contracts.
Pappert said consumers who decided to terminate their car leases early
were instructed by FMC personnel to return to the original Ford dealers to
obtain the final lease “payoff” figures. Consumers said they were unaware of
the exact amount of the early lease “payoff” charges.
“The investigation determined that the car dealers would pad or inflate
the early lease ‘payoff’ charges, remit to FMC the actual balance owed on the
leases, and then keep the extra funds,” Pappert said. “Our settlement not
only returns money to consumers unknowingly victimized in the alleged scheme,
but requires the defendants to disgorge the profits illegally obtained and
permanently bars them from conducting business in violation of the state’s
consumer protection laws.”
The Commonwealth’s lawsuit was resolved in a consent agreement that was
also filed today. Under the terms of the agreement, FMC is required to pay
consumer restitution, the costs of the refund program and $13,000 to the state
for investigation expenses. The 111 car dealers are required to forfeit
nearly $449,000 to the state for costs and other public protection purposes.
Pappert said, “While FMC did not directly benefit from the alleged illegal
practices, it was in its best interest to direct customers back to the dealers
who could then persuade consumers to sign new leases or purchase Ford cars or
Pappert said nearly 7,000 Pennsylvanians who were allegedly overcharged
for early lease termination fees from 1991-1994 will automatically receive a
questionnaire and release form in the mail to obtain their $100 refund.
Other Ford customers who paid early lease termination charges since 1995
may also be eligible and can apply for a refund by contacting the settlement
administrator at 1-800-221-3312 or accessing the following website
http://www.gilardi.com/fordcreditrclagsettlement/. Consumers have until
February 2005 to apply for restitution.
Under the terms of the consent agreement, the defendants admit no
wrongdoing and are also required to:
— Permanently cease any vehicle leasing practices or procedures that
violate the state’s Consumer Protection Law.
— Change its “Red Carpet” lease contract language to clearly explain a
consumer’s rights when terminating the lease agreements early.
— Permanently cease making any untrue or misleading statements in
connection with the early termination of lease contracts for any
In addition, the agreement requires the settlement administrator to
collect all funds and documents necessary for the distribution of restitution
to consumers, plus provide Pappert’s Office with regular reports on the
progress of the restitution program.
The Commonwealth’s lawsuit and consent agreement was filed in Dauphin
County Court. The agreement is final pending court approval.
Pappert said Pennsylvania and 37 other states are involved in the
multi-state settlement. The national settlement requires FMC to pay the
states a total of $500,000 in fees and consumer restitution. The 1,362 car
dealers will pay the states a total of nearly $5.9 million.