Another F&I controversy in as many months erupted in California where 204 Ford and Lincoln Mercury dealers were fined $822,500 for allegedly inflating early termination charges on Ford Credit Red Carpet leases.
Ford Credit, in addition, agreed to pay restitution fees of $100 each to approximately 36,000 California new-vehicle lessees, in addition to $111,921 in investigations costs incurred by district attorneys in Alameda, Los Angeles and Sacramento counties.
The agreement involving Red Carpet leases was reached in July, a month after AutoNation-owned Gunderson Chevrolet, of El Monte, CA, was raided by investigators from the state's Department of Motor Vehicles.
File cases said to contain documents showing "packing" of loan payments with after-sale inclusion of unordered extended service contracts and credit insurance were seized.
AutoNation spokesman Jim Donahue says the No. 1 dealer network was cooperating fully with the California authorities. Other dealers are being investigated for similar offenses, according to reporters who broke the Gunderson story after a tip from a former F&I manager at the dealership, one of the largest in Chevrolet sales in the U.S.
Thomas A. Papageorge, consumer protection chief for the Los Angeles district attorney's office, says Ford and Lincoln Mercury consumers were compelled to accept the word of dealer personnel in early termination moves because lease contracts are "very complex and almost impossible for consumers to understand."