SEATTLE -May 1, 1998 -- The Attorney General today announced a national credit insurance sales consulting company will pay $205,000 plus money to settle individual claims for allegedly encouraging auto dealers to hide the costs of extra products in early payment quotes.
Universal Underwriters Life Insurance Company of Kansas and Universal Underwriters Service Corporation of Missouri, signed the consent decree without admitting any wrongdoing to settle alawsuit filed September 1997by the Attorney General.
Universal allegedly encouraged dealers in Washington to engage in a practice called“packing”to help sell service contracts and credit insurance to customers who might otherwise not buy the optional products. Under the scheme, customers using dealer financing are quoted a monthly payment significantly higher than what is needed to cover the price of the vehicle. That extra room in the payment allows dealers to add in the optional products or services in the contract without changing the monthly payment.
“Consumers may have been mislead during the negotiations with the auto dealers about the actual cost of added products and services,” said Attorney General Christine Gregoire. “If you bought a vehicle in this state recently, read your contract. You may be paying for something you never knew you had or thought was provided free of charge. If what you bought involved a Universal product, you may be included in claims process.”
Gregoire believes many consumers are unaware they've been “packed” because after hours of lengthy negotiations they may have failed to focus on the additional cost for the optional products which was disclosed in writing at the end of the transaction.
“Even when the actual costs are disclosed in writing, people don't understand what's happened,” said Gregoire. “Because the payments they were quoted and agreed to early in the negotiations never changed, they didn't realize they're paying extra for those products.”
Consumers who, within the last three years, purchased Universal's credit insurance or service contract products as part of a dealer-financed vehicle purchase have until July 29, 1998, to file a claim with the Attorney General's Office. Under the consent decree, Universal is required to make a “good faith” settlement offer to consumers, including refunds and or cancellations of the particular products or policies involved. Consumers may request that unsettled claims be submitted for binding arbitration.
The $205,000 to be paid by Universal includes: $100,000 in “cy pres” restitution to be divided equally between the Legal Aid for Washington (“The Law”) Fund and the Consumer Credit Counseling and will go to assist indigent and low income persons on auto sales, repair, credit, insurance and other consumer issues and to help consumers experiencing difficulty managing their debt; $25,000 in civil penalties; and $80,000 in costs and fees
Consumers have the right to expect dealers to accurately quote monthly payments, said Gregoire, who believes resolving this case is a major step towards eliminating the practice of 'packing' in the car industry nationwide.
In addition to the Universal lawsuit, the Attorney General also filed suit against Associate Dealers Group (ADG) of Bellevue, Washington, Inc. and Resource Dealer Group (RDG) of Illinois. The ADG/RDG lawsuit is still pending.
Consumers who want more information or who would like to file a claim as part of the Universal settlement should call the Attorney General's office at 1-800-551-4636.