Oregon Department of Justice

Attorney General Ellen F. Rosenblum

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ATTORNEY GENERAL HARDY MYERS ANNOUNCES SETTLEMENT WITH SALEM CAR DEALERSHIP ENDING SALES PRACTICES OF 'PACKING'

August 20, 2008

Investigators found that almost every new and used car contract  included extensive 'packing' of aftermarket products.

Attorney General Hardy Myers today announced the filing of a $100,000 settlement agreement with a Salem automobile dealership ending several illegal practices such as 'packing' sales contracts with unwanted aftermarket products and not telling the buyers they did not have to purchase the additional merchandise, and not following the specifics of the "bushing" law when the dealer is unable to obtain lender financing within 14 days of the sale and must unwind the deal.

Named in an Assurance of Voluntary Compliance (AVC) filed in Marion County Circuit Court is Erling Johansen, Inc. doing business as Salem Nissan, 2808 Market Street, NE, Salem. The AVC admits no law violation.

The Salem car dealership agreed to pay the Oregon Department of Justice (DOJ) $100,000 for its Consumer Protection and Education Fund under a three payment schedule including $15,000 immediately; $15,000 by September 1, 2008; and $20,000 by October 1, 2008. DOJ agreed to suspend payment of the remaining $50,000 if the respondent materially complies with all conditions of the agreement.

DOJ staff investigating the allegations in complaints against Salem Nissan found that in almost every car sold, both new and used, the company was 'packing' the contracts with several aftermarket products without the consumers' knowing they didn't have to purchase the products. This was done under a program entitled "Pride of Ownership," which included a variety of extended service warranties, securities products, insurance and a useless gas-saving device called a Vortex Fuel Maximizer.

Investigators also found that Salem Nissan on numerous occasions violated the Oregon "bushing" statute by having consumers sign new sales contracts without advising them they had a right to walk away from the deal if the original offer was no longer available.

"We cannot over emphasize the importance of carefully reading the contract before signing for the purchase of an automobile," Myers said. "Consumers should understand exactly what they are buying and for how much and make sure that no additional products were added to the price without their authorization."

Under the agreement, Salem Nissan must make extensive changes to its operating procedures including not representing that the sale or lease of an automobile is contingent on buying additional product such as extended warranties. The company also must describe the difference shown on the extension sticker between the offering price and the Manufacturer's Suggested Retail Price (MSRP) as "additional dealer profit," "additional mark-up" or by a similar term. The extension sticker must accurately itemize and describe all charges added to or subtracted from the MSRP to reach the offering price.

The AVC also makes it clear that the company must comply with all aspects of the "bushing" law in unwinding a deal if financing cannot be obtained within 14 days after the contract is signed. The company must notify the buyer that he or she did not qualify for financing and is entitled to receive all items of value given to the seller as part of the transaction including any trade-in, down payment and any monthly payments that might have been made.

In addition to the many changes agreed to by the company, employees also must, in good faith, attempt to resolve consumer complaints filed with DOJ within 20 days following receipt of the complaint. If at that time the complaint is not resolved, the company will arrange for mediation and, if that fails, arbitration.

The company also agreed to conduct training for all its sales, finance and management personnel for the next year and to all new personnel within 15 days of beginning employment, regarding state consumer protection laws and rules that apply to car sales.

"In today's marketplace, there are many tools available to buyers on the Internet and elsewhere to assist in researching the cost of new and used cars as well as the value of a trade-in," Myers explained. "Consumers should always do the research before they comparison shop for a new or used car. It also never hurts to arrange for a second person to accompany you, especially if there is a language barrier of any kind."

Finally, the company agreed to make an additional review of any transaction where the buyer's competency to enter into a contract is questioned. The following types of transactions would trigger an automatic review: 

  • Buyers are under the age of 18 or over the age of 70
  • Buyers for whom English is not the primary language and a communication
    barrier may exist
  • Buyers who had purchased a different vehicle within the last 12 months
  • Buyers without a driver's license
  • Buyers with a physical or mental handicap which would hinder their ability
    to drive

In addition to the many procedural requirements in the AVC, the company must rescind the lease agreement with Manuel Coria of Salem, returning any down payment and monthly payments.

Contact:

Jan Margosian, (503) 947-4333 (media line only) jan.margosian@doj.state.or.us |
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