A Montgomery County Toyota dealership has agreed to pay $10,000 for a consumer education program, to appoint a consumer ombudsman to handle consumer complaints and to comply with all local, state and federal laws on car advertising and sales.
Those are the terms of an unusual agreement disclosed last week between Silver Spring Toyota, 1237 East-West Hwy., and the Montgomery County Office of Consumer Affairs.
"This is the first time that our office--or any other local consumer office in the Washington area--has had a settlement with a payment for a consumer education program or an ombudsman," said George Rose, chief of the automotive unit in the Montgomery consumer office.
He said the money will be used for consumer ads in newspapers and possibly radio and the Yellow Pages. "We want to alert consumers to problems they may have before buying an automobile," Rose said. "We want to tell them to check company complaint records and read consumer publications that are available from our office or from the public library."
Silver Spring Toyota signed the agreement without acknowledging any wrongdoing or violation of the law. "We are in full compliance with the law," said Michael Charapp, the company's attorney. "We want to deal fairly with consumers, and this agreement is tangible evidence of our desire to do that."
Charapp said the company agreed to pay the $10,000 for consumer education because it was less expensive than fighting the consumer office in lengthy court action.
During the past two years, the Montgomery County consumer agency has received 87 complaints against Silver Spring Toyota, Rose said. He said the average number of complaints against local dealerships during that time was 32. The only Montgomery County dealership with more complaints was Glenmont Chrysler-Plymouth, which was the subject of 134 complaints, Rose said.
Most of the complaints against Silver Spring Toyota involved customer dissatisfaction with repairs, service and warranties, but 12 of them alleged deceptive auto sales practices, Rose said. The investigation was based on those 12 cases, in which it was alleged that the dealership had threatened to sue customers who tried to cancel proposed car purchases, used high-pressure tactics to persuade customers to finance their cars through the dealership and cashed deposit checks that the salesmen had promised to hold.
One customer, for example, said she had intended to finance her car through her bank, using her savings account as collateral and thus getting a break on the interest rate. But Silver Spring Toyota told her she would have to finance the car through the dealership, because her bank no longer made such loans, the woman said in her complaint.
Later she learned that her bank did make such loans and at a lower rate than the dealership, the complaint said.
Meantime, Silver Spring Toyota is fighting two other legal actions.
One is a lawsuit filed by attorney Richard Paugh on behalf of three customers charging conspiracy to defraud, unfair and deceptive trade practices and breach of contract. That case is pending in the Montgomery County Circuit Court.
In the second case, now pending in U.S. District Court in Baltimore, Silver Spring Toyota is one of more than 100 Toyota dealerships named in an antitrust suit filed by Maryland, Virginia, the District of Columbia, Pennsylvania, Delaware and West Virginia. The petition alleges that the dealers in the mid-Atlantic Toyota region conspired to raise profit margins on car sales by forcing consumers to buy a rust-proofing protection package that had a suggested list price of $500, according to Maryland Assistant Attorney General Michael F. Brockmeyer.
The dealer's cost of the package was about $100, he said.
The suit asks that consumers who bought 1980 Toyotas be reimbursed for overcharges they paid as a result of the alleged conspiracy.