On September 16, the New York Attorney General’s Office (OAG) announced a settlement with two Westchester County dealerships, resolving allegations of deceptive fee practices under General Business Law § 349 and § 350 and Executive Law § 63(12). The resolution requires more than $1 million in immediate consumer restitution, with additional claims-based payments potentially reaching into the millions, plus $700,000 in penalties. For dealers and finance professionals, the underlying findings are worth attention; the settlement is an illustration of how regulators are analyzing fee disclosure and add-on sales in current enforcement actions.
Link to The Core Allegations The Core Allegations
According to the Assurance of Discontinuance, the dealerships implemented a 2% “Sales Commission” charge applied to nearly every retail sale and lease transaction, roughly 97% at one dealership and 96.8% at the other. The Attorney General’s investigation found three problems with the way this fee was presented, each independently significant:
- First, the fee was optional but was not disclosed as such. The pre-printed line item stated the charge was “not required by law,” language the OAG found created ambiguity rather than clarity. Consumers reasonably read “not required by law” to mean the fee was government-related overhead, not an elective charge they could decline.
- Second, the label itself was misleading. A “sales commission,” as commonly understood, is compensation paid to the salesperson from the dealership’s margin. The OAG found no reliable evidence that the charge functioned this way, and when consumers asked about it, staff reportedly gave inconsistent or inaccurate explanations, including claims that it directly compensated the salesperson.
- Third, the near-universal capture rate undercut any claim that the fee was truly voluntary. A 97% acceptance rate for an optional charge with no product or service attached is, in the OAG’s view, itself evidence that the fee was functioning as a mandatory add-on regardless of its labeling.
Link to The Add-On Product Findings The Add-On Product Findings
The settlement separately addressed the inclusion of a bundled aftermarket product, priced as high as $2,495, and included in a majority of transactions. The OAG’s findings on this product are instructive for any dealer offering similar bundles. The investigation determined that the product’s advertised benefits were largely illusory. For example, a “collision credit” marketed as up to $2,500 in reimbursement was only payable if the consumer purchased or leased another vehicle from the same dealership within 60 days, effectively converting a protection product into a loyalty incentive with no immediate value to a consumer who had just been in an accident.
The larger compliance issue was disclosure. The OAG found the product was often advertised on vehicles and websites without any indication of cost or optionality, and that transaction documents did not consistently make clear that consumers could decline it.
Link to Disclosure Evolution Was Not Sufficient Disclosure Evolution Was Not Sufficient
The dealerships did revise their disclosure documents twice, in May 2022 and again in September 2024, and neither revision satisfied the OAG. The May 2022 form was untitled and bundled the fee with genuine optional add-ons. The September 2024 form, despite being titled “optional sales commission,” still described the charge as partially offsetting employee compensation, language the OAG found reinforced the impression that the fee was an unavoidable cost rather than a true option. Incremental disclosure improvements do not resolve an underlying labeling or presentation problem if the document’s substance continues to suggest the charge is standard or expected.
Link to Required Reforms Required Reforms
The settlement requires both dealerships to permanently cease charging any fee characterized as a sales commission and to permanently cease offering add-on protection and reconditioning packages or any substantially similar bundled product. Going forward, any additional product or fee must be disclosed through a standalone “elected options form” that separately itemizes each optional item and requires the consumer’s affirmative, written consent. The dealerships must also implement a “dealer worksheet” disclosing the negotiated price, trade-in treatment, government fees, and any installed equipment before a consumer enters the finance office, and must conduct mandatory annual compliance training for all sales, finance, and management personnel.
Link to Practical Takeaways Practical Takeaways
For dealers and finance professionals, several practical points emerge from this settlement:
- An optional fee is only optional if the consumer can decline it without friction. Additionally, the dealership’s capture rate can not, by itself, suggest otherwise. A near-universal acceptance rate on a fee with no associated product or service is a red flag regulators will treat as evidence of de facto mandatory pricing.
- Fee labels matter. A charge described as a “commission,” “service fee,” or similar term should function exactly as that label implies. Mislabeling a charge, even if the underlying amount is legally permissible, creates independent liability exposure under deceptive practices statutes.
- Add-on products should be evaluated for genuine consumer value. Legal permissibility alone is not sufficient. Products with narrow, conditional payout triggers invite scrutiny regardless of how they are marketed.
- Revising a disclosure form is not a substitute for correcting the underlying practice. Regulators will examine whether a revised document still creates a misleading overall impression, not merely whether it uses the word “optional.”
Finally, this settlement follows a broader pattern of enforcement activity by the New York OAG in the auto finance space, including prior settlements involving Nissan-affiliated dealerships. Dealers operating in New York, and likely other jurisdictions monitoring this trend, should treat this as an opportune moment to audit fee disclosures, add-on product marketing, and staff training protocols before similar issues surface in an investigation of their own.