Bloomington-Normal and Peoria car dealerships accused of fraud in AG, FTC lawsuit

A group of car dealerships with several locations in Bloomington-Normal and Peoria has been accused of “systematically” defrauding its customers since April 2021.

Leader Automotive Group and its parent company AutoCanada were the targets of a joint lawsuit filed Thursday by the Illinois Attorney General and Federal Trade Commission [FTC], the agency tasked with enforcing federal consumer protection and antitrust laws. A former vice president of U.S. operations, James Douvas, was also cited in the suit.

The legal complaint said Leader Automotive “deceived consumers about the price and availability of vehicles, charged them for expensive add-ons without consent, tacked on unwanted junk fees to purchases, posted fake reviews, and failed to disclose that U.S. customers were buying cars imported from Canada, along with other unlawful conduct,” a press release from the FTC said.

Leader Automotive, the suit said, would advertise low prices online but would then tell customers at the dealership that the vehicle they were considering came with preinstalled add-ons they would be required to pay for — costs that totaled thousands of dollars and contradicted advertisements that promised “no surprise add-ons.” Frequently cited add-ons included protective coatings under the name Xzlion and LoJack theft protection.

One exhibit in the complaint showed a Kia Forte advertised for around $17,000 but sold for nearly $4,000 more than listed due to add-ons. The cost ended up being “well above” the average market price for the vehicle.

Nearly 80% of the dealerships’ customers were charged for at least one such add-on and the group reported more than 99% profit on them, according to the suit. Part of the financial scheme relied on bringing customers to the dealerships’ physical location, as sales representatives were provided scripts that generally did “not allow the disclosure or confirmation of specific price information while assuring customers they will be rewarded for visiting a dealership.”

Despite ongoing state and federal investigations, the suit said Leader Automotive continued its practices of adding junk fees and add-ons to customers’ total bills, though one dealership said “if the customer looks like they are from the [Attorney General’s office]” a fee for vehicle certification would be waived. Certification practices were also among the allegations made against Leader Automotive: The dealerships often failed to report the sale of a certified vehicle to the manufacturer, meaning customers did not get benefits of a limited warranty that accompanies certification.

Leader Automotive also told its employees to post fake reviews online to offset negative reviews left by customers, according to the suit, and either offered an incentive payment of $25 per review or threatened to withhold compensation. The suit also said its prize fliers also frequently failed to disclose that no vehicle purchase was necessary to participate in written promotions.

The group and its parent company came to a settlement the same day the suit was filed, agreeing to pay $20 million to refund impacted customers and, going forward, clearly disclose a vehicle’s actual, offered price and obtain consent for any additional charges.

The FTC said the $20 million figure was the largest financial judgement the agency has ever secured against an auto dealer. Once the court system has finalized the settlement, the federal agency will set up a refund program and will contact consumers directly, an FTC spokesperson said.

“Working closely with the Illinois Attorney General, we are holding these dealerships accountable for unlawfully extracting millions of dollars from consumers through a textbook bait-and-switch scheme, and bolstering their poor reputation with fake reviews,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a press release. “We will continue our work to ensure that consumers are not being overcharged for cars, and that honest dealers do not need to compete with firms that cheat.”

Bloomington-Normal area dealerships cited in the lawsuit included: