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Attorney General Lockyer Announces $700,000-Plus Consumer Protection Settlement with State's Largest Independent Car Rental Firm

Suit Alleges Fox Rent A Car Used GPS Devices to Illegally Charge for Out-of–State Travel
Thursday, November 9, 2006
Contact: (415) 703-5837

(REDWOOD CITY) – Attorney General Bill Lockyer today announced a $700,000-plus settlement of a consumer protection lawsuit against Fox Rent A Car, Inc. that alleges the largest California-based independent car rental company illegally slapped surcharges on those who traveled outside a three-state area and unlawfully forced customers to buy liability insurance.

“Fox sprang some nasty surprises on its customers,” said Lockyer. “The company falsely told consumers that if they couldn’t show proof they possessed liability insurance, they had to buy coverage to rent a vehicle. Fox advertised unlimited mileage. But the firm installed GPS devices on rented vehicles, tracked customers’ movements, then unlawfully charged them hundreds of dollars extra when they drove their families to Utah or Oregon. The victims of these illegal practices will receive restitution under this settlement. And Fox has been forced to reform the way it does business to ensure it treats customers fairly.”

The San Mateo County Superior Court today entered the judgment reflecting the settlement. Lockyer and San Mateo County District Attorney James P. Fox on Wednesday simultaneously filed the complaint and settlement with the court. Judge Gerald J. Buchwald approved the settlement. Aside from Fox Rent A Car, Inc., the defendants include related business entities, as well as the individual owners and officers of the companies.

The settlement requires the defendants to reimburse thousands of former customers who were forced to purchase insurance they did not want or need. Also eligible for restitution will be hundreds of patrons whose movements were tracked by a global positioning system (GPS) device and who had to pay a surcharge for violating Fox’s restriction on traveling outside California, Arizona and Nevada.

Further, former customers may receive compensation for other improper assessments, such as charges for alleged vehicle damage that Fox did not tell consumers about until months after they returned rentals. And any customer who already has filed with law enforcement authorities, the Better Business Bureau or the company a complaint about other problems with Fox – or files such a complaint within 90 days after today – is eligible to be considered for restitution.

The consumer restitution provided by the settlement is expected to total about $500,000. The settlement specifically sets aside $350,000 to reimburse consumers for liability insurance payments, and at least $89,000 in restitution for travel-restriction surcharges. The restitution for other improper assessments is expected to total roughly $25,000.

The settlement also requires the defendants to pay $200,000 in civil penalties, and $50,000 in cost reimbursement to the Attorney General’s Office and San Mateo County District Attorney’s Office.

The complaint alleges Fox violated California law by forcing customers to purchase liability insurance as a condition of rental. Civil Code section 1936(n) prohibits rental companies from requiring customers to buy insurance or similar products.

Additionally, Fox in its advertisements told consumers rental charges covered unlimited mileage. However, the company had a policy restricting travel outside California, Arizona or Nevada. Fox monitored customers’ movements through GPS devices installed in the rentals, according to the complaint. The company charged customers who drove beyond the boundaries an extra $50, plus 35 cents for every mile driven over 100 miles in a day, including miles driven within California, the complaint alleges. Civil Code section 1671 prohibits assessment of such “liquidated damages penalties.” In this case, the hefty surcharge violated the statute because it had no connection to any damages allegedly caused by a driver’s violation of the travel restriction.

Fox committed other unfair business practices, the complaint alleges, including “assessing renters for vehicle damage months after those renters returned the vehicles, when at the time the renters returned the vehicles, (Fox) made no mention of any damage having been done.”

The settlement includes court-enforced “injunctive relief” provisions which permanently bar Fox from: coercing its customers into buying unnecessary insurance; using electronic tracking devices to collect information about a consumer’s use of a rental vehicle; and using any information collected through such devices to impose surcharges, fines or penalties.

Lockyer noted the use of GPS and other electronic tracking devices in rental cars is restricted under a law, AB 2840, that took effect January 1, 2005. Supported by Lockyer, AB 2840 permits the devices to be used only for specific purposes, such as tracking down lost or stolen vehicles. The statute bars use of the devices to track renters’ movements or to assess penalties arising from renters’ use of the vehicle.

Consumers who want to file a complaint against Fox should contact the San Mateo County District Attorney’s Office, Attention Deputy District Attorney Chuck Finney, 400 County Center, Third Floor, Redwood City, CA 94063. Consumers can obtain a complaint form by calling (650) 363-4651. Complaints also can be submitted to the Attorney General’s Office at http://www.ag.ca.gov/consumers/mailform.htm or by writing to the Public Inquiry Unit of the Attorney General’s Office at P.O. Box 944255, Sacramento, CA 94244-2550.

For more information about the settlement and eligibility for restitution, go to http://ag.ca.gov/consumers/refunds.php .

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