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Attorney General Lockyer Brings Consumer Protection Action Against Toyota Dealerships Over Sales Practices

Wednesday, August 8, 2001
Contact: (415) 703-5837

(LOS ANGELES) – Attorney General Bill Lockyer, in a joint consumer protection action with the district attorneys of Orange and Los Angeles counties, announced today settlement of a civil lawsuit filed in Los Angeles Superior Court against South Bay Toyota, T/V of Costa Mesa, Inc. (operating as South Coast Toyota) and Shigeyasu Hiraiwa, the president of both companies.

The consumer protection complaint alleged that South Bay Toyota at 18416 South Western Avenue, Gardena, and South Coast Toyota at 1966 Harbor Boulevard, Costa Mesa, engaged in false advertising and unfair sales practices that included high-pressure tactics and misleading statements to induce consumers to lease rather than buy vehicles and switching customers from a financed purchase to a lease without the knowledge of the customer.

"In this case, hundreds of car-buying consumers were bilked through unfair and deceptive sales practices," Lockyer said. "Through the settlement, refunds are being made available to victims."

The defendants who did not admit the violations entered into a stipulated judgment to pay $1.5 million in restitution, $405,000 in penalties and $95,000 in costs. During discussions leading to the judgment, the defendants made substantial additional restitution and rescission of contracts. While the defendants have sold the dealership, the settlement imposes extensive restrictions if a new dealership is owned or operated in California.

The consumer protection action was brought by the Attorney General with Los Angeles County District Attorney Steve Cooley and Orange County District Attorney Tony Rackauckas. Also involved in the case was the Department of Motor Vehicles, which has initiated administrative actions against a number of the dealers' salespeople.

The defendants were accused of numerous violations that included:

*Advertising vehicles for sale or lease which were in fact not available;

*Failed to give the required 48-hour advance written notice to withdraw advertisements of vehicles that have been sold or withdrawn from sale;

*Advertising vehicles at a sale price not actually intended to be offered;

*Refusing to sell vehicles at the advertised price unless the consumer used the dealer's financing, paid cash or purchased other goods or services such as extended warranties, anti-theft devices and insurance;

*Engaging in a bait-and-switch scheme in which the dealer aggressively attempted to switch consumers who respond to the advertisements to different, more expensive vehicles which the dealer would sell at prices substantially above those advertised;

*Falsely creating the impression that a lease was functionally equivalent to a purchase or would build equity or ownership interest in the vehicle;

*Falsely telling consumers that if they enter into a lease agreement, they could terminate the lease before the end of the lease term without any penalty;

*Using a variety of tactics to inflate the price above what the consumer and dealer had orally agreed, such as inserting a higher price into the written contract and if questioned stating falsely that the higher price was for "bank"or "insurance" purposes or to cover taxes.

*Engaging in "payment packing" in which consumers are quoted a monthly payment higher than necessary to purchase or lease the vehicle then falsely offering "free" or "discounted" goods or service or including them at a fee without the customer's knowledge;

*Failing to credit consumers for all or part of their down payment;

*Falsely stating that the dealer has a three-day money back guarantee if the consumer finds a better price within that time;

*Removing the federally required manufacturer's suggested retail price window sticker from the vehicle before the consumer took possession of the vehicle, and refusing to provide that sticker to the consumer on request;

*Negotiating the purchase and lease of vehicles in Spanish, but failing to provide a Spanish-language translation of the contract.

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