Direct Mail and AG's

Why would you?

Attorney General Spitzer today announced settlements with an advertising agency and 14 New York City, Westchester County and Long Island-area auto dealerships, which had sent a deceptive and illegal direct mail promotion to tens of thousands of New Yorkers.

The settlements require fundamental changes in the way the dealerships utilize direct mail solicitations in the future, including:

* Ending the practice of using envelopes that look like those of a government agency, such as the State Department of Motor Vehicles;
* Requiring the registration of prize giveaway contests with the Secretary of State;
* Revealing the odds of winning a prize; and
* Disclosing the number, value, size and kind of prizes offered.

"These mailings were a textbook example of how to mislead consumers," Spitzer said. "Very often, the purchase of an automobile is one of the most important financial decisions that a consumer makes. Consumers should not be lured into an auto dealership through the use of deceptive marketing practices and bogus prize giveaway schemes that violate state law."

Each of the 14 dealerships involved in the promotion solicited consumers to attend a one day sale. The promotional material was sent in a mailing envelope with a large print, bold-faced legend stating "IMPORTANT! MOTOR VEHICLE NOTIFICATION. Reg. 84-91 --3052A." The Attorney General found the envelopes were deceptive and had the capacity to mislead consumers because they closely resembled those used by the State Department of Motor Vehicles.

Enclosed in each of the envelopes was a "scratch off card" which stated that "You Are Definitely a Winner! Of a cash award up to $1,000, a $10,000 bond or a valuable gift." Consumers were required to bring the card to the dealership on a designated day, to be scratched off in the presence of a dealer representative.

The Attorney General’s investigation also found that the cards misstated the odds of winning each prize, and misled consumers as to the true nature, value and kind of prizes offered.

Ultimately, the only prizes actually won by consumers were a $2 cash prize, a $5 cash prize, an emergency flashlight or other "consolation" prize.

Moreover, the prize giveaway violated the state’s "Games of Chance Law," because it was not properly registered with the Secretary of State and because the dealers failed to establish a bond in an amount sufficient to pay for or purchase the total value of the prizes offered.

Each envelope also contained a facsimile check stating that the recipient had been pre-approved for a loan of up to $19,500. But, in fact, the credit of the consumers who received the mailing was not actually pre-approved, and the promotion violated the federal Fair Credit Reporting Act.

"It is time the auto dealers clean up their act and conduct solicitations in a more truthful way," Spitzer said. "My office will continue to monitor all forms of auto dealer advertising and solicitations to ensure that consumers’ rights are protected."

The Attorney General’s voluntary agreements with the 14 auto dealers and the advertising agency require them to pay a total of $90,500 in costs and penalties. The parties, which cooperated with the Attorney General’s investigation, entered into the settlements without admitting any violation of law.