May 18, 2010

That deal on a used car might not be as good as you think. For example, an "emergency liquidation" might not mean the dealer has to slash prices. It may be just a gimmick to get you on the lot.

That's the reasoning behind Iowa Attorney General Tom Miller's lawsuit against Smart Automotive Group of Louisiana, which Miller says used deceptive "false-premise" ads for used-car sales events in Iowa.

"We alleged they used deceptive ads to trick consumers into thinking used cars and trucks were being sold at bargain prices at special sales events when in fact vehicles were from dealers' regular used-vehicle inventories," Miller said.

According to the lawsuit, Smart Automotive sale ads falsely used terms such as "Seized and Repossessed Vehicle Event," "Statewide Used Vehicle Liquidation," "Emergency Disposal Event," and other deceptive and misleading terms that were not true.

Smart Automotive Group sold promotional advertising and sales packages to Iowa auto dealers to increase sales of the dealers' used vehicles, the suit said. Such packages "are designed to trick consumers into believing the vehicles come from a source other than the dealer's usual used vehicle inventory and are available at lower than usual retail prices," the suit said. Miller called the practice "false-premise" deceptive advertising.

"The problem is that such ads mislead customers into thinking vehicles must be sold quickly and at bargain prices, when that is not the case," Miller said. "Consumers are misled, and sometimes they end up paying prices that are even higher than normal."

The suit also alleged Smart Automotive Group used other misleading ads or tactics, such as scratch-off prize cards, as "a subterfuge designed to trick consumers into visiting the dealership," subjecting consumers to undesired sales pitches.

The suit also said Smart Automotive sometimes sent in sales teams who "use high-pressure sales tactics to sell consumers vehicles under false pretenses."

The suit was filed Friday morning in Polk County District Court in Des Moines. It asks the court to order civil penalties up to $40,000 per violation of the Consumer Fraud Act, order restitution for consumers, and prohibit future violations.

Defendants named in the lawsuit are Smart Automotive Group, LLC, located at 1329 Gardenia Drive, Metairie, LA, and Bernard E. Burst III of New Orleans, President of Smart Automotive Group.