August 14, 2013 – 12:01 am ET
– UPDATED: 8/14/13 11:59 am ET
The Jeff Schmitt Auto Group, of Fairborn, Ohio, has seven stores around Dayton, with total new and used vehicle sales of about 7,800 in 2012.
It also had an A+ rating from the Dayton Better Business Bureau — but that rating is expected to drop. The rating is under review for a downgrade amid allegations of shady practices, particularly in its finance and insurance operations. And the auto group is paying the price.
Since December, the auto group has paid about $625,000 to resolve 16 civil lawsuits and five other complaints alleging unfair and deceptive business practices.
John North, CEO of the Dayton BBB, previously told Automotive News that the bureau planned to lower the auto group’s rating on Aug. 12 because of a “high volume” of complaints against the auto group that built up over many months.
As of Aug. 14, though, the Dayton BBB’s Web site showed no rating for the Jeff Schmitt Auto Group, and said the group’s accreditation was suspended on Aug. 7 “due to failure to eliminate the underlying cause of complaints on file with the BBB and failure to maintain minimum BBB Rating.
The matter will be reviewed by the BBB’s Board of Directors at its next meeting” on Sept. 10.
It also said, “Businesses are under no obligation to seek BBB accreditation, and some businesses are not accredited because they have not sought BBB accreditation.”
Among the allegations: Staffers at the auto group used a “five-finger close,” whereby the finance manager places a hand on the paperwork, literally covering up extra charges for products the customer was unaware of, while getting the customer’s signature on a contract.
Ronald Burdge, principal of Burdge Law Office in Dayton, Ohio, and a consumer law specialist, filed the now-settled lawsuits and complaints as well as nine additional lawsuits against the auto retailer alleging unfair and deceptive acts and practices, civil conspiracy, fraud and corrupt activities.
Separately, the Ohio Attorney General’s Office has 29 complaints on file against Jeff Schmitt Auto Group, all received between Jan. 1, 2012, and July 31, 2013, a spokeswoman said. Of those, 10 are for “misrepresentation” and another 10 for “title,” “billing issues” and “failure to disclose” combined. Only one other dealership in the area came close to that level, with 17 complaints, the Dayton Daily News reported.
In a written statement, owner Jeff Schmitt said “thousands upon thousands” of his customers are satisfied.
“Periodically, a very small number of customers may not be satisfied with their purchase or their purchase terms. We would hope that, when a customer has an issue, they would come to us to seek fair resolution,” he said in the statement.
There are “a handful” of people who prefer to sue, he added, “hoping to reap financial rewards that are often wildly out of proportion to whatever harm they may feel they have experienced.”
The Dayton Better Business Bureau has logged 79 complaints against the company over the past 36 months, North said.
In September, Schmitt submitted a plan to the Dayton BBB to resolve the complaints, which he was doing, the bureau’s North said. But a review a few weeks ago showed there “were another good volume of complaints that match that pattern,” he said.
“When we see that, we take action,” North said. “We are working with Jeff Schmitt now and we will ask him to resolve those complaints.”
The FI office is at the heart of the lawsuits and complaints.
The dealership group allegedly tacked on an average of $4,000 to $7,000 of FI products such as rust protection or extended service contracts to many deals, Burdge said. The FI managers did not inform customers of the add-ons, and if they did, they implied the products were free, he said. They also used the “five-finger close” to prevent customers from reading the contract, he said.
“They were hiding the numbers that were actually on the contract and misleading the consumer,” Burdge said.
He said some of his clients were told they had to get an FI product because the lender required it. “We all know that’s not true,” Burdge said.
In some cases, the products were never on the vehicles. For example, Burdge had 10 vehicles tested for the rustproofing they were supposed to have. Only one vehicle had it, he said.
Burdge has also filed lawsuits alleging racketeering. The suits say Jeff Schmitt Auto Group inflated the income or lowered the housing costs of prospective car buyers to secure more car loans.
Steve VanGorder, former general manager of all the Schmitt stores, is named in at least some of the lawsuits. He was also named to Automotive News’ list of 40 Under 40 this year.
Last month, Automotive News reported on VanGorder’s high-pressure FI sales process at the stores. VanGorder kept a waiting list of top salespeople qualified to move into FI if an FI manager failed to meet certain financial targets.
In that story, Patrick Cade, the business manager for the group’s Chevrolet store in Miamisburg, Ohio, said: “If they see us not performing like they expect us to, they’re going to call us out on it.”
Cade, who also was named in some of the lawsuits, did not return a call for a comment on the lawsuits or the settlements.
VanGorder no longer works at Jeff Schmitt Auto Group. In a statement to Automotive News, he said, “There is no relationship between litigation and my departure from the Jeff Schmitt Auto Group. I consider Jeff Schmitt to be a friend and mentor, and we continue to have a good relationship.”
As part of the legal settlements, Burdge said, the dealership group agreed to have written procedures banning the five-finger close and the word “rustproofing.”