U.S.A.:Ford to settle lease probe
3,700 dealers face deadline to accept offer from finance arm in early lease-end dispute
By Eric Mayne / The Detroit News
Ford dealers who join a lease fraud settlement will pay a penalty based on the value of their outstanding leases:
Total value of leases* Payment
Up to $10 million: $3,500
$10 million to $25 million: 6,000
$25 million or more: 8,000
*as of 12/31/01
Source: Detroit News research
Ford Motor Co.’s finance arm is poised to settle a dispute dating back to the early 1990s that it overcharged consumers who purchased their leased vehicles after ending the lease early.
About 3,700 Ford dealers across the United States face a May 15 deadline to accept or reject the proposed settlement, which would end an investigation of Ford’s leasing practices that began in 1991.
In exchange for payments of up to $8,000 each, the dealers — subjects of a 39-state probe led by the attorneys general in Florida and Illinois — would be free from further investigation and any charges or penalties. Dealers who choose not to join the settlement would not have such safeguards.
In addition, Ford Motor Credit Co., which financed the 155,000 early-end leases in question, would also be free from any litigation. But the finance company must pay $100 to each eligible customer who ended a lease before it expired between 1991 and 1994, and then bought the vehicle.
The total number of eligible consumers is estimated to be 15,500 — for a payout by Ford Credit of about $1.5 million.
Ford Credit would also pay up to $500,000 to reimburse the attorneys general for costs incurred during the investigation, which stemmed from a similar California case that began in 1994 and was resolved in 1997.
The states allege Ford leasing contracts did not adequately spell out final transaction prices in cases involving customers who terminated leases early, and then purchased the same vehicles.
The practice was fraudulent, the attorneys general claim, because a customer would not know how much of the transaction price went toward lease termination, and how much went toward the vehicle purchase.
Ford Motor Credit disagreed, maintaining that its early contracts had no provision to establish vehicle pricing in the event of early lease termination. Under company practice, a customer’s remaining payments were added to the purchase option price available at the end of the lease.
Just weeks after California’s investigation was launched, Ford changed its contract wording to clarify how much customers would pay to purchase their vehicles if they ended their lease early.
Ford Credit is currently meeting with dealers to discuss the proposed resolution.
“It has not been signed by all parties,” said Joann Carrin, a spokeswoman for Florida’s attorney general’s office. “Until there is a signed settlement, then the case is ongoing.”
Ford Credit spokesman Dan Jarvis called it “a good settlement all around. It’s up to each dealer to determine whether or not they want to opt in.”
Dealers who accept the settlement will be liable for payments of $3,500, $6,000 or $8,000, based on the volume of their leasing business. Dealers who own multiple stores would pay a separate penalty for each Ford or Lincoln Mercury dealership involved.
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My next Ford.....