The Connecticut Department of Consumer Protection has filed a complaint against American Car Rental in New Haven, Conn., accusing the company's Acme Rent-A-Car operation of unlawfully charging customers speeding fines.
The company, owned by brothers Steven and Paul Kozlowski, operates just one location and maintains a fleet of about 100 cars.
Acme monitors vehicle speed through the use of AirIQ's GPS-based vehicle tracking systems. Acme automatically debits customer bank accounts or credit cards whenever customers exceed 79 miles per hour. The company charges $150 for each speeding occurrence that lasts a minimum of two straight minutes.
The Connecticut Consumer Protection Department has asked Acme to sign a cease-and-desist order, promising to halt the speeding fines and to provide past consumers with full restitution. Headed by Commissioner James Fleming, the department has also issued a subpoena to Acme, requesting the names of all consumers who have been charged for speeding violations since the company began the practice in October 2000.
The complaint charges that Acme:
* Failed to disclose the purpose and intended use of the GPS device.
*Applied surcharges to the consumers' bills for alleged speeding violations and failed to notify consumers of the surcharges.
*Failed to provide consumers the opportunity to refute the allegations and surcharges.
*Failed to notify consumers that the surcharges would be withdrawn from their bank accounts or charged to their credit cards.
* Has a rental agreement that provides for a penalty clause when the company has sustained no damage -- a business practice that the department said is contrary to public policy and invalid under the Connecticut Unfair Trade Practices Act.
Acme Rent-A-Car attorney Max F. Brunswick, however, said the company will not sign the cease-and-desist order. A hearing to address the matter is set for August 22 at the State Office Building in Hartford. In the meantime, the department has the option to apply for a temporary injunction to prevent Acme from continuing the practice.
In an interview with Auto Rental News, Brunswick said the front page of Acme's rental agreement includes a disclosure stating that all vehicles are GPS-equipped and that customers exceeding speeds of 79 miles per hour are subject to a fee of $150 for each speeding occurrence. Agents instruct customers to read the paragraph and initial it, he said.
Brunswick said he is now drafting a more detailed disclosure for inclusion in the rental agreement. The revision will make clearer that speeding fines imposed are deducted automatically from accounts. Cash customers in violation of the speeding policy forfeit a $150 deposit.
The goal of the speeding penalty, Brunswick said, is not to generate revenue but to prevent accidents in order to keep Acme's insurance costs down. Otherwise, he said, Acme cannot afford to offer customers competitive rates.
"We've offered to donate all the fees to a charitable group like MADD, but the state said that wouldn't satisfy the requirement," Brunswick said.
Acme's practice of charging speeding fines was first brought to the attention of the Consumer Protection Department by Acme customer James Turner, who was fined $450 last fall. He responded by bringing a case against Acme in small claims court and by filing a complaint with the Consumer Protection Department.
The small claims court case was postponed indefinitely pending a ruling by Consumer Protection Commissioner Fleming.
Brunswick said that Acme on July 6 mailed a $450 check to Turner's attorney after noting that Turner had not initialed the speeding fine disclosure in his rental agreement. The check was to be held in escrow until the small claims action was withdrawn.