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A.G. Schneiderman Reaches Agreement with Zipcar For Charging Thousands of Consumers Damage Fees in Violation of Law

LongIsland.com

The law requires that consumers have an opportunity to dispute damage fees before they are assessed. Zipcar charged some consumers damage fees in violation of the law.

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New York, NY - July 28, 2016 - Attorney General Eric T. Schneiderman today announced that his office has reached a settlement with the membership-based rental car company Zipcar, Inc. for routinely charging New York consumers damage fees for rental vehicles in violation of New York law. The law requires that consumers have an opportunity to dispute damage fees before they are assessed, but an investigation by the Attorney General’s Office found that, in some cases, Zipcar charged consumers damage fees before notifying consumers of suspected damage.

“Consumers should never learn that they have been accused of damaging a rental car when they see a surprise charge on their credit card statement,” said Attorney General Schneiderman. “New Yorkers have a right to contest damage fees before any penalties are assessed and my office will continue to enforce the law to ensure that customers are treated fairly.”

Zipcar’s membership contracts provide that consumers are liable for any damage to the rental vehicle that occurs while the car is in their possession – whether they cause the damage or not.  Zipcar failed to provide consumers with notice of the damage and the amount of liability, and an opportunity to inspect the damaged vehicle before charging for damage to the vehicle, as required by New York law. 

Instead, when damage to a vehicle occurred, Zipcar conducted an investigation to determine which Zipcar member had the car reserved at the time the damage occurred.  It then notified the consumer it deemed responsible for the damage, and charged the consumer’s account for the damage – up to a limit of $1,000 – before the consumer had the opportunity to dispute the charge. Under this policy, Zipcar charged 5,000 New York consumers for damage to its vehicles from 2011 through 2015.

In one instance, Zipcar charged a consumer $750 for scratches on a car before it even notified the consumer of the damage.  When the consumer complained that the damage had not occurred at the time of his reservation, Zipcar reviewed the file but refused to refund the money it had charged.

Under the settlement with the Attorney General, Zipcar has agreed to refund any damage charges that were assessed against consumers who contested their responsibility for the vehicle damage.  Zipcar has also agreed to pay $35,000 in fees and costs to the Attorney General’s office.  In addition, Zipcar has agreed to comply with New York law, and not to charge consumers for damage to its vehicles unless they affirmatively agree that they are liable or Zipcar obtains a legal determination of liability.

Unlike the traditional rental car industry, which requires consumers to visit a centralized rental car location every time they want to rent a vehicle, Zipcar permits pre-approved consumers who sign a membership agreement and pay a membership fee to rent Zipcar cars on an hourly or daily basis without having to pick up the car at a rental car agency.  Zipcar members can pick up rental vehicles at a variety of locations, including street parking spots and commercial parking garages.  Zipcar charges consumers for each rental using the credit or debit card information maintained by the consumer on file.   

Consumers who were charged a damage fee in connection with their rental of a Zipcar vehicle may be eligible for a refund if they objected to liability at the time the damage fee was assessed.  Consumers can submit a claim online, or call the Attorney General’s office at 212-416-6045 to have a claim form sent to them or they can submit a request by mail.

The Zipcar investigation was handled by Assistant Attorney General Kate Matuschak, Special Assistant Attorney General Stephen Mindell, Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia, all of the Consumer Frauds and Protection Bureau.  The Consumer Frauds and Protection Bureau is part of the Division of Economic Justice, headed by Executive Deputy Attorney General Manisha Sheth.