A rose is a rose, but for many car buyers, price is not price, it is not price. The FTC and the State of Illinois announce a record $10 million settlement alleging that North American Auto Service, known to car buyers in Illinois, Florida, Pennsylvania and Missouri as their dealers were named Napleton, used A range of deceptive and unfair tactics have been linked to hidden fees for add-on services such as service contracts, gap insurance and maintenance plans. More importantly, according to the FTC and the State of Illinois, defendants engaged in discriminatory practices that resulted in black car buyers paying a disproportionately higher interest rate markup than similarly situated non-Latino white applicants.
The complaint, which names Napleton’s corporate office, eight dealerships and two dealership general managers as defendants, alleges the defendants often waited until the end of a lengthy negotiation process before burying secret allegations among mountains of other documents. In some cases, consumers were given quotes that did not include unauthorized add-ons. But even when consumers call dealers about hidden fees, defendants often falsely claim add-ons are actually free or that charges are mandatory. Let’s be clear: According to the FTC and the State of Illinois, this is not a rare issue of random fees. A survey cited in the complaint showed that 83 percent of buyers were charged surcharges without their approval or due to deception by the defendants.
The complaint also alleges that the defendants violated multiple federal and state laws, including the Equal Credit Opportunity Act, by discriminating against Black consumers who financed their vehicles. Napleton employees had wide latitude to increase the cost of individual consumer loans by increasing the amount of interest paid or sneaking add-ons into contracts. According to the complaint, the company exercised its discretion to racially discriminate against customers, and the dealership’s black customers were charged approximately $190 in interest. The complaint also states that black customers paid $99 more for additional services.
Under the terms of the proposed settlement, $9.95 million of the $10 million in financial remedies will be used to provide monetary relief to consumers, of which $50,000 will be paid to the Illinois Attorney General’s Court Order and Voluntary Compliance Payment Program Fund. The settlement also requires significant changes in the way the defendants do business. This includes establishing a comprehensive fair lending scheme that requires them to limit the additional interest markup they charge consumers, train staff on fair lending practices and take action against staff who breach the scheme’s rules, and notify any discrimination complaints received Federal Trade Commission. The settlement also prohibits misrepresentations about the cost or terms of buying, leasing or financing a car. Additionally, defendants must obtain the consumer’s express informed consent for all charges.
The message to car dealers should be obvious. The same legal standards of authenticity and transparency that apply to other consumer transactions apply to the car buying process. Additionally, law enforcement officials will not tolerate consumer discrimination based on race, ethnicity, religion, national origin, sex, marital status, age, or other prohibited criteria.
