FTC Announces Settlement with Multistate Automobile Dealership and Chief Executive Over Alleged Unauthorized Fees for Optional Products and Discrimination Against Black Applicants | Hudson Cook, LLP



  • The Federal Trade Commission (FTC), in conjunction with Illinois, announced a $10 million resolution to allegations that a group of multistate auto dealers and the CEO violated the FTC Act, the Equal Credit Opportunity Act, Truth in Lending Act, and State law in relation to the sale and financing vehicles and optional products. The FTC alleged that the defendants engaged in unfair and deceptive practices in the sale of optional products such as service contracts, GAP insurance and paint protection. The FTC also alleged that the defendants raised interest rates and added unauthorized fees for optional products, resulting in higher costs for black applicants, in violation of the ECOA.
  • Defendants neither admitted nor denied the allegations, but consented to the entry of an injunction and order requiring them to establish a comprehensive Fair Lending Program and to charge consumers only for optional products with their express and informed consent.
  • The Commission’s vote to approve the action was 4-0. In a separate statement, Chair Lina Khan and Commissioner Rebecca Slaughter explained that “protecting consumers from unscrupulous automobile sales practices” is a critical role for the FTC and that it will continue to take action to “ensure consumers get accurate pricing and financing information.”
  • Additionally, Khan and Slaughter said the FTC will “aggressively pursue” violations of the Equal Credit Opportunity Act (ECOA). The couple also reportedly backed a separate injustice tally for alleged discriminatory practices, echoing similar statements by CFPB director Chopra about using injustice to fight discrimination more broadly.


On March 31, 2022, the FTC and Illinois announced that they had resolved, via stipulated order, claims against nine car dealerships and a general manager. The Complaint alleges that the Defendants violated the FTC Act, the Truth in Lending Act, the Illinois Consumer Fraud Act, the Equal Credit Opportunity Act, and the Illinois Motor Vehicle Advertising Law, for unlawfully adding charges for products unwanted optionals such as service contracts. and paint protection. According to the agencies, in many cases the fees were added when consumers specifically declined the products, and in other cases consumers were wrongly told that the products were free or necessary to purchase or finance their car. Finally, the complaint alleges that the defendants discriminated against black candidates in the financing of their vehicles. The complaint alleges that the multistate dealership has a “discretionary policy that allows its employees to mark up interest rates and add fees for add-on products, which has resulted in higher costs for black applicants than non-Latino white candidates in the same situation”. The complaint says the dealership charged black borrowers “on average, about $190 more in interest… [and] charge black consumers more often for add-ons,” resulting in black consumers paying “$99 more on average for add-ons.”

The defendants neither admitted nor denied the allegations, but agreed to settle the case for $10 million. The stipulated order will prohibit them from misrepresenting the costs or terms of buying, leasing or financing a car, and will prohibit them from unlawful credit discrimination. The settlement will also require defendants to establish a comprehensive fair lending program and to charge consumers for optional products only with express, informed consent.


You can view all relevant court documents and press releases at FTC enforcement page.


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