Federal Trade Commission cracks down on false advertising, discriminatory pricing in auto industry

Agency reaches two multi-million dollar settlements over dealer business practices
The Federal Trade Commission said an increase in deceptive advertising and junk fees in the auto industry has led the agency to propose new rules to curtail the
Published: Jan. 25, 2023 at 7:06 PM EST
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InvestigateTV - The Federal Trade Commission said an increase in deceptive advertising and junk fees in the auto industry has led the agency to propose new rules to curtail questionable business practices.

“What we’re out there doing is trying to make sure that businesses are conducting themselves in non-deceptive ways and in a way that accurately portrays the nature of the deal,” FTC Senior Attorney Mark Glassman said. “We’ve certainly noticed a large number of instances of it happening.”

Glassman said in the past year the FTC took action against two companies: Passport Automotive Group and Napleton, a multistate auto dealer.

In the complaint against Passport, the FTC alleged the company regularly advertised certified, reconditioned, or inspected cars at specific prices. However, when the customer went to buy the car, the complaint said Passport charged “them extra hundreds to thousands of dollars in fees” for inspections and certifications, essentially “double charging” the buyer.

“One of the examples that we cited in one of the cases was of a consumer who had purchased a used car that was advertised as a certified used car,” Glassman said. “Then when he went to buy the car, he was told that he’d have to pay a fee for inspection and recertification and those were things that were already part of the certification process.”

The complaint also alleged Passport charged “Black and Latino consumers” hundreds of dollars more in financing costs and fees on average than white customers, violating the FTC Act and the Equal Credit Opportunity Act.

In the settlement with the FTC, Passport denied liability but agreed to pay $3.3 million, which will be used to refund customers. Passport also agreed to a change in business practices

In the case against Napleton, the FTC complaint alleged the company charged junk fees for unwanted “add-ons” to customers’ bills and also allegedly discriminated against “Black applicants” by charging them more for financing.

Napleton settled the lawsuit by denying liability but agreeing to pay $10 million, which will be used to refund affected customers. A statement released by the Ed Napleton Dealership Group said:

While we vehemently denied any wrongdoing, the Ed Napleton Dealership Group resolved disputed claims made by the Federal Trade Commission and the Illinois Attorney General’s office last April. We made this decision to avoid the disruption of an ongoing dispute with the government. As a result, we reluctantly determined that it was in our best long-term business interests to resolve these matters.

This settlement was the result of a three-year process where we provided complete transparency to the government. Most of its claims were based on interpretations of statistical data and there was no actual finding of intentional wrongdoing.

The Napleton family has been in business for over 90 years, selling and servicing millions of vehicles. We are proud of our trusted, time-tested reputation and relationship with our customers and are fully committed to transparency in all of our dealings.

The governments’ unproven claims relate to 8 of the 51 Ed Napleton Dealer Group dealership locations. Dealerships outside of the Ed Napleton Dealership Group bearing the Napleton name were never part of this inquiry.

We have taken steps to implement additional safeguards to ensure full transparency to our customers. We intend to continue to build on the trust we have worked so hard to create with the consuming public and look forward establishing new relationships with generations of satisfied customers to come.

Glassman offered the following tips for consumers to protect themselves when purchasing a vehicle:

  • Ask for a copy of every single document when discussing car payments and loans.
  • Reach out to the car finance company directly if you have any questions or if you want to adjust your payments.
  • Be wary if someone asks you to pay upfront in return for re-negotiating the terms of a loan.