On May 21, 2020, the Federal Trade Commission filed a complaint in the Southern District of New York citing multiple violations of the FTC Act, the Truth in Lending Act (TILA), and the Equal Credit Opportunity Act (ECOA) against Defendants Liberty Chevrolet (d/b/a Bronx Honda) and its general manager, Carlo Fittanto. In its complaint, the FTC alleges that the Defendants not only engaged in unlawfully misleading and deceptive businesses practices but also discriminated against its African-American and Hispanic car buyers by targeting them with higher financing markup rates compared to those offered to non-Hispanic, white car buyers. These charges are a reminder that the federal government remains a strong enforcer of federal consumer protection laws and will pursue cases for discriminatory practices.
To substantiate its contentions regarding the Defendants’ alleged violations of TILA and the FTC Act, the FTC included multiple examples of the Defendants’ deceptive business practices: (1) the Defendants ran advertisements that promoted vehicles for sale at a “now” price but refused to honor these prices; (2) the Defendants’ advertisements for their vehicles included an estimated monthly payment and a reference to an interest rate but failed to disclose the annual percentage rate (APR), in violation of the TILA; (3) the Defendants charged customers a false “certification” fee for Certified Pre-Owned Hondas that already met American Honda’s certification benchmarks, or misled customers to believe that they had to pay additional certification fees to secure the seven-year, 100,000 mile warranty; (4) the Defendants falsely misled customers to believe that they needed to pay additional documentation fees, charging up to $695, in violation of New York state law that caps these fees at $75; and (4) after the sale, the Defendants charged customers sales tax twice in the transactions without the customers’ consent, or the Defendants instructed customers to sign blank contracts that later revealed the inflated monthly payments after the purchase of the vehicle.
The FTC’s complaint also covered the Defendants’ alleged discriminatory practices in vehicle financing, which violated the ECOA Act’s provision banning discrimination on the basis of race, color, or national origin in credit transactions. The FTC alleged the Defendants maintained a dealership-wide policy instructing personnel to add a markup that was not based on a calculated underwriting risk or the customer’s credit score that applied solely to African-American and Hispanic customers because the Defendants believed these customers have limited education. During the Obama administration there was intense regulatory scrutiny of dealership financing. This case demonstrates that the Trump administration will also pursue these cases, though the evidence here indicates potentially intentional acts. Dealerships should therefore continue to take seriously the need to demonstrate compliance with the ECOA by applying any markup in a consistent and non-discriminatory manner.