Illinois-headquartered Ed Napleton Automotive has agreed to pay $10 million to settle a lawsuit filed against the car dealership for charging thousands of black consumers for add-ons without their consent.
The Federal Trade Commission and Illinois filed the consumer complaint against the dealership, eight of its dealerships in Illinois, Florida, Pennsylvania and Missouri on March 31. The lawsuit alleges that black customers of dealerships were charged about $190 more in interest and paid $99 more for similar add-ons than “similarly located” white customers.
“Working closely with the Illinois Attorney General, we hold these dealerships accountable for discriminating against minority consumers and introducing unwanted charges on people’s bills,” said Samuel Levine, director of the FTC’s Consumer Protection Bureau, in a statement. “Especially as families struggle with rising car prices, dealerships who cheat their customers can expect to hear from us.”
Napleton is one of the largest automotive groups in Illinois, with 51 dealerships in eight states. According to the complaint, Napleton Automotive’s eight dealerships and the general manager of two Illinois locations unlawfully applied fees for payment insurance, paint protection and other add-ons without customers’ authorization.
Some had already rejected the products. The FTC said illegal junk charges cost consumers hundreds, if not thousands, of dollars.
The lawsuit alleges that 83% of black auto buyers interviewed during the survey were charged additional fees without authorization or through deception. Customers were informed that the add-ons were free or required in other cases.
Under the settlement, $9.95 million of the $10 million judgment will be awarded to consumers and $50,000 will be directed to the Illinois Court-Ordered and Voluntary Payment Projects Fund. .
The lawsuit alleges that the seller would wait until after a “several hours” negotiation to insert the fee into the customer’s purchase contract, which is often up to 60 pages long.
In one case, an Arlington Heights, Illinois dealership charged a customer nearly $4,000 in additional fees after paying the same amount as a deposit on the vehicle. Therefore, the deposit only covered the illegal charges and the customer still owed the full cost of the car.
In another incident cited in the complaint, a salesperson told a customer that two oil changes, a tire rotation and windshield protection came with the purchase of the vehicle. He refused an extended warranty but changed his mind after the seller offered him a discount.
The customer later found out that the dealership charged $426 for oil changes, tire rotations and windshield protection. He was charged the full amount of the extended warranty and an additional $289 for etching windows without his knowledge. The customer said he tried to call the dealer several times to cancel, but no one answered. He eventually went directly to the warranty service provider to cancel the add-on.
According to the complaint, Napleton employees also increased the cost of a consumer loan for black customers by increasing the amount they paid in interest.
The actions violate Illinois Consumer Fraud and Deceptive Dealings Act.
The settlement requires Napleton dealerships to create a comprehensive fair lending program that would cap the additional interest mark-up they can charge consumers, among other things.
Additionally, the settlement directs the car dealership to only charge consumers with “express and informed consent.” It prohibits dealers from misrepresenting the cost, terms, charges associated with buying or leasing a car in the future.
A Napleton spokesperson said the car dealership “vehemently” denied any wrongdoing, the Chicago Tribune reported.
“The Ed Napleton Dealer Group has resolved disputed claims made by the Federal Trade Commission and the Illinois Attorney General’s Office,” Tilden Katz said in an April 1 statement.
“We took this decision to avoid the interruption of an ongoing dispute with the government. As a result, we have reluctantly determined that it is in our best long-term business interests to resolve these issues.