One of the largest U.S. automotive groups is facing action from the federal government due to alleged discriminatory practices.
On Aug. 15, the Federal Trade Commission (FTC) has filed an administrative complaint, against Asbury Automotive due to allegedly systematically charging consumers for costly add-on items they did not agree to or were falsely told were required as part of their purchase, specifically against Black and Latino consumers.
The FTC alleges that three Texas dealerships—David McDavid Ford Ft. Worth, David McDavid Honda Frisco, and David McDavid Honda Irving as well as general manager of those dealerships, Ali Benli—engaged in a variety of practices to sneak hidden fees for unwanted add-ons past consumers.
Asbury Response
After reviewing the dealerships’ records, Asbury will contest the FTC’s lawsuit alleging violations related to the sale of what the FTC calls “add-on” products and will defend the dealerships’ sales practices.
According to Asbury officials, customers who purchased protection products received full disclosure about the products’ costs, impact on payments, and other important terms consistent with company policy. Customers signed for the protection products, which were itemized separately on paperwork provided to the customers.
Asbury CEO David Hult stated, “We will not allow the FTC to coerce fines from us or subject us to onerous requirements that negatively impact the car-buying experience for our customers, would not apply to others, and would place us at a competitive disadvantage in the industry. We are confident that we will prevail in the litigation.”
Payment Packing
Federal authorities said “payment packing” happens when the dealerships convinced consumers to agree to monthly payments that were larger than needed to pay for the agreed-upon price of the car, and then “packed” add-on items to the sales contract to make up that difference.
“The FTC will continue to crack down on illegal hidden fees and discrimination, which have no place at car dealerships,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection in a press statement announcing the action. “Like the Combating Auto Retail Scams (CARS) Rule, today’s action underscores our commitment to protecting consumers shopping for cars and leveling the playing field for honest dealers.”
According to the complaint, numerous consumers complained about Asbury’s practices as they reported being charged thousands of dollars without their knowledge or charged items they had declined including protective chemical coatings and service contracts to life and disability insurance policies.
Discriminatory Practices
The federal complaint details that Asbury’s sales and financing process made it difficult, if not impossible, for consumers to know they were being charged for these add-ons, with consumers being asked to sign documents on electronic devices that showed only the places where they should sign and not the full documents. In other cases, consumers who noticed the add-on charges were falsely told they were mandatory.
A survey of customers across the dealerships showed that as many as 75 percent of consumers reported that they were charged for add-on products and services they did not authorize or were falsely told were required, according to federal officials.
As for the discriminatory practices, FTC officials pointed to company documents that show the dealerships treated Black and Latino consumers differently from non-Latino White consumers, charging them hundreds of dollars extra on average for add-ons—including those add-ons for which they were charged without consent.
As a result, Black ($298 more) and Latino ($214) consumers had a higher average for the same add-ons than non-Latino White consumers.
Asbury Questions FTC Investigation
Asbury attacked these allegations, noting the FTC refused to provide the methodology they employed in making their allegations and the auto group found the federal agency had not received any consumer complaints about the McDavid dealerships from 2019, the start of the period covered by the lawsuit, through late spring of this year through a through a Freedom of Information Act request.
Dan Clara, senior vice president of operations, in rejecting the FTC’s assertion that minority customers were charged more for protection products than other customers noted the three dealerships in question are highly diverse, reflecting the demographics of the guests they serve.
“Asbury is committed to non-discrimination and has implemented policies, training, and monitoring to ensure that our dealerships comply with standards on fair lending and equal credit opportunity,” Clara said.
