The Federal Trade Commission accused three North Texas David McDavid car dealerships and the company that owns them of saddling customers with hidden fees for unwanted add-on items — especially Black and Latino consumers.
The FTC voted 5-0 to issue an administrative complaint against Asbury Automotive and the dealerships, the commission announced in a press release Friday.
The commission alleged wrongdoing at three David McDavid locations: the Ford location in Fort Worth, the Honda location in Frisco and the Honda location in Irving.
The dealerships and their general manager Ali Benli allegedly engaged in practices like “payment packing” in which customers unwittingly agree to monthly car payments that were more expensive than necessary and then added items to the sales contract to make up the difference.
Company documents also showed one dealership charged Black customers $298 more than white customers on average for the same add-ons, according to the FTC. For Latino consumers, it was $214 more on average.
“The FTC will continue to crack down on illegal hidden fees and discrimination, which have no place at car dealerships,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a press release. “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.”
The add-ons included purportedly protective chemical coatings and service contracts to life and disability insurance policies, according to complaints from consumers. Some said representatives never discussed these products during sales, while others said they explicitly said no to the products, which were later added on without their consent.
Customers weren’t shown full documents, according to the FTC, only shown the places where they should sign. Others were told the add-ons were mandatory.
As much as 75% of consumers reported they were charged for add-ons they didn’t consent to, according to the release.
Benli did not return a request for comment. The Frisco David McDavid location declined to comment and referred KERA News to Asbury's email for requests on FTC information.
In a statement Friday, Asbury Automotive rejected what it called the "false" and "unfounded" allegations of misleading business practices and racial discrimination. Customers received full disclosure about the cost of "protection products" and the impact on their car payments, according to the statement.
Asbury wrote the dealerships also require an independent deal clerk to review sales to ensure protection products are sold with the customer's signed consent. The automotive group accused FTC officials of refusing to share the methods they used to come to the allegations against Asbury, despite Asbury's requests for the information.
The FTC issues administrative complaints when it has reason to believe the law is being violated and a proceeding is in the public interest. That begins a process where the allegations are tried in a hearing before an administrative law judge.
The FTC did not provide a date for that hearing. Asbury wrote that it plans to challenge the FTC's lawsuit.
"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," Asbury CEO David Hult said in the statement.
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