FTC Takes Action Against Dealership Group in Texas

• By: TIADA Compliance
• On: 09/03/2024 10:47:48
• In: Federal / National Posts
• Comments: 0

“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. “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.” As part of their efforts to work with honest dealers, the FTC's Dallas office has participated in several events of TIADA and will be participating in an educational seminar offered by TIADA in Dallas on October 21^st.

Details of the FTC Case

The FTC's action against the dealer group highlights violations under the Equal Credit Opportunity Act (ECOA), which prohibits discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, or age. The complaint alleges that the dealer group used deceptive practices when setting interest rates and that Black and Latino customers were systematically charged higher markups on auto loans. Additionally, the FTC found evidence that these customers were more likely to be subjected to what the agency calls “add-on products,” leading to inflated costs.

The FTC is pursuing this action to address what it sees as a pattern of discriminatory behavior. If found to violate the law, this could result in penalties and require changes to the dealer group's lending practices.

What This Means for Texas Dealerships

For independent dealers in Texas, this is a reminder of the importance of compliance with federal and state regulations regarding fair lending practices. Discriminatory lending or pricing, whether intentional or not, can lead to significant legal consequences, as seen in this FTC case. Dealerships must ensure that their financing processes are transparent and free from bias to protect their customers and businesses.
 

The Bigger Picture

The FTC's action against the dealer group comes as the FTC is facing a challenge of their CARS Rule and should serve as a warning to all Texas dealerships that as the litigation is ongoing, Texas dealers are especially vulnerable to enforcement from the FTC. As the auto industry becomes increasingly scrutinized for fair lending practices, independent dealers must take proactive steps to protect their businesses from similar legal actions. Texas dealerships can stand out by ensuring they treat all customers fairly, regardless of race or ethnicity.
 
By staying informed and vigilant, dealerships can continue to build trust within their communities and avoid the pitfalls of non-compliance. This is a crucial moment for all automobile dealers to reflect on their practices and make any necessary adjustments to align with the law.
 
For further guidance on compliance and best practices, Texas independent dealers can contact TIADA for resources and support.