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Financial Services Law Insights and Observations

FTC and Wisconsin sue auto dealer group for alleged discrimination and illegal fees

Federal Issues Wisconsin State Issues Discrimination Fees Enforcement

Federal Issues

The FTC and the State of Wisconsin announced that they filed a complaint in the District Court for the Western District of Wisconsin against an auto dealer group, and its current and former owners, and general manager, alleging that the defendants deceived consumers by tacking hundreds or even thousands of dollars in illegal junk fees onto car prices and discriminated against American Indian customers by charging them higher financing costs and fees relative to similarly situated non-Latino whites.

The complaint also notes the disparity only increased since a change of ownership in 2019. Specifically, the complaint alleges that the defendants regularly charged many of their customers junk fees for “add-on” products or services without their consent, which resulted in additional fees and interest on the customers’ loans. Further, the defendants allegedly discriminated against American Indian customers in the cost of financing by adding more “markup” to their interest rates. This additional markup cost American Indian customers, on average, $401 more compared to non-Latino white customers.

The complaint resulted in two proposed settlements. The proposed settlement with the auto dealer, its current owners, and the general manager requires the company to stop deceiving consumers about whether add-ons are required for a purchase and obtain consumers’ express informed consent before charging them for add-ons. The settlement will also the require the defendants to establish a comprehensive fair lending program that, among other components, will allow consumers to seek outside financing for a purchase and cap the additional interest markup the auto dealer can charge consumers. The current owners and general manager will also be required to pay $1 million to be used to refund affected consumers.

Separately, the former owners agreed to pay $100,000 to be used to refund affected consumers.