Dealer Group Settles With FTC For $3.38 Million Over Discrimination, Bogus Fees

Image: Passport Auto Group

A Maryland-based dealership will pay $3.38 million to the Federal Trade Commission, in a lawsuit settlement that will be used refund illegal fees charged to its Black and Latino customers, that were also discriminated against, Automotive News reports.

Passport Automotive Group is made up of nine dealerships based in the Washington D.C. metro area. The group was known for advertising low prices on used vehicles. However, cars rarely left the lot at those advertised prices.

Passport would add on bogus fees that the dealers claimed customers were required to pay. A lot of the fees “required on the vehicles” were simply made up by the dealer. From the complaint:

For example, Passport Nissan of Marlow Heights advertised a Certified PreOwned 2018 Nissan Rogue for $24,050. However, it subsequently charged the buyer $2,390 in fees, purportedly required for reconditioning and certification. As a result, the buyer ended up paying at least $2,390 more than the advertised price to purchase the vehicle. In another instance, Passport Mazda advertised a Certified Pre-Owned 2016 CX-5 for $19,900, but then charged the buyer a $695 fee, purportedly required for certification.

Many of those fees were also tacked on by Passport using discriminatory practices — charging Black and Latino customers interest rates as a markup. On average, the complaint alleges, Passport charged these markups at a higher rate to Black and Latino customers than white customers. The FTC says that in a three-year span between August 2017 and August 2020, Black customers were charged about $291 in more in interest; Latino customers were charged about $235) more. The FTC also found that Passport charged Black customers the maximum markup allowed 47 percent more often than white consumers — and Latino customers would see those markups 38 percent more.

The FTC wasn’t having it. Its director of the Bureau of Consumer Protection said in a statement, “The Commission is continuing its crackdown on junk fees and discriminatory practices that harm Black and Latino consumers.” And the FTC meant it, as the lawsuit settlement concluded with Passport expected to pay out $3.4 million to affected customers. Passport is also required to establish a fair lending program and ensure its dealers have provisions not to add financing markups, while also prohibiting Passport’s dealers from misrepresenting vehicle cost terms.

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Even though Passport agreed to pay the fine, the dealer group is denying all the allegations the FTC has leveraged against it. Responding to Automotive News, the dealer group says that the charging of fees was an isolated incident that only involved “a group of three employees, and those employees are no longer part of the organization.” Yea, ok.

Passport also doesn’t agree with the FTC saying its dealers engaged in discrimination saying that allegations are based on “an unreliable approach to guessing borrowers’ races” which… doesn’t make much sense. The cards seem to be in the FTC’s favor on this one, because it’s not the first time the agency has had to intervene with Passport’s selling practices. Apparently, the dealer was engaging in sending out false recall notices to customers to lure them into visiting the dealership back in 2018.