When Black customers went into an Ed Napleton Automotive dealership, federal regulators allege they received more than just a car.
As it turned out, federal regulators said Black customers drove off a Napleton dealership lot with higher interest rates than white customers, in addition to add-on services they didn’t request.
Last week, the Federal Trade Commission, FTC, and Illinois Attorney General Kwame Raoul announced that the Ed Napleton Automotive dealership will pay a $10 million fine after the Oakbrook-based dealership allegedly discriminated against Black customers and engaged in widespread deceptive business and advertising practices at its eight dealerships in Illinois, Florida and Missouri.
Illinois Napleton dealerships in Arlington Heights, Oakbrook and Elmhurst were among the defendants in the lawsuit.
The FTC and state of Illinois allege Napleton charged customers more than $70 million in unwanted add-on fees since 2017, according to their complaint.
The lawsuit, filed March 31, doesn’t say how many Black customers were affected and what dealerships engaged in the alleged discriminatory practices. But the FTC said the Napleton dealerships discriminated against Black consumers in connection with financing vehicle purchases.
Napleton employees had wide latitude to increase the cost of a consumer’s loan by the amount paid in interest or adding add-ons to the final contract. As a result, Black customers at the dealerships were charged approximately $190 more in interest and paid $99 more for similar add-ons than similarly situated non-Latino white customers.
The lawsuit also said, “Disparities in charges between Black consumers and non-Latino white consumers are statistically significant and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”
The Napleton Automotive Group “vehemently” denied any wrongdoing and in a statement to Automotive News said, “This settlement is the result of a three-year process where we provided complete transparency to the government. Most of its claims were based on interpretations of statistical data and there was no actual finding of intentional wrongdoing.” While Black customers suffered alleged discrimination, Napleton’s alleged victims seems to have been from all races and ethnic groups. The lawsuit details some of their alleged experiences. At the dealership, consumers frequently spend time test driving and selecting a vehicle, and then go through the long process of negotiating the price of the vehicle. After that, for consumers who are financing vehicles, there is often a lengthy discussion of the financing terms.
After an often hours-long process, Napleton employees allegedly presented customers with a stack of complex, highly technical documents that was more than 60 pages deep and required over a dozen signatures.
The FTC alleged that Napleton employees would insert charges for add-on products like oil changes and tire rotations in these documents without telling their customers. The FTC said these charges commonly amount to hundreds or thousands of dollars and are typically added to the amount financed and spread out over monthly payments, making the added charges more difficult to detect.
In other instances, the FTC said after customers have been at a dealership for hours, Napleton salesmen would falsely tell them that add-on products or packages are required to purchase or finance the vehicle, even though they were not included in the low prices advertised or disclosed to consumers who called to confirm prices.
If consumers ask to have these extra charges from add-ons removed, Napleton salesmen would falsely tell customers that the add-ons are not optional, according to the lawsuit.
The FTC said that according to a survey of Napleton’s customers, at least 83 percent of them were charged for add-on products without their knowledge and consent. The FTC said the add-on packages range from $1,395 to $2,495 for each vehicle.
At the Napleton auto dealership in Arlington Heights, the FTC alleged that one customer agreed to a total price for a vehicle before making a down payment. The customer later discovered that the dealership took the $4,000 down payment and tacked on add-on charges of roughly the same amount without the customer’s consent. Thus, the customer’s down payment only covered the cost of the unauthorized charges, and he still owed the full cost of the vehicle.
The FTC said after one customer complained that a Napleton dealership tacked on add-on products to the sales contract without consent, the dealership admitted to charging for seven add-on products “and refused to refund the consumer for one that it deemed not cancellable, despite the fact that the consumer had never authorized it.”
In another alleged incident, a customer was told that two oil changes, a tire rotation and windshield protection came with the purchase of the vehicle. He lived far from the dealership and was unlikely to have his car serviced there and would never have paid for windshield protection because it was already covered by his insurance. He also initially declined an extended warranty as far too expensive, but then ultimately agreed when offered a discounted price.
He later discovered he had been charged $426 for oil changes, tire rotation and windshield protection, despite Napleton’s promise that they were free. The customer also had been charged the full amount of $3,937 for the extended warranty. He was also charged $289 for window etching without his knowledge or authorization.
The customer tried calling the dealership multiple times to cancel the add-ons and request refunds, but no one returned his calls. He eventually had to contact the warranty add-on provider directly to request a cancellation of the warranty.
In another alleged incident, the FTC said a customer at Napleton’s Elmhurst Kia/Acura noticed that his purchase price was nearly $1,000 higher than expected. After the consumer pointed out the additional charge, the salesman informed him that he was being charged for an add-on package. The customer said that he was not interested in purchasing the add-on package, but the salesman said he could not remove it. After some debate, the customer asked if he could at least remove some of the add-ons in the package. The salesman said he could not, saying that the full package was required.
“Working closely with the Illinois Attorney General, we are holding these dealerships accountable for discriminating against minority consumers and sneaking junk fees onto people’s bills,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement.
Under the terms of the proposed settlement, $9.95 million of the $10 million judgment will be used to provide monetary relief to consumers, and $50,000 will be paid to the Illinois Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund.
The settlement will also require Napleton to establish a comprehensive fair lending program that, among other components, will cap the additional interest markup they can charge consumers.
The settlement also requires Napleton to charge consumers only with express, informed consent, and prohibits them from misrepresenting the cost or terms to buy, lease, or finance a car, or whether a fee or charge is optional.