Markets Wired

New York City car dealer Bronx Honda and its general manager, Carlo Fittanto, will pay $1.5 million to settle Federal Trade Commission charges they discriminated against African-American and Hispanic car buyers and engaged in numerous other illegal business practices.

According to the FTC’s complaint, the defendants told sales people to charge higher financing markups and fees to African-American and Hispanic customers. The defendants told employees that these groups should be targeted due to their limited education, and not to attempt the same practices with non-Hispanic white consumers. According to the complaint, African-American and Hispanic customers paid more for financing than similarly situated non-Hispanic white consumers.

The complaint alleges that African-American consumers were charged about $163 more in interest than similarly situated non-Hispanic white consumers, while Hispanic consumers were charged about $211 more in interest.

In addition to alleged racial discrimination, the defendants are charged with numerous illegal practices in the advertising and sales process that caused consumers to pay substantially more than they expect. The complaint alleges that the defendants:

• failed to honor advertised sale prices, inflating the cost through a variety of methods;
• changed the sales price on paperwork in the middle of the sale without telling the consumer, a practice the defendants internally referred to as adding “air money” to the contract;
• double-charged consumers for taxes and fees without their knowledge; and
• told consumers that they had to pay thousands of dollars in unnecessary fees to purchase “certified pre-owned” cars that were not required by that program.

The complaint alleges that the defendants violated the FTC Act, the Truth in Lending Act (TILA), and the Equal Credit Opportunity Act (ECOA). In addition to the $1.5 million payment that will be used to provide redress to consumers, the settlements also prohibit Bronx Honda and Fittanto from misrepresenting the cost or terms to buy, lease, or finance a car, or whether a fee or charge is optional. They will also be required to establish a fair lending program that will, among other components, cap the amount of additional interest markup they can charge consumers.

The FTC would like to thank the Bronx District Attorney’s Office for its invaluable assistance with the investigation and for its work as a law enforcement partner in protecting consumers.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. Commissioner Rohit Chopra and Commissioner Rebecca Kelly Slaughter each issued concurring statements. The FTC filed the complaint and final order in the U.S. District Court for the Southern District of New York.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge