FTC hits Illinois auto dealer with $10M UDAP settlement
The settlement is the highest in the regulator’s history
Eight dealerships and one general manager under Illinois-based Ed Napleton Automotive Group are settling with the Federal Trade Commission (FTC) and the state of Illinois for $10 million after being accused of charging illegal “junk fees” and discriminating against Black consumers in the financing process.
The complaint, submitted by the FTC on April 1, accuses the dealer group of “sneaking” in up to thousands of dollars in illegal junk fees for unwanted ancillary products and engaging in discriminatory financing practices against Black consumers, according to the FTC. The complaint stated that 83% of the dealer group’s consumers were charged “junk fees” for add-ons, including paint protection and payment insurance, that were either declined or not authorized with informed consent.
The defendants include: North American Automotive Services, Ed Napleton Elmhurst Imports, Napleton’s Arlington Height Motors, Napleton Enterprise, Clermont Motors, North Palm Motors, Napleton’s Ellwood Motors, Napleton’s Mid Rivers Imports and Hitko Kadric, general manager of two of the dealerships.
The proposed $10 million settlement is the largest FTC settlement in history regarding auto finance, according to the statement. The dealer group will be responsible for paying $50,000 to the Illinois Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund, and the remaining $9.95 million will be allocated to a monetary relief fund for damaged consumers.
Along with paying the settlement, the dealer group will be responsible for implementing a fair lending program, according to the FTC.
The complaint is a clear signal that the FTC will be watching for these types of deceptive and unfair practices, Kenneth Rojc, managing partner at Nisen & Elliott, told Auto Finance News, noting that the Consumer Financial Protection Bureau, too, will be closely monitoring auto lenders for the same grievances related to their dealer partners’ practices.
The FTC’s focus on deceptive practices, including discriminatory behaviors and junk fees, follows the CFPB’s Jan. 26 issuance of its request for public input on unexpected or unfair financing fees.
“This may be a good time for lenders to reinforce the importance of fair lending compliance and other compliance elements as it relates to their dealer agreements,” Rojc said. Lenders should require separate written acknowledgments on fair lending in the financing of ancillary products and more closely examine documents submitted by dealers, he noted.
Auto Finance Risk Summit, the premier event for risk ad compliance management in auto finance, returns April 25-26 in San Diego. This event is the central resource for education and networking focused on best practices in risk management and will prepare your team for the dynamics of the evolving auto finance market. To learn more about the 2022 event and register, visit www.AutoFinanceRiskSummit.com.
