Passport Automotive settles FTC suit over illegal fees, discrimination for $3.38 million

Passport Automotive Group agreed to pay $3.38 million to settle a Federal Trade Commission lawsuit filed against the dealership group for charging illegal fees and discriminating against Black and Latino customers. 

The Maryland group, along with its president, Everett Hellmuth, and vice president, Jay Klein, together will pay this fine to refund the customers affected by these unlawful practices.

In its complaint, the FTC alleged Passport advertised certified, reconditioned or inspected cars at specific prices but added extra certification, reconditioning or inspection fees it falsely claimed customers were required to pay. For example, the FTC cited one case in which a vehicle advertised for $24,050 sold for $26,440 because of illegal add-on fees. 

The FTC also said Passport charged Black customers about $291 more and Latino customers about $235 more in interest than white customers. The agency also alleged Black customers on average paid an extra fee 24 percent of the time while Latino customers paid an extra fee 42 percent of the time compared with white customers.

“The Commission is continuing its crackdown on junk fees and discriminatory practices that harm Black and Latino consumers,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a statement.

In addition to refunding nearly $3.4 million to customers, the FTC also is requiring Passport to establish a fair lending program to ensure it stops discriminating against certain consumers. The program will have a provision requiring each Passport dealership to either not include a financing markup or to charge the same markup rate to all customers. The FTC said Passport claimed it had a policy to prevent discrimination but did not monitor or enforce it. 

The FTC said it would further prohibit Passport from misrepresenting the cost or terms to buy, lease or finance a car — or whether a fee or charge is optional. The agency also would require express, informed consent from customers before they are changed any fees. 

In a written reply to Automotive News regarding the allegations that it charged customers extra fees, Passport said it “does not tolerate behavior that violates customer trust, and the company took swift action upon learning that some customers were charged redundant fees. An internal investigation determined that violations were largely isolated to a group of three employees, and those employees are no longer part of the organization.”

As for claims of discrimination, the group said the FTC’s allegations are based on “an unreliable approach to guessing borrowers’ races.”

Passport said it refutes the FTC's findings “in the strongest possible terms,” but that fighting the charges in court would take too long and be too costly, and “ultimately would have distracted us from the important work we do. 

“That time, energy and money can be better utilized by continuing to invest in our communities,” the dealership group said. “For that reason, we agreed to the settlement announced today.”

Passport Automotive Group, a family-owned business, started in 1991 and has nine stores in Virginia and Maryland selling BMW, Infiniti, Mazda, Mini, Nissan and Toyota vehicles.

The action against Passport comes as the FTC has proposed stricter rules to protect consumers from what it says are deceptive or unfair practices by dealerships. The agency wants to ban finance and insurance coverage and physical vehicle add-ons "that provide no benefit" and require expanded disclosure and consent on such optional products — including a list of prices online.

Also under consideration by the FTC is a crackdown on dealerships' advertising related to the cost of the vehicle itself.

NADA and many dealers argue the FTC proposals are “unsupported, sloppy and inconsistent in regulating the industry.”

This marks the second time the FTC has cracked down on Passport, its president and vice president. The consumer agency in 2018 said Passport mailed out more than 21,000 notices alerting customers of a fake “urgent recall” to induce them to visit the dealership.