A New York Honda dealership agreed to pay $1.5 million to settle charges levied by the Federal Trade Commission that management discriminated against African-American and Hispanic car buyers, among other violations.
The FTC, in a complaint filed in U.S. District Court in New York on May 21, accused Bronx Honda and its general manager, Carlo Fittanto, of deceptive advertising, inflating vehicle prices with fraudulent expenses, charging above the minimum $75 state limit for documentation fees, and double-charging consumers taxes on vehicle purchases. With these and other practices, the FTC alleged the defendants violated the FTC Act, the Truth in Lending Act and the Equal Credit Opportunity Act, the agency said in a statement Wednesday.
One scam cited by the FTC in its initial complaint involved adding fees to certified pre-owned Honda vehicles.
Despite the fact that American Honda prohibits dealerships from charging a separate fee for the seven-year, 100,000-mile warranty included with CPO vehicles, Bronx Honda charged customers "certification fees" of up to $1,995 for the coverage. Additionally, the FTC accused Bronx Honda of passing on to CPO customers the certification expenses, such as reconditioning fees, of about $3,000. Bronx Honda also charged customers as much as $695 in document fees when selling vehicles, the complaint said.
The dealership’s attorney, William Diaz-Rousselot, said in a statement that Bronx Honda took the allegations raised by the FTC “very seriously” and its new management team “worked hard to identify and address the needs of its diverse community.”
“Bronx Honda entered into the settlement with the FTC because its alternative was to face the prohibitive cost of years of litigation against the federal government which would have exceeded the cost of the settlement,” he said in a statement emailed to Automotive News. “Bronx Honda chose an outcome that would keep its doors open and allow it to continue to provide quality products and service to the Bronx.”
The complaint alleges that at least as far back as 2010, African-American and Hispanic borrowers have been charged "statistically significant" higher markups than similarly situated white customers.
Among thousands of consumers who received indirect financing contracts through Bronx Honda, the dealership charged the average African-American borrower approximately 19 basis percentage points, or $163, more in interest, and the average Hispanic borrower approximately 24 basis percentage points, or $211, more than white counterparts, the FTC alleges.
"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," the FTC said in the statement.
Those borrowers received the maximum allowable markup 50 percent more often than non-Hispanic white borrowers, who either did not receive a markup or received a rate below the buy rate twice as often.
The $1.5 million payment will be used to provide redress to consumers, the FTC said in the statement.
The settlements also prohibit Bronx Honda and Fittanto from misrepresenting vehicle costs or terms of vehicle sales and requires the dealership to establish a fair lending program that includes, among other stipulations, a cap on dealer markup for arranging indirect financing for consumers.