Napleton Automotive Group, one of the largest dealership groups in the United States, will pay a record $10 million to settle a Federal Trade Commission auto lending case. The company was accused of inserting illegal “junk fees” and add-ons into customer contracts, as well as charging higher interest rates to Black customers when financing their vehicles.
Napleton “vehemently” denied any wrongdoing in a statement released on Friday.
The Federal Trade Commission (FTC) stated in a statement in its case with the state of Illinois that eight Napleton dealerships in Illinois, Florida, Pennsylvania, and Missouri, as well as a general manager of two Illinois dealerships, were alleged to have illegally added junk fees and other add-on products such as paint protection to contracts that were as long as 60 pages in duration.
According to their complaint, the Federal Trade Commission and the State of Illinois allege that Napleton has charged customers more than $70 million in unwarranted add-on fees since 2017.
According to the Federal Trade Commission, the fees cost each customer hundreds or thousands of dollars. In many cases, buyers deliberately denied the add-ons, while others claimed they were misled into believing the items were free or were required in order for them to purchase or finance a vehicle, according to the Federal Trade Commission (FTC).
Specifics of the complaint
Customer complaints such as the following were cited by the government as evidence:
A Napleton dealership salesperson informed a buyer that $3,400 in add-ons were necessary by a financing business in order for the customer to be accepted.
A buyer claimed that a Napleton dealership advertised a final pricing on its website, but when the customer came, he was told that he would have to pay an additional $2,495 for an add-on package.
A consumer was promised that two oil changes, tire rotation, and windshield protection were included with the purchase of a vehicle; however, he later discovered that he had been charged $426 for the services.
The dealerships named in the complaint, which includes nine rooftops, are as follows: Napleton’s Kia of Elmhurst, Ed Napleton Acura in Elmhurst, and Napleton’s Arlington Heights Chrysler-Dodge-Jeep-Ram, all in Illinois; Napleton’s Northlake Chrysler-Dodge-Jeep-Ram in Lake Park, Napleton Clermont Chrysler-Dodge-Jeep-Ram, Napleton Northlake
According to the Federal Trade Commission, Hitko Kadric, the general manager of two dealerships in Illinois, was also named in the complaint.
Accusations of discrimination
The Napleton business is also accused of discriminating against Black consumers when it comes to auto loans, with allegations dating back at least to 2017. According to the Federal Trade Commission, Napleton workers would raise the cost of a customer’s loan by increasing the interest rate or by including additional add-ons.
According to the Federal Trade Commission, black clients at the dealerships paid more than “similarly situated” non-Latino white customers. According to the Federal Trade Commission, Black clients spent $99 more for similar add-ons and were charged around $190 more in interest than White customers.
According to the Federal Trade Commission, the claimed discriminatory actions were in violation of the Equal Credit Opportunity Act.
According to the FTC and an Illinois lawsuit, the Napleton group claimed that among the tens of thousands of people who secured financing through the group, Black borrowers paid an average of 18.4 basis percentage points more in interest than white borrowers.
Specifically, the complaint states that “differences in charges between Black consumers and non-Latino White consumers are statistically significant and cannot be explained by factors linked to underwriting risk or credit characteristics of applicants.”
As the FTC’s Bureau of Consumer Protection Director Samuel Levine stated in a statement, “we are holding these dealerships accountable for discriminating against minority buyers and slipping trash fees onto people’s bills.”
Refusal to acknowledge wrongdoing
In a statement, the Napleton group stated that it “vehemently rejected any wrongdoing.”
A representative for the Ed Napleton Dealership Group, Tilden Katz, told Automotive News that the company has settled disputed charges brought against it by the Federal Trade Commission and the Illinois Attorney General’s office, according to an emailed statement. In order to avoid a disruption of an existing disagreement with the government, we made this decision. After much deliberation, we came to the conclusion that it was in our best long-term commercial interests to settle these issues.
In order to reach this settlement, we went through a three-year procedure in which we were completely transparent with the government. The majority of its assertions were based on statistical data interpretations, and no evidence of purposeful misconduct was discovered.”
Approximately $9.95 million of the settlement will be distributed to customers, with the remaining $50,000 being placed in an Illinois Attorney General’s fund.
Prior to this, in 2017, Sage Automotive Group consented to a more than $3.6 million settlement with the FTC for claimed misleading and unfair sales and financing practices, among other issues. This was the previous record FTC settlement with a car dealership. More than 43,000 Sage customers were among those who benefitted from the settlement.
Napleton is also required to develop a fair lending program that limits the amount of additional interest markups that the group can pass on to customers. Additionally, the group and its dealerships are prohibited from misrepresenting the cost or terms of purchasing, leasing, or financing vehicles, as well as whether a fee or charge is mandatory.
Additionally, the organization must hire a fair lending officer and teach staff on fair lending practices, submit fair lending complaints to the Federal Trade Commission, and sanction employees who violate the fair lending program.
According to Automotive News’ most recent ranking of the top 150 dealership groups in the United States, Napleton Automotive of Oakbrook Terrace, Ill., will sell 35,768 new automobiles in 2020 and is rated No. 13 on the list.
This report was written with the assistance of Jack Walsworth.