Shocking FTC Case: Minority Car Buyers Cheated!

A row of parked black and silver cars in a dealership

A landmark FTC case exposes discriminatory practices against minority car buyers, raising questions about regulatory fairness.

Story Highlights

The FTC charged Bronx Honda with racial discrimination in auto financing practices.
A $1.5 million settlement was reached to address these allegations.
This was the first FTC case alleging racial discrimination in auto-dealer matters.
The case underscores the need for stricter regulatory oversight.

FTC Takes Action Against Bronx Honda

In May 2020, the Federal Trade Commission (FTC) filed a complaint against Liberty Chevrolet Inc., doing business as Bronx Honda, for discriminatory practices in auto financing. The complaint alleged that African-American and Hispanic car buyers were systematically charged higher financing costs and add-on fees compared to similarly situated white buyers, violating the Equal Credit Opportunity Act (ECOA) and the FTC Act.

The allegations included charging African-American buyers an average of $163 more and Hispanic buyers an average of $211 more in interest through discretionary markups. Additionally, the dealership was accused of engaging in deceptive advertising and sales practices like altering prices in paperwork and double-charging taxes.

Settlement and Regulatory Implications

On May 27, 2020, Bronx Honda agreed to a $1.5 million settlement and extensive conduct-based injunctions. This historic settlement was the first modern FTC case charging an auto dealer with illegal racial discrimination under ECOA. The settlement requires Bronx Honda to implement a fair lending program and imposes limits on dealer interest-rate markups to prevent future discrimination.

This case has set a precedent, becoming a touchstone in policy debates over dealer markups and disparate impact analysis. FTC Commissioners emphasized the case’s significance in addressing systemic discrimination and called for further rulemaking to regulate auto finance pricing.

Broader Implications for Auto Dealerships

The Bronx Honda case highlights the broader issue of discriminatory practices in auto financing. It signals a regulatory crackdown on discretionary dealer markups and deceptive practices that disproportionately harm minority borrowers. The FTC has since continued to emphasize its focus on curbing such practices, proposing a Motor Vehicle Dealers Trade Regulation Rule aimed at ensuring transparency and fairness in auto sales and financing.

For consumers, especially minority buyers, this case offers a glimpse of hope for fairer access to credit and more transparent pricing. However, it also underscores the need for vigilance in ensuring compliance and protecting consumer rights against discriminatory practices.