Last week, the Federal Trade Commission (FTC) and the State of Arizona announced a joint action against Coulter Motor Company, an Arizona-based motor vehicle dealership, and its former general manager, for allegedly engaging in deceptive pricing practices and discriminatory financing treatment of Latino consumers. The complaint alleges violations of the FTC Act, the Equal Credit Opportunity Act, and the Arizona Consumer Fraud Act. The defendants have agreed to a $2.6 million settlement, most of which will be used to provide refunds to affected consumers.

The FTC and the State of Arizona allege that Coulter Motor Company, which operates Coulter Cadillac Tempe and Tempe Buick GMC, engaged in a variety of unlawful practices, including:

• Deceptive Online Pricing: Coulter allegedly advertised vehicles online at significant discounts, leading consumers to believe they could purchase the cars at the advertised prices. However, when consumers arrived at the dealership, they were informed that the advertised prices were not available. Instead, the dealership added hundreds or thousands of dollars in “market adjustments,” pre-installed add-ons, and other miscellaneous fees.
• Unauthorized Add-Ons: The complaint alleges that Coulter charged consumers for add-ons such as vehicle identification number etching, window tinting, nitrogen-filled tires, and theft recovery services without their authorization. In some instances, Coulter charged consumers for add-ons they had not agreed to purchase, falsely claimed that add-ons were required, and charged consumers twice for the same add-on.
• Discriminatory Practices: The complaint also alleges that Coulter discriminated against Latino consumers by charging them higher interest rates and add-on costs compared to non-Latino White consumers. On average, Latino consumers allegedly paid nearly $1,200 more in interest and add-on charges.

Under the terms of the proposed settlement, the defendants are required to pay $2.6 million, of which $2.35 million will be used to provide refunds to consumers. The settlement also requires Coulter to establish a comprehensive fair lending program, which includes appointing a fair lending officer, conducting employee training on fair lending practices, and implementing policies for charging fees and markups.

This action serves as yet another example of the FTC enforcing the concepts behind the pending Combating Auto Retail Scams (CARS) Rule, even though it is not yet final. As discussed here, the CARS Rule purportedly aims to address concerns of consumer deception in the motor vehicle sales process. Many of the allegations against Coulter — false price advertising, unauthorized add-ons, “nitrogen-filled” tires — are directly targeted by the CARS Rule. Though the CARS Rule is being litigated in the Fifth Circuit, as discussed here, this action demonstrates the FTC’s commitment to the initiatives set forth in the Rule.