David McDavid Honda of Irving, a dealership under the umbrella of Asbury Automotive Group (NYSE: ABG), is at the center of a Federal Trade Commission (FTC) lawsuit alleging deceptive sales practices and discrimination. The lawsuit, which targets Georgia-based Asbury Automotive Group as the parent company, also involves David McDavid Ford of Ft. Worth and David McDavid Honda of Frisco.
The FTC accuses David McDavid Honda of Irving and the other two dealerships of unfairly charging minority customers—specifically Black and Latino buyers—higher prices for protection products compared to white customers. The lawsuit alleges that Black customers were charged an average of $298 more and Latino customers $214 more for these add-on products. It also claims that the dealership routinely added services to customer contracts without proper consent and misled some customers about the necessity of these services.
According to a Georgia news site, Asbury Automotive Group had the three dealerships perform a detailed internal review of its sales practices. The company asserts that its procedures align with its policies and ensure full disclosure of the protection products’ costs, impact on payments, and other essential terms. According to Asbury, customers were required to sign documents itemizing these products separately.
To further ensure compliance, Asbury dealerships mandated an additional review by an independent deal clerk before finalizing sales. This review aimed to confirm that protection products were sold with explicit, written consent from customers. Asbury’s policies and training strictly prohibit selling protection products such as service contracts, maintenance plans, and interior-exterior protection without clear customer approval. Any violations of these policies, Asbury stated, would lead to disciplinary action, including termination of the employees involved.
Asbury criticized the FTC for not disclosing its methodology behind the allegations despite repeated requests. The company also noted that a Freedom of Information Act request revealed no consumer complaints against the McDavid dealerships from 2019, when the period covered by the lawsuit begins, through late spring of this year. This is not completely true because the FTC provided examples in the complaint against the three dealerships.
Example of complaints
In the FTC complaint, an example is given on the practices of the accused dealerships: "In numerous instances, Respondents have added unwanted charges to vehicle sales contracts. One tactic Respondents use is getting a consumer to agree to a monthly payment that exceeds what they need to pay under the contract to purchase a vehicle, and then ''packing" the sales contract with add-on charges to make up the difference. For example, a salesperson might represent that a consumer qualifies for financing with a monthly payment of $400, when the monthly payment for the vehicle under the contract is actually $350. The salesperson then includes, or "packs," the contract with add-ons to make up some or all of the difference between the two monthly payments, so that it appears the consumer is receiving a similar or smaller monthly payment."
One consumer reported that McDavid Ford Fort Worth charged him over $2,800 for products he never agreed to, including $1 ,200 for guaranteed asset protection ("GAP") agreement; $1,024 for ResistAll, a supposed microscopic chemical coating that claims to prevent damage to the vehicle's interior and exterior; and $584 for a key replacement service. Likewise, a David McDavid Honda Frisco consumer discovered that the dealership had charged her on multiple occasions for add-ons that she did not know about and never would have agreed to purchase, including $3,000 for a service contract and over $4,700 for a life insurance policy, a disability insurance policy, a maintenance plan, and a service contract.
A customer in Irving said that he signed the sales contract on a portable electronic device and was only shown the spots where he needed to sign and not the entire contract. Three weeks later, he discovered that the finance manager had added a $1,750 maintenance package and $609 key replacement package without permission.
According to survey data cited in the lawsuit:
- At least 73% of consumers who purchased a vehicle at David McDavid Honda of Irving reported being charged for at least one add-on that they did not agree to buy or that was misrepresented as required.
- At least 75% of consumers at David McDavid Honda of Frisco experienced similar issues.
- At least 58% of consumers at David McDavid Ford of Ft. Worth faced charges for at least one add-on that they did not consent to or that was misrepresented as necessary.
What Asbury Automotive is saying
“Asbury Automotive takes great pride in its compliance procedures and training practices, and firmly believes that we protect our guests and serve them well,” said David W. Hult, Asbury’s CEO. “We offer popular and reliable products that protect our guests and their families including roadside assistance for stranded motorists, coverage for maintenance and unexpected repairs, and protection from interior and exterior damage.”
Dan Clara, Senior Vice President of Operations, rejected the FTC’s assertion that minority customers were charged more for protection products than other customers. “Asbury is committed to non-discrimination and has implemented policies, training, and monitoring to ensure that our dealerships comply with standards on fair lending and equal credit opportunity,” Clara said. “I am proud that Asbury is one of the few companies in the industry that has a Chief Diversity, Equity, and Inclusion Officer. In addition, the three dealerships in question are highly diverse, from the highest level of leadership to front-line staff workers, and in that way reflect the demographics of the guests they serve.”
Asbury CEO David Hult added, “We will not allow the FTC to coerce fines from us or subject us to onerous requirements that negatively impact the car-buying experience for our customers, would not apply to others, and would place us at a competitive disadvantage in the industry. We are confident that we will prevail in the litigation.”
What the FTC is saying
“The FTC will continue to crack down on illegal hidden fees and discrimination, which have no place at car dealerships,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Like the Combating Auto Retail Scams (CARS) Rule, today’s action underscores our commitment to protecting consumers shopping for cars and leveling the playing field for honest dealers.”
The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
