Late last week, Asbury Automotive Group rejected “false and unfounded” allegations by the Federal Trade Commission (FTC) of “payment packing” at three of its dealerships in the Dallas-Fort Worth area.

The development surfaced a couple of days after the FTC voted unanimously to join the state of Arizona against a pair of franchised dealerships that allegedly engaged in a wide array of practices that harmed consumers.

After carefully reviewing the dealerships’ records, Asbury said it will contest the FTC’s lawsuit alleging violations related to the sale of what the FTC calls “add-on” products and will defend the dealerships’ sales practices.

According to a dealer group news release, the dealerships — David McDavid Ford of Fort Worth and David McDavid Honda of Frisco and of Irving — conducted a thorough internal review.

Consistent with company policy, Asbury said customers who purchased protection products received full disclosure about the products’ costs, impact on payments, and other important terms. Customers signed for the protection products, which were itemized separately on paperwork provided to the customers, according to Asbury.

Meanwhile, the FTC alleged that those Asbury stores in Texas systematically charged consumers for costly add-on items they did not agree to or were falsely told were required as part of their purchase.

The FTC also alleged that Asbury discriminates against Black and Latino consumers, targeting them with unwanted and higher-priced add-ons.

In an administrative complaint, the FTC alleged that three Texas dealerships owned by Asbury that operate as David McDavid Ford Fort Worth, David McDavid Honda Frisco, and David McDavid Honda Irving, along with Ali Benli, who acted as general manager of those dealerships, engaged in a variety of practices to sneak hidden fees for unwanted add-ons past consumers.

FTC officials explained these tactics included a practice called “payment packing,” where the dealerships convinced consumers to agree to monthly payments that were larger than needed to pay for the agreed-upon price of the car, and then “packed” add-on items to the sales contract to make up that difference.

In its news release, Asbury pointed out that prior to finalizing sales, the dealerships take the additional, “extraordinary” step of requiring a compliance review by an independent deal clerk to ensure that protection products are sold with the buyer’s signed consent.

Asbury said its dealerships’ policies and training forbid the sale of protection products such as service contracts, maintenance plans, and interior-exterior protection without explicit, written approval from customers.

If Asbury team members are found to have engaged in the sort of conduct alleged by the FTC, they are subject to disciplinary action, including termination, according to the dealer group news release.

The dealer group said FTC officials refused to provide the methodology they employed in making their allegations even though Asbury requested such information for several months.

Asbury said it has verified through a Freedom of Information Act request that the FTC received no consumer complaints about the McDavid dealerships from 2019, the start of the period covered by the lawsuit, through late spring of this year.

“Asbury Automotive takes great pride in its compliance procedures and training practices, and firmly believes that we protect our guests and serve them well,” Asbury CEO David Hult said in the news release. “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.”

Meanwhile, the FTC said in its news release that “numerous” consumers complained about Asbury’s practices.

Consumers reported being charged thousands of dollars without their knowledge for add-ons that range from supposedly protective chemical coatings and service contracts to life and disability insurance policies, according to the complaint.

“While some consumers reported that salespeople never discussed these products during the sales process, others said that they specifically declined these products only to find they were added on without consent,” the regulator said.

The FTC said that Asbury’s sales and financing process made it difficult, “if not impossible,” for consumers to know they were being charged for these add-ons, with consumers being asked to sign documents on electronic devices that showed only the places where they should sign and not the full documents.

“In other cases, consumers who noticed the add-on charges were falsely told they were mandatory,” the FTC said.

The FTC indicated a survey of customers across the dealerships showed that as many as 75% of consumers reported that they were charged for add-on products and services they did not authorize or were falsely told were required.

In addition, according to the complaint, company documents show that the dealerships treated Black and Latino consumers differently from non-Latino White consumers, charging them hundreds of dollars extra on average for add-ons — including those add-ons for which they were charged without consent.

The complaint also alleged that there was no non-discriminatory reason for these higher costs.

The FTC said this process happened in financed transactions across each of the dealerships, with one charging Black consumers, on average, $298 more for the same add-ons, and Latino consumers, on average, $214 more for the same add-ons than non-Latino White consumers.

The complaint alleged that Asbury and the three dealerships, along with Benli, violated the FTC Act and the Equal Credit Opportunity Act.

“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,” Levine continued in the regulator’s news release.

Asbury senior vice president of operations Dan Clara 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 in the group’s news release. “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,” Clara continued.

The FTC vote to issue the administrative complaint was 5-0.

The FTC reiterated that it issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the FTC 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.

“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,” Hult said. “We are confident that we will prevail in the litigation.”

For inquiries and information, visit https://investors.asburyauto.com/ftc.