Here’s how a unanimous vote can still contain dissension in the automotive regulatory world.

The Federal Trade Commission voted unanimously to join the state of Arizona against a pair of franchised dealerships. Officials said the stores engaged in a wide array of practices that harm consumers, from deceptive online vehicle pricing to charging Latino car buyers more in interest and add-on products.

But two commissioners are concerned the FTC is trying to overstep its authority.

Both Melissa Holyoak and Andrew Ferguson wrote dissenting statements this week as the FTC said Arizona-based Coulter Motor Co., along with its former general manager, Gregory Depaola, will pay $2.6 million to settle a lawsuit, most of which will go to provide refunds to consumers harmed by defendants’ allegedly unlawful actions.

In the complaint, the FTC and state of Arizona allege that Coulter, which operates Coulter Cadillac Tempe and Tempe Buick GMC, along with Depaola, regularly charged consumers for unwanted add-ons that consumers never agreed to pay and other “bogus fees.”

Officials said a survey of consumers who purchased or leased cars from Coulter found that 92% were charged for at least one add-on without their authorization, or that they thought was required.

“Coulter used junk fees and other illegal tactics to drive up prices for consumers, especially Latino consumers,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a news release. “The FTC will continue cracking down on practices that drive up prices, cheat consumers and undercut honest sellers.”

In her statement, Holyoak said, “I vote to bring this case because I have reason to believe defendants engaged in the violations of law,” and Ferguson said in his statement, “I concur in charging these counts without qualification.”

But then both commissioners explained their positions about why the FTC might be going too far with this complaint that charges Coulter and Depaola for violations of the FTC Act, the Equal Credit Opportunity Act, and the Arizona Consumer Fraud Act.

Ferguson explained through his statement that FTC also accused the defendants of discriminatory practices in violation of the Equal Credit Opportunity Act (ECOA).

“There is no doubt that ECOA prohibits intentional discrimination. But the complaint also alleges that the defendants implemented an unlawful practice or policy that disparately impacted Latino customers in violation of ECOA,” Ferguson said.

“I concur in charging this count because the commission and the courts have previously applied disparate impact theories in ECOA cases. My support of this count should not, however, be interpreted as agreement that disparate-impact claims are in fact cognizable under ECOA. Indeed, I have reservations about whether ECOA, properly interpreted in light of recent Supreme Court decisions, imposes disparate-impact liability,” he continued.

Ferguson wrapped his assertions by recapping Supreme Court, “has instructed lower courts and administrative agencies to interpret ‘antidiscrimination laws … to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose.’”

Ferguson is concerned about what this FTC decision could do to future regulatory activities.

“There are reasonable arguments that disparate-impact liability would be consistent with ECOA’s broad purpose of promoting access to credit without regard to protected status. And a Senate Report on the 1976 amendments to ECOA suggested the availability of disparate-impact liability,” Ferguson said.

“But the Supreme Court has jettisoned the freewheeling purpose-first, text-second approach that once characterized statutory interpretation,” he added.

Holyoak took a similar approach in her statement.

“Absent Congressional authorization, the commission should not attempt to broaden the FTC’s unfairness consumer protection authority into a comprehensive civil rights authority — a new standard of liability that may have unintended and pernicious consequences,” Holyoak said.

“These consequences may be especially pernicious when the commission assigns individual liability due to statistical disparities. Individuals may, for example, have strong incentive to shield themselves from liability by ‘inject[ing] racial considerations,’ practices, or audits into everyday business activities to fend off future unfair discrimination claims,” she continued.

Holyoak then referenced activities spearheaded by Rohit Chopra, who is now director of the Consumer Financial Protection Bureau but was with the FTC in 2022, saying the regulator “began pursuing unfair discrimination actions in earnest.”

Holyoak also is concerned that this path will raise more Congressional questions.

“Compounding recent erroneous assertions of authority by doubling down lessens the chance that Congress will trust the commission with more authority or more resources, even regarding areas of enforcement where there is bipartisan agreement,” she said. “There is little doubt in my mind that today’s misguided inclusion of an unfair discrimination claim further reduces the likelihood Congress increases our funding or restores our authority to seek economic redress for consumers.

“Indeed, last month’s Congressional hearing concerning the commission’s funding and authorities confirms my view,” Holyoak continued. “Describing the erosion of the public’s trust in the commission, the Subcommittee Chairman implored the Chair to ‘regain [Congress’s] trust.’ Instead of rebuilding that trust, today the commission asserts it has broad enforcement authority to identify and police discrimination across the economy — further jeopardizing the agency’s efforts.

“The FTC has strayed before in its use of its unfairness authority. That exercise in legislation ended poorly. And I am afraid the recent course the Commission has set us on may end poorly as well,” she added.

So, if there’s this much dissention, what did the FTC unanimously vote to undertake action against these Arizona dealerships?

According to the complaint, Coulter advertised prices for cars online at significant discounts under the cars’ suggested retail prices, in many cases thousands of dollars less, leading consumers to think they could purchase the advertised car for that advertised amount.

The FTC said consumers complained that when they arrived at the dealership, they were told the advertised price was not available.

“Instead, the dealership added hundreds or thousands of dollars more than the advertised price in a so-called ‘market adjustment,’ supposed add-ons that were pre-installed on the car, and other miscellaneous fees,” officials said in the news release.

The FTC indicated add-ons included items like vehicle identification number etching, window tinting, nitrogen-filled tires, and theft recovery services. Officials said these were items that Coulter would “deceptively tell consumers were required to purchase the car.”

The complaint alleged that in some cases, Coulter charged consumers twice for the same add-ons, once individually and again as part of an add-on “package.”

The complaint also alleged that Coulter discriminated against Latino consumers in vehicle transactions.

On average, Latino consumers who shop at Coulter paid nearly $1,200 more in interest and add-on charges than their non-Latino White counterparts. These increased costs come in the form of higher interest rate markups on financing, as well as higher charges for various add-on products, according to the FTC.

Under the terms of the proposed federal court order with the FTC and the State of Arizona, Coulter and Depaola are required to pay a $2.6 million judgment, of which $2.35 million will be used to provide refunds to consumers harmed by their allegedly unlawful actions.

The proposed settlement also requires Coulter to establish a comprehensive fair lending program that includes appointing a fair lending officer, conducting employee training, and implementing policies for charging fees and markups.

The commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The complaint and stipulated final order were filed in the U.S. District Court for the District of Arizona.

In affirming the move, FTC chair Lina Khan and commissioners Rebecca Kelly Slaughter and Alvaro Bedoya wrote their own statement, refuting Ferguson and Holyoak and the portion of ECOA the pair used to make their points.

“This case again makes clear that some conduct may violate both anti-discrimination law (here, ECOA) and Section 5,” Khan, Slaughter and Bedoya said. “Under the reading of Section 5 that our colleagues seem to espouse, lawbreakers would enjoy effective immunity under Section 5 if their conduct also violated a separate anti-discrimination law.11 There is no basis for this reading of the law, here or anywhere else in law enforcement.

“Law violators are charged, every day, for separate statutory violations stemming from a single line of conduct,” they continued. “Rather than assume that discriminatory business practices enjoy a safe harbor under unfairness, we should make our determinations on a case-by-case basis, according to the specific facts and law at hand. We will continue to approach each legal question and fact pattern with an open mind and assess the merits of each claim based on the facts before us.”

In concluding her statement, Holyoak made a comment that dealerships and finance companies might be thinking, too.

“Last, I write briefly concerning the proposed order. Some of what it requires resembles provisions in the Combating Auto Retail Scams (CARS) Rule, finalized in January of this year but not yet in effect,” she said.