Car dealer treated buyers unfairly based on race, AG contends
Release date: 1/13/2014
Cooper joins US DOJ to go after Auto Fare, Southeastern Auto Corp.
Charlotte: Two Charlotte used car dealerships and their owner allegedly target consumers with overpriced vehicles and predatory car loans based on their race and must be stopped, Attorney General Roy Cooper said in a lawsuit filed Monday.
“Charging people inflated prices based on their race isn’t the way to do business in our state,” Cooper said. “These allegations show outrageous behavior that should be stopped.”
Cooper’s Consumer Protection Division joined the Civil Rights Division of the U.S. Department of Justice and the U.S. Attorney for the Western District of North Carolina to file suit in federal court today in Charlotte against two local used car dealerships and their owner.
The complaint alleges that Auto Fare, Inc., Southeastern Auto Corp. and their owner, Zuhdi A. Saadeh, charged African American customers in Charlotte prices far above market rate for vehicles and signed them up for unfair loans. Cooper is asking the court to declare the defendants’ actions illegal under North Carolina’s Unfair and Deceptive Trade Practices Act, order them stopped and require consumer refunds and penalties.
The U.S. Department of Justice also alleges in the suit that the defendants violated the federal Equal Credit Opportunity Act, which bars creditors from discrimination based on race, color, religion, national origin, sex, marital status or age.
“Intentionally targeting African Americans for contracts with predatory terms because of their race violates fair lending laws,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division. “By filing this lawsuit, the Justice Department is acting to ensure that subprime dealers in the auto industry provide credit in accordance with the law. The Justice Department will continue to ensure that people have equal access to credit, regardless of race.”
“The terms of a person’s loan should not be determined by their race,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Predatory lending and illegal discrimination will simply not be tolerated.”
Both Auto Fare and Southeastern Auto Corp. are “buy here, pay here” used car dealerships, meaning Saadeh and the companies both sell cars and provide financing to customers. Customers enter into installment sale contracts that allow them to pay for a car over a period of time. The lawsuit contends that Saadeh is responsible for determining the terms of sale and financing deals at the dealerships, and that he also approves loans and repossessions.
As alleged in the complaint, Saadeh routinely sells cars to African American customers at prices far above industry standards. Saadeh requires unusually high down payments and charges 29 percent interest on his car loans, the maximum allowed under state law. Payments and interest rates are set without actually assessing customers’ credit histories or collecting information about their ability to make payments.
For example, as detailed in the complaint, Saadeh purchased a 2001 BMW for $7,610. The suggested retail value of the car was $10,625 but Saadeh sold it for $12,900 – a 70 percent markup. Even though the consumer’s only income was unemployment payments, Saadeh approved financing. The customer paid $2,500 down and then made bi-weekly payments of $200. With an interest rate of 29 percent, the consumer ended up paying a total $20,013.42 for the car – approximately 188 percent of its suggested retail value.
According to the complaint filed today, when consumers could not keep up with the payments on their predatory car loans, Saadeh repossessed vehicles without giving them reasonable notice. In some instances, the dealerships even repossessed cars whose owners were not behind on their loan payments. Saadeh sometimes uses GPS devices installed without the customers’ consent to locate and repossess cars he has sold.
Any consumers who did business with Saadeh or his companies since 2006 are encouraged to call Cooper’s Consumer Protection Division at1-877-5-NO-SCAM toll-free within North Carolina or file a consumer complaint online at ncdoj.gov.
“All consumers deserve to be treated fairly when they spend their money,” said Cooper.
Contact: Noelle Talley (919) 716-6413