October 2022

The Federal Trade Commission is taking action against auto dealer Passport Automotive Group for deceiving consumers by tacking hundreds to thousands of dollars in illegal junk fees onto car prices and for discriminating against Black and Latino consumers with higher financing costs and fees. Passport, its president, Everett Hellmuth, and its vice president, Jay Klein, will pay more than $3.3 million  to settle the FTC’s lawsuit, which will be used to refund consumers harmed by Passport’s conduct.  

“With this action against Passport and its top executives, the Commission is continuing its crackdown on junk fees and discriminatory practices that harm Black and Latino consumers,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “As families struggle with rising prices, companies that think they can hit consumers with hidden fees should think again.”

Passport, based in Maryland, owns car dealerships around the Washington, D.C., metropolitan area. In 2018, the FTC brought action against Passport, its president, and vice president, alleging the company mailed more than 21,000 fake “urgent recall” notices to consumers in 2015 and 2017, to lure them to visit dealerships.

In its complaint announced today, the FTC alleges that Passport regularly advertises certified, reconditioned, or inspected cars at specific prices, but then adds extra certification, reconditioning, or inspection fees that it falsely claims consumers are required to pay. The FTC also alleges that Passport charges Black and Latino consumers hundreds of dollars more in financing costs and fees, on average, than white consumers. In its complaint against Passport, the FTC alleges that the company has for years violated the FTC Act and the Equal Credit Opportunity Act by:

• Charging illegal junk fees: Passport advertises cars as “certified,” “inspected,” or “reconditioned” at specific prices, but the FTC alleges that when customers try to pay the amount advertised for those vehicles, Passport adds hundreds or thousands of dollars in fees. These fees either increase the price over what was advertised or negate any discounts the consumers negotiated. The complaint cites one case in which a vehicle advertised for $24,050 was in fact sold for $26,440 due to illegal add-on fees. Passport frequently describes the extra fees it charges to customers for inspection, reconditioning, or certification as required when in many instances, auto manufacturers specifically prohibit dealers from charging separately for certification costs.

• Discriminating against Black and Latino customers: The complaint alleges that Passport regularly charges Black and Latino customers more in financing costs and fees than they charge non-Latino white customers. Although Passport claimed that it had a policy to prevent discrimination, the complaint alleges that Passport did not even enforce or monitor the policy.

The FTC’s complaint alleges that Black and Latino consumers paid on average about $291 and $235, respectively, more in interest than non-Latino white consumers did. It also alleges that Black and Latino consumers paid on average an extra fee 24 percent and 42 percent more often, respectively, than non-Latino White consumers.

Enforcement Action

Passport, its president, and its vice president have agreed to a proposed federal court order that would:

• Prohibit them from charging different groups different markups: The order would require Passport to establish a fair lending program to ensure it does not discriminate going forward, including a provision that will require each Passport dealership location to either charge no financing markup or charge the same markup rate to all consumers.

• Prohibit them from deceiving consumers about prices and fees: The order would prohibit Passport from misrepresenting the cost or terms to buy, lease, or finance a car, or whether a fee or charge is optional. It would also require them to only charge consumers fees with their express, informed consent.

• Require them to pay money to refund consumers: The order would require Passport to pay the FTC $3.38 million to refund consumers harmed by Passport’s unlawful actions.

The FTC has taken significant action to protect consumers across the automotive marketplace in recent years, most recently by announcing a proposed rule that would ban many of the junk add-on fees and bait-and-switch tactics plaguing car buyers. In the last ten years alone, the FTC has brought more than 50 law enforcement actions related to automobiles and helped lead two nationwide law enforcement sweeps that included 181 state-level enforcement actions in these areas.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 4-1. Then-Commissioner Noah Joshua Phillips voted no on the motion to authorize staff to file the complaint and stipulated final order before he left the Commission. Chair Lina M. Khan, Commissioner Rebecca Kelly Slaughter, and Commissioner Alvaro M. Bedoya issued a majority statement. Commissioner Christine S. Wilson issued a statement. Commissioner Phillips issued a dissenting statement.  The complaint and stipulated final order were filed in the U.S. District Court for the District of Maryland.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission has issued its latest report to Congress on protecting older adults, which highlights key trends based on fraud reports by older adults, and the FTC’s efforts to combat the problem through law enforcement actions, rulemaking, and outreach and education programs.

“Protecting older consumers from predatory practices is a top priority, and our report highlights the many steps we’ve been taking,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We’ll continue to bring aggressive cases, engage in proactive outreach and research, and work closely with others, including in our new Advisory Group formed under the Stop Senior Scams Act.”

The report, Protecting Older Consumers, 2021-2022, A Report of the Federal Trade Commission, finds that in 2021 older adults reported significantly higher losses to investment scams, business impersonation scams and government impersonation scams than they did in 2020:

• Investment scams: $147 million reported lost, up 213 percent from 2020.
• Business impersonation scams: $151 million reported lost, up 134 percent from 2020.
• Government impersonation scams: $122 million reported lost, up 109 percent from 2020.

As in prior years, the analysis of fraud reports received by the FTC in 2021 showed that adults aged 60 and over were substantially less likely to report losing money to fraud than adults aged 20-59. When they did report losing money, though, they tended to report losing substantially more than younger adults. Consumers 80 and older reported losing a median of $1,500 to fraud, while those in their seventies reported a median loss of $800.

The analysis included in the report to Congress also found that adults 60 and older were nearly five times as likely as adults aged 20 to 59 to report losing money to a tech support scam. Older adults were more than twice as likely to report a loss to a prize, lottery or sweepstakes scam, and 45 percent more likely to report losing money to a friend or family impersonation scam.

The report’s analysis shows that older adults filed the largest number of reports about online frauds—where consumers are contacted via social media, the web, or online ads. The largest median losses, however, were reported by older adults on fraud that started with a phone call. Scams where older adults were contacted on social media are on the rise; reported losses from this type of scam more than doubled to $164 million between 2020 and 2021.

The report focuses on key actions the FTC has taken to protect older consumers. In 2021, the Commission began three rulemakings that are highlighted in the report: one on government and business impersonation, one on deceptive or unfair earnings claims, and one on revisions to the Telemarketing Sales Rule. The report notes that each of these areas have significant impact on older adults.

In addition, the report notes a number of enforcement actions that had a particular impact on older consumers, including cases against a money transfer provider, a payment plan used by an investment training scheme, and scammers making false health claims, including some related to the COVID-19 pandemic. The report highlights a number of ongoing law enforcement partnerships in which the FTC works with other federal agencies, along with state and local authorities, to take actions to protect older consumers.

Finally, the report details the FTC’s outreach and education efforts through such programs as the Pass it On campaign, which focuses on providing fraud prevention resources to older adults so they can help protect their communities by sharing the information and materials with family and friends.

The Commission vote authorizing the report to Congress was 5-0.

The Federal Trade Commission is seeking public comments on whether it should propose updates to its Energy Labeling Rule to modernize and expand the Rule’s coverage to reduce energy costs for consumers and require manufacturers to provide consumers with repair instructions.

“We look forward to hearing from the public on our initiative to reduce energy costs, promote competition, and strengthen repairability,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “As prices rise, the Commission will continue to take aggressive action to protect consumers’ pocketbooks and strengthen their right to repair their own products.”

The FTC’s Energy Labeling Rule requires manufacturers to attach labels to major home appliances and other consumer products to help consumers compare the energy usage and costs of competing models. The Rule prohibits retailers from removing or altering these labels, which help consumers anticipate their energy usage and avoid costly surprises after they have bought a product. The FTC also has authority to require manufacturers to provide consumers with instructions for the maintenance, use, or repair of covered products.

In an Advance Notice of Proposed Rulemaking announced today, the FTC is seeking public comment on whether it should propose amendments to the Rule, specifically addressing;

• Requiring Repair Instructions. In its May 2021 “Nixing the Fix Report” to Congress, the Commission found “scant evidence to support manufacturers’ justification for repair restrictions,” which result in limited access to repair information, consumer reliance on manufacturers’ repair networks, or consumer replacement of products before the end of their useful lives. Accordingly, the FTC is seeking comment on whether the Commission should require manufacturers to include information on how consumers can repair their products. Access to this information will strengthen consumers’ right to repair damaged products, without the need to go back to the manufacturer, providing them with potentially lower-cost repair options. It could also help ensure that independent repairers have a chance to compete with manufacturers and licensed dealers. Finally, it could help protect our environment by allowing consumers to repair rather than replace damaged appliances.

• Developing EnergyGuide Labels for Several New Product Categories. The FTC requires energy labels on products to assist consumers in making purchasing decisions. As detailed in the Federal Register notice to be published shortly, the Commission seeks comment on potential new labels for: 1) clothes dryers, 2) air cleaners (also known as air purifiers), 3) miscellaneous refrigerator products including coolers (wine chillers) and combination cooler products, 4) additional light bulbs including low-brightness bulbs, 5) residential ice makers, 6) humidifiers, 7) miscellaneous gas products (also known as hearth products), 8) cooking tops, and 9) electric spas.

• Matching Label Format and Location to Consumer Shopping Patterns. The FTC is seeking comment on whether any rule changes are necessary to ensure labeling requirements are consistent with current shopping behavior. While the Rule currently requires that manufacturers affix labels on the units themselves, fewer products appear on display in stores as more and more consumers are shopping online. The Commission is seeking information on new ways label information can be provided to reduce the burden on manufacturers, while still ensuring it is readily available to consumers.

The FTC also seeks comment on whether it should consider changes to the content on, and format of, EnergyGuide labels currently in use.

The Commission vote approving publication of the notice in the Federal Register was 5-0, with Chair Lina M. Khan issuing a separate statement and Commissioner Christine S. Wilson issuing a separate concurring statement. Then-Commissioner Noah Phillips registered a vote in the affirmative to approve publication in the Federal Register before he left the Commission. Once it has been published in the Federal Register, consumers can submit comments electronically. Consumers also may submit comments in writing by following the instructions in the “Supplementary Information” section of the Federal Register notice.

The Federal Trade Commission announced it is extending the deadline by one month to submit comments on the agency’s Advance Notice of Proposed Rulemaking (ANPR) on commercial surveillance and lax data security practices. The public will now have until November 21, 2022 to submit comments.