AG sues car dealership for overcharging black and Hispanic customers for add-ons - The Boston Globe

AG sues car dealership for overcharging black and Hispanic customers for add-ons – The Boston Globe

The attorney general’s office said it based its findings on an analysis of dealer records from 2016 to 2018.

“Jaffarian has consistently engaged in the same or substantially similar policies and practices since at least 2016,” says the suit, which was filed in Essex Superior Court.

In a statement released in response to the lawsuit, an attorney for Jaffarian said, “We categorically deny the allegations of this lawsuit…Jaffarian takes a strong stand against discrimination in all its forms.

Jaffarian said he “has never received a customer complaint of discrimination” and plans to “defend the lawsuit vigorously…in court.”

The sale of add-ons usually occurs after a customer has negotiated a price to buy or lease a car, and arranged financing if necessary. At this point, the CFO typically quotes prices for various add-ons — such as paint protection, key replacements, service agreements, and wheel and tire agreements — but customers “may not understand that these prices are negotiable,” the lawsuit states. CFOs actually have “unfettered discretion” in pricing add-ons.

“As a result, two consumers may be charged very different margins for the same [add-on] product,” the suit reads.

Dealerships generally make more money selling add-on products than selling the car itself, the attorney general’s office said in the news release. Additionally, Jaffarian structures its compensation for financial managers to reward them for selling products at the highest prices, directing managers to “encourage consumers to buy more complementary products and place higher margins on those products.” “, says the lawsuit.

“The higher the margins, the more a CFO earns,” the suit reads.

“Under these circumstances, Jaffarian seeks and extracts disproportionately higher profits from black and Hispanic consumers,” the lawsuit states.

“A grossly unfair phenomenon in today’s marketplace is price disparity based on the ethnic race of the buyer,” the lawsuit states. “Many studies show that these disparities are caused when sellers have the freedom to set prices.”

The attorney general’s office says it investigated more than 2,000 add-on sales at Jaffarian. By analyzing customers’ first, last and last names and addresses, as well as census data, the attorney general’s office was able to “determine the predicted race and ethnicity of each consumer,” the lawsuit says.

When selling accessories to white customers, Jaffarian earned an average markup of about $1,000. But for black customers, it was $1,500 and for Hispanics, $1,380.

The lawsuit faults Jaffarian for failing to “provide instructions or audit to ensure fair and non-discriminatory treatment of its clients.”

“Discretionary pricing policies that are not coupled with regular audits, training and other checks to prevent conscious or unconscious bias from influencing pricing decisions have long been known to lead to discrimination, particularly in the workplace. ‘against consumers of color,’ the lawsuit states.

“Jaffarian knew or ought to have known that his pricing and compensation policies, alone and in combination, would likely result in unfair and discriminatory prices that harm consumers,” the lawsuit states.

The attorney general’s office said Jaffarian’s practices violate the state’s Consumer Protection Act and the Public Accommodations Act, which prohibits discrimination based on race, color and national origin in accommodations. public places. In the lawsuit, Healey’s office seeks an order blocking these practices, as well as restitution and civil penalties.

“We commend the Massachusetts Attorney General’s office for taking action to end these disturbing abuses,” said John Van Alst, attorney for the National Consumer Law Center, according to the press release “NCLC research shows that discrimination is widespread in the car sales and financial sector.”


I have a problem? Send your consumer concern to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.


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