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Employees at the four Tate’s Auto Group dealerships were stunned to find themselves out of a job on Thursday as it was announced that the dealerships were closing their doors effective immediately. Employees were told by management that a judge had ordered the closure of all dealerships owned by Richard Berry.
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Berry, who is also the manager of Tate’s Auto Group, and Linda Tate, the president of the company, have been tied up in court the past year after the Federal Trade Commission (FTC) submitted charges filed against the company in US District Court.
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In March, Berry filed Chapter 11 bankruptcy on behalf of the company’s four dealerships in an effort to reorganize the company, then on Thursday, Tate Ford-Lincoln-Mercury in Holbrook, Tate’s Auto Center of Winslow, Tate’s Auto Center in Show Low and Tate’s Auto Center of Gallup, Inc., all closed their doors with no determination of when or if they will be re-opened.
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The FTC came down on the company last August alleging a range of illegal activities, which included falsifying consumers’ income and down payment information on vehicle financing applications and misrepresenting important financial terms in vehicle advertisements.
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Berry initially attempted to minimize the allegations by stating, “We may have had a rogue employee or two who found a way around our processes to help qualify consumers or consumers themselves whom inflated their incomes so they would qualify for a loan (but this) is not reflective of our company and how we do business.”
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More recently Berry sought to place the blame squarely on Santander Consumer USA Inc. and its subsidiary Chrysler Capital, claiming the sub-prime lender pressured him to write as many sub-prime auto loans as possible, but then abruptly stopped its lending, leaving him with hundreds of unsold vehicles and having to collect vehicles that were now denied financial approval.
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But according to the complaint filed by the FTC, since at least 2014, the dealerships owned by Berry sought to increase its sales by falsifying consumers’ monthly income and down payments on financing applications and contracts submitted to third-party financing companies.
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The FTC charges that during the sales process, Tate’s Auto Group employees would falsify consumers’ financial information and falsely inflated the numbers, making it appear that consumers had higher monthly incomes than they really did. It also alleges that the dealerships often inflated the amount of a consumer’s down payment as well. The forms were allegedly altered without the customer’s knowledge either before or after they were signed.
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As a result, financing companies extended credit to consumers who defaulted at a higher rate than qualified buyers. Many of the affected consumers are members of the Navajo Nation, according to the FTC.
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Among the complaints are allegations that Tate’s Auto’s advertising deceived consumers about the nature and terms of financing or leasing offers.
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The complaint charges Tate’s Auto with violating the FTC Act, the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA).
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According to the FTC, acting as owner of the four dealerships, Barry formulated, directed, controlled, had the authority to control, or participated in Tate’s Auto’s allegedly illegal conduct. The FTC also charged that Linda Tate has received hundreds of thousands of dollars from the other defendants, including funds directly connected to the alleged unlawful conduct.
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An attempt to contact Berry via email was not responded to as of press time.
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