Tate’s Auto Group charged with falsifying contracts by the FTC

According to the complaint, since at least 2014, Tate’s Auto has sought to increase its sales by falsifying consumers’ monthly income and down payments on financing applications and contracts submitted to third-party financing companies.

The FTC charges that during the sales process, Tate’s Auto asked consumers to provide personal information including their name, address and monthly income and told consumers they would submit the information to financing companies. However, instead of using consumers’ actual information, the complaint states that in many cases Tate’s Auto falsely inflated the numbers, making it appear that consumers had higher monthly incomes than they really did. It also alleges that Tate’s Auto often inflated the amount of a consumer’s down payment as well.

According to the complaint, Tate’s Auto representatives often prevented consumers from reviewing the income and down payment information on the forms, such as by rushing consumers through the process of reviewing and signing the financing applications, having consumers fill out the forms over the phone and failing to give them the income and down payment portion of the application before they signed.

In other cases, the FTC said Tate’s Auto altered financing documents after consumers signed them, without their knowledge. Such consumers, the FTC alleges, often were approved for financing based on the false information Tate’s Auto provided.

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.

The complaint also alleges that Tate’s Auto’s advertising deceived consumers about the nature and terms of financing or leasing offers. For example, Tate’s Auto allegedly advertised discounts and incentives to consumers without adequately disclosing limitations or restrictions that would prevent many customers from qualifying for them.

Finally, the FTC alleges that Tate’s Auto’s social media ads violated federal law by failing to disclose required terms.

According to Berry, the allegations are not what they appear to be. “These accusations, on which the FTC relied upon, are completely substantiated by misleading data provided to the FTC by a lender we are currently in litigation in the U.S. federal court in Dallas. The only way we can refute this data is to do so in federal court.”

The FTC stated that this is the first action alleging income falsification by auto dealers. In addition to Berry, the complaint also names the company’s president, Linda Tate, as a relief defendant.

“The FTC made every effort to avoid filing this complaint as their real goal was money. We were simply not willing to admit to something that first goes against our family values, second against a long standing company policy, third the great many filters we have in place to identify such discrepancies and lastly the integrity of our employees,” he said. “With the claims came an offer of settlement with the FTC, to which we said no. We have decided to stand up for ourselves, something we intend to do in Federal Court.”

The initial resolution offered by the FTC included that Tate’s Auto would compensate consumers impacted by the circumstances but the agency is not in a position to seek monetary compensation moving forward. The FTC is a punitive agency, so no civil penalties can be sought. The initial agreement declined by Berry provided notice of the violations but he would not have had to admit his company committed the violations. He would have had to provide assurances that such conduct would not occur in the future.

“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. We (will) fight the FTC to defend our good name and the good many people whom we employ.”

The complaint charges Tate’s Auto with violating the FTC Act, the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA). The FTC is seeking an injunction barring the defendants from such practices in the future.

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 charged that Linda Tate has received hundreds of thousands of dollars from the other defendants, including funds directly connected to the alleged unlawful conduct.

“Buying a car is one of the biggest purchases consumers make. When consumers tell an auto dealer how much they make and how much they can pay upfront, the dealer can’t turn those facts into fiction,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “The FTC expects auto dealers to be honest with consumers from the first advertisement to the final purchase.”

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

“Tate’s Auto has always sought to implement processes and safeguards to make sure business conduct is consistent with the company’s family values and this action by the FTC in no way changes that goal: to sell and service customers honestly and to the best of our ability. We are confident that we will be vindicated and appreciate the continued support of our community, staff and customers,” concluded Berry.

The FTC reiterated that it files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the regulator that a proceeding is in the public interest. The case will be decided by the court.