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Rhinelander Auto Center agrees to a $1 million settlement over junk fees and discrimination against Native Americans

A Rhinelander dealership has to pay more than a million dollars to customers for charging junk fees and discriminating against Native American customers.

The Wisconsin Department of Justice and Federal Trade Commission announced the agreement with Rhinelander Auto Center Tuesday afternoon.

The DOJ says the Rhinelander Auto Center, its current and former owners, and general manager Daniel Towne deceived consumers by tacking hundreds or even thousands of dollars in illegal junk fees onto car prices. It also claims they discriminated against American Indian customers by charging them higher financing costs and fees.

The defendants have agreed to proposed court orders that will require Rhinelander’s current owners and Towne to stop their unlawful practices and provide $1.1 million to be used for refunds to consumers.

The complaint from the FTC and Wisconsin DOJ says the dealership regularly charged many of their customers junk fees for “add-on” products or services without their consent. It cites a survey of Rhinelander customers that shows half of them said they were charged for add-ons without authorization or through deception.

One woman said she was told she had to buy GAP insurance to buy the car, even though she didn’t want to buy it. It cost her more than $1,000 in fees and additional interest on her loan.

The FTC say American Indian customers also had these junk fees for their purchases. Additionally, the dealership added to the cost of financing for American Indian customers by adding more “markup” to their interest rates. This meant they were on average paying $401 more than non-Latino white customers.

The complaint also notes that, since Rhinelander changed ownership in 2019, the disparity has only increased. In total, American Indians paid on average approximately $1,362 more for add-ons in credit transactions than non-Latino White customers since 2016, and $1,374 more since the new ownership took over, according to the complaint.

“Working closely with the State of Wisconsin, we are holding these dealerships accountable for discriminating against American Indian customers and sneaking junk fees onto consumers’ bills,” said Director of the FTC’s Bureau of Consumer Protection Samuel Levine in a statement. “A vehicle is one of the most expensive purchases families make, and we are fully committed to ensuring that all consumers navigating the car-buying process can do so without facing unlawful discrimination or paying for products and services they do not want.”

The Rhinelander Auto Group Tuesday issued the following statement after the Federal Trade Commission and the Wisconsin Department of Justice announced a voluntary agreement related to the auto dealer:

“Rhinelander Auto Group respects all of its customers, and we are committed to treating all customers with dignity. We totally reject that our people – many of whom are long-term members of the local community – would engage in the practices alleged. That’s not who we are, and there is a great deal of evidence to reinforce the fact that Rhinelander Auto Group and its employees are ethical, decent, and very good people.

“Nonetheless, to avoid lengthy and costly litigation, we reluctantly agreed to a voluntary resolution to conclude the matter. The agreement includes no admission of wrong-doing, and it requires the company to pay a forfeiture; upgrade its compliance, credit, and other administrative policies; and expand its employee training efforts.

“Rhinelander Auto Group is glad to put this matter behind us and focus on serving our customers. We have been a part of the Rhinelander area for nearly 20 years, and we take pride in doing things the right way and treating everyone fairly. Our commitment is to continue on that path going forward.”

The proposed settlement with Rhinelander Auto Center’s current owners and Towne will require the company to stop deceiving consumers about whether add-ons are required for a purchase and obtain consumers’ express informed consent before charging them for add-ons. The settlement will also require the defendants to establish a comprehensive fair lending program that, among other components, will allow consumers to seek outside financing for a purchase and cap the additional interest markup Rhinelander Auto Center can charge consumers. The current owners and Towne will also be required to pay $1 million to be used to refund affected consumers.

The former owners, Rhinelander Auto Center, Inc. and Rhinelander Motor Company, have agreed to a separate settlement that would require the companies to permanently wind down the businesses and pay $100,000 to be used to refund affected consumers.

The Commission vote to authorize FTC staff to file the complaint and to approve the proposed stipulated final orders was 3-0. The complaint and proposed final orders were filed in the U.S. District Court for the Western District of Wisconsin.

The FTC, Wisconsin DOJ, Wisconsin’s Department of Transportation; Department of Financial Institutions; and Department of Agriculture, Trade and Consumer Protection, as well as the Better Business Bureau of Wisconsin, all assisted with this matter.

The settlement with the State of Wisconsin is dependent on approval by Wisconsin’s Joint Committee on Finance per the requirements of 2017 Wisconsin Act 369.

Katie Thoresen is WXPR's News Director/Vice President.
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