An operator of used-car dealerships is facing a federal lawsuit after officials determined that he and his two Charlotte, N.C.-based dealerships charged black customers more and offered them “predatory” terms from 2006 to at least 2011, the Charlotte Observer reports.
According to the lawsuit, filed Monday by the U.S. government and the state of North Carolina, owner Zuhdi A. Saadeh targeted black customers through “reverse redlining.”
“Charging people inflated prices based on their race isn’t the way to do business in our state,” North Carolina Attorney General Roy Cooper said in a statement, according to the Observer. “These allegations show outrageous behavior that should be stopped.”
Saadeh, of course, denies the accusations, with his attorney saying that he has never discriminated against anyone of African descent.
“It is outrageous that the Department of Justice seems to suggest that just because Mr. Saadeh’s businesses are located in an African-American community, that they should be subject to a higher scrutiny than a business in a non-African-American community,” the attorney, Kathleen Lucchesi, said in her own statement.
The lawsuit accuses Saadeh of setting prices—vehicle prices, down payment amounts and interest rates—that were way above industry-standard suggested retail prices.
One example given was when the dealer paid $7,610 for a 2001 vehicle and then sold it for $12,900, a markup of almost 70 percent. The official suggested retail value of the car was $10,625, around a 40 percent markup. In the same instance, the customer was charged a 29 percent annual percentage rate, which is the highest interest rate allowed in the state.
Saadeh’s attorney claims that the interest rate was the same for all customers, and vehicle prices were set “before a customer ever walks onto the lot.”
Federal officials are also claiming in the lawsuit that the dealerships didn’t properly assess whether customers were really able to pay for the vehicles. Cars were sold to customers who made the down payments and had proof of residency and income, regardless of how much they actually made.
To top it all off, the dealerships allegedly repossessed vehicles when customers had not defaulted. They allegedly went as far as to put GPS devices into vehicles without the customers knowing so that the dealerships would be able to find the cars later to repossess them.
“Several hundred people, without regard to race, may have been subject to the practices,” Cooper’s office claimed in an email.
Officials believe that Saadeh particularly targeted black customers because he thought they had fewer credit options. The suit claims that the business owner used “racial slurs” when talking about his black customers.
Saadeh denies ever making any derogatory comments.
Read more at the Charlotte Observer.