Charlotte 'Buy Here, Pay Here' Car Dealer Must End Unfair Loans Based on Race, Pay Consumer Relief
Image: NCCC

Charlotte 'Buy Here, Pay Here' Car Dealer Must End Unfair Loans Based on Race, Pay Consumer Relief

February 13, 2015

Two Charlotte, North Carolina used car dealerships that targeted consumers with overpriced vehicles and predatory car loans based on race must repay victims and change its practices, North Carolina Attorney General Roy Cooper announced.

The settlement resolves a lawsuit filed in January 2014 by Cooper, the Civil Rights Division of the U.S. Department of Justice and the U.S. Attorney for the Western District of North Carolina against Auto Fare, Inc., Southeastern Auto Corp. and their owner, Zuhdi A. Saadeh.

As alleged in the lawsuit, the dealerships charged African American customers prices far above market rate and signed them up for predatory loans. Cooper contends that the defendants' actions violated North Carolina's Unfair and Deceptive Trade Practices Act and federal officials alleged violations of the Equal Credit Opportunity Act.

"All consumers deserve to be treated fairly when they buy a car," Cooper said. "We hope this case sends a strong message that car dealers cannot use race when targeting buyers with overpriced cars and oppressive loans."

Under the settlement, Auto Fare, Southeastern Auto Corp. and Saadeh must change their business and lending practices to make certain that their loans and vehicle repossessions are fair to everyone. The settlement also requires the defendants to pay $225,000 to compensate the consumers that were taken advantage of.

The final settlement came after the court denied the defendants' motion to dismiss the case and agreed that intentionally targeting African American customers with unfair loans, a practice known as reverse redlining, is illegal discrimination.

Both Auto Fare and Southeastern Auto Corp. are 'buy here, pay here' used car dealerships, meaning Saadeh and the companies sell cars as well as provide financing to customers. Customers at these dealerships enter into installment sale contracts that allow them to pay for a car over a period of time.

As alleged in the lawsuit, Saadeh required unusually high down payments and charged 29 percent interest on car loans, the maximum allowed under state law. Payments and interest rates were set without actually assessing customers' credit histories or their ability to make payments. When consumers could not keep up with the payments on their predatory car loans, the lawsuit alleged that Saadeh repossessed vehicles without reasonable notice. In some instances, the dealerships repossessed cars even though the owners were not behind on their loan payments. Saadeh sometimes used GPS devices installed without the customers' consent to locate and repossess cars.

To prevent these unfair practices from happening in the future, the settlement requires Saadeh and his dealerships to:

  • Charge competitive sales prices;
  • Limit buyers' projected monthly payments to no more than 25% of a borrower's income;
  • Offer interest rates at least five percentage points below the state's rate cap;
  • Offer lower interest rate for borrowers who are at lower credit risk;
  • Prohibit hidden fees on top of the required down payment;
  • Allow consumers to get an independent inspection of the car before buying it;
  • Disclose more information at the time of sale (including the presence of a GPS or automatic shut off device);
  • Provide down payment refunds to borrowers who quickly go into default;
  • Strictly comply with state laws on repossession of vehicles;
  • Prohibit repossessions until at least two consecutive payments have been missed; and
  • Give borrowers improved notices before repossession.

Consumers who are eligible for money back under the settlement will be contacted by the settlement administrator later this year by mail.

Individuals who believe that they may have been victims of illegal conduct by Auto Fare or Southeast Auto and have questions about the settlement can call 1-800-896-7743, mailbox 92, or send an email to