Tate's Auto Group owner settles with FTC for $450,000

The dealer principal of Tate's Auto Group — accused in 2018 of deceiving predominantly Native American car buyers at his dealerships and falsifying information on their vehicle financing applications — resolved the issue last month with a $450,000 settlement with the Federal Trade Commission.

The federal agency originally had pursued a $7 million settlement, which failed to materialize following the dealership group's bankruptcy proceedings last year. However, if the dealership group had the $7 million, the agency argues it couldn't have recovered the money for impacted consumers because of a recent Supreme Court decision that limits the FTC's powers to seek monetary relief from companies.

The FTC initially settled with Richard Berry, owner and manager of Tate's, and group President Linda Tate for the $7 million figure in September 2020, according to a press release. Tate had locations in Arizona and New Mexico, on the fringes of the Navajo Nation reservation.

The FTC sought injunctive relief and a the judgment for consumers on allegations the dealership group falsified consumers' income and down payment information on vehicle financing applications and misrepresented financial terms in vehicle advertisements. The resulting legal battle drained the group's finances and put it out of business.

Tate's Auto denied the claims and planned to fight the allegations in federal court but later filed for Chapter 7 bankruptcy — which involved the group's dealerships and other parties, including auto lenders Ford Credit, Nissan Motor Acceptance Corp. and Santander Consumer USA.

At the conclusion of the bankruptcy proceedings, there was likely not much, if anything, left for the FTC, said Jean Noonan, a partner at Hudson Cook.

"The FTC would be last in line to get any money," she said. "The secured creditors would come first. While the FTC had a judgment, it was an unsatisfied judgment and probably an unsatisfiable judgment."

The July 26 FTC agreement with Berry and Tate is substantially smaller. The settlement was signed off on in U.S. District Court in Arizona and concluded the FTC's case. The funds were provided by the dealership's insurance company and went directly to the agency. The money can be used for consumer redress, the settlement said, with the remainder going to the U.S. Treasury.

FTC Commissioner Rebecca Kelly Slaughter said in a July 29 statement the agency may have obtained more relief for consumers had it retained the powers recently stripped in the Supreme Court decision.

The nation's highest court decided April 22 the FTC cannot invoke Section 13(b) of the FTC Act to seek monetary relief for impacted consumers in federal court in a case involving payday lender AMG Capital Management. This decision hindered the FTC's pursuit of monetary relief in the Tate case, Slaughter said.

"If the FTC continued to pursue Section 5 claims against Mr. Berry and relief defendant claims against Ms. Tate through trial the most we could expect to return to consumers is not $7 million, but $0," Slaughter said.

In a statement emailed to Automotive News, Berry asserted his group's innocence against the allegations and accused agency staff of being motivated by political agendas.

"Fortunately, we had an outstanding insurance partner which not only defended us but encouraged early in the process to not allow for the 7-figure 'settlement' the FTC sought in lieu of filing the complaint," Berry wrote. "Even though we had prevailed on every meaningful charge the FTC alleged our carrier agreed to make a payment of gesture just to end the madness."

He also spoke out against Congress' efforts to restore the FTC's powers to disgorge businesses accused of wrongdoing to disperse directly to consumers.

"We are no longer in business, our stores are shuttered and the small communities ... are affected," Berry said. "I would encourage every dealer and small business to contact their congressional and senate representatives to urge them not to grant the FTC the powers they seek. As you can see — in the wrong staff's hands they can erase a life's work."

Meanwhile, Congress is working on returning those powers to the FTC. The Democratic-controlled House voted 221-205 on July 20 to pass the Consumer Protection and Recovery Act, which authorizes the FTC to go to court to seek financial redress from businesses that engage in "unlawful commercial practices such as false advertising, consumer fraud and anticompetitive conduct," according to the bill's summary.

In her statement, Slaughter said the charges against Tate were "eerily similar" to consumer mistreatment that occurred during the financial crisis.

"This is exactly the type of pernicious conduct targeting a community that has already suffered generations of economic injustice that the FTC should be pursuing," Slaughter said. "The consumers targeted with this scheme were from a population that is not only presently but also historically oppressed."

Audrey LaForest contributed to this report.