Fake Urgent Recall Notices Once, Discriminatory Financing the Second Time

Passport Automotive Group operates car dealerships across the Washington, D.C. metropolitan area, advertising certified, reconditioned, and inspected vehicles at specific prices. According to the Federal Trade Commission, the company then added extra certification, reconditioning, and inspection fees it falsely claimed customers were required to pay — on top of separately charging Black and Latino consumers hundreds of dollars more, on average, in financing costs and fees than white consumers with comparable credit profiles.DOCUMENTED

Passport, its president Everett Hellmuth, and its vice president Jay Klein agreed in October 2022 to pay more than $3.3 million to settle the FTC's lawsuit — the second time in seven years the company faced federal charges over its sales practices.DOCUMENTED

What the complaint alleges

According to the FTC, Passport regularly advertised vehicles as certified, reconditioned, or inspected at specific prices, then added extra fees for that certification, reconditioning, or inspection that the company falsely claimed consumers were required to pay — charges the complaint alleges were not actually mandatory despite being presented that way.DOCUMENTED The complaint separately alleges Passport violated the Equal Credit Opportunity Act by charging Black and Latino consumers, on average, 28 and 26 basis points more, respectively, in financing markups than non-Hispanic white consumers with comparable credit qualifications.DOCUMENTED

A more granular pattern of discrimination

Beyond the financing rate disparity, the FTC's complaint identified a second, distinct form of discrimination: Passport charged at least one extra fee 24 percent more frequently to Black customers and 42 percent more frequently to Latino customers than to non-Hispanic white customers, according to the agency's analysis.DOCUMENTED That frequency-based disparity, measuring how often an extra fee appeared on a transaction at all rather than only how large financing markups were, gave the FTC a second, independent statistical basis for its discrimination allegations — notably, without a specific claim that these particular fees were themselves built into the credit extended to consumers, a distinction the agency's own commentary on the case specifically noted.REVIEWED

Why this was Passport's second federal case

Passport had already faced FTC action once before: in 2018, the agency charged the company with mailing more than 21,000 fake “urgent recall” notices to consumers in 2015 and 2017, designed to create false urgency and lure recipients into visiting a dealership under the pretense of a safety recall that did not actually apply to their vehicle.DOCUMENTED Samuel Levine, Director of the FTC's Bureau of Consumer Protection, said the new action against Passport was “continuing its crackdown on junk fees and discriminatory practices that harm Black and Latino consumers,” warning that companies “that think they can hit consumers with hidden fees should think again.”DOCUMENTED A second federal enforcement action against the same company within a relatively short period suggests the underlying sales culture identified in the 2018 case was not meaningfully addressed by that earlier settlement alone.

Terms of the settlement

Under the settlement, Passport, Hellmuth, and Klein agreed to pay more than $3.3 million, funds directed toward refunding consumers harmed by the company's conduct.DOCUMENTED The order also requires Passport to establish a fair lending program eliminating dealer markups on installment loan financing, or alternatively to charge the same markup rate to all consumers regardless of race or ethnicity, and to obtain express, informed consent before charging any fee.DOCUMENTED

The same company had already been caught mailing more than 21,000 fake urgent recall notices years earlier — this was its second federal enforcement action over its sales practices.

Why the case matters

For car buyers in the D.C. metropolitan area and beyond, the Passport case illustrates that naming individual company executives, not just the corporate entity, in a discrimination and junk-fee complaint reflects a deliberate FTC strategy to hold specific decision-makers personally accountable — particularly when, as with Passport, the underlying company has already faced federal enforcement once before for a different category of deceptive conduct.

Why a second offense carries more weight with regulators

When a company faces a second federal enforcement action within a relatively short window, regulators and courts generally treat that repeat pattern as evidence the company's underlying business culture, not merely an isolated employee's misconduct, is producing the challenged conduct. That repeat-offender context can influence both the size of a subsequent settlement and the scope of individual liability regulators pursue against a company's specific executives, as occurred here with Passport's president and vice president both named directly.

What a fake recall notice looks like compared to a real one

Genuine vehicle safety recalls come directly from the manufacturer or the National Highway Traffic Safety Administration, are free to remedy, and can be independently verified using a vehicle's VIN number through NHTSA's own public recall lookup tool. A notice arriving from a dealership rather than a manufacturer, especially one urging an immediate visit without providing independently verifiable recall details, is worth checking against that official government tool before responding. That quick check protects against both a fabricated recall notice and, more broadly, any dealership relying on manufactured urgency to drive a sale. It takes only a few minutes and can prevent a costly, unnecessary dealership visit built on manufactured urgency. Consumers who make that check a habit protect themselves regardless of which dealership sends the next notice. That final habit closes the loop on every protection this case established.

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