CHARLOTTE, N.C. — The U.S. Department of Justice, the U.S. Attorney’s Office for the Western District of North Carolina and the North Carolina Department of Justice filed a lawsuit Monday alleging that defendants Auto Fare Inc., Southeastern Auto Corp. and Zuhdi A. Saadeh — the owners and operators of two buy-here, pay-here used-car dealerships — violated the Equal Credit Opportunity Act by intentionally targeting African-American customers for the extension and servicing of installment sale contracts on unfair and predatory terms.  The operations were also charged with violation the state’s Unfair and Deceptive Trade Practices Act.

The complaint, which was filed Monday in the U.S. District Court for the Western District of North Carolina, alleges the defendants engaged in a pattern or practice of “reverse redlining” by targeting African-American customers for installment sale contracts with inflated sales prices, down payments and interest rates without meaningfully assessing the customers’ credit.  The complaint states that Saadeh, who operates Auto Fare and United Car Sales, used racial slurs to refer to African-Americans and made statements expressing his views that African-American customers have fewer credit options, making them more likely to accept the predatory terms of the contracts offered by the defendants. 

The defendants’ practices resulted in higher rates of default and repossession than other subprime used-car dealers. The complaint also alleges that the defendants failed to provide customers with a reasonable notice of repossession; repossessed vehicles of customers who were not in default; failed to give customers refunds they were due; improperly seized customers’ personal property in repossessed vehicles; and used global positioning system devices to locate and repossess vehicles without informing customers that the dealership had installed these devices. 

“Intentionally targeting African-Americans for contracts with predatory terms because of their race violates fair lending laws,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division. “By filing this lawsuit, the Justice Department is acting to ensure that subprime dealers in the auto industry provide credit in accordance with the law. The Justice Department will continue to ensure that people have equal access to credit, regardless of race.”