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Feds say Charlotte used-car dealer offered ‘predatory’ loans to black customers

Two Charlotte used-vehicle dealerships and their operator charged inflated prices to black customers and offered them “predatory” terms from 2006 to at least 2011, according to a federal lawsuit filed Monday.

The businesses’ owner, Zuhdi A. Saadeh, targeted black customers though “reverse redlining,” says the suit filed by the U.S. government and the state of North Carolina. The dealerships involved are Auto Fare, 3558 Wilkinson Blvd., and Southeastern Auto Corp., 3911 Wilkinson Blvd.

“Charging people inflated prices based on their race isn’t the way to do business in our state,” state Attorney General Roy Cooper said in a statement. “These allegations show outrageous behavior that should be stopped.”

Saadeh denies the allegations, according to his attorney, Kathleen Lucchesi. She said her client has never discriminated against any of his customers or targeted African-Americans for unfair and predatory lending practices.

“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,” Lucchesi said in a statement.

The lawsuit says the “buy here, pay here” dealerships provided the financing for the vehicles, and that Saadeh set vehicle prices, down payment amounts and the interest rates charged to his customers.

The dealerships charged sales prices in excess of industry-standard suggested retail prices, according to the allegations.

In one 2010 example mentioned in the lawsuit, the dealer paid $7,610 at auction for a 2001 car and sold it for $12,900, a markup of almost 70 percent, the lawsuit says. The National Automobile Dealers Association’s suggested retail value of the used car was $10,625, about a 40 percent markup, the suit says.

Auto Fare charged the same customer a 29 percent annual percentage rate, the highest interest rate allowed under North Carolina law, the suit says.

Lucchesi said Saadeh offered customers the same interest rate, regardless of their race. Vehicle prices are set “before a customer ever walks onto the lot,” she said.

The lawsuit also claims the dealerships did not “meaningfully” assess its customers’ ability to make payments on their vehicles. Vehicles were sold to customers who made the required down payments and provided documentation of their residency and income, regardless of how much they earned, according to the allegations.

In addition, the dealerships repossessed vehicles when customers were not even in default, the suit says. In some instances, GPS devices were installed in vehicles without customer knowledge, allowing the dealerships to locate vehicles for repossession, according to the allegations.

The lawsuit does not specify how many people were affected. In an email, Cooper’s office said it is hard to provide an estimate.

“Several hundred people, without regard to race, may have been subject to the practices,” the email said.

Saadeh, the suit says, was drawn to African-American customers, perceiving them to have fewer options for credit. The suit also says Saadeh used “racial slurs” about his black customers.

Lucchesi said Saadeh “has not used racial slurs or made derogatory comments.”

The U.S. is suing under the Equal Credit Opportunity Act. The state is suing under the North Carolina Unfair and Deceptive Trade Practices Act. Researcher Maria David contributed.

Roberts: 704-358-5248; Twitter: @DeonERoberts
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