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March 19th, 2012
FTC Settles with Car Dealerships Over Deceptive Ad
The Federal Trade Commission ("FTC") recently announced that it reached agreements with five car dealerships that require them to stop running ads in which they promise to pay off a consumer's trade-in no matter what the consumer owes on the vehicle. These cases are the first of their kind brought by the FTC and are an example of the FTC's increased focus on consumer protection issues that may arise in the sale, financing or leasing of motor vehicles. The misrepresentation alleged in these cases was one of the topics raised at the FTC's 2011 public roundtables.
The FTC alleged that the five dealers misrepresented to consumers that they would no longer be responsible for paying off the loan balance on their trade-in, even if it was greater than the car’s actual trade-in value. In fact, consumers were still responsible for paying off the entire amount. According to the FTC, the dealers included the difference in the consumer's new loan or, in the case of one dealer, just required consumers to pay it out of pocket. In addition, complaints in three of the cases allege violations of the "Truth in Lending Act" and "Regulation Z" for failing to disclose certain credit-related terms. Two complaints also charge violations of the "Consumer Leasing Act" and "Regulation M".
The proposed settlement orders prohibit each dealer from misrepresenting that they will pay the remaining loan balance on a consumers’ trade-ins. For the dealers charged with violating the Truth in Lending Act and Regulation Z, the orders mandate future compliance with the law, including clear and conspicuous disclosures when advertising certain terms related to consumer credit. The orders also require that if any finance charge is advertised, the rate must be stated as an "annual percentage rate" or "APR." The dealers charged with violations of the Consumer Leasing Act and Regulation M are required to clearly and conspicuously make all lease-related disclosures required by law, including the monthly lease payment.
The proposed settlement orders will be subject to public comment for 30 days, until April 16, 2012, at which point the FTC will decide whether to make them final. Written comments can be sent to: FTC, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Ave., N.W., Washington, DC 20580.
In conjunction with these case announcements, the FTC issued a new consumer education publication, Negative Equity Ads and Auto-Trade-ins.
Read the full press release- FTC Takes Action To Stop Deceptive Car Dealership Ads
Read the FTC's new consumer education publication- Negative Equity Ads and Auto-Trade-ins
If you have any questions about the FTC's announcement, please contact Jeffrey Greenbaum at (212) 826 5525, jgreenbaum@fkks.com, or any other member of the Frankfurt Kurnit Advertising Group.
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“Made in the U.S.A.” Claims Continue to be Scrutinized
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June 4 2018
