Tag Archive | "deceptive advertising"

FTC Approves Consent Order in Texas Dealer’s Deceptive Advertising Case

WASHINGTON, D.C. — Following a public comment period, the Federal Trade Commission (FTC) said this week it has approved the final consent order settling its deceptive advertising charges against Cowboy AG LLC, a Dallas-based company doing business as Cowboy Toyota and Cowboy Scion.

The announcement is related to a December 2017 compliant related to Cowboy Toyota’s Spanish-language newspaper ads. According to the FTC, the dealership violated the FTC Act by misrepresenting the cost of purchasing or leasing cars as well as the qualifications or restrictions for financing or leasing cars. It also mispresented the availability of vehicles for sale, according to the FTC’s complaint.

The regulator also charged the dealership with failing to disclose credit or lease terms required under the Truth in Lending Act (TILA) or Consumer Leasing Act when it touted certain “triggering” terms of credit or lease, such as the monthly payment. The complaint also alleged that favorable terms were prominently stated in the Spanish-language ads, with material limitations to those terms provided only in fine-print English at the bottom.

The final order settling the FTC’s charges prohibits Cowboy Toyota from misrepresenting the cost of financing, buying, or leasing a vehicle. The order also requires the dealership to accurately represent any qualifications or restrictions on a consumer’s ability to obtain offered financing or lease terms, including restrictions based on their credit history.

The order also prohibits the dealership from misrepresenting the number of vehicles, makes, or models available for purchase or lease. Cowboy Toyota is also required to clearly and conspicuously disclose all financing and lease terms in its ads, as well as all related qualifications or restrictions. And if Cowboy Toyota makes a representation in one language, it must state clearly and conspicuously any material limitations in the same language, the FTC said.

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Nine-Store Los Angeles Group Charged With Payment Packing, Yo-Yo Financing

WASHINGTON, D.C. — The Federal Trade Commission today charged nine Los Angeles-area dealerships and their owners with a wide range of deceptive, and unfair sales and financing practices, including payment packing and using “yo-yo” finanicng tactics. According to the FTC’s announcement, this is the first time the regulator has filed an action against an auto dealer for engaging in yo-yo financing.

The FTC’s complaint, filed in the U.S. District Court for the Central District of California, also charges the dealerships with violating the Truth in Lending Act and Regulation Z, as well as the Consumer Leasing Act and Regulation M for failing to clearly disclose reguired credit and lease information in their advertising. The regulator is seeking to end the alleged practices and return money to consumers.

“The car-buying process is a two-way street,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a statement. “The FTC expects dealers to honor their contractual obligations, and will pursue those who use yo-yo financing tactics and pack unwanted costly add-ons onto consumers’ contracts.”

Charged were Universal Nissan; Kia of Downtown Los Angeles; Glendale Infiniti and Glendale Nissan; Mercedes-Benz of Valencia; West Covina Toyota/Scion; Sage Covina Chevrolet; Sage Pre-Owned; and Sage Hyundai. All are owned and operated by Sage Auto Group.

According to the FTC’s complaint, the dealerships enticed consumers — particularly the financially distressed and non-English speakers — into their showrooms with print, internet, radio and television advertisements that featured misleading claims, including that vehicles could be purchased at lower prices than the dealerships were prepared to sell them for. The dealerships also falsely advertised that customers would receive lower monthly payments and be able to provide smaller down payments for specific cars, the FTC charged.

Other tactics included advertising finance offers that were really leases. The dealerships also falsely advertised that they would pay off consumers’ trade-in vehicles. The FTC also charged the dealerships with using phony online reviews, including ones posted by their own employees, to tout their dealerships and discredit negtative reviews highlighting their illegal practices.

The dealerships were also charged with violating the FTC Act’s prohibition on deceptive and unfair acts or practices for including F&I products like service contracts and GAP in customers’ deals without their knowledge. In some cases, car buyers were told the products were free.

In some instances, according to the complaint, consumers were forced to sign new contracts with different terms than the contract they had already signed. In others, the dealerships allegedly told consumers who completed finance contracts that their agreements had been canceled and that the dealerships were permitted to keep the down payments or trade-ins. If the consumers argued these claims, the FTC charged, the dealerships claimed they could take legal action them if they did not comply.

The FTC’s complaint also lists Joseph Sage, Leonard Sage, Michael Sage, Sage Holding Company Inc., and Sage Management Company Inc. as defendants. The commission’s vote authorizing the filing of the complaint against Sage Auto Group defendants was 2-1.

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FTC Official Releases 7 Deadly Sins of Dealer Advertising

SAN CLEMENTE, Calif. — The Federal Trade Commission official who led the agency’s Operation Ruse Control, which resulted in 252 auto-related enforcement actions, shared this week the seven deadly sins of advertising that put dealers on her regulatory radar.

Cindy Liebes, director of the Federal Trade Commission’s Southeast Region, shared her list ahead of her Sept. 22 keynote address at DealerSocket’s 2015 Innovate conference, where she will outline the lessons learned from the FTC’s Operation Ruse Control.

“No doubt, one of the FTC’s top priorities is protecting consumers in the auto marketplace. However, I’ve also heard from many honest dealers saying they can’t compete with the dealer down the street who doesn’t follow the rules,” Liebes said. “Regulatory actions against unscrupulous dealers promote fair competition, which is good for any industry and protects the players trying to do the right thing.

“While I can’t speak about current nonpublic investigations, it’s important for dealers to know that the FTC is committed to bringing law enforcement actions in the auto industry,” she added. “We don’t pay attention to the size of a dealer either. Big and small stores need to get their house in order.”

According to Liebes, dealers’ violations include:

  1. Twisting the facts about add-ons: For example, a California-based company deceptively claimed in online ads and through a network of authorized dealers that car buyers who purchased its biweekly payment program would save money. Consumers weren’t told that the cost of the add-on often outstripped any savings. This case resulted in a $2.475 million settlement of refunds and fee waivers.
  2. Lowballing your pitch: Several dealers recently crossed the line by using headlines to tout bargain prices while failing to adequately disclose the true cost of the deal. For example, one Florida dealership pitched “used cars as low as $99.” But $99 was just the minimum bid for cars offered at a liquidation sale, and that didn’t include substantial mandatory fees. The ads also included photos of loaded cars without clearly explaining that some pictures featured — like spoilers and sunroofs — weren’t included in the price.
  3. Luring customers with misleading “zero” promises: One California dealer’s deceptive use of zero promised “$0 initial payment, $0 down payment, $0 drive-off lease.” Another ad promised “$0 down, 0% APR financing, 0 payments and 0 problems.” But consumers had to pay much more upfront to lease or purchase the cars. And “0% APR?” The annual percentage rate for financing those cars for the advertised payment was way more than 0%.
  4. Hiding the strings attached to a deal: An Alabama dealership highlighted eye-catching prices without clearly explaining what the vehicle would really cost consumers. In some cases, ads featured prices that factored in special discounts or rebates that weren’t available to everyone. For example, some prices applied only to recent college graduates, a restriction not prominently disclosed.
  5. Burying key disclaimers in fine print: Fine-print footnotes, unclear “disclaimers” that consumers must scroll down to see, or other buried information won’t live up to the FTC’s “clear and conspicuous” standard. Advertisers often ask how big a disclosure must be, but it’s more than a matter of font size. A clear and conspicuous disclosure is one sufficient for consumers to actually notice, read and understand.
  6. Ignoring applicable credit laws: One common pothole is using certain “triggering terms” under the Consumer Leasing Act, Truth in Lending Act, Reg. Z or Reg. M without making required disclosures. For example, advertising monthly lease payments kicks in a requirement under the Consumer Leasing Act that you disclose other facts about the transaction. Examples are total amount due at lease signing, whether a security deposit is required, and the number, amount and timing of scheduled payments.
  7. Violating prior orders: The FTC may seek monetary civil penalties for violations of prior FTC administrative orders. For example, the FTC recently brought two actions alleging violations of administrative orders, which prohibited dealers from deceptively advertising the cost of buying or leasing a car. One action resulted in the dealer group paying a hefty civil penalty, while the other action is pending. These actions show that there can be a financial cost for violating FTC orders.

To learn more about Liebes’ address as well as other sessions slated for this month Innovate 2015 Conference, visit www.myinnovate2015.com.

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FTC Approves Final Consent Orders in Two Deceptive Ad Cases

Following a public comment period, the Federal Trade Commission has approved final consent orders involving two auto dealers that deceptively advertised the sale, financing and leasing of their vehicles.

Under the settlement orders, Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif., are prohibited from misrepresenting in any advertisement the cost to purchase or lease a vehicle, or any other material fact about the price, sale, financing, or leasing of a vehicle. The consent orders also address the alleged Truth in Lending Act and Consumer Leasing Act violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws.

The Jim Burke order also prohibits the auto dealer from representing that a discount, rebate, bonus, incentive or price is available unless it is available to all consumers or the qualification terms are clearly and conspicuously disclosed.

These cases were part of the FTC’s nationwide and cross-border auto sweep Operation Ruse Control, which was announced in March 2015. The commission announced a final consent with National Payment Network, Inc., a company involved in the sweep that deceptively advertised its add-on biweekly auto payment plan, earlier this month.

The commission votes approving the final orders were 5-0.

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FTC Takes Action Against Two Dealer Groups for Deceptive Advertising

WASHIINGTON — Two dealer groups targeted by the Federal Trade Commission two years ago for deceptive advertising are in trouble again, the agency announced today. The two retail chains, which operate more than a dozen stores in five states, were charged with violating the administrative orders prohibiting them from deceptively advertising the cost of buying or leasing a car.

Charged were Billion Auto, a chain of 20 family-owned dealerships in Iowa, Montana and South Dakota, and its family-controlled advertising company, Nichols Media Inc., and Ramey Motors and three affiliated dealerships located in Virginia and West Virginia. The groups were two of five dealer groups that settled with the FTC in March 2012 over ads that promised to pay a consumer’s trade-in no matter what the consumer owes on the vehicle.

“If auto dealers make advertising claims in headlines, they can’t take them away in fine print,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “These actions show there is a financial cost for violating FTC orders.”

According to the FTC’s press release, Billion Auto and its ad agency have agreed to settle charges that they violated the FTC’s 2012 administrative order, which prohibited the group and its affiliates from misrepresenting material costs and terms of vehicle finance and lease offers. It also required specific disclosures, mandated by the Truth in Lending Act (TILA) and Regulation Z, and the Consumer Leasing Act (CLA) and Regulation M. The dealer group will pay $360,000 in civil penalties to settle the FTC’s charges.

According to the FTC’s complaint, Billion and its advertising company violated FTC’s administrative order by frequently focusing on only a few attractive terms in their ads while hiding others in fine print, through distracting visuals or with rapid-fire audio delivery. Some of the ads, the agency noted, promoted low monthly payments or attractive annual percentage rates and finance periods, but concealed other material items such as low payments were for leases, not sales and major limits on who could qualify for discounts. Offers also often included significant added costs.

The FTC charged Ramey and its three stores with allegedly misrepresenting the costs of financing or leasing a vehicle by concealing important terms of the offer, such as a requirement to make a substantial down payment. The complaint also charged Ramey with failing to make credit disclosures clearly and conspicuously, as required by the TILA. It also alleged that the dealer group failed to retain and produce for the FTC appropriate records to substantiate its offers. Ramey Motors and its affiliates are subject to $16,000 in civil penalties for each alleged violation of the FTC administrative order.

The commission voted unanimously to refer the Billion complaint and proposed stipulated order to the Department of Justice for filing. The Justice Department filed the complaint and proposed stipulated order on behalf of the commission in the U.S. District Court for the Northern District of Iowa on Dec. 11, 2014.

The commission also voted unanimously to authorize the filing of the complaint against Ramey Motors Inc., Ramey Automotive Group Inc., Ramey Automotive Inc., and Ramey Chevrolet Inc. It was filed in the U.S. District Court for the Southern District of West Virginia on Dec. 11.

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Dealerships to Pay $175K For Deceptive Ads

Boston, MA — Four affiliated car dealerships in western Massachusetts have agreed to pay a total of $175,000 to resolve allegations that they regularly published misleading advertising, then failed to follow through on sale prices and promotions, Attorney General Martha Coakley announced Wednesday.

An assurance of discontinuance was filed Tuesday in Suffolk Superior Court. It alleges that Country Nissan in Hadley, Country Hyundai in Northampton, Northampton Volkswagen, and Patriot Buick GMC in Charlton regularly ran deceptive advertising campaigns on television, radio, dealership websites, Facebook and Twitter.

The settlement resolves allegations against the dealerships’ owners and operators Carla Cosenzi of Longmeadow and Thomas Cosenzi of West Springfield, along with their affiliated companies, Tommy-Car Management Corp., Tommy-Car Corp., Tommy Car Advertising Inc., T & C Auto Corp., Country Hyundai, Inc., and Patriot Buick GMC Inc.

“We allege that these car dealers were luring consumers to their showrooms with misleading advertisements and refused to make good on the advertised sales and promotions,” Coakley said.

According to the settlement, the AG’s Office received complaints regarding the four car dealerships’ advertising and marketing practices and initiated an investigation. The AG’s Office alleges that these dealerships engaged in a pattern of advertising that suggests bait-and-switch tactics were used to lure consumers into their showrooms with sales and promotions that were not actually available.

As part of the investigation, the AG’s Office found that the defendants allegedly refused to sell vehicles in accordance with advertised terms or conditions. This included advertising certain sales or promotions that did not disclose all necessary or usual charges, and advertising sales and promotions without clearly and conspicuously disclosing all conditions. In addition, the AG’s office alleges that the company failed to pay the advertised price for trade-in vehicles or failed to disclose other conditions on the offer.

The settlement requires defendants to pay the Commonwealth $175,000 over six months and to permanently refrain from unfair or deceptive advertising practices in the future. The Cosenzis, who deny the allegations against them, cooperated fully with the attorney general’s investigation.

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