Tag Archive | "Federal Trade Commission"

FTC Charges Arizona Group With Falsifying Incomes on Consumer Credit Apps


WASHINGTON, D.C. — Three weeks after announcing the completion of a seven-state sweep regarding compliance with its Used Car Rule, the Federal Trade Commission announced on Wednesday it has charged a group of four dealerships with a range of illegal activities, including falsifying consumers’ income and down payment information on credit applications and misrepresenting financial terms in vehicle advertisements.

According to the regulator, this was the FTC’s first action alleging income falsification by dealerships. Its complaint names Richard Berry as a defendant and Linda Tate as a relief defendant. They operate a group of four dealerships in Arizona and New Mexico, near the border of the Navajo Nation.

“Buying a car is one of the biggest purchases consumers make. When consumers tell an auto dealer how much they make and how much they can pay upfront, the dealer can’t turn those facts into fiction,” said Andrew Smith, the FTC’s recently confirmed director of its Bureau of Consumer Protection. “The FTC expects auto dealers to be honest with consumers from the first advertisement to the final purchase.”

Since at least 2014, according to the complaint, Tate’s Auto allegedly increased its sales by falsifying consumers’ monthly income and down payments on credit applications and finance contracts submitted to finance sources. The four dealerships named in the complaint are Tate’s Auto Center of Winslow, Tate’s Automotive, Tate Ford-Lincoln-Mercury, and Tate’s Auto Center of Gallup.

The regulator charged that, during the sales process, Tate’s Autos asked consumers to provide personal information — including their name, address, and monthly income — and told them the information would be submitted to financing companies. But instead of using consumers’ actual information, the complaint alleges, Tate’s Auto falsely inflated the numbers, making it appear that applicants had higher monthly incomes than they really did. The dealerships also allegedly inflated the amount of a customer’s down payment.

“We’re not talking about nickel-and-dime discrepancies,” wrote Lesley Fair, senior attorney with the FTC’s Bureau of Consumer Protection, in an Aug. 1 blog post on the FTC’s website. “According to just one of the examples in the complaint, a consumer told Tate’s she had a fixed monthly income of about $1,200, but a Tate’s staffer allegedly inflated it to $5,200 in the paperwork.

“Wouldn’t consumers spot the false information? Not necessarily,” Fair continued. “The complaint charges that the defendants often used tactics that prevented people from reviewing the documents. Tate’s personnel allegedly rushed some consumers through the process; had them fill out forms over the phone or in places like grocery store parking lots or restaurants; or altered the documents after consumers signed them.”

The FTC charged that consumers, many of whom are members of the Navajo Nation, were approved for financing based on the false information the group’s dealerships provided. These consumers, the regulator further alleged, defaulted at a higher rate than qualified buyers.

The FTC also charged in its complaint that Tate’s Auto’s advertising deceived consumers about the nature and terms of financing or leasing offers. For example, the group allegedly advertised discounts and incentives without adequately disclosing limitations or restrictions that would prevent many customers from qualifying for the offers.

The regulator also alleges that Tate’s Auto’s social media ads violated the FTC Act, the Truth in Lending Act, and the Consumer Leasing Act by failing to disclose required terms. The FTC is now seeking an injunction barring the defendants from such practices in the future.

“One YouTube ad claimed the featured car ‘can be in your driveway for only $169 per month,’” Fair wrote in her blog. “In fact, consumers can’t buy that car for the advertised monthly payment. That amount applies only to a lease. What’s more, the FTC says the ad didn’t clearly disclose that to get that monthly payment, consumers must shell out $2,899 plus other fees at lease signing.

“Then there’s the online ad where the company touted an ‘incentive’ discount of $5,250,” Fair continued. “But buried behind multiple hyperlinks was the fact that the discount was available only to consumers who trade in a 1995 or newer vehicle or terminate a lease from another car company 30 days before or 90 days after delivery.”

The FTC’s complaint charges that Berry, acting as owner of the four dealerships, formulated, directed, controlled, had the authority to control, or participated in Tate’s Auto’s allegedly illegal conduct. The FTC also charges that Tate received hundreds of thousands of dollars from the other defendants, including funds directly connected to the alleged unlawful conduct.

“The complaint charges that over time, others in the industry got wise to what Tate’s was doing,” Fair wrote in her blog. “In December 2015, a major financing company that regularly worked with Tate’s conducted a review. The company reported inflated income on 17.9% of applications from Tate’s Auto Center of Gallup, 37.5% of applications from Tate’s Auto Center, 38.7% of applications from Tate’s Nissan Buick GMC, and 44.8% of applications from Tate’s Auto Center of Winslow.”

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Arizona.

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FTC, 12 Partner Agencies Conduct Used Car Rule Compliance Sweep


WASHINGTON, D.C. — The Federal Trade Commission, working jointly with 12 partner agencies in seven states, conducted the first compliance sweep of car dealerships since its amended Used Car Rule took effect earlier this year, the regulator announced today.

The sweep was conducted in 20 cities nationwide between April and June 2018. According to the FTC, inspectors found Buyers Guides on 70% of the more than 2,300 vehicles inspected, with almost half of those displaying the revised Buyers Guide. Of the 94 dealerships inspected, 33 had the revised Buyers Guide on more than half of their inventory, and 14 had revised Buyers Guides on all of their used cars.

“Why check things out now? Well, dealers were required to start using the new version of the guide on January 28, 2018,” wrote Colleen Tressler, a consumer education specialist for the FTC, wrote in a blog posted today on the regulator’s website. “And here’s what we found. Of the more than 2,325 vehicles inspected, almost half had the revised Buyers Guide. Dealers not displaying the revised guide received letters warning them to bring their dealerships into compliance.”

Under the amended Used Car Rule, which took effect on Jan. 28, 2018, dealers must display a revised window sticker, or Buyers Guide, on each used car they offer for sale. The revised guide changes the description of an “As Is” sale, places boxes on the face of the guide dealer can check to indicate whether a vehicle is covered by a third-party warranty and whether a service contract may be available, and adds airbags and catalytic converters to the Buyers Guide’s list of major defects that may occur in used vehicles, among other changes.

Dealers who fail to comply face penalties of up to $41,484 per violation. State and local law enforcement agencies also enforce the recently amended rule.

Over the coming weeks, according to the FTC, dealerships that were not displaying the revised Buyers guide can expect follow-up inspections to ensure they have brought themselves into compliance with the amended rule.

The FTC, along with its partner agencies, inspected dealership in the following areas: 1) Burbank, North Hollywood, Richmond, San Bruno, San Jose, San Pablo, and Van Nuys, California; 2) Jacksonville, Florida; 3) Chicago, Illinois; 4) New York, New York (Queens); 5) Brooklyn Heights, Cleveland, East Cleveland, and Cleveland Heights, Ohio; 6) Arlington, Dallas, and Grand Prairie, Texas; and 7) Lakewood, Puyallup, and Tacoma, Washington.

Agencies involved include the California Department of Motor Vehicles Inspection Division; district attorney’s offices in Contra Costa County, Los Angeles County, Santa Clara County, San Mateo, Calif.; the Florida Bureau of Dealer Services; the Cuyahoga, Ohio, County Department of Consumer Affairs; the Ohio Bureau of Motor Vehicles; the City of Chicago Department of Business Affairs and Consumer Protection; the New York City Department of Consumer Affairs; the Texas Department of Motor Vehicles; and the Washington State Office of the Attorney General.

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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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FTC Announces Significant Hike to Civil Penalty Maximums


WASHINGTON, D.C. — Violations of the Federal Trade Commission’s prohibition on unfair or deceptive acts or practices are going to get more expensive come Aug. 1. That’s when the commission’s interim final rule aimed at increasing a variety of civil penalties takes effect.

According to its website, the FTC has approved final amendments to Commission Rule 1.98 that adjust the maximum civil penalty dollar amounts for violations of 16 provisions the regulator enforces, as required by the Federal Civil Penalties Inflation Adjustment Act Improvement act of 2015. The act directs agencies to implement a “catch-up” inflation adjustment based on a prescribed formula.

The maximum civil penalty amount will increase from $16,000 to $40,000 for the following violations and others listed in the Federal Register Notice:

  • Section 5(l) of the FTC Act: Final commission orders issued under section 5(b) of the FTC Act
  • Section 5(m)(1)(A) of the FTC Act: Trade regulation rules issued by the commission under section 18 of the FTC Act that address unfair or deceptive acts or practices, and other laws enforced by the commission that provide for civil penalties by reference to section 18
  • Section 7A(g)(1) of the Clayton Act: Premerger filing notification requirements under the Hart-Scott-Rodino Improvements Act

The Commission vote to publish the Federal Register Notice amending Commission Rule 1.98 was 3-0.

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FTC Announces Significant Hike to Civil Penalty Maximums


WASHINGTON, D.C. — Violations of the Federal Trade Commission’s prohibition on unfair or deceptive acts or practices are going to get more expensive come Aug. 1. That’s when the commission’s interim final rule aimed at increasing a variety of civil penalties takes effect.

According to its website, the FTC has approved final amendments to Commission Rule 1.98 that adjust the maximum civil penalty dollar amounts for violations of 16 provisions the regulator enforces, as required by the Federal Civil Penalties Inflation Adjustment Act Improvement act of 2015. The act directs agencies to implement a “catch-up” inflation adjustment based on a prescribed formula.

The maximum civil penalty amount will increase from $16,000 to $40,000 for the following violations and others listed in the Federal Register Notice:

  • Section 5(l) of the FTC Act: Final commission orders issued under section 5(b) of the FTC Act
  • Section 5(m)(1)(A) of the FTC Act: Trade regulation rules issued by the commission under section 18 of the FTC Act that address unfair or deceptive acts or practices, and other laws enforced by the commission that provide for civil penalties by reference to section 18
  • Section 7A(g)(1) of the Clayton Act: Premerger filing notification requirements under the Hart-Scott-Rodino Improvements Act

The Commission vote to publish the Federal Register Notice amending Commission Rule 1.98 was 3-0.

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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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