Tag Archive | "Federal Trade Commission"

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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Dealer Fined $690,000 for Consumer-Protection Law Violations


NEWARK, N.J. — A used car dealership has been ordered to pay $693,645.91 after a Superior Court Judge found that it violated state consumer protection laws and regulations a total of 640 times.

The state’s ten-count complaint against RLMB Inc., filed this March, alleged that RLMB and its manager, Michael L. Bloom, violated the Consumer Fraud Act, the Motor Vehicle Advertising Regulations, the Automotive Sales Regulations, the Used Car Lemon Law (UCLL) and UCLL regulations by, among other things, advertising used motor vehicles for sale without disclosing to consumers the vehicle’s prior damage or prior use; selling vehicles “as is” when they qualified for a warranty; and permitting third parties to advertise, offer for sale and/or sell used motor vehicles on Craigslist that were titled to RLMB.

The dealership and Bloom failed to file a response to the complaint, resulting in  Judge Stephan C. Hansbury entering a final judgment by default. The judgment requires the defendants to pay $640,000 in civil penalties, $31,200.91 in reimbursement to the State for its legal and investigative costs and $22,445 in restitution to seven consumers. By the terms of the judgment, the dealership must comply with all applicable state laws and regulations in its business practices.

“The penalty ordered in this matter is appropriate and should send a clear message to all motor vehicle dealerships that violating our consumer protection laws and regulations comes at a steep price,” Acting Attorney General John J. Hoffman said. “We are continuing to review the practices of new and used motor vehicle dealers to ensure consumers are not taken advantage of.”

“The evidence presented to the court by the Division of Consumer Affairs, resulted in a favorable decision for consumers,” said Acting State Director of Consumer Affairs Steve Lee. “Dealerships must not withhold information from consumers that the dealerships are required by law to provide.”

According to the complaint, RLMB required consumers to sign blank sales documents, did not prominently display the Federal Trade Commission Used Car Buyers Guide in vehicles for sale, did not conspicuously post the total sale price of vehicles, failed to itemize documentary service fees, and did not pay the $.50 administrative fee for each used motor vehicle sold, as required by the UCLL, among other things.

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