Tag Archive | "Regulation Z"

Fed Reserve, CFPB Leave TILA, CLA Dollar Thresholds the Same for 2017


WASHINGTON, D.C. — The dollar thresholds in the Truth in Lending Act (TILA)’s Reg. Z and the Consumer Leasing Act (CLA)’s Reg. M for exempt consumer credit transaction will remain at $54,600 for 2017, the Federal Reserve Board and the Consumer Financial Protection Bureau announced on Nov. 23.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the TILA and the CLA by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the “Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).” If there is no annual percentage increases, the board and bureau will not adjust the exemption threshold.

“Based on the CPI-W in effect as of June, 1, 2016, the exemption threshold will remain at $54,600 through 2017,” the two agencies stated in a joint notice.

The decision means consumer credit and lease transactions at or below $54,600 will continue to be subject to the protections and requirements of Reg. Z and M, according to the National Automobile Dealers Association (NADA)’s Regulatory Affairs Group.

“This announcement is consistent with the Dodd-Frank Act amendments to the Truth in Lending Act and the Consumer Leasing Act to adjust these thresholds each year by the annual percentage increase in the Consumer Price Index,” the NADA 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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AFIP Issues Guidance on Reg. Z and M Dollar Thresholds for 2016


COLLEYVILLE — The Association of Finance and Insurance Professionals issued guidance this week on the Federal Reserve Board and the Consumer Financial Protection Bureau’s Nov. 25 announcement that 2016 dollar thresholds for Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing Act) exemptions will remain unchanged in 2016.

Protections under the TILA and CLA will apply to consumer credit transactions and consumer leases of $54,600 or less in 2016, according to the agencies, the same thresholds that applied in 2015, reports F&I and Showroom.

“The $54,600 threshold will remain the same for 2016, as well the accepted practice for processing transactions in excess of that amount.”

The $54,600 maximum amount to qualify for installment sale and consumer lease protection under TILA and CLA, respectively, is not based on the selling price of the vehicle, but on the “amount financed” for a credit sale and the “total contractual obligation” for a lease, Robertson added. The total contractual obligation includes non-refundable amounts a lessee is contractually obligated to pay under the lease, but excludes the residual value, purchase option price and amounts such as taxes, license and registration fees collected by the lessor, but paid to third parties.

“However, most dealers treat all consumer transactions as if they fall under TILA and CLA, regardless of the dollar amount involved,” Robertson noted. “Under the two regulations, a consumer transaction is one in which the vehicle is used ‘primarily’ for household, family or personal use. Consumer transactions exceeding the $54,500 threshold may be recorded on a TILA compliant installment sale agreement or a Consumer Leasing Act compliant lease agreement.”

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5 Dealers Targeted by FTC for Deceptive Ads


Five car dealers have agreed to Federal Trade Commission settlement orders 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.

The FTC charged that the ads, which ran on the dealers’ websites and on sites such as YouTube.com, deceived consumers into thinking they would no longer be responsible for paying off the loan balance on their trade-in, even if it exceeded the trade-in’s value. Instead, the dealers rolled the negative equity into the consumer’s new-vehicle loan or, in the case of one dealer, required consumers to pay it out of pocket, reported F&I and Showroom magazine.

The proposed settlements, reached as part of the FTC’s ongoing efforts to protect consumers in financial distress, bar all of the dealers from making similar deceptive representations in the future. The cases are the first of their kind brought by the FTC. The commission also issued a new consumer education publication titled “Negative Equity Ads and Auto-Trade-ins” to help consumers understand these types of ads.

“Buying a new car or truck is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will pay off’ what they owe on their current vehicle when they really won’t,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “The Federal Trade Commission is constantly on the lookout for potentially deceptive ads, and brings actions to stop them when appropriate.”

The dealers named in the FTC’s complaints are Billion Auto Inc. of Sioux Falls, S.D., Frank Myers AutoMaxx LLC of Winston-Salem, N.C., Connecticut-based dealers Key Hyundai of Manchester and Hyundai of Milford, which advertise jointly, and Ramey Motors Inc. of Princeton, West Virginia.

The complaints charge that the dealers’ representations that they will “pay off” what the consumers owe are false and misleading, and violate the FTC Act. In the case of Billion Auto Inc., the operation’s video promotion showed an inverted video of a car moving to depict a customer being upside down on their vehicle. The video then flips right-side up and displays the following tagline: “Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car.”

Frank Myers AutoMaxx’s tagline for its advertisements read: “Uncle Frank wants to pay [your trade] off in full, no matter how much you owe.”

Key Hyundai and Hyundai of Milford used the following line to promote its dealerships: “I want your trade no matter how much you owe or what you’re driving. In fact I’ll pay off your trade when you upgrade to a nicer, newer vehicle.” Ramey Motors used a similar line in its ads.

In addition, the complaints in three of the cases allege violations of the Truth in Lending Act (TILA)’s Regulation Z for failing to disclose certain credit-related terms. Complaints in two of the cases allege violations of the Consumer Leasing Act (CLA)’s Regulation M for failing to disclose certain lease-related terms.

The proposed orders settling the FTC’s charges against the dealers are designed to prevent them from engaging in similar deceptive advertising practices in the future. First, each order prohibits the dealer from misrepresenting that it will pay the remaining loan balance on a consumer’s trade-in, so the consumer will have no further obligation for any amount of that loan. It also prohibits the dealer from misrepresenting any other facts related to leasing or financing a vehicle.

The proposed orders against Billion Auto, Key Hyundai, Hyundai of Milford, and Ramey Motors require these dealers to comply with TILA and Regulation Z, and to make clear and conspicuous disclosures when advertising certain terms related to issuing consumer credit. It also requires that if any finance charge is advertised, the rate must be stated as an “annual percentage rate.”

In addition, the proposed orders against Billion Auto, Key Hyundai, and Hyundai of Milford require the dealers to clearly and conspicuously make all lease-related disclosures required by the CLA and Regulation M, including the monthly lease payment.

The proposed orders also require each of the dealers to keep copies of relevant advertisements and materials substantiating claims made in their advertisements, and to provide copies of the order to certain employees. Finally, the dealers are required to file compliance reports with the FTC to show they are meeting the terms of the orders, which will expire in 20 years.

The misrepresentation alleged in these cases was one of the topics raised at the FTC’s 2011 public roundtables regarding consumer protection issues that may arise in the sale, financing or lease of motor vehicles. And the commission’s vote to issue the administrative complaints and accept the consent agreement packages containing the proposed consent orders for public comment was 4-0.

The FTC will publish a description of the consent agreement packages in the Federal Register. The agreements will be subject to public comment for 30 days, beginning today and continuing through April 16, 2012, after which the commission will decide whether to make the proposed consent orders final.

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