FTC, states announce crackdown on fraud in auto sales, finance

FTC, states announce crackdown on fraud in auto sales, finance

The Federal Trade Commission and 32 states announced a nationwide crackdown on deception and fraud in auto sales, financing and leasing. There were 187 enforcement actions since the agencyês last sweep, including one in Maryland and 41 in Virginia. Many of the Virginia enforcement actions were against independent dealers, several of them for failure to advertise as a dealer on Craigslist.

Other enforcement actions included both civil and criminal charges of deceptive advertising, automotive loan application fraud, odometer fraud, deceptive add-on fees and deceptive marketing of car title loans.

The FTC listed some examples of deceptive ads:

« The ad says, –Low, low price,” but doesnêt explain that buying the car at that price requires a down payment plus fees included in the fine print.

« The ad says, –Only $99/month,” but doesnêt reveal that advertised payments are temporary and –balloon” later.

« The ad mentions a zero or low-rate loan that doesnêt apply to everyone.

« The ad says, –You won!” but thereês no prize.

For the first time since receiving expanded authority over auto dealers under the Dodd-Frank Act, the FTC has leveled two auto enforcement actions involving add-ons, in which a dealer or other third party adds to the vehicle sales, lease or finance agreement charges for other products or services. Examples include extended warranties, payment programs, GAP insurance, credit life insurance, road service, theft protection and undercoating.

The FTCês two new advertising consent orders against dealers involved allegations of deceptive price advertising. The proposed orders final in 30 days have requirements about advertising rebates and other matters that are consistent with the position that the Virginia Motor Vehicle Dealer Board staff adopted in its special meeting March 9. That meeting was reported in last weekês WANADA Bulletin and is available by clicking here. The FTCês actions provide further reasons for the Virginia Board to adopt the position developed in the special meeting as its final policy.

The consent order states that any discount, rebate, bonus, incentive or price advertised by the dealership must be available for all consumers, for all vehicles advertised, or that the ad must –clearly and conspicuously disclose all qualifications or restrictions on: (a) a consumerês ability to obtain the discount, rebate, bonus, incentive or price and (b) the vehicles available at the discount, rebate, bonus, incentive or price.”

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