With FTC targeting auto ads, dealers need to know the rules

With FTC targeting auto ads, dealers need to know the rules

The Federal Trade Commission recently announced a crackdown on fraud in auto sales and finance, reported in the April 3 WANADA Bulletin. WANADA Kindred-Line member and dealer attorney Mike Charapp of Charapp and Weiss evaluated FTC enforcement actions and outlined several advertising areas where dealers should be cautious:

« Truth in Lending. Most of the consent orders have involved allegations of Truth in Lending Act violations. These are easy violations for the FTC to spot. Dealer staff involved in advertising and the dealershipês outside ad agency should understand trigger terms and the disclosures required by law if there is a trigger.

« Bait and switch. The focus of the three latest consent orders and of many of the previous ones is in the realm of –bait and switch.” The FTC focuses on pricing or sales terms it believes are not available to all potential buyers. Advertised vehicle pricing and terms should be available to all buyers. If offers are not available to all, as would be the case with new car prices based on manufacturer rebates and incentives that have limitations, a dealer must take care that the qualifications to achieve the savings are clearly and conspicuously disclosed.

« Negative equity. Early in its post-Finance Reform Act consent orders time frame in 2011-12, the FTC charged violations by dealers who used some variant of the claim where they would pay off a trade –no matter how much you owe.” The FTC signaled that it would look closely at claims that failed to disclose that negative equity would be rolled into the new finance balance. This is an ongoing FTC hot button.

« Internet Advertising. The FTC is not looking only at newspaper advertising, but Internet ads as well. FTC knows that dealers concentrate marketing efforts on the Internet, and regulators are, is in fact, reviewing dealer websites. Internet advertising is governed by the same rules that apply to other media, and those creating Web content for the dealership need to know the rules.

NADAês legal group commissioned special counsel earlier this year to craft their latest version of a Dealer Guide to Federal Advertising Requirements through their Driven Management Series. A copy of the complete guide which all dealer sales teams and their ad agencies should have close at hand as a ready reference can be reviewed and downloaded by clicking here.

Download Bulletin PDF