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HOT TOPICS
2016
MEMBERSHIP
DIRECTORY
123
FTC COMPLETES NEW SWEEP OF AUTO DEALER
PRACTICES RESULTS IN 187 ENFORCEMENT ACTIONS -
$2.6 MILLION IN JUDGMENTS
The Federal Trade Commission (FTC) released the results of Operation Ruse Control; an enforcement sweep
of car dealers’ practices. The FTC partnered with criminal and civil enforcement agencies
in the latest investigation. This is the second sweep related to automobile dealers
within a two year time period.
The FTC targeted these specific practices it found to be deceptive:
•
Purchase Add-ons
– products or services sold by a dealer or third
party and added to finance contract or lease. For example, the
FTC found a dealership that misrepresented a payment program
that claimed it would save consumers money however it failed
to disclose that the significant fees it charged for the service
often cancelled out any actual savings.
•
Deceptive Advertising
– Bait and Switch advertisements.
For example the FTC found ads offering promotional prices
and rebates, but disclaimers in very small print eliminated
customers from qualifying for advertised promotional rates.
•
Loan Application Fraud
– dealers used straw purchasers
or changed customer information on credit applications to
ensure loan qualification for vehicles customers may not
have been able to afford.
The FTC expressed particular concern over purchase add-ons sold
by dealers. The agency settled with a New Jersey dealer and a company
offering bi-weekly payment plans to customers. The FTC claims that these bi-
weekly pay plans include service fees that exceed any potential savings gained from the bi-weekly
payments.
Fines & Liability
The NJ dealer will pay $184,000 to the FTC while the company offering the automatic bi-weekly payment
plan will pay $1.5 million to consumers and $949,000 directly to the FTC.
The Agency indicated that criminal prosecutions could be forthcoming seeking sanctions, including jail time,
for individuals (i.e.: sales people, sales managers and F&I) found to have committed bank or wire fraud or
other wrongdoing.
The FTC indicated that their fraud investigators, previously assigned to the mortgage industry have now been
assigned to focus their attention on auto dealers. Enforcement action against auto dealers is ongoing.