FTC’s Continued Crackdown On Auto Industry Deception And Fraud

The Federal Trade Commission (FTC) and 32 law enforcement partners have announced the results of Operation Ruse Control, a nationwide crackdown on deception and fraud that is intended to protect consumers when purchasing or leasing a car. The auto industry as a whole is certainly taking note, with car dealerships analyzing the cases to ensure that they aren’t crossing any lines in their own business practices.

“For most people, buying a car is one of the largest purchases they’ll make,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Car ads must be truthful, loan terms must be clear, and dealer practices must be honest. That’s why our partners are working together to crack down on deceptive marketing about car sales, leasing and financing.”

Since the FTC’s last sweep, there were 187 enforcement actions in the United States and 65 in Canada. The enforcement efforts include 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.

For the first time since receiving expanded authority over auto dealers under the Dodd-Frank Act, the FTC has taken two auto enforcement actions involving add-ons, which refers to a dealer or other third-party adding to the vehicle sales, lease or finance agreement charges for other products or services.

The first of these actions was against the National Payment Network (NPN) in San Mateo, California, who allegedly violated the FTC Act by deceptively pitching consumers an auto payment program that it claimed would save consumers money. However, NPN failed to explain the fees that it charged for the service were often high enough to cancel out any actual savings for the consumer. In a related case, the FTC alleged that Matt Blatt dealerships, in New Jersey, failed to disclose the fees associated with NPN’s add-on service, while the dealerships received a commission for each of the more than 1,000 consumers that they enrolled in the service.

Both NPN and Matt Blatt dealerships have agreed to settle the charges, and are prohibited from stating that a payment program will save consumers money unless the amount of savings is actually greater than the total amount of all fees that the consumer will incur by enrolling.

In the next case, three auto dealers have agreed to settle charges that they ran deceptive ads that violated the FTC Act, as well as violating the Truth in Lending Act (TILA) and/or Consumer Leasing Act (CLA). Cory Fairbanks Mazda of Longwood, Florida, Jim Burke Nissan of Birmingham, Alabama, and Ross Nissan of El Monte, California were the dealers in question. According to the FTC, these dealerships ran ads that stated sales, leasing or financing options that appeared to be beneficial to consumers, but were actually canceled out by fine-print disclaimers. Additionally, in some instances, the disclaimers did not disclose relevant terms, including required down payments.

In another case, Regency Financial Services of Lake Worth, Florida, and its CEO, Ivan Levy, allegedly charged consumers upfront fees to negotiate an auto loan modification on their behalf, but on some occasions provided nothing in return. According to the complaint by the FTC, the defendants violated the FTC Act and Telemarketing Sales Rule by misrepresenting that they would obtain auto loan modifications for consumers and provide full refunds if they failed to do so. This case has not yet been settled.

This large operation follows the FTC’s sweep against 10 auto dealers earlier this year, and illustrates the agency’s continued efforts to protect consumers who are purchasing and financing vehicles.

The details of these cases are important to understand for all auto dealers, to ensure that their practices are not violating any of these rules. The FTC is continuing its crackdown, so it’s highly advisable that all auto dealerships are careful to understand the boundaries and to stay within all of the agency’s guidelines for fair practices in car leasing and sales.