Is the FTC Monitoring Your Dealership Advertising?

Back on January 9th, 2014, the Federal Trade Commission launched a new initiative called, “Operation Steer Clear.” This program includes the creation of a task force specifically used to monitor the advertising practices at car dealerships all across the nation.

The FTC explained that they were going to penalize (or prosecute) 10 dealerships whose advertising was decidedly deceptive. As an FTC press release explained back in January, the government felt that some dealers were, “…falsely leading consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and/or make no upfront payment to lease vehicles. One dealer even misrepresented that consumers had won prizes they could collect at the dealership.”

The FTC later listed the 10 dealerships that they decided had committed what they found to be violations of Federal Acts and statues. The possible fines for these violations were as much as $16,000 per day. The most frequent complaints were that dealerships failed to disclose something in their advertising. In the case of each of the 10 dealerships, the advertising from the store failed to disclose credit or lease terms.

Those violations stemmed from alleged violations of one of the following:

-Truth In Lending Act- It’s been a Federal law since 1968. It’s intended to protecting consumers when they deal with lenders and creditors.

-Consumer Leasing Act – Amended the Truth in Lending Act. Under CLA, consumers have the right to information about the cost and terms of a vehicle lease.

-Regulation M – Under it lessors must provide information about how the lease payment was calculated, as well as information about early termination or maintenance fees, if the vehicle can be purchased after the lease is up.

-Regulation Z – The requirements imposed by the TILA are found in Regulation Z.

It’s worth noting that the rule making authority for the Truth in Lending act was transferred to none other than the Consumer Financial Protection Bureau. The CFBP is the organization that went after Ally Bank in 2013, forcing them to pay nearly 100 million dollars for allegations of discriminatory auto lending. What constituted discrimination according to the CFBP was not entirely answered or disclosed. The reason for pointing that out is that the rule making authority behind a long-standing Act that impacts car dealers is the same government organization that fined Ally bank for millions without having to completely explain how their statisticians came to the “discrimination” conclusion. A deeper explanation of how the CFBP reached its conclusion was never given (despite numerous inquiries) to congress.

We will continue to seek out more information on this and other stories that involve the role that the government is and will be playing in the automotive industry.