Jamie LaReau
Automotive News
January 9, 2014 – 12:00 pm ET — UPDATED: 1/9/14 12:24 pm ET – adds details
Nine U.S. auto dealerships will settle deceptive advertising charges as part of a nationwide investigation by the Federal Trade Commission dubbed Operation Clean Sweep.
The investigation focused on the sale, financing and leasing of vehicles, the FTC said today.
The dealerships that settled charges were:
• Norm Reeves Honda Superstore in Cerritos, Calif.
• Honda of Hollywood in Los Angeles
• Nissan of South Atlanta in Morrow, Ga.
• Infiniti of Clarendon Hills in Clarendon Hills, Ill.
• Paramount Kia in Hickory, N.C.
• Fowlerville Ford in Fowlerville, Mich.
• Southwest Kia, which owns New World Auto Imports in Dallas, New World Auto Imports of Rockwall in Rockwall, Texas; and Hampton Two Auto Corp. of Mesquite, Texas
• Two used-only dealerships — Casino Auto Sales of La Puente, Calif., and Rainbow Auto Sales of South Gate, Calif.
The FTC is also taking action against a 10th dealership, Courtesy Auto Group of Attleboro, Mass.
The FTC said the dealers in this case made several “misrepresentations” in print, Internet and video advertisements that violated the FTC Act, falsely leading consumers to believe they could buy cars for low prices, get low monthly payments through financing and/or make no upfront payment to lease vehicles.
One dealer misled consumers to believe they won prizes they could collect at the dealership, the FTC said.
“Car ads are an important source of information for serious shoppers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a statement. “Dealers’ ads need to spell out costs and other important terms customers can count on. If they don’t, dealers can count on the FTC to take action.”
Norm Reeves Honda Superstore and Honda of Hollywood allegedly violated the FTC Act by deceptively advertising that consumers could pay zero money upfront to lease a vehicle, when in fact the advertised amounts excluded “substantial fees and other amounts,” the FTC said.
The ads also allegedly violated the Consumer Leasing Act and Regulation M by not disclosing certain lease-related terms, the FTC said. Norm Reeves Honda Superstore’s ad also alleged violated the Truth in Lending Act and Regulation Z by not disclosing certain credit-related terms.
The proposed consent orders settling the charges in the nine cases are intended to prevent the dealerships from engaging in similar deceptive advertising in the future, the FTC said.
Here are specifics of the charges against the dealerships, according to the FTC:
Georgia
Nissan of South Atlanta allegedly violated the FTC Act by deceptively advertising that consumers could finance a vehicle purchase with low monthly payments when, in fact, the payments were temporary “teasers” after which consumers would owe a different amount. The ads also allegedly violated TILA and Regulation Z, by failing to disclose certain credit related terms.
Illinois
Infiniti of Clarendon Hills allegedly violated the FTC Act by deceptively advertising that consumers could pay $0 up-front to lease a vehicle when, in fact, the advertised amounts excluded substantial fees and other amounts. The ads also allegedly violated the CLA and Regulation M, by failing to disclose certain lease related terms.
North Carolina
Paramount Kia allegedly violated the FTC Act by deceptively advertising that consumers could finance a purchase with low monthly payments when, in fact, the payments were temporary “teasers” after which the consumer would owe a much higher amount, by several hundred dollars. The ads also allegedly violated the TILA and Regulation Z, by failing to clearly and conspicuously disclose certain credit related terms.
Michigan
Fowlerville Ford allegedly violated the FTC Act by sending mailers that deceptively claimed consumers had won a sweepstakes prize, when, in fact, they had not. Some of their ads also allegedly violated TILA and Regulation Z, by failing to disclose certain credit related terms.
Texas
Southwest Kia companies allegedly violated the FTC Act by deceptively advertising that consumers could purchase a vehicle for specific low monthly payments when, in fact, consumers would owe a final balloon payment of over $10,000.
The companies also allegedly deceptively advertised that consumers could drive home a vehicle for specific low up-front amounts and low monthly payments when, in fact, the deal was a lease and they would owe substantially more up-front. The ads also allegedly violated the CLA and Regulation M, by failing to disclose certain lease related terms, and the TILA and Regulation Z, by failing to disclose certain credit related terms.
California
Casino Auto Sales and Rainbow Auto Sales allegedly violated the FTC Act by deceptively advertising that consumers could purchase vehicles at specific low prices when, in fact, the price was $5,000 higher. Both dealers used a mix of English and Spanish in their ads.
Prohibitions
The settlements — which are not yet final — involve proposed consent agreements which prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing, or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle.
In some cases, the proposed consent orders also require the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws.
Fowlerville Ford also is prohibited under the proposed order from misrepresenting material terms of any prize, sweepstakes, giveaway, or other incentive.
Public comment
The Commission voted unanimously to accept the packages containing the nine proposed consent orders, the FTC said.
The agreements will be subject to public comment for 30 days, beginning today and continuing through Feb. 10, 2014, after which the Commission will decide whether to make the proposed consent orders final.
The FTC’s administrative complaint against Courtesy Auto Group also was approved unanimously by the Commission.
It alleges that Courtesy Auto Group violated the FTC Act by deceptively advertising that consumers can lease a vehicle for $0 down and specific monthly payments when, in fact, the advertised amounts exclude substantial fees. The ads also allegedly violate the CLA and Regulation M, by failing to disclose or clearly and conspicuously disclose certain lease related terms.
The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations against Courtesy Auto Group will be tried in a formal hearing before an administrative law judge.
Read more: http://www.autonews.com/article/20140109/RETAIL07/140109857/dealerships-settle-deceptive-advertising-charges-in-ftc-sweep#ixzz2pvLU6JtM
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John Paul Strong
John Paul Strong combines his two decades of automotive marketing experience with a team of more than 150 professionals as owner and CEO of Strong Automotive.
