Back in January of 2014, I wrote in my article
The FTC Strikes Again – You Ain’t Seen Nothing Yet that “
although it may seem that the FTC is only the ‘dealer advertising cop’, they are expanding their reach in several other areas”. Well, that prediction has come home to roost in a big way.
This week, the FTC charged nine California auto dealerships and
their owners with using a wide range of deceptive and unfair sales and
financing practices.
In addition to deceptive advertising (among the worst of which was
advertising $38 down/$38 month when the actual deal was $2695 due at
signing and payments of $179 after the first 6 months), the dealers were
accused of the following:
- Subjecting non-English speaking consumers and individuals with
poor credit, to deceptive, misleading, and unfair practices when
offering add-on products and services or when arranging financing
- Packing additional charges for add-on products and service into the amount financed without consumers’ informed consent
- Deceptively claiming that such add-on products are required as a
condition of the purchase or financing of the vehicle or will improve
consumers’ chances of obtaining financing
- Deceptive and unfair tactics to pressure consumers to agree to
different financing terms or have otherwise refused to honor the
contract (“yo-yo practices.”)
- Dealership employees and their families posting positive,
five-star reviews of the dealerships on websites that deceptively
purport to be objective or independent
- Selecting and pre-printing add-on products on the sales and
financing forms, such as the F&I product menus, pre-contract
disclosures, and the contract, before discussing or presenting them to
the consumer
- Rushing consumers through the closing process and simply indicating to consumers where to sign
- Having consumers sign blank documents
- Telling consumers that they would not be charged the cost of the add-on products when in fact they were
- Telling consumers that they could cancel the add-on products
within a specified time for a refund and failing to process the
paperwork or have claiming to have lost the paperwork, resulting in
delayed cancellations or lower refund payments
- Approving deals to customers with risky credit before bank
financing had been secured in order to increase their sales numbers
knowing that the dealership was not going to be able to secure bank
financing on the offered terms
- Representing to consumers that they must sign the new contract when dealers failed to assign financing
- Refusing to return the consumer’s down payment or trade-in vehicle
- Having consumers’ vehicles repossessed where consumers had valid, binding contracts
It appears that the FTC obtained information about the dealers’ practices from both consumers and former dealership employees.
Here’s the ultimate game-changer: unlike earlier FTC actions where
there have been no initial monetary penalties, it looks like this one is
going to be very, very expensive. The FTC is requesting that the court
assess both injunctive relief and relief to redress injury to consumers
including but not limited to, rescission or reformation of contracts,
restitution, the refund of monies paid, and the disgorgement of
ill-gotten monies; and the FTC’s costs and legal fees.
The stakes have gone up – way up. Dealers nationwide need to get serious about compliance. Today.
