Dealers Beware: The FTC Is on the Warpath
Misleading auto ads are in the sights of the FTC. The agency is using its strong enforcement powers to go after print, television and online ads that do not disclose all the costs and other terms of auto sales and leases. Dealers caught breaking the laws and regulations face censure and potentially severe financial penalties.August 2, 2017
The Federal Trade Commission is making full use of its bolstered regulation and enforcement power over auto sales advertising.
How One Ad Misled Consumers
The FTC is paying particular attention to ads that are posted online or on social media.
The agency reportedly has said that dealerships boost their chances of problems with the FTC by taking ads that might have been fine for print or on television and cutting and pasting them online. The reason: Fine print can become unreadable when reproduced in smaller print online or a video.
In one case against an auto dealer, the FTC complaint says the website ad included a photo of the car and a video. Near the end of the video ad, a block of text appears stating:
Combined with other examples of the dealers' website ads, the FTC concluded that "the company does not disclose important additional terms of the prominently advertised lease, including but not limited to whether consumers must pay tax, tags, registration or doc fees, the number of lease payments, and whether an extra charge may be imposed at the end of the lease."
When the Dodd-Frank Wall Street Reform and Consumer Protection Act became law in 2010, the FTC's power over the ads increased. The agency now looks at television, print and online ads to see if they clearly spell out all the costs and other important terms of a sale needed by consumers. Dealers publishing misleading ads risk censure and potentially severe financial penalties.
The FTC has charged several auto dealers with false or deceptive advertising about the cost of buying or leasing cars. Most dealers settle the charges by agreeing to take a series of administrative steps to ensure that future ads comply with relevant laws and regulations.
The agreements warn that further violations may result in civil penalties. Those penalties could amount to as much as $16,000 per day. The agreements remain in effect for 20 years.
One enforcement action charged a Massachusetts auto dealer with running advertisements saying consumers could lease vehicles with no money down and specified monthly payments. The FTC said the advertised amounts did not mention substantial fees.
In a consent order, the dealership agreed to follow the rules applying to such ads, which requires clearly and conspicuously disclosing, for instance, whether the price in the ads are for loans or leases and how much money must be paid up front.
Among other dealerships charged were:
- A Maryland dealer that allegedly advertised "Internet prices" and "dealer discounts" not available to a typical consumer.
- An Ohio dealer who allegedly ran a bait and switch operation in which discounts applied only to more expensive models of the advertised vehicles.
- Two dealerships in California charged with advertising vehicles for sale for $5,000 less than their actual prices. Both used ads that included a mix of English and Spanish.
- A dealer in Georgia allegedly advertising auto financing with low monthly payments, when the payments advertised were temporary "teasers." After making a few payments at the teaser rate, the monthly payment would go up.
- A Michigan dealership that allegedly sent out mailers falsely claiming that the recipients had won sweepstakes prizes.
The dealerships are charged under a variety of laws and regulations, including the FTC Act, the Consumer Leasing Act and the Truth in Lending Act. All the dealers said the violations were not deliberate.
Closely review your dealership's ads to ensure you don't inadvertently run any ads that could be construed as misleading.