“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.”
Cases Involving Vehicle Purchase Add-Ons
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 is the practice of a dealer or other third party adding to the vehicle sales, lease, or finance agreement charges for other products or services. A few examples include extended warranties, payment programs, guaranteed automobile protection (commonly called GAP or GAP insurance), credit life insurance, road service, theft protection, and undercoating.
National Payment Network, Inc. (NPN): The FTC charged that NPN, headquartered in San Mateo, Calif., allegedly violated the FTC Act by deceptively pitching consumers an auto payment program – both online and through a network of authorized auto dealers -- that it claimed would save consumers money. NPN failed to disclose that the significant fees it charged for the service often cancelled out any actual savings. The fees to enroll in NPN’s program averaged $775 on a standard five-year auto loan.
Matt Blatt Inc. and Glassboro Imports, LLC (Matt Blatt dealerships): In a related case, the FTC alleged that Matt Blatt dealerships, with multiple locations in New Jersey, violated the FTC Act by failing to disclose or adequately disclose the fees associated with NPN’s add-on service and that many consumers would not save money overall due to the program’s significant fees. Matt Blatt dealerships received a commission for each of the more than 1,000 consumers they enrolled.
NPN and Matt Blatt dealerships have agreed to settle the FTC charges, and under proposed consent orders are prohibited from misrepresenting that a payment program will save consumers money, unless the amount of savings is greater than the total amount of fees and costs charged in connection with the program. They also are prohibited from misrepresenting that the payment programs or their associated fees will improve, repair or otherwise affect a consumer’s credit record.
NPN will refund more than $1.5 million to consumers, and waive another $949,000 in fees to current customers during the fee waiver period. Matt Blatt dealerships also will pay $184,000 to the FTC as part of the settlement.
Cases Involving Deceptive Advertising
Three auto dealers, Cory Fairbanks Mazda of Longwood, Fla., Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif., have agreed to settle charges that they ran deceptive ads that violated the FTC Act, and also violated the Truth in Lending Act (TILA) and/or Consumer Leasing Act (CLA). According to the FTC complaints, ads touted sales, lease or financing options that seemed attractive but were cancelled out by fine-print disclaimers. In other instances, the disclaimers did not disclose relevant terms, such as required down payments.
All of the financing offers, lease payments, and $0 down references in this ad are completely undermined by the fine print, which requires $3,000 down for all deals.
The proposed settlements in these actions prohibit the defendants from misrepresenting the purchase cost or any other material fact about the price, sale, financing or leasing of a vehicle. Jim Burke Nissan and Cory Fairbanks Mazda are also prohibited from representing that a discount, rebate, bonus, incentive or price is available unless it is available to all consumers or all qualifications and restrictions are clearly and conspicuously disclosed.
The Commission votes to issue the three administrative complaints and accept the proposed consent orders were 5-0. The agreements will be subject to public comment for 30 days, beginning today and continuing through April 27, 2015, after which the Commission will decide whether to make the proposed consent orders final. Submit a comment electronically:
Cory Fairbanks Mazda
Auto Loan Modification Case
At the FTC’s request, the U.S. District Court for the Southern District of Florida temporarily halted the practices of Regency Financial Services of Lake Worth, Fla., and its CEO Ivan Levy, who allegedly charged consumers upfront fees to negotiate an auto loan modification on their behalf, but then often provided nothing in return. The court also froze defendants’ assets, and last month entered a Stipulated Preliminary Injunction Order. The FTC’s lawsuit filed on Jan. 26, 2015 is ongoing, and the Commission is seeking a permanent injunction to stop defendants’ deceptive practices and to return ill-gotten gains to consumers.
According to the FTC’s complaint, 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 operation follows the FTC’s sweep against 10 auto dealers announced in January 2014, and is part of the agency’s ongoing effort to protect consumers purchasing and financing a new vehicle.
Consumers in the market for a new or used vehicle should read the FTC’s new blog post, Add-On Auto Finance Plan Gets a “D” for Deception, along with Are Car Ads Taking You for a Ride? and Buying and Owning a Car. Businesses can check out new guidance in the FTC’s blog post: Operation Ruse Control: 6 Tips If Cars Are Up Your Alley.
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