- FTC Targets Deceptive Advertising of Sale, Finance and Lease Terms by Automotive Dealers
- January 30, 2014 | Authors: David N. Anthony; Paige S. Fitzgerald; Nicholas R. Klaiber; John C. Lynch; Alan D. Wingfield
- Law Firms: Troutman Sanders LLP - Richmond Office ; Troutman Sanders LLP - Washington Office ; Troutman Sanders LLP - Richmond Office
Following up its settlement with two automotive dealers in September 2013, the Federal Trade Commission (FTC) has continued its nationwide targeting of misrepresentations made in print, Internet and video advertisements that relate to the sale, financing and leasing of motor vehicles. The FTC alleged that these dealers’ advertisements falsely led consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and make no upfront payments to lease vehicles.
As part of its investigation, the FTC pursued violations of the Consumer Leasing Act (CLA) and Regulation M, as a result of certain dealers’ failure to disclose various lease-related terms as well as violations of the Truth in Lending Act (TILA) and Regulation Z, as a result of certain dealers’ failure to disclose various credit-related terms. The FTC also alleged violations of the FTC Act for the dealers’ deceptive advertisements which included statements that a vehicle could be purchased for specific low monthly payments when the low monthly payments were temporary “teaser rates” or when a balloon payment was present at the end of the loan. In addition, the FTC also targeted certain deceptive statements in advertisements related to vehicle pricing. Both franchised and nonfranchised dealers from California, Georgia, Illinois, North Carolina, Michigan and Texas were included as part of the FTC’s sweep.
Under the FTC’s proposed consent orders settling these charges, the dealerships would be prohibited 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.
Since 2011, when the Consumer Financial Protection Bureau was established and usurped much of the FTC’s jurisdictional reach, the FTC has made it clear that a regulatory priority would be cracking down on deceptive advertising of sale, finance and lease terms in motor vehicle sales. More enforcement actions in this area can be expected.