The Federal Trade Commission has given final approval to a consent agreement with Jerry C. Cohen and the three northern Virginia automobile dealerships of which he is president and CEO -- Jerry's Ford Sales, Inc., John's Ford, Inc. (which does business as Jerry's Leesburg Ford), and Jerry's Chevrolet Geo Oldsmobile, Inc. -- settling charges that they deceptively advertised their "optional payment" financing plan and engaged in other lease and credit advertising violations. The Commission's action makes the consent order provisions binding on the respondents.
In its complaint detailing the charges in this case, the FTC alleged that many ads promoted low initial, monthly payments without adequately revealing the existence of mandatory balloon payments of thousands of dollars at the end of the payment term. Challenged ads also inaccurately or inadequately disclosed the annual percentage rate (APR) or other credit or lease terms associated with the financing or leasing plans being promoted, the FTC alleged. The ads allegedly violate one or more of the federal credit- and lease-disclosure laws -- the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA), and their implementing regulations -- and/or the Federal Trade Commission Act.
Under the final order, the respondents are prohibited from misrepresenting in any manner the terms of financing the purchase of a vehicle. The order also sets out detailed requirements for the respondents to comply with TILA and CLA disclosure laws and regulations. Among those requirements:
- credit ads that state a rate of finance charge must disclose that rate as an APR and must accurately calculate that rate;
- credit ads that state any number or amount of payments, the amount or percentage of down payment, or the amount of any finance charge must also accurately, clearly and conspicuously state the amount or percentage of the down payment, the terms of repayment (including any balloon payment), and the APR;
- the respondents must actually arrange or offer any specific credit terms included in an advertisement;
- lease ads that state the amount of any payment, the number of payments, or that any or no payment is required at the consummation of the lease must also state, clearly and conspicuously, that the transaction is a lease; the total amount of any payment required at consummation; the number, amounts, due dates or periods of scheduled payments and the total of such payments; a statement as to whether the lessee can buy the leased property and when, and the price or method of determining the purchase price; and a statement regarding the amount or method of determining any liabilities the lease imposes on the lessee at the end of the term; and
- the respondents must make leases available at advertised terms.
Finally, the order contains various reporting and notification provisions.
The consent agreement was announced for a public-comment period on June 6. The Commission vote to issue it in final form occurred onAug. 29, and was 5-0.
NOTE: A consent agreement is for settlement purposes only and does not constitute admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $10,000.
A news release summarizing the complaint and consent agreement was issued at the time the Commission accepted the consent agreement for public comment. Copies of that release and of the complaint and final order are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov.
(FTC File No. 932 3340)
(Docket No. C- 3612)