9923246

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In The Matter of
R.N. MOTORS, INC.,
RED NOLAND CADILLAC, INC.
, corporations,
and
NELSON B. NOLAND, individually and as an officer of the corporations.

DOCKET NO. C-3947

COMPLAINT

The Federal Trade Commission, having reason to believe that R. N. Motors, Inc., a corporation, and its subsidiary, Red Noland Cadillac, Inc., a corporation, and Nelson B. Noland, individually and as an officer of the corporations, ("respondents"), have violated the provisions of the Federal Trade Commission Act, 15 U.S.C. 45-58, as amended, the Consumer Leasing Act, 15 U.S.C.  1667-1667f, as amended, and its implementing Regulation M, 12 C.F.R.  213, as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges:

  1. Respondent R.N. Motors is a Colorado corporation with its principal office or place of business at 990 Motor City Drive, Colorado Springs, Colorado 80906. Respondent R.N. Motors controls the policies, acts or practices of its wholly-owned subsidiary, Red Noland Cadillac, Inc., including the acts or practices alleged in this complaint.
  2. Respondent Red Noland Cadillac, Inc. is a Colorado corporation and a wholly-owned subsidiary of R.N. Motors with its principal office or place of business at 990 Motor City Drive, Colorado Springs, Colorado. Respondent Red Noland Cadillac, Inc. offers automobiles for sale or lease to consumers.
  3. Respondent Nelson B. Noland is an officer of the corporate respondents. Individually or in concert with others, he formulates, directs, controls, and participates in the policies, acts, or practices of the corporate respondents, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of the corporate respondents.
  4. Respondents have disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 C.F.R.  213.2, as amended.
  5. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44.
  6. Respondents have disseminated or have caused to be disseminated consumer lease advertisements ("lease advertisements") for automobiles, including but not necessarily limited to the attached Red Noland Exhibit A. Red Noland Exhibit A is an electronic advertisement. This lease advertisement contains the following statements:

A.

Current Lease Specials

  1999 Deville 1999

Seville STS

1999

Eldorado

Monthly Payment $535 $649 $529
# Months 36 36 36
GMAC Smart Lease Rates 2.5% 4.1% 2.6%
Down Payment $1,800 $1,800 $1,800
Security Deposit $575 $700 $575

(Red Noland Exhibit A)

FEDERAL TRADE COMMISSION ACT VIOLATIONS

COUNT I:Failure to Disclose, and Failure to
Disclose Adequately, Lease Terms

7. In lease advertisements, including but not necessarily limited to Red Noland Exhibit A, respondents have represented, expressly or by implication, that consumers can lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount, the downpayment, and the security deposit.

8. These lease advertisements have failed to disclose, and failed to disclose adequately, additional terms pertaining to the lease offer, such as the total amount due at lease inception, including but not limited to whether or not third-party fees, such as taxes, licenses, and registration fees, are required as part of the total amount due at lease inception. This information would be material to consumers in deciding whether to visit respondents' dealerships and/or whether to lease an automobile from respondents. The failure to disclose, and failure to disclose adequately, these additional terms, in light of the representation made, was, and is, a deceptive practice.

9. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C.  45(a).

CONSUMER LEASING ACT AND REGULATION M VIOLATIONS

COUNT II: Failure to Disclose, and Failure to Disclose Clearly and Conspicuously, Required Lease Information

10. Respondents' lease advertisements, including but not necessarily limited to Red Noland Exhibit A, state the monthly payment amount, the downpayment, and the security deposit, but fail to disclose, and fail to disclose clearly and conspicuously, certain additional terms required by the Consumer Leasing Act and Regulation M, as amended, including one or more of the following terms:

a. that the transaction advertised is a lease;
b. the total amount due prior to or at consummation, or by delivery, if delivery occurs after consummation. This total amount may: (1) exclude third-party fees that vary by state or locality, such as taxes, licenses and registration fees, and disclose that fact, or (2) provide a total that includes third-party fees based on a particular state or locality as long as that fact and the fact that such fees may vary by state or locality are disclosed;
c. whether or not a security deposit is required;
d. the number, amounts, and timing of scheduled payments; and
e. that an extra charge may be imposed at the end of the lease term in a lease where the liability of the consumer is based on the difference between the residual value of the leased property and its realized value at the end of the lease term.

11. Respondents' practices have violated Section 184 of the Consumer Leasing Act, 15 U.S.C.  1667c, and Section 213.7 of Regulation M, 12 C.F.R. 213.7, as amended.

COUNT III: Failure to Disclose, and Failure to Disclose Clearly and
Conspicuously, Required Lease Rate Information

12. Respondents' lease advertisements, including but not necessarily limited to Red Noland Exhibit A, state specific lease rates for each of certain advertised vehicles, but fail to disclose, and fail to disclose clearly and conspicuously, the following notice concerning lease rates required by Regulation M:

This percentage may not measure the overall cost of financing this lease.

13. Respondents' practices have violated Section 213.4(s) of Regulation M, 12 C.F.R. 213.4(s), as amended.

THEREFORE, the Federal Trade Commission this fifth day of June, 2000, has issued this complaint against respondents.

By the Commission.
Donald S. Clark
Secretary
SEAL: