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When it comes to car advertising, truth should be standard equipment. That’s the message of Operation Ruse Control, a coast-to-coast and cross-border sweep by the FTC and state, federal, and international law enforcers aimed at driving out deception in automobile ads, adds-ons, financing, and auto loan modification services. The FTC cases offer 6 tips to help keep your promotions in the proper lane.

1.    Avoid practices that turn add-ons into bad-ons.  Two of the FTC actions involve add-ons – extra products or services tacked on to the sale, lease, or financing of a car. Typical add-ons include extended warranties, guaranteed automobile protection (GAP) insurance, credit life insurance, undercoating, and the like. According to the FTC, California-based National Payment Network deceptively claimed in online ads and through a network of authorized dealers that car buyers who bought its biweekly payment program would save money. What consumers weren’t told was that the cost of the add-on often outstripped any savings. The FTC says that was a material fact that should have been disclosed upfront. In a related action, the FTC sued New Jersey dealerships Matt Blatt Inc. and Glassboro Imports LLC for pitching NPN’s deceptive add-ons and pocketing hefty commissions. To settle the case, NPN will provide consumers with $2.475 million in refunds and fee waivers. The dealerships will turn over an additional $184,000.

2.  Don’t low-ball your pitch.  Three of the Operation Ruse Control cases challenge allegedly deceptive advertising by auto dealers.  Some crossed the line by using headlines to tout bargain prices while failing to disclose – or failing to adequately disclose – the true cost of the deal. For example, ads for Cory Fairbanks Mazda of Longwood, Florida, pitched “used cars as low as $99.” But according to the FTC, $99 was just the minimum bid for cars offered at a liquidation sale and that didn’t include substantial mandatory fees. In a similar vein, the FTC says the dealership’s ads included photos of loaded cars without clearly explaining that some pictured features – like spoilers and sunroofs – weren’t included in the price.

3.   Steer clear of deceptive “zero sum” games.  Just as Seinfeld billed itself as a show about nothing, ads for Ross Nissan of El Monte focused on nothing, too – as in “$0 INITIAL PAYMENT, $0 DOWN PAYMENT, $0 DRIVE-OFF LEASE.”  The California company made the same claims in Spanish language ads. Other ads promised “$0 down*, 0% APR financing*, 0 payments*, and 0 problems.” Well, the FTC had a problem with – among other things – the deceptive use of “zero.” The dealership’s “$0 at lease inception” deal wasn’t applicable if consumers wanted the cars in the ads for the advertised monthly payment. What about “$0 down payment?” The FTC says people, in fact, had to pay a down payment to finance the vehicles for the monthly payment featured in the ads. And “0% APR?” The annual percentage rate for financing those cars for the advertised payment was way more than 0%. (The complaint against Cory Fairbanks Mazda made similar allegations about deceptive “zero” claims.)  The message for dealers:  Don’t lure customers in with misleading “zero” promises.

4.  If strings are attached, make them clear to consumers upfront.  That’s the message of the FTC’s settlement with Jim Burke Nissan in Birmingham, Alabama. According to the complaint, the dealership highlighted eye-catching prices without clearly explaining what the vehicle would really cost consumers. For example, in some cases, what appeared to be the full price was actually what people would have to pay after they ponied up a down payment of as much as $3,000. Other ads featured prices that factored in special discounts or rebates that weren’t available to everyone. For example, some prices applied only to recent college grads, a restriction not prominently disclosed. The ads didn’t tell prospective buyers without a freshly-inked sheepskin that they’d have to pay more. (The Cory Fairbanks complaint includes a similar charge that the company didn’t clearly explain that the advertised discount or price had qualifications – for example, that it was available only to prior Mazda owners.)  What can other dealers take from the cases? Clearly disclose material restrictions and limitations.

5.   Fineprint footnotes and buried “disclaimers” are non-starters.  The FTC says ads for Jim Burke Nissan, Ross Nissan of El Monte, and Cory Fairbanks Mazda all included variations on a deceptive theme: fineprint footnotes, unclear “disclaimers” that consumers had to scroll down to see, or other buried information that didn’t meet the agency’s “clear and conspicuous” standard. Advertisers often ask how big a disclosure has to be, but it’s more than a matter of font size. A clear and conspicuous disclosure is one sufficient for consumers to actually notice, read, and understand it. 

6.  Give credit laws the credit they’re due. The actions against all three dealers allege that they violated provisions of federal credit statutes. One common pothole: using certain “triggering terms” under the Consumer Leasing Act, Truth in Lending Act, Reg Z, or Reg M without making required disclosures. For example, if you advertise monthly lease payments, that kicks in a requirement under the CLA that you disclose other facts about the transaction – like the total amount due at lease signing, whether a security deposit is required, and the number, amount, and timing of scheduled payments. 

Also part of Operation Ruse Control: a law enforcement action against Florida-based Regency Financial Services and CEO Ivan Levy. According to the FTC, the company charged financially-strapped consumers upfront fees to negotiate changes to their car notes, but often didn’t provide anything in return. A federal judge froze the defendants’ assets and entered a Stipulated Preliminary Injunction.  Litigation continues in that case.


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