Operation Ruse Control: 6 tips if cars are up your alley

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.

 

Comments

By any reason , do you supervise Puerto Rico auto sales? I understand that we are suffering this problem and know, Insurance Services Office introduced a new insurance form named Auto Dealers Coverage Form which introduces claims resulting fro Auto Dealers Errors and Omission. Please explain how this will work.

i went this past week to see about buying a car this dealer had it was a 1999 for 3,000 i wanted to trade in my 2002 kia sedona van.now i'm the trpe of person that likes to know what i'm getting into before i sign on the bottom line so i asked all abut the tax ,title tag ,so the sales man went to adding up every thing and he came up with like a total of 4,500 dollars before what i get for my trade in i found out they wanted to charge 650.00 as a dealers fee and sum other charges ,bottom line is if i had gone through with the deal i would be paying about 2,000 more over what the car was saling for which was 3000 grand . thats just plain wrong

Taxes, tags and doc fees are all standard. Taxes and tags do not go to benefit the dealers. Doc fees go towards paying the dealership employees who have to process and prepare all the paperwork so that the buyer does not have to deal with the banks, dmv or government. Buyers should educate themselves. It is very difficult for an educated buyer to get fooled.

Seriously such a great post..!!

I really appreciate you for this information.

I purchased a vehicle from a dealer that was involved in a prior accident. When I expressed my concerns about the purchase I was assured it was a minor accident less then $1000 in damage. I was provided a CarFAX report to support the dealers claim. I purchased the vehicle and 2.5 years later I decide to trade the vehicle only to discover it was in a major accident with front and back end damage. I was low balled on the trade due to the accident and one dealer refuse to take it in exchange for a new purchase. What action can I take if the dealer was deceptive and failed to provide true and accurate information about the vehicle? I have proof that I was provided a dated CARFAX report, and the accident results were on the report at the date of purchase. PLEASE ADVICE.

Carfax and others are not fool proof but they often Know more than the dealer. It is not like the dealer knows each car every detail from the day it was made. The dealer did their best to inform you buy giving you the vehicle history. ( Not required by law)

Most states have Damage Disclosures and brand vehicles with Major damage ( Amounts and percentages vary by state). If it was not branded then the dealer did nothing wrong.

It goes both ways, customer will tell you that their trade was never wrecked, then you pull the Carfax and find out they wrecked the first week the had it. And it is "Always just scratch"

Regardless if the repair is acceptable ( you did not notice for 2.5 years) and did not exceed the disclose amount they did nothing wrong.

The dealer you are trying to trade with is probably using as a tactic to low ball your trade.

1 out of 5 cars that are over 5 years old have been to the body shop.
1 out of 10 Brand New cars have been to the body shop.
Scratches, dings, dents, fender benders happen, and you can not junk a car for those reasons.
If it was a serious accident and your state has damage disclose laws, then you might have some standing.

I bought a used 2014 jeep, (still under factory warranty), but certain things were not disclosed and I wonder If there is a legal responsibility for dealers to disclose these things...I found that the jeep was manufactured for the Canada Market, which explains why there was NO air conditioning. neither disclosed. there was NO buyers guide on the vehicle, but in my paperwork the was one folded with the other papers, the tape strips still have the covering on them. I was also told that the 5/100000 mile Power train warranty "stays with the vehicle" but have heard different. so any help on any of these items would be appreciated .

Do not rely on CarFax reports!
I bought a beautiful 2000 dodge Viper from a private party in 2010, had it inspected by two Dodge dealerships in Phoenix AZ. One of the dealerships ordered a CarFax report for me on the car. The report showed that the car was involved in an accident in 2003 but showed the car was repaired and had a clean normal title. Both dealerships found NO evidence that the car had been in an accident.
In 2016 I decided to sell the car, a buyer flew in to test drive the car and committed to buy it. The buyer is an employee of Nationwide Insurance company. After he left he ordered a new CarFax report in which he found a new entry posted in 2013 that the car was declared a total loss after the 2003 accident by the insurance company. This had to be an error by CarFax but investigations showed the new entry was added to the report 10 years after the accident and 3 years after I purchased the car and was accurate. I had to give a substantial discount in order to sell the car. I challenged CarFax but of course was just blown off by one of their attorneys.
I could never find out which insurance company declared the car a "total loss". If I find out that the insurance company was Nationwide I will try to get a federal investigation started.

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