This summer, the Federal Trade Commission (FTC) announced multiple enforcement actions relevant to dealers. The allegations, summarized below, consist of violations of various federal and state laws in connection with the selling and financing of vehicles and voluntary protection products.
Since the FTC issued the Vehicle Shopping Rule, which is currently on hold pending the resolution of litigation, the FTC has continued its trend of high-profile FTC enforcement actions against franchised dealers and the automotive industry. These enforcement actions signal the need for dealers to conduct robust training and oversight in all aspects of their advertising, sales and finance operations.
Each enforcement action involves a unique combination of circumstances, but the FTC allegations include:
Section 5 of FTC Act, 15 U.S.C. § 45(a)- Misrepresenting vehicle prices in advertisements.
- Deceptively charging for voluntary protection products and “add-ons” including charging for products the customer did not agree to, falsely claiming that products were required, or “packing” sales contracts with products to achieve an artificially inflated monthly payment.
- Misrepresenting that vehicles have undergone inspection when they have not.
- Misleading statements about what vehicle service contracts cover (also in violation of the Telemarketing Sales Rule (TSR), 16 CFR 310).
- Discriminating against minorities by charging them more in interest and add-on charges than similarly-situated white customers.
- Discriminating against minorities by charging them more in interest and add-on charges than similarly-situated white customers.
- Failing to display a Buyers Guide on used vehicles for sale online.*
- Failing to make the text of the warranty readily available for examination by prospective buyers.
- Misrepresenting vehicle shipping and fulfillment practices.
- Failing to ship vehicle orders within the timeframe required.
- Failing to offer consumers the opportunity to consent to a delay in vehicle shipping or to cancel their order and receive a prompt refund.
Dealers should carefully review the recent enforcement actions with an attorney familiar with federal, state and local laws governing vehicle advertising, sales and financing, as well as their dealership operations personnel to determine appropriate compliance measures to adopt for their dealership. As a reminder, while not recognized as a compliance safe harbor by the FTC, NADA offers multiple optional products to assist dealers in these areas, including:
- Dealer Guide to Federal Advertising Requirements (LOG-IN REQUIRED)
- Dealer Guide to the Used Car Rule (LOG-IN REQUIRED)
- NADA Memo: Mail, Internet, or Telephone Order Merchandise Rule (LOG-IN REQUIRED)
- NADA/NAMAD/AIADA Fair Credit Compliance Policy and Program
- NADA/NAMAD/AIADA Model Dealership Voluntary Protection Products Policy
Additional Details
FTC’s recent enforcement actions with links to the complaints follow:
Note
Dealers should take particular note that the text of the law does not require display of the Buyers Guide for online advertising. However, the stipulated order seeks to prevent the dealer from: “Before offering a Used Vehicle for sale to a consumer via the internet, failing to display a properly completed Buyers Guide through a hyperlink that is prominently and conspicuously displayed with each Used Vehicle offered for sale.” Dealers, particularly those engaged in online used vehicle sales, should work with an attorney to review their Buyers Order and other relevant disclosure processes considering this enforcement action.
NHADA has several partners who offer legal services to members, including:
