The Federal Trade Commission (FTC) and Maryland Attorney General have filed yet another complaint against another dealership group. This time, the allegation is against a Washington-area automotive dealership group for allegedly engaging in systematic consumer “deception”- both in advertising and in-person consumer interaction – that cost car buyers millions of dollars in unauthorized charges and unwanted add-on products.
According to the complaint filed in the U.S. District Court for the Eastern District of Virginia, three dealerships and their management company, along with the dealer principal and several other executives, allegedly advertised prices they refused to honor and falsely claimed that customers were required to obtain financing through their dealerships.
Unlike some recent FTC announcements which reported settlements in connection with FTC actions, here the FTC and Maryland AG issued a release about the filing of this Complaint prior to any settlement. The Complaint is pending (and of course the allegations are unproven.) and seeks a permanent injunction, disgorgement and restitution* (see note), and $10,000 per violation of Maryland law. It also seeks to hold all parties, including those named individually jointly and severally liable for all damages.
The FTC alleges that the dealerships engaged in several deceptive practices, including:
Notably, the FTC cites to a comparison of advertised prices to actual transaction prices, noting that “88% of consumers who purchased vehicles from the dealership group between 2020 and 2023 paid an average of $2,000 more than advertised prices.” The complaint also alleges that 68% of customers were charged for at least one add-on product they allegedly neither agreed to purchase nor were informed was optional.
This is the latest in a series of actions that the FTC has taken against dealerships during the pendency of the case challenging the CARS Rule in the 5th Circuit. In each of these cases, the FTC is holding dealers largely to the standards of the CARS Rule for advertising and F&I practices. Again, the Commission voted 5-0 to file the Complaint.
This is yet another clear example of the risks to dealers in the current regulatory environment – regardless of the outcome of the CARS Rule challenge. In light of this and other similar cases, dealers should carefully evaluate and strengthen their compliance programs to ensure adherence to both federal and state laws governing advertising, pricing, and consumer transactions. Dealers should prioritize clarity in pricing and advertising, obtain clear, written consent for all add-ons and fees, and accurately represent all product features and services offered.
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* See FTC Complaint at p. 26 “of all moneys that Defendants received in connection with their unfair or deceptive trade practices and payment of all other economic damages incurred by these consumers in connection with Defendants’ unfair or deceptive trade practices….”
Author: Brad Miller, Chief Compliance/Regulatory Officer, Head of Legal, ComplyAuto
The original article is available here.