2015 GNYADA MEMBERSHIP DIRECTORY

FTC COMPLETES NEW SWEEP OF AUTO DEALER PRACTICES RESULTS IN 187 ENFORCEMENT ACTIONS - $2.6 MILLION IN JUDGMENTS The Federal Trade Commission (FTC) released the results of Operation Ruse Control an enforcement sweep of car dealers’ practices. The FTC partnered with criminal and civil enforcement agencies in the latest investigation. This is the second sweep related to automobile dealers within a two year time period. The FTC targeted these specific practices it found to be deceptive: • Purchase Add-ons – products or services sold by a dealer or third party and added to finance contract or lease. For example, the FTC found a dealership that misrepresented a payment program that claimed it would save consumers money however it failed to disclose that the significant fees it charged for the service often cancelled out any actual savings. • Deceptive Advertising – Bait and Switch advertisements. For example the FTC found ads offering promotional prices and rebates, but disclaimers in very small print eliminated customers from qualifying for advertised promotional rates. • Loan Application Fraud – dealers used straw purchasers or changed customer information on credit applications to ensure loan qualification for vehicles customers may not have been able to afford. The FTC expressed particular concern over purchase add-ons sold by dealers. The agency settled with a New Jersey dealer and a company offering bi-weekly payment plan to customers. The FTC claims that these bi- weekly pay plans include service fees that exceed any potential savings gained from the bi-weekly payments. Fines & Liability The NJ dealer will pay $184,000 to the FTC while the company offering the automatic bi-weekly payment plan will pay $1.5 million to consumers and $949,000 directly to the FTC.

HOT TOPICS 2015 GNYADA Membership Directory 99

The Agency indicated that criminal prosecutions could be forthcoming seeking sanctions, including jail time, for individuals (i.e.: sales people, sales managers and F&I) found to have committed bank or wire fraud or other wrongdoing. The FTC indicated that their fraud investigators, previously assigned to the mortgage industry have now been assigned to focus their attention on auto dealers. Enforcement action against auto dealers is ongoing.