2018 GNYADA Membership Directory

CFPB’s general practice of not writing rules or regulations but“regulating by enforcement,”which means bringing actions for practices that the FTC first deems to be unfair or deceptive by bringing an enforcement proceeding against a dealer, thereby putting other dealers on notice that the practice violates the FTC Act. Deceptive Conduct Most dealer deceptive conduct involves failure to make required disclosures (e.g., triggered terms under TILA or the CLA when a dealer advertises a payment amount), written or oral misrepresentations, or omissions of material information both in advertisements and in personal dealings with a consumer. The issue is whether the act or practice is likely to mislead a consumer, rather than whether it actually misleads the consumer. The FTC considers all of the facts and circumstances of a transaction in order to reach this conclusion. As you may be aware, the FTC has focused on deceptive dealer advertising in recent years, including its 2014 Operation Steer Clear and its 2015 Operation Ruse Control. The FTC has pursued numerous deceptive practice claims against auto dealers. For example, FTC regulations set forth restrictions on advertising practices it considers to be deceptive, such as “bait and switch” advertising and advertising discounts from MSRP if few, or any, sales below MSRP take place in the dealer’s geographic area. Another deceptive practice is “rebate stacking,” where multiple rebates available only to select groups (military, recent college grads, first time car buyers, etc.) are advertised together to calculate a vehicle price, even though few, if any, consumers will qualify for all of them. The FTC has brought complaints against dealers for misrepresenting the down payment in lease and financing transactions; failing to disclose fees, security deposits, etc.; selling vehicles with known defects that consumers were not able to determine (e.g., selling new vehicles with paint defects likely to cause rust, odometer rollbacks, and other concealment of conditions on used vehicles); selling vehicles that are subject to an open recall while advertising as rigorous pre-sale inspection; and payment packing. The FTC has indicated that advertising the fuel economy of vehicles can also trigger liability. The FTC has further taken the position that no item can be advertised as “free” when the primary item being sold (such as an automobile) is subject to a negotiated price. In fact, the FTC has issued an entire regulation on when the word “free” can be used in advertising without being deceptive. Since 2012, the FTC brought more than 30 deceptive practice enforcement actions against dealers. Four involved dealers who advertised that they would pay off a customer’s trade-in balance even if the customer was “underwater.” At least five enforcement actions involved dealers advertising prices and discounts that were either not available to all consumers or deceptive in terms of being available only on higher-priced, “loaded” vehicles, terms that were not disclosed. Others are discussed in Chapter 8: The FTC: Marketing and Advertising Vehicles, and Credit Terms, including deceptive pricing, concealment of terms, and making the advertised terms available on only a small number of vehicles. The FTC is being very aggressive on scrutinizing dealer advertising especially on the Internet and in social media. Disclaimers or qualifications must be disclosed “clearly and conspicuously” and in close proximity to the advertised language they qualify. The term“advertising”should also be viewed broadly; in 2016 the FTC took action against one dealer for posting fake positive reviews about the dealership on social media. Each of the enforcement actions brought by the FTC involved consent orders that can last up to 20 years and many of the consent orders will be followed by class action lawsuits for state UDAP claims, as FTC consent orders can provide a road map to plaintiffs’lawyers.

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