GNYADA December 2014 Newsletter

FTC Takes Action Against Two Auto Dealer Chains 10

offer, such as a requirement to make a substantial down payment… [and] failing to make credit disclosures clearly and conspicuously, as required by the TILA.” These cases represent the fourth set of advertising enforcement actions brought by the FTC against auto dealers since 2012. New York Advertising Guidelines Based on the description of these ads, they would violate New York’s Advertising Guidelines for Auto Dealers. Dealers are cautioned to ensure that all advertising complies with Federal, State and local Advertising Guidelines, even when a third party prepares the content for you, and to be sure that any ad agency promises, in writing, to stand behind their work. The New York Advertising Guidelines can be found at http://www.gnyada.com/dealers/ services/overview. GNYADA thanks NADA Regulatory Affairs for this article. Under both state and federal law, consumers have a “private right of action” for damages and attorney’s fees. State and federal laws also pro- vide for substantial penalties for vio- lations. Prior to offering credit repair services or products, dealers should consult their attorney. This item is intended as information only; for specific advice, contact your attorney. This article was provided by Stuart A. Rosenthal, Esq. He can be reached at Stuart@Rosenthal.Lawyer or 914.205.7700 to answer any questions.

entered into a consent agreement, and the Justice Department is seeking remedies by filing a complaint in federal district court. With regard to the dealer chain that settled the charges, the FTC states: “the dealerships and advertising com- pany violated the 2012 FTC adminis- trative order by frequently focusing on only a few attractive terms in their ads while hiding others in fine print, through distracting visuals, or with rapid-fire audio delivery. For exam- ple, some dealership ads promoted low monthly payments or attractive annual percentage rates and finance periods, while concealing other mate- rial items, such as low payments were for leases, not sales; major lim- its existed on who could qualify for discounts; and offers often included significant added costs.” With regard to the other dealer chain, the FTC states, in part, that it “allegedly misrepresented the costs of financing or leasing a vehicle by concealing important terms of the improve a consumer’s credit history, in return for a fee. Under that law, only certain types of nonprofits and licensed attorneys can charge or col- lect any fee in advance of performing the services. There are specific dis- closures and terms that must be included in credit repair contracts. Federal Law: The federal Credit Repair Organizations Act similarly prohibits advance fees and requires specific disclosures. It also requires a three-day cooling-off period (right of cancellation).

The Federal Trade Commission (FTC) announced on December 12, 2014, that it is taking action against two auto dealer chains for deceptive- ly advertising the cost of buying or leasing a car. These actions follow consent orders the FTC entered into with the same dealer chains in 2012 to resolve allegations that they engaged in deceptive advertising related to negative equity and failed to satisfy the disclosure requirements that apply to credit and/or lease ads containing “trigger terms.” Because the dealer chains agreed in those consent documents, the FTC is now seeking civil penalties in addi- tion to other forms of relief, such as the imposition of extensive compli- ance monitoring, compliance report- ing, and recordkeeping requirements. According to the FTC’s press release, one of the dealer chains has already agreed to settle the charges and, as part of the agreement, pay a civil penalty in the amount of $360,000. The other dealer chain has not The NYAG has taken the position that companies that sell credit repair products may violate state laws. The AG’s office is looking into the prac- tices of the credit repair industry. Credit Repair Organizations Act There are both state and federal laws and regulations that limit “credit repair organizations,” prescribing what they can do and say and requir- ing specific forms and disclosures. New York State Law: A credit repair business is one that performs or promises to provide a service to

11 AG Investigating Credit Repair Offers

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • December 2014

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