GNYADA 2019 Membership Directory & Services Guide

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 “under water.” 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. “Abusive” Practices Under Section 1031 of the Dodd-Frank Act, abusive practices include practices that materially interfere with the consumer’s ability to understand a term or condition of the product or service or take unreasonable advantage of a consumer’s lack of understanding, inability to protect their interests, or their reasonable reliance on the credit provider (dealer) to act in the consumer’s interests. Ex-BCFP Director Richard Cordray had indicated the agency would not publish regulations further clarifying what are abusive practices but would do so by bringing enforcement actions against perceived violators. Said Cordray, “For an institution, if they are in a situation, they should be thinking carefully about whether they are taking unreasonable advantage of their customer … It’s a customer by customer thing.” However, in October 2018, Acting BCPB Director Mick Mulvaney announced a rulemaking to develop the“abusive”legal standard, but offered no timeline for progress. Again, the BCFP does not have authority to enforce“abusive”trade practice violations against franchised auto dealers but the same conduct that the BCFP would consider to be “abusive” may support a private UDAP action under state law. Honesty and transparency in the sales and F&I processes are perhaps the best defense to a claim of an unfair or abusive practice. Section 1042 of Dodd-Frank extends this UDAP enforcement authority to state Attorneys General and other regulators. Already, several state AGs have brought civil actions involving creditors other than auto dealers. to share information and coordinate their supervisory and enforcement efforts among their respective regulated entities. The FTC partnered with 32 law enforcement agencies in the U.S. and Canada to implement Operation Ruse Control, a crackdown on perceived deception and fraud in auto sales. Collectively, they brought over 185 actions against auto dealers. Both the FTC and the BCFP have signed similar memoranda of understanding with state Attorneys General. Note that despite the fact that the BCFP has slowed somewhat in its use of UDAAP as an enforcement tool, the FTC continues to exercise its UDAAP authority, and in novel ways. Recently, the FTC charged a dealership

2019 membership directory & services guide / hot topics

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