Jan 15, 2014
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FTC Now Enforces Stricter Advertising Guidelines, Operation Steer Clear

Car advertising

Truth in advertising has never been for the Auto Industry, right? Starting in January 2014, Auto Dealers will need to clean up their act, when it comes to ALL advertising. A nationwide enforcement sweep is underway and it will be focused on TV, newspaper, and online claims about sales, financing and leasing. Here are 8 pointers taken from the FTC ( Federal Trade Commission ) website, the fines that are being imposed are as high as 16k per day that each ad ran in paper, TV or online, don’t get caught by the feds while trying to capture more customers through deceptive advertising. In most cases, even if you had a disclaimer that explained the advertising, they still prosecuted. There are 10 lawsuits so far as of January 9th, and the FTC is promising to sweep the entire country with Operation Steer Clear.

Most of the dealerships were New/Used car dealers, but there were also a few Independent dealers as well, so this will be a great time to clean up your advertising act!

The following examples were taken from the current cases that were prosecuted:

Deceptive Pricing – Consumers complained of being lured into the lot by vehicles that were advertised at a specific low price, but either the car was already sold or the real price was $5,000 higher.

Teaser Payments – Consumers complained that while auto dealers advertised an unbelievable low monthly payment ($69.00 per month), when the final paperwork was drawn up the payment increased over time. The FTC said, “Dealers did not state the number of payments and how much they would be after those first few low monthly payments.”

Balloon Payments- Consumer complained that the advertised low monthly payments ($99.00), without openly disclosing that the buyer would owe a final balloon payment. FTC said, “dealers did not state the amount of that balloon, in this case, over $10,000.”

Zero down for Lease Vehicle – Consumer complained that dealers advertised zero down up front to lease a car. FTC said, “not true, behind the advertising were heavy fees and other amounts that were due upfront.”

Lease Terms Not Disclosed -Consumer complained low up-front amount and low payment in ads. FTC Said, “advertising was made without clearly explaining that the transaction was actually a lease which had many hidden fees.”

Hidden Rates – Consumer complained the dealer advertised 0 percent for 60 months. FTC said, “the rate applied only if people bought a new car for up to a certain dollar amount, such as $12,000 But if the buyer chose a car for $18,000, the buyer would pay a higher rate, that was not clearly stated.”

Prize Promotion – Consumer complained of falsely claimed sweepstakes, using a mailer.  FTC said, Mailer was used falsely just to get customer in door, with no actually prize or winner.”

Credit/Lease Disclosure Failure – Consumer complained ads applied to customers with certain credit scores. FTC said, “Dealers violated the Truth in Lending Act (TILA), Reg Z, the Consumer Leasing Act, and Reg M – long-standing laws that any dealer should be familiar with. The common thread was the failure to disclose key credit-or-lease related terms in ads.”

To settle the FTC lawsuits the dealers have signed proposed orders that will change the way they had previously advertised in TV, Radio, and Newspaper and online. The terms most discussed are:

1- Ban on ads that misrepresent the cost to buy, lease, or finance a vehicle

2- Prohibition on other deceptive claims about pricing, sale, leasing, and/or financing

After charged, the defendant is ordered to abide by the TILA and the Consumer Leasing Act. As well as forbidding bogus claims of prizes, or other sweepstakes or incentives.

To view TILA or Consumer Leasing Act, please visit www.ftc.gov .

About FTC: The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

For an example of the advertising please visit:

http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-announces-sweep-against-10-auto-dealers-operation-steer-clear-drives-home-auto-ads-must-be/auto-ads-full-size-ads.pdf

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