Caveat Venditor: Car-Dealer Advertisement Complaints Cost Group $1.4 Million in Settlement with FTC ""

By | November 8, 2017

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If car shoppers expect to pay a certain amount for a vehicle and then learn that they’re on the hook for hundreds or thousands of dollars more, it can be a confusing and aggravating experience, to say the least. And it could have been the result of misleading advertising. That’s why the Federal Trade Commission filed a complaint against a Southern California dealer. The Conant Auto Retail (CAR) Group said the allegations are without merit and has admitted no wrongdoing, but it has nevertheless agreed to settle with the FTC for $1.4 million.

The FTC said some of the company’s dozen Norm Reeves dealerships in California and Florida violated several consumer-protection laws by leading car shoppers to believe they could finance vehicles for low monthly payments, or lease vehicles with no money down, while failing to adequately disclose associated costs. The ads were run despite a 2014 consent agreement that prohibited the Norm Reeves dealers and nine other dealership groups from allegedly misrepresenting the costs of vehicles. But shortly after signing, some Norm Reeves dealers kept running ads that violated the agreement, the FTC said.

In its complaint, the FTC pointed to more than a dozen examples of ads run on several media platforms and in email promotions. In one ad shown below, Norm Reeves Buick GMC in Irvine, California, was running an ad on its homepage in 2015 that offered zero percent APR for 60 months. The FTC said the ad failed to disclose the amount or percentage of the down payment and the full repayment terms.

Norm Reeves Ad

In another example, the Norm Reeves Huntington Beach (California) dealership sent out an email in 2015 that prominently featured the offer of a new Honda Civic at 1.9 percent APR for 72 months. But that deal only applied to a consumer with Tier 1+ credit, and even then the down payment would vary, the FTC said in its complaint. A consumer with Tier 1+ credit typically has a FICO score above 700.

“Most consumers do not have a credit score high enough to be considered Tier 1+ and therefore do not qualify for many of Defendants’ advertised offers,” the FTC said in its complaint. As with the other example, the FTC also said the ad failed to disclose certain terms.

Norm Reeves Ad

For an ad run on multiple online platforms in 2015 and 2016, a Norm Reeves dealer spot said “$0 due at lease signing” and “Lease for $159/mo + tax.” The FTC said that, although there is additional language on the right side of the ad, “It is small, grey, and illegible.” The ad also didn’t say whether a security deposit was required, nor what the number of scheduled payments would be.


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Norm Reeves Ad

In addition to the monetary outlay, the settlement requires that the dealer group regularly demonstrate that it is complying with the FTC’s orders for 20 years. Although it agreed to the $1.4 million payment, the CAR Group has not admitted liability or fault. “The settlement payment was for an amount that was equivalent to the company’s expected defense costs and within the range of lower level FTC/dealer settlements on a per-dealership basis,” the group said in a statement.

“The FTC made allegations about CAR Group advertising that CAR considered to be without merit,” the company continued. “The Complaint set forth allegations about minor technical issues in a handful of ads. The CAR Group publishes many thousands of advertisements annually.”

The settlement with CAR Group is much larger than other recent, similar cases. Last year, in an $85,000 settlement with Southwest Kia of Dallas, the FTC alleged that cars were being advertised for $179 per month, but “in print too small to read without magnification” the dealer disclosed that $1999 would be due up front, along with other taxes and fees, and there would be an $8271 balloon payment at the end of a 38-month financing term. In 2014, the FTC fined Billion Auto, a chain of 20 dealerships in the upper Midwest, and Nichols Media, an advertising company, $360,000 in civil penalties for ads that focused on a few attractive items while hiding other factors in fine print. In all of these cases, the FTC alleged the dealers violated the Truth in Lending Act, the Consumer Leasing Act, and other related regulations.

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