We've previously warned our audience that the FTC has been taking aggressive action against car dealers. This past week served as a reminder of its hard-charging ways, as two more dealer groups found itself in their crosshairs.
The Arizona case
In the first action, the FTC and Arizona Attorney General brought an action against an Arizona based auto dealership for a plethora of alleged violations, including ECOA, Federal UDAP, and state law claims surrounding alleged deceptive and discriminatory practices in advertising, disclosures, pricing, and sales practices. Even more troubling, the lawsuit names a former dealership employee as a defendant. The pleadings stated:
Defendants lure consumers into their automobile dealerships with low advertised prices for new and used vehicles. Defendants’ actual prices often are thousands of dollars higher than advertised, due to a surprise “market adjustment” on the vehicle and other bogus fees and charges. In many instances, Defendants charge consumers for add-on items (“add-ons”) the consumers have not authorized, Defendants tell consumers that such add-ons are required, or charge consumers twice for the same add-ons. Defendants also charge higher interest rates and greater add-on costs to Latino consumers as compared to non-Latino White consumers.
To summarize, the key allegations include deceptive pricing, advertising lower prices online, only to raise them after the customer was at the dealership, unauthorized add-ons, by giving the impression that products were mandatory, and discriminatory practices, with Latino customers allegedly paying more on interest on finance deals and add-on charges compared to non-Latino white customers. None of these allegations are new, we've seen these before.
The Texas Case
Next, the FTC took aim in Texas against three affiliated dealers, and against the general manager. These are only allegations at this point, and the dealers have vowed to fight them. They include packing on additional fees not discussed, higher than necessary monthly payments, and similar add-on, advertising and deceptive acts to the Arizona matter. Again, this is a trend as to what the FTC considers as actionable.
What's a Dealer to Do?
Get Busy, that's what. Check how vehicles are advertised, and what goes into the advertised fee. The Cars Rule (Vehicle Shopping Rule) isn't effective yet, but it's not too early to consider what will be required to be disclosed in the Offering Price.
Next, if you are selling after-market products, be sure to have a disclosure form that makes the price clear and has the buyer state that the purchase is voluntary. It doesn't hurt to disclose the voluntary nature of the purchase repeatedly. Please note that both offering price and add-on products are directly addressed in the Cars Rule.
Also, train your staff on how to properly communicate this information to customers and make sure you have documented written materials to back this up.
Please reach out to Ignite at info@ignitecp.com if you'd like to discuss the merits of your individual sales and finance programs, advertising, training, or any other aspect of your business.
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