Putting the brakes on deceptive auto ads

When it comes to cars, sometimes good things come in twos: double wishbone suspension, dual overhead cams, twin torsion bars, and classic 2 + 2 muscle cars. What’s not on that list? Two lawsuits charging two auto dealers with deceptive advertising in violation of two FTC orders.

In 2012, the FTC settled separate administrative cases against Billion Auto and Ramey Motors, alleging that the companies had misrepresented key financing terms in the sale of cars. The FTC just announced enforcement actions – the Billion matter is a settlement with a civil penalty of $360,000 and the Ramey case is a complaint – charging that the dealerships violated the terms of those orders.

The Billion case
In the new case against Billion, the defendants are 20 dealerships in Iowa, Montana, and South Dakota, and a family-controlled advertising company, Nichols Media. The FTC’s action focuses on ads that used various combos of fine print and fast talk to mislead consumers about major terms of the deal. For example, one TV ad prominently touted “LEASE FOR $179 MO.,” but flashed tiny type for just three seconds:

What was buried in the fine print? That the only consumers eligible for the $179 lease were repeat customers who also were members of the military or veterans. What’s more, they had to come to the table with $2,000 and the first monthly payment. Given the pounding music, pop-up graphics, whistle blasts, and multiple screen wipes, the FTC says it’s unlikely consumers could have caught those crucial terms.

The complaint against Billion also cites a 30-second radio ad. In a normal cadence, the announcer said, “Now drive the 2013 Nissan Altima for just 99 dollars a month or the 2013 Nissan Sentra, just 79 dollars a month.”  But fasten your seatbelt because in the last few seconds of the ad, the announcer put the pedal to the metal with this motor-mouth voiceover: “Thirty-six month, 36 thousand mile lease plus first payment tax and license. 5000 down with qualified credit. See dealer for details.” Only in this rapid-fire delivery did Billion say that it was really a 3-year lease – not a sale – and consumers had to come in with $5,000 plus the first month’s payment in their pocket.

The complaint charges that the Billion defendants violated the FTC order by frequently focusing on only a few attractive terms in their ads while hiding key information in fine print or fast talk. The settlement includes a permanent injunction and a $360,000 civil penalty.

The Ramey case
The defendants in the pending lawsuit are four Virginia- and West Virginia-based dealerships. The complaint cites an ad with big-print visuals and voiceover that said, “Get a new 2012 Toyota Tundra for $27,989 or $389 per month.”  But what did the fineprint say on the bottom of the screen?

STK#2k1277. PRICES INCLUDED ALL MANUFACTURER REBATES AND INCENTIVES. PAYMENTS WITH $2,000 DOWN AND APPROVED CREDIT. TAX, TITLE LICENSE AND $175 PROCESSING FEE NOT INCLUDED. 75 MONTHS @ 3.99% APR. ENDS 7/31.

According to the FTC, by emphasizing the purchase price and monthly payment, the defendants represented that those amounts were inclusive of all material costs and terms of the transaction. The lawsuit alleges the defendants didn’t clearly disclose the hefty down-payment.

Another Ramey ad highlighted a new 2013 GMC Sierra X Cab 4 x 4 for $411 a month. According to the complaint, only in the flash of fine print did the company “disclose” that to get that deal, a buyer had to trade in a 1999 or newer Chevrolet or GMC truck.

The complaint also cites numerous TV and online ads for consumer credit that the FTC says didn’t make the clear and conspicuous disclosures required by law.  One doozy, alleges the FTC, buried key credit terms in an eleven-line block of rotating text that flashed on the screen for just two seconds.

The lawsuit against the Ramey defendants charges that they misrepresented the costs of financing or leasing a vehicle by concealing important terms of the offer and failed to make credit disclosures clearly and conspicuously, as required by the 2012 administrative order and the Truth in Lending Act. In addition, the FTC alleges that the auto dealer group failed to retain and produce appropriate records to substantiate its offers. The FTC is asking a federal court in West Virginia to impose civil penalties.