9923080 UNITED STATES OF AMERICA In The Matter of NORTHEAST AUTO OUTLET, INC. and NORTHEAST AUTO OUTLET CORPORATION, corporations, also d/b/a NORTHEAST CHEVY/GEO, NORTHEAST KIA, NORTHEAST DODGE, NORTHEAST HYUNDAI, NORTHEAST BUICK, NORTHEAST ISUZU, NORTHEAST JEEP/EAGLE, NORTHEAST VOLKSWAGEN, and ARTHUR MICCHELLI, individually and as an officer of the corporations. DOCKET NO. COMPLAINT The Federal Trade Commission, having reason to believe that Northeast Auto Outlet, Inc. and Northeast Auto Outlet Corporation, corporations, also doing business as Northeast Chevy/Geo, Northeast Kia, Northeast Dodge, Northeast Hyundai, Northeast Buick, Northeast Isuzu, Northeast Jeep/Eagle, Northeast Volkswagen, and Arthur Micchelli, individually and as an officer of the corporations, ("respondents") have violated the provisions of the Federal Trade Commission Act, 15 U.S.C. §§ 45-58, as amended, the Consumer Leasing Act, 15 U.S.C. §§ 1667-1667f, as amended, and its implementing Regulation M, 12 C.F.R. § 213, as amended, and the Truth in Lending Act, 15 U.S.C. §§ 1601-1667, as amended, and its implementing Regulation Z, 12 C.F.R. § 226, as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent Northeast Auto Outlet, Inc. is a Pennsylvania corporation with its principal office or place of business at 3301 Grant Avenue, Philadelphia, PA 19114. Respondent offers automobiles for sale or lease to consumers. 2. Respondent Northeast Auto Outlet Corporation is a Pennsylvania corporation with its principal office or place of business at 3301 Grant Avenue, Philadelphia, PA 19114. Respondent offers automobiles for sale or lease to consumers. 3. Respondent Arthur Micchelli is an officer of the corporate respondents. Individually or in concert with others, he formulates, directs, controls, and participates in the policies, acts, or practices of the corporations, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of the corporate respondents. 4. Respondents have disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 C.F.R. § 213.2, as amended. 5. Respondents have disseminated advertisements to the public that promote credit sales and other extensions of closed-end credit in consumer credit transactions, as the terms "advertisement," "credit sale," and "consumer credit" are defined in Section 226.2 of Regulation Z, 12 C.F.R. § 226.2, as amended. 6. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44. 7. Respondents have disseminated or have caused to be disseminated advertisements promoting consumer leases ("lease advertisements") and/or credit sales ("credit advertisements") for automobiles, including but not necessarily limited to the attached Northeast Exhibits A, B, and C. Northeast Exhibits A, B, and C are advertisements in the print media. These lease and/or credit advertisements contain the following statements:
FEDERAL TRADE COMMISSION ACT VIOLATIONS Count I: Misrepresentation of Advertised Transaction 8. In lease advertisements, including but not necessarily limited to Northeast Exhibit A, respondents have represented, expressly or by implication, that consumers can purchase the advertised vehicles by financing the vehicle through credit for the monthly payment amounts prominently stated in the advertisements. 9. In truth and in fact, consumers cannot purchase the advertised vehicles by financing the vehicle through credit for the monthly payment amounts prominently stated in the advertisements. The monthly payment amounts prominently stated in the advertisements are components of lease offers and not credit offers. Therefore, respondents' representation as alleged in Paragraph 8 was, and is, false or misleading. 10. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Count II: Misrepresentation of the Availability of Advertised Offers 11. In lease and/or credit advertisements, including but not necessarily limited to Northeast Exhibit A, respondents have represented, expressly or by implication, that the offer to double consumers' downpayments up to $4,000 would be available for the lease or credit offers advertised. 12. In truth and in fact, the offer to double consumers' downpayments up to $4,000 was not available with the advertised lease or credit offers. Therefore, respondents' representation as alleged in Paragraph 11 was, and is, false or misleading. 13. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Count III: Failure to Disclose, and/or Failure to Disclose Adequately, Lease Terms 14. In lease advertisements, including but not necessarily limited to Northeast Exhibits A, B, and C, respondents have represented, expressly or by implication, that consumers can lease or purchase the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount. 15. These lease advertisements have failed to disclose, and/or failed to disclose adequately, additional terms pertaining to the lease offer, such as the total amount due at lease inception. This information either does not appear at all or appears in fine print in the advertisements. This information would be material to consumers in deciding whether to visit respondents' dealerships and/or whether to lease an automobile from respondents. The failure to disclose, and/or failure to disclose adequately, these additional terms, in light of the representation made, was, and is, a deceptive practice. 16. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Count IV: Failure to Disclose, and/or Failure to Disclose Adequately, Credit Terms 17. In credit advertisements, including but not necessarily limited to Northeast Exhibits A, B, and C, respondents have represented, expressly or by implication, that consumers can finance the purchase of the advertised vehicles at the terms stated in the advertisements, including but not necessarily limited to the sales price and/or the downpayment amount. 18. These credit advertisements have failed to disclose, and/or failed to disclose adequately, additional terms pertaining to the credit offer, such as the annual percentage rate, and/or the terms of repayment. This information either does not appear at all or appears in fine print in the advertisements. This information would be material to consumers in deciding whether to visit respondents' dealerships and/or whether to purchase an automobile from respondents. The failure to disclose adequately these additional terms, in light of the representation made, was, and is, a deceptive practice. 19. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). CONSUMER LEASING ACT AND REGULATION M VIOLATIONS Count V: Failure to Disclose, and/or Failure to Disclose Clearly and Conspicuously, Required Information 20. Respondents' lease advertisements, including but not necessarily limited to Northeast Exhibits A, B, and C, state a monthly payment amount, but fail to disclose, and/or fail to disclose clearly and conspicuously, certain additional terms required by the Consumer Leasing Act and Regulation M, including one or more of the following terms:
21. The lease disclosures required by Regulation M, if provided, are not clear and conspicuous because they appear in fine print and/or in an inconspicuous location. 22. Respondents' practices have violated Section 184 of the Consumer Leasing Act, 15 U.S.C. § 1667c, and Section 213.7 of Regulation M, 12 C.F.R. § 213.7. Count VI: Failure to Disclose the Total Amount Due at Lease Signing with Equal Prominence 23. Respondents' lease advertisements, including but not necessarily limited to Northeast Exhibits A, B, and C, state a downpayment amount more prominently than the disclosure of the total amount due at lease signing, in violation of Section 213.7(b)(1) of Regulation M, 12 C.F.R. § 213.7(b)(1). 24. Respondents' practices have violated Section 213.7(b)(1) of Regulation M, 12 C.F.R. § 213.7(b)(1). TRUTH IN LENDING ACT AND REGULATION Z VIOLATIONS Count VII: Failure to Disclose, and/or Failure to Disclose Clearly and Conspicuously, Required Information 25. In credit advertisements, including but not necessarily limited to Northeast Exhibits A, B, and C, respondents have stated the amount of the downpayment as terms for financing the purchase of the advertised vehicles, but have failed to disclose, and/or failed to disclose clearly and conspicuously, the following items of information required by Regulation Z: the amount of any downpayment, the annual percentage rate, and/or the terms of repayment. 26. The credit disclosures required by Regulation Z, if provided, are not clear and conspicuous because they appear in fine print and/or in an inconspicuous location. 27. Respondents' practices have violated Section 144 of the Truth in Lending Act, 15 U.S.C. § 1664, and Section 226.24(c) of Regulation Z, 12 C.F.R. § 226.24(c). COUNT VIII: Failure to State Rate of Finance Charge as Annual Percentage Rate 28. In credit advertisements, including but not necessarily limited to Northeast Exhibit B, respondents have stated a rate of finance charge without stating that rate as an "annual percentage rate," using that term or the abbreviation "APR." 29. Respondents' practice constitutes a violation of Section 144 and 107 of the TILA, 15 U.S.C. §§ 1664 and 1606, respectively, and Sections 226.24(b) and 226.22 of Regulation Z, 12 C.F.R. §§ 226.24(b) and 226.22, respectively. THEREFORE, the Federal Trade Commission this ___ day of _________, 1999, has issued this complaint against respondents. By the Commission. Donald S. Clark SEAL: |