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9923082 UNITED STATES OF AMERICA In The Matter of DOCKET NO. COMPLAINT The Federal Trade Commission, having reason to believe that Dunphy Nissan, Inc., a corporation, and Serge Naumovsky, individually and as an officer of the corporation, ("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 Dunphy Nissan, Inc. is a Pennsylvania corporation with its principal office or place of business at 5018 Township Line Rd., Drexel Hill, Pennsylvania 19083. Respondent offers automobiles for sale or lease to consumers. 2. Respondent Serge Naumovsky is an officer of the corporate respondent. Individually or in concert with others, he formulates, directs, controls, and participates in the policies, acts, or practices of the corporation, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of the corporate respondent. 3. 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. 4. 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. 5. 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. 6. Respondents have disseminated or have caused to be disseminated consumer lease advertisements ("lease advertisements") and credit sale advertisements ("credit advertisements") for automobiles, including but not necessarily limited to the attached Dunphy Exhibits A, B, and C. Dunphy Exhibits A, B, and C are advertisements in the print media. These lease and/or credit advertisements contain the following statements: A. [Dunphy Exhibit A states numerous lease and credit offers, including:] "HURRY! FINAL 2 DAYS TO TAKE ADVANTAGE
OF THE SPECIAL OFFERS! . . . NEW '98 ALTIMA GXE $14,295 NEW '98 ALTIMA SE $15,599 NEW '98 ALTIMA GLE $15,999 [A fine print disclosure at the bottom of the ad states, "Altima/Maxima/Pathfinder/term/miles per year/42/42/50/12/12/12 All leases are with no money down, no cap cost reduction, 1st mo. Pymt., Ref.Sec.Dep., Bank Fee, Taxes, Tags & Registration are due at inception. All Buy Prices with $2000 cash or trade. . . ."] (Dunphy Exhibit A) B. [Dunphy Exhibit B states several lease and credit offers, including:] "PRESIDENTS DAY SALE!. . . HURRY! SPECIAL SALES INCENTIVES END MONDAY AT 10PM . . . FINANCING AS LOW AS 6.9% & YOU KEEP THE REBATE. . . . . . '98 ALTIMA GXE. . . '98 PATHFINDER SE. . . '98 QUEST . . . [Fine print disclosures near the bottom and at the bottom of the ad state "Prices and payments include down payment of $399. All leases are for 42 months with 12,000 mile a year with approved credit, 1st months payment, security deposit, bank fee & reg. are required at inception. All payments and prices are plus tax and include all factory rebates and incentives.] (Exhibit B) C. [Dunphy Exhibit C states numerous lease and credit offers, including:] "SUMMER SAVINGS EVENT! FINANCING AS LOW AS 0% ON EVERY NEW VEHICLE NEW '98 MAXIMA SE . . . $18,999 with $2000
cash or trade NEW '98 PATHFINDER SE . . . $2,000 DOWN DEALS [A fine print disclosure at the bottom of the ad states: "ALTIMA/MAXIMA/PATHFINDER/SENTRA/QUEST/TERM/MILES PER YEAR/48/38/48/48/48/12/10/12/12/12 1ST MO. PYMT., REF.SEC.DEP., BANK FEE, TAXES, TAGS, & REGISTRATION ARE DUE AT INCEPTION . . . ."] (Dunphy Exhibit C) FEDERAL TRADE COMMISSION ACT VIOLATIONS Count I: Misrepresentation of Inception Fees 7. In lease advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, respondents have represented, expressly or by implication, that the amount stated as "down" or "downpayment" is the total amount consumers must pay at lease inception to lease the advertised vehicles. 8. In truth and in fact, the amount stated as "down" or "downpayment" in respondents' lease advertisements is not the total amount consumers must pay at lease inception to lease the advertised vehicles. Consumers are required to pay additional fees beyond the amount stated as "down" or "downpayment," including but not limited to the first month's payment, a security deposit, and/or a bank fee. Therefore, respondents' representation as alleged in Paragraph 7 was, and is, false or misleading. 9. 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 Advertised Transaction 10. In lease advertisements, including but not necessarily limited to Dunphy Exhibit B, respondents have represented, expressly or by implication, that consumers can finance the purchase of the advertised vehicles for the monthly payment amounts prominently stated in the advertisements. 11. In truth and in fact, consumers cannot finance the purchase of the advertised vehicles 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 10 was, and is, false or misleading. 12. 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 13. In lease advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, respondents have represented, expressly or by implication, that consumers can lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount and/or the downpayment amount. 14. 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 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. 15. 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 Credit Terms 16. In credit advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, respondents have represented, expressly or by implication, that consumers can purchase the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the sales price and/or downpayment amount. 17. These credit advertisements have failed to disclose additional terms pertaining to the credit offer, such as the annual percentage rate and the terms of repayment. 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 these additional terms, in light of the representation made, was, and is, a deceptive practice. 18. 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 19. Respondents' lease advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, state a monthly payment amount and/or downpayment 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:
20. 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. 21. 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 22. Respondents' lease advertisements, including but not necessarily limited to Dunphy 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). 22. 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 Required Information 23. In credit advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, respondents have stated a monthly payment amount and/or a downpayment amount as terms for financing the purchase of the advertised vehicles, but have failed to disclose the following items of information required by Regulation Z: the annual percentage rate and the terms of repayment. 24. 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 25. In credit advertisements, including but not necessarily limited to Dunphy Exhibits A, B, and C, respondents have stated a rate of finance charge without stating that rate as an "annual percentage rate," using that term or the abbreviation "APR." 26. 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. |