FTC Takes Action Against Two Dealer Groups for Deceptive Advertising
WASHIINGTON — Two dealer groups targeted by the Federal Trade Commission two years ago for deceptive advertising are in trouble again, the agency announced today. The two retail chains, which operate more than a dozen stores in five states, were charged with violating the administrative orders prohibiting them from deceptively advertising the cost of buying or leasing a car.
Charged were Billion Auto, a chain of 20 family-owned dealerships in Iowa, Montana and South Dakota, and its family-controlled advertising company, Nichols Media Inc., and Ramey Motors and three affiliated dealerships located in Virginia and West Virginia. The groups were two of five dealer groups that settled with the FTC in March 2012 over ads that promised to pay a consumer’s trade-in no matter what the consumer owes on the vehicle.
“If auto dealers make advertising claims in headlines, they can’t take them away in fine print,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “These actions show there is a financial cost for violating FTC orders.”
According to the FTC’s press release, Billion Auto and its ad agency have agreed to settle charges that they violated the FTC’s 2012 administrative order, which prohibited the group and its affiliates from misrepresenting material costs and terms of vehicle finance and lease offers. It also required specific disclosures, mandated by the Truth in Lending Act (TILA) and Regulation Z, and the Consumer Leasing Act (CLA) and Regulation M. The dealer group will pay $360,000 in civil penalties to settle the FTC’s charges.
According to the FTC’s complaint, Billion and its advertising company violated FTC’s administrative order by frequently focusing on only a few attractive terms in their ads while hiding others in fine print, through distracting visuals or with rapid-fire audio delivery. Some of the ads, the agency noted, promoted low monthly payments or attractive annual percentage rates and finance periods, but concealed other material items such as low payments were for leases, not sales and major limits on who could qualify for discounts. Offers also often included significant added costs.
The FTC charged Ramey and its three stores with allegedly misrepresenting the costs of financing or leasing a vehicle by concealing important terms of the offer, such as a requirement to make a substantial down payment. The complaint also charged Ramey with failing to make credit disclosures clearly and conspicuously, as required by the TILA. It also alleged that the dealer group failed to retain and produce for the FTC appropriate records to substantiate its offers. Ramey Motors and its affiliates are subject to $16,000 in civil penalties for each alleged violation of the FTC administrative order.
The commission voted unanimously to refer the Billion complaint and proposed stipulated order to the Department of Justice for filing. The Justice Department filed the complaint and proposed stipulated order on behalf of the commission in the U.S. District Court for the Northern District of Iowa on Dec. 11, 2014.
The commission also voted unanimously to authorize the filing of the complaint against Ramey Motors Inc., Ramey Automotive Group Inc., Ramey Automotive Inc., and Ramey Chevrolet Inc. It was filed in the U.S. District Court for the Southern District of West Virginia on Dec. 11.
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