Dallas-Area Dealers Settle With FTC
Three Dallas area auto dealers, collectively known as Southwest Kia, agreed to pay an $85,000 civil penalty to settle with the Federal Trade Commission last week. The charges claim they violated a 2014 administrative order, which barred them from deceptively advertising the cost of buying or leasing a car, according to an FTC press release issued Thursday.
The three dealers — New World Auto Imports, New World Auto Imports of Rockwell, and Hampton Two Auto Corp. — obfuscated sale and lease terms, adding significant costs, or limiting which could qualify for vehicles at advertised prices, in violation of the 2014 order, according to the FTC.
The 2014 case was part of the FTC’s Operation Steer Clear, a nationwide crackdown on misleading advertising regarding motor vehicle sales, financing and leasing.
“You don’t need a detailed understanding of consumer protection laws to recognize the FTC is not going to allow consumers to be ‘tricked’ into transactions where the terms of the deal are not fully disclosed,” said Michael Thurman, Partner at Thurman Legal.
In an advertisement, for example, the dealers offered two cars for “under $200 per month,” but in fine print that appeared for two seconds, disclosed that the offer applied only to leases, not sales, and required a $1,999 payment at lease signing, according to the release. Furthermore, one dealer mailed ads claiming a new car could be purchased for $179 per month, “but in print too small to read without magnification, disclosed that $1,999 would be due up front, along with tax, title and license fees, and that $8,271 would be due at the end of a 38-month financing term,” the FTC wrote in the release.
“Even if a seller includes (and the buyer signs) all kinds of disclosures in the deal paperwork, if the consumer was misled by the advertising upfront, the FTC’s position will be that the transaction cannot be ‘cured’ after the fact,” Thurman explained.
In addition to the $85,000 civil penalty, the proposed order prohibits the dealers, in any ad for buying, financing or leasing vehicles, from misrepresenting the cost of purchase with financing, the cost of leasing, or any other material fact about price, sale, financing or leasing. It also prohibits misrepresentations that anyone, including those with poor credit, is likely to receive financing or leasing, including particular finance or lease terms.
The proposed order also prohibits dealers from violating the Truth in Lending Act and the Consumer Leasing Act, both of which require clear and full disclosure of credit and lease terms.
