The Federal Trade Commission recently listed “seven deadly sins” of dealership advertising, marketing and sales practices, with six out of seven involving finance, such as pricing, F&I products, or financing disclosures, with No. 7 being violating prior orders in the same matters — an example of which just recently occurred.
Cindy Liebes, director of the FTC’s Southeast Region, listed the seven deadly sins in remarks prepared for this week’s Innovate 2015: The Independent Dealer Industry Conference, in Fort Worth, Texas, sponsored by DealerSocket, a dealership technology provider.
The FTC publishes detailed rules for dealership advertising, citing examples, on its web site.
Here’s the list of “sins”:
Twisting the facts about add-ons. The FTC earlier this year announced a consent order with National Payment Network, which agreed to pay almost $2.5 million in refunds and waived fees. The FTC said the company marketed a biweekly payment program without adequately disclosing that fees could outweigh the savings. The company had already stopped offering biweekly payments.
Lowballing your pitch. Several dealerships were cited recently by the FTC for using headlines to tout bargain prices while failing to adequately disclose the true cost of the deal. For example, one Florida dealership pitched “used cars as low as $99.” But $99 was just the minimum bid for cars offered at a liquidation sale, the FTC said, and didn’t include substantial mandatory fees
Luring customers with misleading “zero” promises. One California dealership’s ads promised “$0 initial payment, $0 down payment, $0 drive-off lease,” the commission said. But the FTC said consumers had to pay much more up front to lease or purchase the cars.
Hiding the strings attached to a deal. An Alabama dealership advertised low prices without clearly and conspicuously explaining that the low prices factored in special discounts or rebates that weren’t available to everyone, for instance recent college graduates, the FTC said.
Burying key disclaimers in fine print. The FTC’s standard is that advertising disclosures must be “clear and conspicuous.” Fine-print footnotes, unclear “disclaimers” that consumers must scroll down to see, or other buried information don’t meet the standard, the FTC said.
Ignoring applicable credit laws. One common pothole is using certain “triggering terms” under the Consumer Leasing Act, Truth in Lending Act, Reg Z or Reg M without making required disclosures, the FTC said. For example, advertising monthly lease payments triggers a requirement to disclose other facts about the transaction, such as the total amount due at lease signing.
Violating prior orders. The FTC may seek monetary civil penalties for violations of prior FTC administrative orders. Earlier this month, the FTC reached a second consent order with a West Virginia dealership group, Ramey Motors Inc., for $80,000, for violating a 2012 consent order regarding deceptive advertising of loan or lease costs.