Providing an important reminder about complying with the terms of a Federal Trade Commission order, a California-based auto dealership agreed to pay $1.4 million to settle charges that it violated a 2014 administrative order.
The original order resolved an action against a dozen dealerships involving deceptive misrepresentations about vehicle pricing, monthly payments and whether upfront payments were required when leasing. The defendants advertised that $0 was required up front to lease a vehicle when consumers actually had to pay substantial fees and other costs, the FTC alleged, with several credit- and lease-related terms required by law omitted from the marketing.
To settle the first complaint, the Norm Reeves dealerships agreed to a prohibition on misrepresentations as well as a requirement to clearly and conspicuously disclose lease and sale terms to ensure compliance with the Federal Trade Commission Act, the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA).
But the FTC returned to the dealership, asserting the defendants failed to comply with the terms of the 2014 order. For example, one of the dealerships sent a promotional email to consumers between Nov. 24, 2015, and Nov. 30, 2015, with the claim “Lease for $99/mo + tax.” Despite this attractively low monthly payment, consumers needed “approved tier 1+ credit with at least $4,000 due at lease signing” after application for various rebates, the FTC said.
For a second time, the dealership made a bargain.
The 2017 consent order—in which the defendants neither admitted nor denied any of the allegations—imposed a $1.4 million civil penalty and reiterated the compliance requirements with the various statutes. The defendants are permanently restrained and enjoined from a host of misrepresentations “about the price, sale, financing, or leasing of any vehicle,” from the down payment necessary to lease a car to the cost of any payments associated with vehicle financing.
Compliance with the CLA, the TILA, Regulation M and Regulation Z was also part of the consent order, along with annual reports for a 20-year period.
To read the complaint in Federal Trade Commission v. Norm Reeves, Inc., click here.
To read the proposed consent order, click here.
Why it matters: Advertisers should remember to abide by the terms of an FTC consent order or face a repeat action from the agency. In the case of the auto dealership, the second time around included a $1.4 million civil penalty.