Southern California dealer group to pay FTC $1.4 million over advertising issues

WASHINGTON, D.C. - 

The Federal Trade Commission flexed its regulatory muscle again this week.

Officials said a southern California-based dealership group will pay $1.4 million to settle FTC charges that it violated a 2014 administrative order prohibiting the company from misrepresenting how much consumers could pay to finance or lease a vehicle.

The proposed court order resolving the FTC’s complaint against the businesses operating as the Norm Reeves dealerships, bars similar advertising misrepresentations and imposes strict compliance and reporting terms to prevent future violations.

According to the FTC’s first complaint, the defendants made a variety of misrepresentations in advertisements to consumers that violated the FTC Act, falsely leading consumers to believe they could buy vehicles for specific low prices, finance vehicles for specific low monthly payments and/or make no upfront payment when leasing.

Specifically, the FTC charged Norm Reeves with deceptively advertising that consumers could pay $0 up-front to lease a vehicle when, in fact, the advertised price excluded substantial fees and other costs. The ads also allegedly violated the Consumer Leasing Act (CLA) by failing to disclose certain lease related terms. One of the dealerships’ ads also allegedly violated the Truth in Lending Act (TILA) and Regulation Z, by failing to disclose certain credit-related terms.

The orders settling the previous complaint, which the commission approved as final in May 2014, prohibited the dealerships from misrepresenting the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle in its ads.

The orders also addressed the defendants’ alleged TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws.

Officials explained the proposed court order announced this week settles the FTC’s civil penalty complaint that the defendants violated the 2014 order by misrepresenting the total cost of vehicle financing or leases to prospective buyers, or misrepresenting the offer’s availability to all consumers.

They added the order also settles commission charges that the defendants failed to disclose, or did not clearly and conspicuously disclose, credit and lease information required by TILA and the CLA, and failed to maintain proper records, in violation of the order.

In addition to prohibiting future misrepresentations about the material costs and terms of vehicle financings or leases, the order requires the defendants to comply with TILA, Regulation Z, and the CLA. It also provides for a $1.4 million civil penalty and contains strong compliance and reporting requirements to ensure compliance with its terms.

The commission vote authorizing the staff to file a complaint for civil penalties and to approve a proposed consent in settlement of the court action was 2-0. The complaint and proposed order were filed in the U.S. District Court for the Central District of California, having been referred back to the FTC by the Department of Justice.

The proposed order settles the FTC complaint against:

—Norm Reeves Honda Superstore Cerritos
—Norm Reeves Ford Superstore Cerritos
—Norm Reeves Lincoln
—Norm Reeves Hyundai Superstore
—Cerritos Infiniti
—Norm Reeves Honda Superstore Huntington Beach
—Conant Auto Retail Group and the Car Group
—Toyota San Diego and Scion San Diego
—Norm Reeves Honda Irvine
—Norm Reeves Volkswagen
—Norm Reeves Buick GMC
—Norm Reeves Acura of Mission Viejo
—Port Charlotte Honda and Port Charlotte Volkswagen
—Norm Reeves Honda Superstore West Covina

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