In general, car dealers have reputations just below personal injury lawyers and politicians, so it's no surprise that most consumers are naturally wary whenever they engage in the process of buying a new vehicle.
As part of an effort to restore consumers' faith in the auto buying process, the Federal Trade Commission is intervening, calling out five dealers from around the country for what it says argues is deceptive advertising. According to the FTC, the dealer ads in question promise to "pay off your car" and to "pay off your trade no matter what you owe" when, in fact, they either rolled the balance of customers' trades into a new loan or just outright demand would-be buyers pay the difference out of pocket.

Tempting, yes, but anyone with a half-full brain cavity would almost certainly start asking questions before signing such paperwork, right? Well, maybe, but these sorts of tactics have spread among auto dealers, likely because they have proven effective.

The dealers named by the FTC include Billion Auto, Inc., in Sioux Falls, South Dakota; Frank Myers AutoMaxx, LLC, in Winston-Salem, North Carolina; Key Hyundai of Manchester, LLC and Hyundai of Milford LLC, of Vernon and Milford, Connecticut and Ramey Motors, Inc., of Princeton, West Virginia.

The FTC's wrist slap settlement requires that for the next 20 years, the above dealers not run deceptive ads, keep copies of the ads they do run, and file reports with the FTC showing their compliance.

If they violate the FTC order, the dealers will be fined up to $16,000 for each infraction. Read all the details in the official press release after the jump, and while you're there, check out an example of one of one of the dealers' advertising handiwork as well.



Show full PR text
FTC Takes Action to Stop Deceptive Car Dealership Ads

FTC Alleges Dealers Falsely Promised To Pay Off Trade-ins, No Matter What Consumers Owed


WASHINGTON, March 14, 2012 /PRNewswire-USNewswire/ -- Five car dealers around the country have agreed to Federal Trade Commission settlement orders that require them to stop running ads in which they promise to pay off a consumer's trade-in no matter what the consumer owes on the vehicle.

The FTC charged that the ads, which ran on the dealers' websites and on sites such as YouTube.com, deceived consumers into thinking they would no longer be responsible for paying off the loan balance on their trade-in, even if it exceeded the trade-in's value (i.e., the trade-in had "negative equity"). Instead, the dealers rolled the negative equity into the consumer's new vehicle loan or, in the case of one dealer, required consumers to pay it out of pocket.

The proposed settlements, reached as part of http://www.ftc.gov/opa/reporter/advertising/protectconsumers.shtml the FTC's ongoing efforts to protect consumers in financial distress , bar all of the dealers from making similar deceptive representations in the future. The cases are the first of their kind brought by the FTC. The Commission also issued a new consumer education publication titled "Negative Equity Ads and Auto-Trade-ins" to help consumers understand these types of ads.

"Buying a new car or truck is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will 'pay off' what they owe on their current vehicle, when they really won't," said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "The Federal Trade Commission is constantly on the lookout for potentially deceptive ads, and brings actions to stop them when appropriate."

The dealers named in the FTC's complaints are: 1) Billion Auto, Inc., in Sioux Falls, South Dakota; 2) Frank Myers AutoMaxx, LLC, in Winston-Salem, North Carolina; 3) Key Hyundai of Manchester, LLC and Hyundai of Milford LLC, in Vernon and Milford, Connecticut, respectively, and which advertise jointly; 4) and Ramey Motors, Inc., in Princeton, West Virginia.

The FTC's complaints allege that despite the dealers' claims, consumers still end up being responsible for paying the difference between the trade-in loan balance and the vehicle's value. The complaints charge that the dealers' representations that they will "pay off" what the consumers owe are false and misleading, and violate the FTC Act. Examples of the allegedly deceptive advertisements include:

"Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car." The advertisement depicts a car moving, inverts the video to depict it upside down, and then turns it right-side up again. (Billion Auto)
"Uncle Frank wants to pay [your trade] off in full, no matter how much you owe." (Frank Myers AutoMaxx)
"I want your trade no matter how much you owe or what you're driving. In fact I'll pay off your trade when you upgrade to a nicer, newer vehicle." (Key Hyundai and Hyundai of Milford)
"Ramey will pay off your trade no matter what you owe . . . even if you're upside down, Ramey will pay off your trade." (Ramey Motors)

In addition, the complaints in three of the cases allege violations of the Truth in Lending Act (TILA) and its implementing Regulation Z for failing to disclose certain credit-related terms, and the complaints in two of the cases allege violations of the Consumer Leasing Act (CLA) and its implementing Regulation M for failing to disclose certain lease related terms.

The proposed orders settling the FTC's charges against the dealers are designed to prevent them from engaging in similar deceptive advertising practices in the future. First, each order prohibits the dealer from misrepresenting that it will pay the remaining loan balance on a consumer's trade-in, so the consumer will have no further obligation for any amount of that loan. It also prohibits the dealer from misrepresenting any other facts related to leasing or financing a vehicle.

The proposed orders against Billion Auto, Key Hyundai, Hyundai of Milford, and Ramey Motors require these dealers to comply with TILA and Regulation Z, and to make clear and conspicuous disclosures when advertising certain terms related to issuing consumer credit. It also requires that if any finance charge is advertised, the rate must be stated as an "annual percentage rate" or as the "APR." In addition, the proposed orders against Billion Auto, Key Hyundai, and Hyundai of Milford require these dealers to clearly and conspicuously make all lease related disclosures required by the CLA and Regulation M, including the monthly lease payment.

The proposed orders also require each of the dealers to keep copies of relevant advertisements and materials substantiating claims made in their advertisements, and to provide copies of the order to certain employees. Finally, the dealers are required to file compliance reports with the FTC to show they are meeting the terms of the orders, which will expire in 20 years.

The misrepresentation alleged in these cases was one of the topics raised at the FTC's 2011 public roundtables regarding consumer protection issues that may arise in the sale, financing or lease of motor vehicles . For many consumers, buying or leasing a car is their most expensive financial transaction aside from owning a home. As the nation's consumer protection agency, the Commission is committed to protecting consumers in connection with these financial transactions.

The Commission vote to issue the administrative complaints and accept the consent agreement packages containing the proposed consent orders for public comment was 4-0. The FTC will publish a description of the consent agreement packages in the Federal Register shortly. The agreements will be subject to public comment for 30 days, beginning today and continuing through April 16, 2012, after which the Commission will decide whether to make the proposed consent orders final.

The FTC acknowledges the valuable assistance of the Iowa Attorney General's Office in the investigation of this matter.

Interested parties can submit written comments electronically or in paper form by following the instructions in the "Invitation To Comment" part of the "Supplementary Information" section. Comments in electronic form should be submitted using the following web links and following the instructions on the web-based form:

Submit comment on Billion Auto
Submit comment on Frank Myers AutoMaxx
Submit comment on Key Hyundai of Manchester and Hyundai of Milford
Submit comment on Ramey Motors

Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics . http://www.ftc.gov/bcp/consumer.shtm. Like the FTC on Facebook and follow us on Twitter . http://www.ftc.gov/competitioncounts.

(FTC File Nos. 1123209, Billion Auto, Inc.; 1123206, Frank Myers AutoMaxx, LLC; 1123204, Key Hyundai of Manchester, LLC; and 1123207, Ramey Motors, Inc.)

SOURCE Federal Trade Commission


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    • 1 Second Ago
  • 54 Comments
      BipDBo
      • 2 Years Ago
      Maybe they can work on a ban on dealer commercials featuring some guy YELLING CAR PRICES AT TWICE THE NORMAL TV VOLUME!!!!
        evannever
        • 2 Years Ago
        @BipDBo
        They did, at least for the volume, but they gave a one year grace period to the advertisers. It's like 9 months and counting.
      donnieorama
      • 2 Years Ago
      Wait. You mean car dealers are trying to cheat us? NO!
      Dark Gnat
      • 2 Years Ago
      I wish Amazon sold cars. Pick the Make, Model, trim level, performance packages, additional features, colors, put in your shopping cart, checkout and have it delivered to you in a few days. Don't like it? Returns are easy! Plus you can rate the seller.
        Duh
        • 2 Years Ago
        @Dark Gnat
        Since that model is not going to work, perhaps there is a reason that Amazon doesn't sell cars.
        martin7341
        • 2 Years Ago
        @Dark Gnat
        Sorry. It is a violation of Federal Law for an automobile manufacturer to sell a car directly to a customer. Dealer's are required.
        SloopJohnB
        • 2 Years Ago
        @Dark Gnat
        Try COSTCO. Or TrueCost. There are also buying services. UBS at the Pentagon once gave my roommate a price on a loaded Accord...he asked for a printout but no dice. He just printed up his own on an excel spreadsheet (had a good memory for numbers..program analyst) and took it to Landmark Honda in Alexandria, VA and got a new Honda Accord at that price. Perhaps he could have done better negotiating (cash deal after all) but it was painless and I thought he did well. Today, anyone can get close to the dealer cost on a car...at least you can get the information. You might not be able to get that price from the dealer unless you're a long term customer who services their car at that dealer. And you won't get a good price on, say, a '12 or '13 Mustang GT V8 convertible....last time I looked Koons Ford in Silver Spring, MD, wanted $5K Additional Dealer Markup. What a joke...I won't even talk to a dealer with ADM on the sticker. I literally hadn't been to a Ford dealer in 40 years....Koons Ford and their ADM on that Mustang just ensured I won't buy one there.
        MacProMan
        • 2 Years Ago
        @Dark Gnat
        you will never be able to return a product like a car, maybe exchange, but keep dreaming on that... no negotiation pricing is simple, just pay the asking price- the manufacturer even says it is fair so just pay it and be happy
      Done Deal DR
      • 2 Years Ago
      "The FTC's wrist slap settlement requires that for the next 20 years, the above dealers not run deceptive ads" So after 20 years, they are legally able to run deceptive ads again? I love this country.
      • 2 Years Ago
      [blocked]
      Andre Neves
      • 2 Years Ago
      More government regulation being used to "protect" the dumb citizens that are vulnerable. Give me a break. Pretty soon, I won't be able to take a piss without some government agency regulating my toilet water for an "ok" to flush.
        Andre Neves
        • 2 Years Ago
        @Andre Neves
        So much sympathy for dumb people here.
        snap_understeer_ftw
        • 2 Years Ago
        @Andre Neves
        so you prefer car dealers taking advantage of ignorant consumers? I see no problem in this type of regulation since it tries to protect dumb citizens
        thecomedian
        • 2 Years Ago
        @Andre Neves
        Bad idea bears say "Slippery slope arguments! Yaaaaay!"
      Andy Dufresne
      • 2 Years Ago
      Ah... makes me feel AMAZING that I was the one pulling one over on the dealer with my last trade-in! Thank you Carfax for not recording the $6,500 accident two months before I unloaded the car! Gotta get THEM before they get you!
        SloopJohnB
        • 2 Years Ago
        @Andy Dufresne
        Well, you actually just scammed the poor bugger who the dealer subsequently sold your car to. And if the car was professionally repaired it should be ok. Most people don't want to buy a car that has had an extensive repair done, but if it was done right it should last the life of the car.
      diffrunt
      • 2 Years Ago
      common biz practices since car time began
      Rick
      • 2 Years Ago
      The people that always say they want a no-hassle, just pick it out and take it home buying experience CRACK ME UP. Jesus christ, if you want to be in and out in 30 minutes, all you have to do is point to the car you want, say "Ill take it. Here is my license and insurance. Can you sit me down to fill out your credit app? thank you." Or even better "here is my draft check from my credit union, they gave me a great rate!" or "I'll bring by the cashiers check after we do the paperwork and you guys clean it up" Any other attempt by you to 'save money' opens you up to the dealership process. Why would you expect to be able to spring a game on them without them doing it back to you? (aka negotiating and asking for discounts.. as if you walking in earns you a discount, yet them investing their lives and millions of dollars doesnt give them right to ask for what a manufacturer figured was a fair and competitive price) And Yes I sold cars before.
        Dark Gnat
        • 2 Years Ago
        @Rick
        In my experience, car dealers get pissed when you try to pay in cash. They want you to finance it if they offer their own financing. One guy tried to guarantee me a certain monthly payment, but wouldn't tell me the total price of the car. "Can we make a deal" was about the only thing he knew how to say. I said "no". I've had dealers try to offer me $500 on a trade in. The tires alone were worth more than that. I've had dealers attempt to talk me into all kinds of vehicles that I didn't want because they would get a higher profit margin if they sold them. Not to mention dealer markup on "high demand" or hard to find cars, including used ones.
        LJSearles
        • 2 Years Ago
        @Rick
        This x' eleventy billion.
        The Other Bob
        • 2 Years Ago
        @Rick
        When I bought my last car, I first spent a great deal of time with a salesperson, test drove etc. I then did my pricing research and e-mailed THEM an offer. I told them I would be willing to pay $x @ y interest rate. They came back with another offer. I can't say it was the best way to negotiate, but it seems to work OK.
        MacProMan
        • 2 Years Ago
        @Rick
        amen brother
      JR
      • 2 Years Ago
      It would be nice if dealers werent involved with sales at all,only service/warranty stuff. Order your car on-line by configurator and it gets delivered to you house. Eliminate all the BS.
        TruthHertz
        • 2 Years Ago
        @JR
        Cool man, test drive your car over the internet. See how they really look in the sunlight through your browser, and see if you fit in the car with a few clicks. Really??? Dealers will always have a place. Get used to it.
          JR
          • 2 Years Ago
          @TruthHertz
          Wow,are you car salesman?
        SloopJohnB
        • 2 Years Ago
        @JR
        Look at the numbers. Car dealers survive on sales, prosper on service. Longer warranty and maintenance service rolled into the car price keep customers coming back to the dealers and the car manufacturers end up paying for maintenance (which is likely shorted...get your car serviced in between factory-mandated services unless you plan to buy new before the maintenance warranty is up) and failures during the warranty period. It's all good...the dealers aren't hurting and if they are, they'll go out of business which is NOT what the manufacturers want.
      reattadudes
      • 2 Years Ago
      what's especially strange about this settlement is all of the charged dealers are in small towns. most of the unscrupulous dealers are in big cities, with big ad budgets. as a former dealer myself, the stupidity of the average buyer has never ceased to amaze me. we never did stuff like this, yet would have these idiots come in and not understand why we didn't have the dog-and-pony show that other dealers did. there was nothing I liked better than to have some idiot "who knew car dealerships screwed everyone" come in and spend a week in the dealership. I gave them free reign of everything, and they got to see how everything worked. they got to see how much money we lost on a new old stock unit that sat on the lot for nine months at 12% floor plan interest (this was back in the 80s-90s), how many times the factory would deny a warranty claim (we had a special account to pay for the repair ourselves, just to keep the customer happy), and the difficulty we many times had just to get financing approved for a customer. I'd also have them bring their "small timer's bible" (Consumer Reports), and compare what Consumer Reports said the "invoice price" was, compared to the actual factory invoice in front of them. Consumer Reports never takes into consideration that there are other fees added by the factory, like advertising, which can add an additional $400-$800 to each invoice for a particular model. advertising varies by model and region. for example, advertising for trucks will be stronger out west, and a dealers in California or Arizona will pay more for truck advertising than a dealer in New Jersey. of course, "the small timer's bible" doesn't take any of this into consideration. and for those who say, "see how dealers rip you off?" when they see deceptive advertising, just remember one VERY simple thing: if it didn't work, they wouldn't do it. if it didn't generate traffic, they wouldn't do it. whenever people call me about buying a car (and aren't in my local area, so I can personally help them), I always tell them to go to the internet/fleet department. the guys there are paid on unit count, not profit. you'll be in and out quickly, with no drama. I can remember a segment on "48 Hours" about ten years ago that featured Earnhardt Ford, a large dealer in the Phoenix area. they tracked two couples buying new Fords: one couple went thru Fleet, and the other the conventional bartering "in the box" (salesman's cubicle). there was a split screen, and you could see the progress of both couples. the "fleet" couple was there 32 minutes, and headed to dinner on their new car. the other was still "in the box." it went on and on, with the first couple getting into bed five hours later, and the other couple still "in the box". the "in the box" couple finally left in their new car, basically identical to the fleet customers, except for one little thing: they paid over $2,000 more than the couple who went thru drama-free Fleet.
      Zee Frunch Canadiun
      • 2 Years Ago
      Makes me want to go car shopping with a baseball bat...
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