5 dealerships to halt ads in deal with FTC
Five dealerships have agreed with federal regulators to stop running ads in which the stores promise to pay off consumer trade-ins, no matter how much the consumers owe.
The dealerships have reached proposed consent settlements with the Federal Trade Commission. All but one are new-car stores.
The agency filed complaints against the stores alleging the ads were deceptive because they made consumers think they would no longer be responsible for paying off the loan balances on their trade-ins, even if the balances exceeded the trade-in values.
Representatives for three of the stores said today that their ads weren't deceptive. The ads ran on the dealership Web sites and on sites such as youtube.com.
According to the complaints, the dealerships would roll the consumers' negative equity in the trade-ins into the new-vehicle loans; in one case, the dealership required the customer to pay off the old loan.
Giving customers the idea that they no longer would be responsible for paying off their old loans violated truth-in-lending and other rules, the FTC said. The FTC also accused dealerships in some cases of violating advertising rules that require disclosures for annual percentage rates and lease terms.
The dealerships named in the FTC complaints are:
Billion Auto Inc. of Sioux Falls, S.D.
Key Hyundai of Manchester LLC in Vernon, Conn.
Hyundai of Milford LLC in Milford, Conn.
Ramey Motors Inc. of Princeton, W.Va.
Frank Myers AutoMaxx LLC, a used-car dealership in Winston-Salem, N.C.
Robert Byerts, an attorney for Key Hyundai and Hyundai of Milford, said in a phone interview that his clients didn't do anything improper with regard to rolling negative equity into a new-car loan.
He said the order stemmed from a vendor that allegedly failed to include a required disclosure on an ad that appeared on YouTube.
"There was no improper treatment, no deception with regard to any consumer. This was not the result of any consumer complaint," Byerts said.
Tracy Myers, owner of Frank Myers AutoMaxx, said: "If our advertising ever misled anyone, it was not intentional and I apologize.
"While it is not my belief that our advertising was or is deceptive, I respect the FTC and what they are trying to do. That is why I decided to fully cooperate with their request to remove the questionable ads from Youtube and to not incur any future violations."
Johnnie Brown, an attorney for Ramey Motors, which has Toyota, GM and Chrysler Group franchises in Princeton, W.Va., said the FTC complaint involved ads that were created for TV.
But Brown said when the same ads were reproduced on the Internet, the required disclosures became too small to be legible.
"Admittedly, the disclosures were not as clear … I think a technical violation would be a fair way to put it. There were no consumer complaints. We simply agreed (in the proposed consent order) to obey the law, which of course we would always do anyway," he said.
Brown's firm is Pullin, Fowler, Flanagan, Brown and Poe, Charleston, W.Va.
David H. Billion Sr., co-owner of Billion Auto, said a violation in his case consisted of neglecting to put “APR,” short for “annual percentage rate,” in a print ad, after a zero-percent offer sponsored by one of his OEMs.
Billion Auto has 16 locations with most domestic and import franchises, except Ford, or luxury-import franchises like BMW, he said.
“We have a chain that runs over 100,000 ads a year for different franchises. They (the FTC) looked at a whole bunch of our ads,” he said.
“Since this happened I’ve been paying close attention to everyone else’s ads, and I see mistakes all the time. Why I got so ‘lucky’ (to have the FTC complaint), I don’t know,” Billion said.
“There are rules and we’ve got to follow them. In this particular instance, it didn’t have it (the “APR” notation). The ad agency thought it was in there, but it wasn’t,” he said.
The FTC also solicited public comments on the proposed settlements. The agreements will be subject to public comment through April 16. After that, the FTC will decide whether to make the proposed consent orders final.
You can reach Jim Henry at email@example.com.