Dealership advertisements must show deals that are feasible for the average consumer and easy for those consumers to understand.
That’s what one Ohio dealership executive learned in resolving a deceptive advertising charge by the Federal Trade Commission.
Progressive Chevrolet Co. and Progressive Motors Inc., in Massillon, Ohio, settled charges with the FTC last week that an ad agency run jointly by the companies promoted monthly lease payments but failed to clearly disclose other essential terms, such as eligible credit scores.
The ad also referenced beacon scores specific to auto lending in the disclosure rather than generally accepted credit scores, the FTC said.
“Only at the bottom of the advertisement, in fine print and not in close proximity to the advertised vehicles, does the advertisement disclose the term of the lease, that the payment does not include tax, title, and fees, and that the offer is ‘[s]ubject to 800 beacon [sic] score or higher with approved credit,’” the FTC said in a complaint.
The beacon scores the ad referenced are auto-loan-specific credit scores that few consumers understand, the FTC said. Most consumers don’t know how the score differs from a general credit score, such as a FICO score or VantageScore, or that less than 20 percent of consumers have a beacon score of 800 or higher, it said.
“The failure to disclose, and/or failure to disclose adequately, that few consumers will qualify, in light of the representations made, was, and is, a deceptive practice,” the FTC’s complaint said.
The advertisement featured two columns: Progressive Chevrolet Co. advertised three new 2014 Chevrolet vehicles on the left and Progressive Motors Inc., pitched six new 2014 Chrysler vehicles on the right. The ad showed the lease cost per month next to each vehicle without a stated length of the lease next to the photo. “Sign & Drive” and “Zip, Zero, Zilch -- Nothing Down” are repeated at least 10 times throughout the advertisement, the FTC said.
Craig Sanders, president of the dealerships, said the advertisement contained all necessary disclosures. But the stores “ultimately agreed that we could have more clearly disclosed certain terms and conditions.”
Advertising with credit scores is a common practice in the retail automotive industry, Sanders said in an emailed statement.
But “the FTC determined that because a majority of consumers would likely not meet such a credit score, that such a fact must actually be stated in the advertisement,” he said.
The dealerships have evaluated their review policies to ensure that its advertisements are compliant with state and federal laws and are fair to consumers, he added.
However, Sanders said the dealerships still believe the advertisements were consistent with practices industrywide.
“It is important to us to note that we know of no customer complaints to the FTC involving these or any other advertisements or practices in our almost 80 years of serving the Massillon and Canton areas and the surrounding communities,” Sanders said. “We apologize to any Progressive customers who felt they had been misled by any such dealership advertisements.”
The dealerships are charged with violating the Federal Trade Commission Act and Consumer Leasing Act and Regulation M.
The proposed consent order prohibits the dealerships from advertising misleading lease or financing terms for 20 years. They must also clearly and conspicuously disclose all qualifications on a consumer’s ability to obtain the advertised offer.
The dealerships are also prohibited from advertising a payment amount, or that no initial payment is necessary, without clearly disclosing that the transaction is a lease, the total amount due at delivery, the payment schedule and amounts, security deposit information and that there may be an extra charge at the end of the lease based on residual value.
Progressive Chevrolet and Progressive Motors join a list of dealerships that have caught fire from the FTC for advertising practices.
Twelve dealerships agreed to settlements after the FTC cracked down on deceptive advertising as part of Operation Steer Clear in 2014.
Under the settlements, the dealerships will also be under scrutiny for 20 years, and any violation could result in a fine of as much as $16,000 for each day a deceptive ad runs.