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5 Dealers Targeted by FTC for Deceptive Ads

March 15, 2012

Five car dealers 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, 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. 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 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 Billion Auto Inc. of Sioux Falls, S.D., Frank Myers AutoMaxx LLC of Winston-Salem, N.C., Connecticut-based dealers Key Hyundai of Manchester and Hyundai of Milford, which advertise jointly, and Ramey Motors Inc. of Princeton, West Virginia.

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. In the case of Billion Auto Inc., the operation’s video promotion showed an inverted video of a car moving to depict a customer being upside down on their vehicle. The video then flips right-side up and displays the following tagline: "Credit upside down? Need a new car? Go to We want to pay off your car."

Frank Myers AutoMaxx’s tagline for its advertisements read: "Uncle Frank wants to pay [your trade] off in full, no matter how much you owe."

Key Hyundai and Hyundai of Milford used the following line to promote its dealerships: "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." Ramey Motors used a similar line it its ads.

In addition, the complaints in three of the cases allege violations of the Truth in Lending Act (TILA)’s Regulation Z for failing to disclose certain credit-related terms. Complaints in two of the cases allege violations of the Consumer Leasing Act (CLA)’s 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.”

In addition, the proposed orders against Billion Auto, Key Hyundai, and Hyundai of Milford require the 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. And the commission’s 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. 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.


  1. 1. Quinn Mallory [ March 15, 2012 @ 02:14PM ]

    It's difficult to believe that car buyers would actually believe they would no longer be liable for the remaining balance on their loan if they traded it in under these kinds of advertisements. Common sense should indicate that any negative equity would be rolled into the new loan. Sometimes I think consumers feign ignorance in an attempt to gain advantage.

  2. 2. BG TANZER [ March 15, 2012 @ 02:40PM ]

    Only a first time buyer (who would not have a loan on the trade in) would NOT know that the trade value and the trade payoff are disclosed on both the Buyers Order AND the Finance Agreement. FTC is really digging deep on this one.

  3. 3. Allison Wenner [ March 15, 2012 @ 05:34PM ]

    I agree many buyers do indeed feign ignorance when you come to the point in disclosing the contract that clearly indicates the negative equity. This is where some demand to see the sales manager or salesperson and claim they were never told this would be rolled into the new loan and they would be paying for this difference.
    Unfortunately sometimes they are actually telling the truth and believe it or not they did not understand.

  4. 4. Kb - Truth [ March 17, 2012 @ 09:55AM ]

    Come on... these sort of ad's are trolling for individuals in the sector of consumers that..lets face it, are all wanting something for nothing. Please don't act surprised ye of very very short memory, have we already forgotten about the mortgage industry? Loaning 120%+ LTV and folks were lining around the block like sheep to be sheared by the lenders. Yes, we need to protect these folks from themselves, because we know who pays in the end for this sort of activity. How about selling vehicles without a bunch of hokypoky and looking out for your neighbors..... aw, forget it. Lets get them for all we can and run like everyone else!! Right?

  5. 5. Patrick Wallace [ March 20, 2012 @ 08:53AM ]

    I would like to think that people have better things to do in their live beside faking ignorance to gain a little advantage. That being said since this is how we make our living would it not be OUR obligation to take this blind spot away by having guests sign clear and clean buyers orders before they go in the business office?


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