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Wanna Bet?

October 2008, F&I and Showroom - Feature

by Thomas B. Hudson, Esq.

It seems like nearly every issue of Spot Delivery contains yet another story of a dealer hammered by an attorney general for using an advertising program alleged by the AG to have violated state prohibitions against unfair and deceptive acts and practices or other state laws. This month is no exception.

Illinois Attorney General Lisa Madigan has sued two car dealers for deceptive sales and advertising practices. The AG’s complaint names Orland Park Nissan and Infiniti of Orland Park as defendants, and alleges that the dealers sent direct-mail advertisements in April 2007

to Chicago-area consumers describing an “exclusive credit amnesty event” and urging consumers to call the dealers to arrange a private appointment.

The mailer indicated that targeted consumers may have filed bankruptcy in the past, but that the “amnesty” would permit consumers to qualify for affordable auto financing regardless of their credit rating. The direct-mailer envelope claimed that “important vehicle recall information” was enclosed and that the consumers’ response was required. However, no recall by the National Highway Traffic Safety Administration existed, and the mailer didn’t contain recall information. Both the AG’s office and the Better Business Bureau had received complaints against the dealerships.

“These deceptive mailers purposely and unfairly targeted consumers who may have struggled at one time to manage their finances,” Attorney General Madigan said. “This lawsuit should send the message to auto dealers that my office won’t tolerate using deceptive marketing practices to lure unsuspecting consumers into risky loans.” [Editor’s note: It’s discouraging when the state’s top legal officer evidently doesn’t know the difference between “loans” and “credit sales.”]

The AG’s complaint alleges that the deceptive mailer violates several Illinois laws, including the Consumer Fraud and Deceptive Business Practices Act, the Loan Advertising to Bankrupts Act, the Uniform Deceptive Trade Practices Act and the Illinois Administrative Rules on Motor Vehicle Advertising.

The AG’s suit asks the court to prohibit the dealers from:

• Violating these consumer protection laws

• Offering incentives and free prizes

• Using the term “recall” in advertisements

• Offering coupons with sales agreements

• Advertising that a loan would be made to a consumer who has declared bankruptcy

The suit also seeks restitution for consumers and asks the court to assess civil penalties of $50,000 per violation, an additional $50,000 statutory civil penalty and a $10,000 civil penalty for each violation committed against a person over 65 years old. Madigan’s suit also asks the court to order the defendants to pay the costs of the investigation and court proceedings.

Keep in mind that, at this point, the AG’s charges are just that – charges. The AG hasn’t proven anything, and the dealerships have yet to respond in court. I might end up eating crow after the dealers file their responses in court, but I couldn’t help but entertain some suspicions about the dealerships’ use of this direct-mail program as I read the AG’s press release. Here are some “I’ll bets.”

I’ll bet that the dealerships bought this direct-mail program from some advertising company.

I’ll bet that the advertising company did not run the program by lawyers familiar with auto dealer advertising laws and restrictions.

I’ll bet that no one at the dealership gave the program the “smell test.” (Goodness knows, this one reeked!)

I’ll bet that the dealerships’ lawyers never reviewed the program.

I’ll bet that the dealerships didn’t ask the advertising company to produce a legal opinion that the program complied with all federal and state laws.

I’ll bet that the dealerships didn’t contractually require the advertising company to indemnify them in case the program was challenged by authorities or in case the dealerships were sued by consumers.

I’ll bet that those dealerships don’t subscribe to Spot Delivery!

Wanna bet?

Thomas B. Hudson, Esq. (thudson@special-finance.com) is the author of several books, available at www.counselorlibrary.com. He is also the publisher of Spot Delivery, a monthly legal newsletter for auto dealers, and CARLAW, a monthly report of legal developments in all states for the auto finance and leasing industry. He is also a partner in the Maryland office of Hudson Cook LLP.

Copyright CounselorLibrary.com 2008, all rights reserved. Based on an article from Spot Delivery. Single-print publication rights only, to Special Finance Magazine. HC# 4845-1020-0578 (9/08).

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