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19 Dealers Charged With Deceptive Advertising in Two-Month Span

July 17, 2012

By Erin Spandorf

Nineteen car dealerships nationwide were charged within a two-month span for deceptive advertising practices. The flood of complaints from consumers could result in harsh disciplinary action and further charges levied against dealers.

“For 2011, the number of complaints involving auto related issues went up dramatically; it’s now in the top 10 (complaints),” said Robin Thurston, staff attorney with the FTC. “We are certainly getting more complaints.”

The following is a list of recent actions taken against dealers by state and federal regulators for deceptive advertising:

FTC Charges Dealers in South Dakota, North Carolina, Connecticut and West Virginia: In March, the FTC charged five car dealers in South Dakota, North Carolina, Connecticut and West Virginia with running advertisements that falsely promised to pay off trade-ins even if the customer still owed money on the vehicle. Posted to dealer websites and YouTube, these ads deceived consumers by making them think that they wouldn’t have to pay off the loan on their trade-in when, according to the FTC, the dealers rolled the negative equity customer’s new vehicle loan. Attorneys General in the four states have, consequently, given a lot of attention to issues with car dealerships in the past few months.

Advertised Sales Price Not Honored in Vermont: In May, 10 Vermont dealerships entered into an Assurance of Discontinuance with Attorney General William Sorrell after his office charged them with not honoring their advertised sales prices. The dealers had to pay refunds to the consumers and one of the companies had to pay $16,000 in penalties to the state.

Massachusetts Dealership Charged With Deceptive Marketing: A family of three Massachusetts dealerships were ordered in May to pay a total of $225,000 in restitution, civil penalties and attorney fees because of deceptive marketing tactics, according to state Attorney General Martha Coakley. The operation was charged with advertising the dealer’s cost of vehicles for sale rather than the actual purchase price. Additionally, employees were charged with having customers sign incomplete documents which were later filled in with a higher price than negotiated. Employees also charged fees for unwanted or undisclosed F&I products and services. The dealership denied the wrongdoing but cooperated with the Attorney General’s office.

Claim Filed Against New Jersey Dealer for Not Disclosing Vehicle Damage: New Jersey Attorney General Jeffrey Chiesa’s office filed suit against a Paterson-based used-car dealership because it sold used vehicles without disclosing prior damage or use. The 51 identified used vehicles the dealership offered for sale had a total of more than $200,000 in damage that went undisclosed to consumers, according to a press release. The dealership also failed to include promised equipment, told customers the vehicles were covered by a warranty when there was none, and failed to disclose to consumers that the sales price didn’t include licensing, registration fees and taxes.

Ohio Dealerships Violate Consumer Finance Laws: Ohio Attorney General Mike DeWine filed lawsuits against two Ohio dealerships due to multiple violations of the state’s consumer financing laws. The violations included failing to notify consumers of payment due dates, failing to notify consumers of the total cost of credit, and including an acceleration clause for consumers who defaulted, according to DeWine’s office. Prior to the discovery of these violations, several consumers had filed complaints against the dealers.

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