The federal agencies overseeing the auto sales, finance and leasing world sure like to trumpet their enforcement actions in press releases. The Consumer Financial Protection Bureau (CFPB) has earned a reputation for saying things in press releases that are not supported by the actions being announced. The Federal Trade Commission (FTC)’s press folks, on the other hand, are becoming known for the catchy names they apply to the agency’s recent enforcement activities.
In early 2014, the FTC announced “Operation Steer Clear,” described as a “nationwide enforcement sweep focusing on the sale, financing, and leasing of motor vehicles.” In that action, nine dealers agreed to settle deceptive advertising charges and action against a 10th dealer was pending. The FTC claimed the dealers made misrepresentations in print, Internet and video ads that violated the FTC Act, falsely leading consumers to believe they could buy vehicles for low prices, finance vehicles with low monthly payments, lease vehicles with no upfront payment, and/or had won prizes they could collect at the dealership.
The ads also allegedly violated the Consumer Leasing Act and Regulation M by failing to disclose certain lease-related terms and/or the Truth in Lending Act and Regulation Z by failing to disclose certain credit-related terms.
Evidently, the FTC press folks liked the catchy moniker so much, they’ve done it again.
On March 26, the FTC and multiple law enforcement partners announced the results of “Operation Ruse Control,” a cross-border enforcement effort focusing on deceptive practices in car sales, leasing and financing. Ruse Control involved 252 enforcement actions — 187 that occurred in the United States since the FTC’s last sweep in early 2014, and 65 in Canada.
The cases include civil and criminal charges of deceptive advertising, financing application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. The FTC has settled six of these cases, obtaining more than $2.6 million in monetary judgments, according to the agency’s press release.
The press release also made this claim: “For the first time since receiving expanded authority over auto dealers under the Dodd-Frank Act, the FTC has taken two auto enforcement actions involving add-ons, which is the practice of a dealer or other third party adding to the vehicle sales, lease, or finance agreement charges for other products or services.” That statement may be technically correct, but it’s misleading. It implies that Dodd-Frank gave the FTC new powers, but the FTC has had the necessary enforcement authority to bring actions like these long before Dodd-Frank was enacted. What Dodd-Frank did was exempt certain car dealers from the jurisdiction of the Consumer Financial Protection Bureau, essentially pressuring the FTC to take up the regulatory slack.
What was striking to me about both Operation Steer Clear and Operation Ruse Control is the FTC’s toolbox for bringing the actions contained nothing new. The laws and regulations that the FTC claimed dealers were violating — the Truth in Lending Act, for example — have been around for decades. The FTC has had authority to prohibit deceptive practices since 1938. Actually, it’s had that authority since 1914 if it could prove injury to competition. And, no, I wasn’t there for either of those.
Not only have the laws and regulations been around for decades, the FTC’s actions did not rely on any imaginative or innovative interpretations of those laws. The rules the FTC claims the dealers broke are about as clear as rules get.
Also striking was the apparent ignorance (or indifference) of the targeted dealers to the requirements under these long-standing laws and regulations. How many times will it be necessary for the FTC to unlimber its two-by-four and flail more dealers before it finally dawns on them that they have serious compliance responsibilities?
If your compliance officer has not read all of the documents the FTC released in connection with these operations and adjusted your dealership’s advertising and sales practices where necessary, he or she should do so immediately.
Don’t have a compliance officer? I rest my poor, tired case.
Tom Hudson is a partner in the law firm of Hudson Cook LLP and the author of several compliance manuals available at CounselorLibrary.com. Copyright Counselor Library.com 2015, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only, to Bobit Business Media. HC# 4813-7818-7811 (5/15).