FTC Issues Settlement Orders for Five Car Dealerships

Five car dealers agreed to settlement orders issued by the Federal Trade Commission (FTC) to cease running deceptive advertising. The dealerships allegedly ran advertisements on their websites and YouTube.com, that made consumers think they didn’t have to pay off their loan balance on their trade-in, even if the balance exceed the trade-in value (negative equity).   The dealerships added the negative equity to the loan for the new car, and one dealership required the consumers to pay it out- of- pocket.

This was the Federal Trade Commission’s first case of this type. The dealers involved were: 1) Billion Auto, Inc., in Sioux Falls, South Dakota; 2) Frank Myers AutoMaxx, LLC, in Winston-Salem, North Carolina; 3) Key Hyundai of Manchester, LLC and (4) Hyundai of Milford LLC, in Vernon and Milford, Connecticut, respectively, and which advertise jointly; (5) and Ramey Motors, Inc., in Princeton, West Virginia.

Additional orders

In addition to stopping the advertising, the proposed orders required the dealers to keep copies of relevant advertisements and materials supporting claims made in their advertisements, to provide copies of the order to certain employees, and prohibits them from misrepresenting other facts relating to leasing or financing a vehicle. The dealers are required to file compliance reports with the Federal Trade Commission to prove they are meeting the terms, which will expire in 20 years.

“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.”

To help consumers understand these advertisements, the Federal Trade Commission issued a new consumer education publication titled “Negative Equity Ads and Auto-Trade-ins”.  Beware of advertisements from dealerships that claim to pay off your trade-in.  Contact the Federal Trade Commission’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Auto Loans, Credit Report, Debt, Financial, Getting Credit, Government, Money & Identity

This post was written by John Ulzheimer