Claims to pay off a consumer’s trade-in “no matter how much they owe” may seem too good to be true – at least the Federal Trade Commission thinks so. And in some cases it was. The FTC has called five different car dealers on the carpet for these false advertisement claims .
The claims lead the consumer to believe the dealership will pay off the buyer’s old car loan when purchasing a new car even if the loan is more than what the car is worth, known as negative equity. But some dealerships have misled consumers with negative equity by taking the remaining balance from the old loan and adding it to the new loan.
During the FTC’s 2011 public roundtables regarding consumer protection issues, concerns were raised about car dealerships making these claims. The commission proceeded to investigate and found Billion Auto, Inc., in Sioux Falls, S.D., Frank Myers AutoMaxx, LLC, in Winston-Salem, N. C., Key Hyundai of Manchester, LLC and Hyundai of Milford LLC, in Vernon and Milford, Conn., respectively, and Ramey Motors, Inc., in Princeton, W. V. in violation of several laws.
Three of the cases involved violations of the Truth in Lending Act and Regulation Z for failing to disclose credit-related terms, including annual percentage rates. Two of the cases were in violation of the Consumer Leasing Act and Regulation M for failing to disclose certain lease related terms, including monthly lease payments.
Due to the violations, the five dealers may have to file a compliance report within 60 days of the final ruling, which will be April 16. If the final ruling finds the dealers liable, they will have to comply with the FTC’s report requests for the next 20 years. They would also be liable for civil penalties if in violation of the compliance agreement at any time over the next 20 years.
Photo: Federal Trade Commission