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The FTC Strikes Again

And This Time it’s a Game Changer

By: Jim Ragonda

Back in January of 2014, I wrote in my article The FTC Strikes Again – You Ain’t Seen Nothing Yet that “although it may seem that the Federal Trade Commission is only the ‘dealer advertising cop,’ they are expanding their reach in several other areas.” Well, that prediction has come home to roost in a big way.

In September of 2016, the FTC charged nine California auto dealerships and their owners with using a wide range of deceptive and unfair sales and financing practices.

Get Serious About Compliance

In addition to deceptive advertising (among the worst of which was advertising $38 down/$38 month when the actual deal was $2,695 due at signing and payments of $179 after the first six months), the dealers were accused of the following:

  • Subjecting non-English speaking consumers and individuals with poor credit, to deceptive, misleading, and unfair practices when offering add-on products and services or when arranging financing
  • Packed additional charges for add-on products and service into the amount financed without consumers’ informed consent
  • Deceptively claiming that such add-on products are required as a condition of the purchase or financing of the vehicle or will improve consumers’ chances of obtaining financing
  • Deceptive and unfair tactics to pressure consumers to agree to different financing terms or have otherwise refused to honor the contract (“yo-yo practices.”)
  • Dealership employees and their families posting positive, five-star reviews of the dealerships on websites that deceptively purport to be objective or independent
  • Selecting and preprinting add-on products on the sales and financing forms, such as the F&I product menus, pre-contract disclosures, and the contract, before discussing or presenting them to the consumer
  • Rushing consumers through the closing process and simply indicating to consumers where to sign
  • Having consumers sign blank documents
  • Telling consumers that they would not be charged the cost of the add-on products when in fact they were
  • Telling consumers that they could cancel the add-on products within a specified time for a refund and failing to process the paperwork or have claiming to have lost the paperwork, resulting in delayed cancellations or lower refund payments
  • Approving deals to customers with risky credit before bank financing had been secured in order to increase their sales numbers knowing that the dealership was not going to be able to secure bank financing on the offered terms
  • Representing to consumers that they must sign the new contract when dealers failed to assign financing
  • Refusing to return the consumer’s down payment or trade-in vehicle
  • Having consumers’ vehicles repossessed where consumers had valid, binding contracts

It appears that the FTC obtained information about the dealers’ practices from both consumers and former dealership employees.

Ultimate Game Changer

Here’s the ultimate game-changer: unlike earlier FTC actions where there have been no initial monetary penalties, it looks like this one is going to be very, very expensive. The FTC is requesting that the court assess both injunctive relief and relief to redress injury to consumers including but not limited to, rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies; and the FTC’s costs and legal fees.

The stakes have gone up – way up. Dealers nationwide need to get serious about compliance. Today.

Jim Radogna
Jim Radogna
Director of Compliance The Lloyd Andersen Group of Companies Inc. and its wholly-owned subsidiary, The College of Automotive Management Before joining LAGC, Jim spent 15 years in dealership management as a sales manager, F&I director, GM, training director and compliance officer. He was the founder and president of Dealer Compliance Consultants Inc., a national automotive compliance resources and training firm. Jim has used his knowledge and industry experience to develop unique, no-nonsense compliance and reputation management solutions for automobile dealerships of all sizes. Jim is a sought-after speaker and frequent contributor to several automotive industry publications. Visit the company’s website at

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