F&I and Showroom, January 2015

Developments FTC Targets Two Groups for Deceptive Advertising TWO DEALER GROUPS TARGETED BY THE Federal Trade Commission FTC for deceptive advertising in 2012 are in trouble again the agency announced in December The retail chains were charged with violating the administrative orders prohibiting them from deceptively advertising the cost of buying or leasing a car Charged were Billion Auto a chain of 20 family owned dealerships in Iowa Montana and South Dakota and its family controlled advertising company Nichols Media Inc and Ramey Motors which operates three dealerships in Virginia and West Virginia The groups were among fi ve dealer groups that settled with the FTC in March 2012 over ads that promised to pay a consumers trade in no matter what the consumer owed on the vehicle If auto dealers make advertising claims in headlines they cant take them away in fi ne print said Jessica Rich director of the FTCs Bureau of Consumer Protection These actions show there is a fi nancial cost for violating FTC orders Billion Auto and its ad agency have agreed to settle charges that they violated the FTCs 2012 administrative order which prohibited the group and its affi liates from misrepresenting material costs and terms of vehicle fi nance and lease offers The dealer group will pay 360000 in civil penalties to settle the FTCs charges According to the agencys complaint Billion and Nichols directors violated the FTCs administrative order by frequently focusing on only a few attractive terms in their ads while hiding others in fi ne print through distracting visuals or with rapid fi re audio delivery The FTC charged Ramey and its three stores with misrepresenting the costs of fi nancing or leasing a vehicle by concealing important terms of the offer such as a requirement to make a substantial down payment The complaint also charged Ramey with failing to make credit disclosures clearly and conspicuously as required by the Truth in Lending Act It also alleged that the dealer group failed to retain and produce for the FTC appropriate records to substantiate its offers Ramey Motors and its affi liates are subject to 16000 in civil penalties for each alleged violation of the FTCs administrative order 8 F I and Showroom January 2015 DOJ Cracking Down on Subprime A merican Honda Finance Corp Ally Financial Credit Acceptance Corp and Toyota Motor Credit Corp were targeted by the the Department of Justice DOJ in recent months regarding their activities in the subprime auto fi nance market In December regulatory fi lings executives from Credit Acceptance and Ally Financial revealed that they have received civil investigative subpoenas from the DOJ requiring them to produce certain documents related to auto lending practices in the subprime market Both fi nance sources said they were cooperating fully with the agencys demands Earlier in the same month Credit Acceptance also received a civil investigative demand from the Offi ce of the Attorney General of the Commonwealth of Massachusetts related to the origination and collection of nonprime auto loans in the state Toyota Motor Credit Corp and American Honda Finance Corp stated in Securities and Exchange Commission SEC fi lings prior to the end of the year that they were facing possible enforcement action from the Consumer Financial Protection Bureau CFPB as well as the DOJ The captives said the two agencies alleged that their auto lending practices particularly policies that allow dealers to mark up consumer interest rates resulted in the discriminatory pricing of auto loans Toyota released a statement on Dec 1 claiming it has activated a stronger more robust compliance management system over the past two and a half years to help realize its consumer protection and regulatory compliance goals Our intent is that these measures will contribute to a solution that meets the CFPBs expectations and allows us to better serve our customers Toyotas statement read in part In the meantime and in keeping with our commitment to fair and responsible lending practices it is important for our customers to know that we do not track the race or ethnicity of our customers or credit applicants and these factors never infl uence our credit or pricing decisions