FTC launches new sweep targeting deceptive dealer practices
The FTC today announced Operation Rush Control, an ongoing 32-partner law enforcement sweep against deceptive auto dealer practices, including both civil and criminal actions. To date, 252 cases have been brought in the U.S. and Canada, with six new FTC cases, including more than $2.6 million in monetary judgments. Among the practices being targeted in Operation Rush Control are deceptive dealer advertising (especially “bait and switch” dealer advertising and fine-print ad disclaimers), automotive loan application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. Jessica Rich, head of the FTC’s Consumer Affairs Division, indicated the FTC would be “on the lookout” for similar cases.
Enforcement of add-ons
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. A few examples include extended warranties, payment programs, guaranteed automobile protection (commonly called GAP or GAP insurance), credit life insurance, road service, theft protection, and undercoating. The FTC indicated these products were hidden in contracts, with the fees or payment wrapped into the total vehicle price. Other practices cited included dealers who inflate buyers’ incomes to get contracts financed, dealers encouraging straw purchasers, and adding nonexistent add-ons to increase the loan amount, all of which make payments unaffordable to consumers.
Auto finance fraud
The FTC also took action against a Florida company that promised to reduce a consumer’s debt, taking a $500 upfront fee but doing nothing. The FTC is in ongoing litigation with the company, to obtain consumer refunds for nationwide victims and penalties as well. A U.S. attorney indicated that criminal felony fraud cases were being filed, including cases for conspiracy, bank fraud, and wire fraud, with criminal penalties and jail time for the sales, F&I and sales managers who committed the wrongdoing. The attorney general indicated that the coalition of U.S. attorneys that worked on mortgage fraud were now focusing on auto finance fraud and would file criminal prosecutions in FTC civil action situations where the conduct was particularly egregious.
Tags: F&I Compliance
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