Operation Ruse Control: FTC Targets Abusive Auto Lending

FTC vs. Auto DealersThe FTC and 32 law enforcement partners recently announced the results of “Operation Ruse Control,” a nationwide and cross-border crackdown to protect consumers when purchasing or leasing a car.  The operation encompasses approximately 252 enforcement actions the FTC has said.  According to the FTC, the six newest cases have produced more than $2.6 million in monetary judgments, and since the last sweep there have been 187 enforcement actions in the U.S. and 65 actions in various parts of Canada.  Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said Operation Ruse Control, “For most people, buying a car is one of the largest purchases they’ll make.  Car ads must be truthful, loan terms must be clear, and dealer practices must be honest. That’s why our partners are working together to crack down on deceptive marketing about car sales, leasing and financing.”

Among the highlights of Operation Ruse Control, are two cases involving Vehicle Purchase Add-Ons.  In the first case, National Payment Network, Inc., the FTC charged National Payment Network with alleged violations of the .  According to the FTC, National Payment Network violated the Act by deceptively pitching consumers an auto payment program that it claimed would save consumers money.  However, National Payment Network failed to disclose to its consumers that the significant fees it charged for its services cancelled out any savings the company promised.  On average, National Payment Network charged consumers more than $775 for their services on standard five-year auto loan.  The second case involved Matt Blatt Inc. and Glassboro Imports, LLC, wherein the FTC alleged that Matt Blatt dealerships violated the FTC by ailing to disclose or adequately disclose the fees associated with NPN’s add-on service and that many consumers would not save money overall due to the program’s significant fees. Matt Blatt dealerships received a commission for each of the more than 1,000 consumers they enrolled.

Both National Payment Network and Matt Blatt have agreed to settle the charges lodged by the FTC.  Under the proposed consent orders, both companies are prohibited from misrepresenting that a payment program will save consumers money, unless the amount of savings is greater than the total amount of fees and costs charged in connection with the program. They also are prohibited from misrepresenting that the payment programs or their associated fees will improve, repair or otherwise affect a consumer’s credit record.  National Payment Network will refund more than $1.5 million to consumers, and waive another $949,000 in fees to current customers during the fee waiver period. Matt Blatt dealerships also will pay $184,000 to the FTC as part of the settlement.

In addition to the add-on cases, the FTC also targeted deceptive advertising and auto loan modification schemes as part of Operation Ruse Control.  As it relates to deceptive advertising, the FTC has pursued three separate auto dealers in the U.S. for deceptive advertisements.  All three auto dealers, Cory Fairbanks Mazda of Longwood, Fla., Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif., have agreed to settle charges that they ran deceptive ads that violated the FTC Act, and also violated the Truth in Lending Act (TILA) and/or Consumer Leasing Act (CLA). According to the FTC complaints, ads touted sales, lease or financing options that seemed attractive but were cancelled out by fine-print disclaimers. In other instances, the disclaimers did not disclose relevant terms, such as required down payments.

The proposed settlements in these actions prohibit the defendants from misrepresenting the purchase cost or any other material fact about the price, sale, financing or leasing of a vehicle. Jim Burke Nissan and Cory Fairbanks Mazda are also prohibited from representing that a discount, rebate, bonus, incentive or price is available unless it is available to all consumers or all qualifications and restrictions are clearly and conspicuously disclosed. The proposed orders also address the TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these rules.

As for the auto loan modification case, at the FTC’s request, the U.S. District Court for the Southern District of Florida temporarily halted the practices of Regency Financial Services of Lake Worth, Fla., and its CEO Ivan Levy, who allegedly charged consumers upfront fees to negotiate an auto loan modification on their behalf, but then often provided nothing in return. The court also froze defendants’ assets, and last month entered a Stipulated Preliminary Injunction Order. The FTC’s lawsuit filed on Jan. 26, 2015 is ongoing, and the Commission is seeking a permanent injunction to stop defendants’ deceptive practices and to return ill-gotten gains to consumers.  According to the FTC’s complaint, defendants violated the FTC Act and Telemarketing Sales Rule by misrepresenting that they would obtain auto loan modifications for consumers and provide full refunds if they failed to do so.

Operation Ruse Control