The Federal Trade Commission and 32 law enforcement agencies announced the results of Operation Ruse Control, a nationwide and cross-border crackdown to protect consumers when purchasing or leasing a car, encompassing 252 enforcement actions.
The results include six new cases totaling more than $2.6 million in monetary judgments.
The U.S. District Court for the Southern District of Florida also temporarily halted the practices of Regency Financial Services of Lake Worth, Fla. and CEO Ivan Levy. The business allegedly charged consumers upfront fees to negotiate an auto loan modification, but then often provided nothing in return. The court froze the defendants assets and a lawsuit filed in January is ongoing.
In the U.S., since the FTCs last sweep as part of Operation Ruse Control, there have been 187 enforcement actions. Another 65 actions took place in Ontario and British Columbia, Canada. The actions involves both civil and criminal charges of deceptive advertising, automotive loan application fraud, odometer fraud, deceptive add-on fees and deceptive marketing of car title loans.
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. National Payment Network Inc.: The FTC charged that NPN, based in San Mateo, Calif., allegedly violated the FTC Act by deceptively pitching consumers an auto payment program - both online and through a network of authorized auto dealers - that it claimed would save consumers money. NPN failed to disclose that the significant fees it charged for the service often cancelled out any actual savings. The fees to enroll in NPNs program averaged $775 on a standard five-year auto loan.
Matt Blatt Inc. and Glassboro Imports LLC: The FTC alleged that Matt Blatt dealerships, with multiple locations in New Jersey, violated the FTC Act by failing to disclose or adequately disclose the fees associated with National Payment Network's add-on service and that many consumers would not save money overall because of the programs significant fees. Matt Blatt dealerships received a commission for each of the more than 1,000 consumers they enrolled.
National Payment Network and Matt Blatt dealerships have agreed to settle the FTC charges, and under proposed consent orders are banned 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 consumers credit record.
NPN 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.
Three auto dealers, Cory Fairbanks Mazda of Longwood, Fla., Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif., settled 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).
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.
"Growing fraud and other deceptive practices in auto sales and financing are important issues affecting consumers when they are buying a vehicle," said Joyce White Vance, U.S. Attorney for the Northern District of Alabama. "My office has worked closely with the FTC on this issue, and has prosecuted criminal cases at a Birmingham dealership. The Mortgage, Loan Fraud and Discrimination Working Group of the Attorney Generals Financial Fraud Enforcement Task Force also is working with other law enforcement agencies to determine what we can do now to prevent fraud during the auto lending process.