Since 2011, the FTC has been investigating dealer "spot delivery" practices. A spot delivery occurs when a dealer is unable to get immediate approval for a customer but, believing it can do so, has the customer complete a conditional Retail Installment Sales Contract (RISC) and delivers the vehicle "on the spot" to the consumer. Both parties usually sign a Conditional Sale Agreement or similar document providing that if the dealer cannot get the RISC purchased with a set number of days, either the consumer or the dealer can unwind the deal or recontract on terms the dealer can get financed. Spot deliveries are prohibited in approximately 16 states.
Plaintiffs' attorneys call spot deliveries "yo-yo" transactions and accuse dealers of deliberately having customers sign RISCs they know they cannot get financed for the purpose of inducing them to accept alternative credit terms less favorable to the consumer once the dealer is unable to get the RISC financed. Like giving a child a free test to keep a puppy, the plaintiffs' lawyers argue the customers do not want to give up their shiny new vehicle and will sign whatever alternative terms the dealer puts in front of them.
We have been anticipating some action from the FTC since 2011, but expected that it might come in the form of a proposed rule or regulation that would be subject to comment. But that is not the case. Furthering their "regulation by enforcement" approach following the Consumer Financial Protection Bureau (CFPB), the FTC filed a lawsuit challenging spot deliveries and other practices of a dealer group in California. Perhaps more significantly, the FTC sued three dealer principals for individual liability under a theory of a "common enterprise," formulated, directed, and controlled by the individuals. The FTC is seeking joint and several liability meaning they are suing to be able to collect and enforce any judgment against the dealerships and the individuals personally. Federal Trade Commission v. Universal City Nissan, Inc. et al. (Case 2:16-cv-07329 Cent. Dist. Cal. September 29, 2016).
Among other things, the FTC charged that "Even after consumers have signed a contract and driven the vehicles off Defendants' lots, Defendants have used deceptive and unfair tactics to pressure consumers to agree to different financing terms or have otherwise refused to honor the contract. Such tactics are often known as 'yo-yo practices." Id. at Paragraph 26.
This is the first time the FTC has adopted the "yo-yo" theory of spot deliveries. It is also consistent with regulatory pronouncements from the Department of Justice, the CFPB, and the FTC that they will seek individual liability from the principals or officers at businesses that are responsible for the conduct.
The complaint in the Universal City Nissan case represents a good summary of deceptive practices that the FTC is focusing on with respect to auto dealers. Deceptive advertising contradicted by small print disclosures or on terms not generally available to consumers; rebate stacking in advertisements; payment packing of aftermarket products and misleading consumers on the terms for aftermarket products citing extended service contracts, GAP, maintenance plans, and VIN etching; posting deceptive online reviews and claiming they came from real consumers; Truth in Lending and Consumer Leasing Act disclosure violations; and "yo-yo" practices at paragraphs 67-71 and Count V of the Complaint. Promising credit to subprime consumers is another charge of unfair and deceptive practices. All dealers should take the time to read the Complaint in this case which is available on the FTC's website at https://www.ftc.gov/system/files/documents/cases/160929sagecmpt.pdf.
Seeking individual liability for the assortment of unfair and deceptive practices is a very troubling development. The FTC's authority to impose fines for violations of consent orders involving deceptive acts and practices was recently increased from $16,000 per violation to $40,000 per violation. Two dealers who violated prior consent decrees on deceptive advertising were fined $360,000 and $85,000. And those fines were imposed under the prior $16,000 per violation authority and not the current $40,000 per violation authority. With individual liability now on the table, the stakes are high not only for your dealership but for you personally.
We can be of assistance in reviewing your advertisements for federal law compliance. In light of the FTC's aggressive enforcement activities. We can also be of assistance with the other issues alleged by the FTC in this case which represents their most current thinking. Check our Specials and give us a chance to help your dealership. Now it is more important than ever.
Plaintiffs' attorneys call spot deliveries "yo-yo" transactions and accuse dealers of deliberately having customers sign RISCs they know they cannot get financed for the purpose of inducing them to accept alternative credit terms less favorable to the consumer once the dealer is unable to get the RISC financed. Like giving a child a free test to keep a puppy, the plaintiffs' lawyers argue the customers do not want to give up their shiny new vehicle and will sign whatever alternative terms the dealer puts in front of them.
We have been anticipating some action from the FTC since 2011, but expected that it might come in the form of a proposed rule or regulation that would be subject to comment. But that is not the case. Furthering their "regulation by enforcement" approach following the Consumer Financial Protection Bureau (CFPB), the FTC filed a lawsuit challenging spot deliveries and other practices of a dealer group in California. Perhaps more significantly, the FTC sued three dealer principals for individual liability under a theory of a "common enterprise," formulated, directed, and controlled by the individuals. The FTC is seeking joint and several liability meaning they are suing to be able to collect and enforce any judgment against the dealerships and the individuals personally. Federal Trade Commission v. Universal City Nissan, Inc. et al. (Case 2:16-cv-07329 Cent. Dist. Cal. September 29, 2016).
Among other things, the FTC charged that "Even after consumers have signed a contract and driven the vehicles off Defendants' lots, Defendants have used deceptive and unfair tactics to pressure consumers to agree to different financing terms or have otherwise refused to honor the contract. Such tactics are often known as 'yo-yo practices." Id. at Paragraph 26.
This is the first time the FTC has adopted the "yo-yo" theory of spot deliveries. It is also consistent with regulatory pronouncements from the Department of Justice, the CFPB, and the FTC that they will seek individual liability from the principals or officers at businesses that are responsible for the conduct.
The complaint in the Universal City Nissan case represents a good summary of deceptive practices that the FTC is focusing on with respect to auto dealers. Deceptive advertising contradicted by small print disclosures or on terms not generally available to consumers; rebate stacking in advertisements; payment packing of aftermarket products and misleading consumers on the terms for aftermarket products citing extended service contracts, GAP, maintenance plans, and VIN etching; posting deceptive online reviews and claiming they came from real consumers; Truth in Lending and Consumer Leasing Act disclosure violations; and "yo-yo" practices at paragraphs 67-71 and Count V of the Complaint. Promising credit to subprime consumers is another charge of unfair and deceptive practices. All dealers should take the time to read the Complaint in this case which is available on the FTC's website at https://www.ftc.gov/system/files/documents/cases/160929sagecmpt.pdf.
Seeking individual liability for the assortment of unfair and deceptive practices is a very troubling development. The FTC's authority to impose fines for violations of consent orders involving deceptive acts and practices was recently increased from $16,000 per violation to $40,000 per violation. Two dealers who violated prior consent decrees on deceptive advertising were fined $360,000 and $85,000. And those fines were imposed under the prior $16,000 per violation authority and not the current $40,000 per violation authority. With individual liability now on the table, the stakes are high not only for your dealership but for you personally.
We can be of assistance in reviewing your advertisements for federal law compliance. In light of the FTC's aggressive enforcement activities. We can also be of assistance with the other issues alleged by the FTC in this case which represents their most current thinking. Check our Specials and give us a chance to help your dealership. Now it is more important than ever.
Since 2011, the FTC has been investigating dealer "spot delivery" practices. A spot delivery occurs when a dealer is unable to get immediate approval for a customer but, believing it can do so, has the customer complete a conditional Retail Installment Sales Contract (RISC) and delivers the vehicle "on the spot" to the consumer. Both parties usually sign a Conditional Sale Agreement or similar document providing that if the dealer cannot get the RISC purchased with a set number of days, either the consumer or the dealer can unwind the deal or recontract on terms the dealer can get financed. Spot deliveries are prohibited in approximately 16 states.
Plaintiffs' attorneys call spot deliveries "yo-yo" transactions and accuse dealers of deliberately having customers sign RISCs they know they cannot get financed for the purpose of inducing them to accept alternative credit terms less favorable to the consumer once the dealer is unable to get the RISC financed. Like giving a child a free test to keep a puppy, the plaintiffs' lawyers argue the customers do not want to give up their shiny new vehicle and will sign whatever alternative terms the dealer puts in front of them.
We have been anticipating some action from the FTC since 2011, but expected that it might come in the form of a proposed rule or regulation that would be subject to comment. But that is not the case. Furthering their "regulation by enforcement" approach following the Consumer Financial Protection Bureau (CFPB), the FTC filed a lawsuit challenging spot deliveries and other practices of a dealer group in California. Perhaps more significantly, the FTC sued three dealer principals for individual liability under a theory of a "common enterprise," formulated, directed, and controlled by the individuals. The FTC is seeking joint and several liability meaning they are suing to be able to collect and enforce any judgment against the dealerships and the individuals personally. Federal Trade Commission v. Universal City Nissan, Inc. et al. (Case 2:16-cv-07329 Cent. Dist. Cal. September 29, 2016).
Among other things, the FTC charged that "Even after consumers have signed a contract and driven the vehicles off Defendants' lots, Defendants have used deceptive and unfair tactics to pressure consumers to agree to different financing terms or have otherwise refused to honor the contract. Such tactics are often known as 'yo-yo practices." Id. at Paragraph 26.
This is the first time the FTC has adopted the "yo-yo" theory of spot deliveries. It is also consistent with regulatory pronouncements from the Department of Justice, the CFPB, and the FTC that they will seek individual liability from the principals or officers at businesses that are responsible for the conduct.
The complaint in the Universal City Nissan case represents a good summary of deceptive practices that the FTC is focusing on with respect to auto dealers. Deceptive advertising contradicted by small print disclosures or on terms not generally available to consumers; rebate stacking in advertisements; payment packing of aftermarket products and misleading consumers on the terms for aftermarket products citing extended service contracts, GAP, maintenance plans, and VIN etching; posting deceptive online reviews and claiming they came from real consumers; Truth in Lending and Consumer Leasing Act disclosure violations; and "yo-yo" practices at paragraphs 67-71 and Count V of the Complaint. Promising credit to subprime consumers is another charge of unfair and deceptive practices. All dealers should take the time to read the Complaint in this case which is available on the FTC's website at https://www.ftc.gov/system/files/documents/cases/160929sagecmpt.pdf.
Seeking individual liability for the assortment of unfair and deceptive practices is a very troubling development. The FTC's authority to impose fines for violations of consent orders involving deceptive acts and practices was recently increased from $16,000 per violation to $40,000 per violation. Two dealers who violated prior consent decrees on deceptive advertising were fined $360,000 and $85,000. And those fines were imposed under the prior $16,000 per violation authority and not the current $40,000 per violation authority. With individual liability now on the table, the stakes are high not only for your dealership but for you personally.
We can be of assistance in reviewing your advertisements for federal law compliance. In light of the FTC's aggressive enforcement activities. We can also be of assistance with the other issues alleged by the FTC in this case which represents their most current thinking. Check our Specials and give us a chance to help your dealership. Now it is more important than ever.
© 2016. Randy Henrick & Associates, L.L.C.
Plaintiffs' attorneys call spot deliveries "yo-yo" transactions and accuse dealers of deliberately having customers sign RISCs they know they cannot get financed for the purpose of inducing them to accept alternative credit terms less favorable to the consumer once the dealer is unable to get the RISC financed. Like giving a child a free test to keep a puppy, the plaintiffs' lawyers argue the customers do not want to give up their shiny new vehicle and will sign whatever alternative terms the dealer puts in front of them.
We have been anticipating some action from the FTC since 2011, but expected that it might come in the form of a proposed rule or regulation that would be subject to comment. But that is not the case. Furthering their "regulation by enforcement" approach following the Consumer Financial Protection Bureau (CFPB), the FTC filed a lawsuit challenging spot deliveries and other practices of a dealer group in California. Perhaps more significantly, the FTC sued three dealer principals for individual liability under a theory of a "common enterprise," formulated, directed, and controlled by the individuals. The FTC is seeking joint and several liability meaning they are suing to be able to collect and enforce any judgment against the dealerships and the individuals personally. Federal Trade Commission v. Universal City Nissan, Inc. et al. (Case 2:16-cv-07329 Cent. Dist. Cal. September 29, 2016).
Among other things, the FTC charged that "Even after consumers have signed a contract and driven the vehicles off Defendants' lots, Defendants have used deceptive and unfair tactics to pressure consumers to agree to different financing terms or have otherwise refused to honor the contract. Such tactics are often known as 'yo-yo practices." Id. at Paragraph 26.
This is the first time the FTC has adopted the "yo-yo" theory of spot deliveries. It is also consistent with regulatory pronouncements from the Department of Justice, the CFPB, and the FTC that they will seek individual liability from the principals or officers at businesses that are responsible for the conduct.
The complaint in the Universal City Nissan case represents a good summary of deceptive practices that the FTC is focusing on with respect to auto dealers. Deceptive advertising contradicted by small print disclosures or on terms not generally available to consumers; rebate stacking in advertisements; payment packing of aftermarket products and misleading consumers on the terms for aftermarket products citing extended service contracts, GAP, maintenance plans, and VIN etching; posting deceptive online reviews and claiming they came from real consumers; Truth in Lending and Consumer Leasing Act disclosure violations; and "yo-yo" practices at paragraphs 67-71 and Count V of the Complaint. Promising credit to subprime consumers is another charge of unfair and deceptive practices. All dealers should take the time to read the Complaint in this case which is available on the FTC's website at https://www.ftc.gov/system/files/documents/cases/160929sagecmpt.pdf.
Seeking individual liability for the assortment of unfair and deceptive practices is a very troubling development. The FTC's authority to impose fines for violations of consent orders involving deceptive acts and practices was recently increased from $16,000 per violation to $40,000 per violation. Two dealers who violated prior consent decrees on deceptive advertising were fined $360,000 and $85,000. And those fines were imposed under the prior $16,000 per violation authority and not the current $40,000 per violation authority. With individual liability now on the table, the stakes are high not only for your dealership but for you personally.
We can be of assistance in reviewing your advertisements for federal law compliance. In light of the FTC's aggressive enforcement activities. We can also be of assistance with the other issues alleged by the FTC in this case which represents their most current thinking. Check our Specials and give us a chance to help your dealership. Now it is more important than ever.
© 2016. Randy Henrick & Associates, L.L.C.
RSS Feed