The FTC has also gotten aggressive in terms of the types of activities that constitute unfair and deceptive practices. Recently, the FTC held that inadequate data security practices do not require any showing of a data breach or other consumer harm to violate Section 5 of the FTC Act as an unfair practice. If you are not implementing and updating your Safeguards program (see our Power Point on this blog site for some of the required Safeguarding actions the FTC requires), you can be subject to an enforcement proceeding for a UDAP.
The same for advertising. Recently, the FTC imposed an $85,000 penalty on a three store Texas dealership for violating a prior consent decree on deceptive advertising of a different type. Three Dallas area auto dealers, collectively known as Southwest Kia, have agreed to pay an $85,000 civil penalty to settle Federal Trade Commission charges that they violated an FTC administrative order barring them from deceptively advertising the cost of buying or leasing a car.
According to the FTC,
According to the FTC, New World Auto Imports Inc., New World Auto Imports of Rockwall Inc. and Hampton Two Auto Corporation concealed sale and lease terms that added significant costs or limited who could qualify for vehicles at advertised prices, in violation of a 2014 order.
In a TV ad, for example, the FTC claimed the dealers offered two cars for “under $200 per month,” but in fine print that appeared on screen for two seconds, disclosed that the offer applied only to leases, not sales, and also required a $1,999 payment at lease signing. Another dealer mailed ads claiming a new car could be purchased for $179 per month, but in fine print the FTC described as too small to read without magnification, disclosed that $1,999 was due up front, along with tax, title and license fees, and that an $8,271 would be due at the end of a 38-month financing term.
The FTC’s complaint also cited a TV ad that allegedly targeted people with major credit problems, such as repossessions or foreclosures. The ad promoted vehicles for $250 per month, but in fine print disclosed that the offer was based on a 4.25 annual percentage rate that few, if any, consumers with such major credit issues could obtain. The FTC also claimed that the dealers advertised credit and lease terms without clearly and conspicuously disclosing information required by federal law, and failed to keep records required by the 2014 consent order.
In addition to the $85,000 civil penalty, the proposed order prohibits the dealers, in any ad for buying, financing or leasing vehicles, from misrepresenting the cost of purchase with financing, the cost of leasing, or any other material fact about price, sale, financing or leasing. It also prohibits misrepresentations that anyone, including those with poor credit, is likely to receive financing or leasing, including particular finance or lease terms.
It also bars the dealers from violating the Truth in Lending Act and the Consumer Leasing Act, which require clear and conspicuous disclosure of credit and lease terms.
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