Auto dealership to pay $1.4 million for violating financing and advertising order

A Southern California-based auto dealership group will pay $1.4 million to settle Federal Trade Commission charges that it violated a 2014 order prohibiting it from misrepresenting how much consumers could pay to finance or lease a vehicle.

The proposed court order resolving the FTC’s lawsuit against 12 businesses, operating as the Norm Reeves dealerships, bars advertising misrepresentations and imposes compliance and reporting terms to prevent future violations.

In the FTC’s first lawsuit, the defendants were charged with making misrepresentations in advertisements to consumers that violated the FTC Act, falsely leading consumers to believe they could buy vehicles for low prices, finance vehicles for low monthly payments, and/or make no upfront payment when leasing.

The FTC charged Norm Reeves with advertising that consumers could pay $0 up-front to lease a vehicle when the advertised price excluded fees and other costs. The ads also violated federal leasing laws by failing to disclose lease terms. One of the dealerships’ ads also violated the lending laws by failing to disclose credit-related terms.

The orders settling the previous lawsuit prohibited the dealerships from misrepresenting the cost of purchasing a vehicle with financing, or other facts about the price, sale, financing, or leasing of a vehicle in its ads. The orders also addressed the defendants’ alleged violations of federal laws by requiring the dealerships to clearly disclose terms required by the credit and lease laws.

The proposed court order announced Monday settles the FTC’s lawsuit charging that the defendants violated the 2014 order by misrepresenting the cost of vehicle financing or leases to prospective buyers or misrepresenting the offer’s availability to all consumers. The order also settles commission charges that the defendants failed to clearly disclose credit and lease information and failed to maintain proper records, in violation of the order.

For helpful information for consumers in the market for a new or used vehicle, see the FTC’s Are Car Ads Taking You for a Ride? and Buying and Owning a Car.