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Feds broaden crackdown on dealership fraud

March 27, 2015
The Federal Trade Commission is broadening its enforcement of car dealerships to crack down on deception and fraud in operations that go beyond advertising.
The latest actions, announced March 26, also target auto-loan application fraud and deceptive practices related to add-on products and services.
Jessica Rich, director of the FTC’s Bureau of Consumer Protection, outlined the "Operation Ruse Control" initiative.
The FTC is pairing up with numerous law enforcement agencies to conduct a "nationwide and cross-border crackdown on deception and fraud in the auto marketplace," the agency said.
It includes more than 250 actions from more than 30 law enforcement agencies. Those actions range in charges that include deceptive advertising, criminal automotive loan application fraud, odometer fraud and deceptive marketing of car title loans.
Add-on products
Among the six new actions announced by the FTC are its first auto enforcement cases involving add-on products or services. These two FTC cases include more than $2.6 million in monetary judgments. The FTC defines add-on products as products or services a dealer or other third party adds to the vehicle lease or finance contract.
At a press conference, Rich said, "Consumers have told us that in many cases, the prices of add-ons are not disclosed adequately or they fail to provide the promised benefits."
She added, "To date, the FTC has also brought dozens of other auto-related cases involving subprime auto loans; deceptively marketed car title loans; dealer misrepresentations about prices, discounts, who will pay off the amount owed on a trade-in vehicle; and scams in which companies promise to reduce auto debt in exchange for a large up-front fee, but then take consumers’ money and do nothing."
String of FTC enforcement
Operation Ruse Control is the latest in a string of actions by the FTC to address practices by car dealers.
Since the FTC began Operation Steer Clear, a nationwide sweep the FTC unveiled in January 2014, the FTC has settled with 12 dealerships accused of deceptive advertising.
Under those settlements, if the dealers failed to comply at any point over the next 20 years, they could face a fine of as much as $16,000 each day a deceptive ad runs.
The settlements are part of an FTC crackdown on dealer advertising that began three years ago. In March 2012, the agency settled with five dealers that it had accused of running deceptive ads. In late 2013, the FTC settled with two more.
In January 2014, when Operation Steer Clear was announced, the agency warned that it wouldn’t let up.It’s doing the same now.
"Protecting consumers in the auto marketplace remains a top priority for the FTC," Rich said. "If auto dealers are not following the rules of the road, we will step in to apply the brakes."
In response to the FTC announcement, the NADA released the following statement:
"(The) NADA strongly supports governmental efforts to address fraud and other prohibited conduct in the marketplace, and we continuously work with federal agencies to provide comprehensive compliance information to our members. It is important to recognize that the enforcement actions announced today are not indicative of any systemic problems within the auto industry - nor, as the agencies acknowledged, are they reflective of the overwhelming number of honest businesses that make up the nation's franchised dealer network. 
"They do, however, involve serious allegations, and while we have no first-hand knowledge of the facts surrounding these individual cases, we share the agencies' view that there is absolutely no place for fraud or deceptive practices in any part of the business community."