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Some AutoTrader Buying Center ads fraudulent, say AG and BBB

November 11, 2010

Illinois dealers participating in the Trade-In Marketplace program are committing an unfair or deceptive act under the state’s Consumer Fraud Act, the Illinois attorney general’s office and the Better Business Bureau announced July 1.

The program advertises that consumers receive a "guaranteed offer" or "guaranteed trade-in" amount, valid for 72 hours at authorized Buying Centers.

But use of the word "guaranteed" is misleading because the initial value established for a consumer’s vehicle is likely to change upon inspection, and the program itself anticipates that, advising that final offers can be different than the guaranteed amount.

The initial guaranteed price is established under an algorithm that considers many factors after information is provided by the consumer on an online form. A vehicle can be used as a trade-in on the purchase of another vehicle, or purchased by dealers--the Buying Centers--with no sale of another vehicle to the consumer.

But Patricia Kelly, senior counsel of the BBB-Chicago, said the AutoTrader program is misleading because the guarantee extends only to dealers, not to consumers.

"AutoTrader represents to the dealer that it will pay the dealer the difference between the first and second price and, consequently, the dealer will never suffer a loss due to the reduced value of a consumer’s vehicle after inspection," said Kelly.

"Thus, the dealer is protected but the consumer is not. Only the price after inspection, not the original price established pursuant to the algorithm, is the actual amount a consumer will realize.

"The initial value established for the consumer’s vehicle is likely to change upon inspection and the program itself anticipates this result," she said. "Therefore, the amount determined under the algorithm is not guaranteed because there is a further and final price determination after inspection."

Kelly said the BBB is sending letters of violation to those dealers who advertise the price "guarantee" without fully explaining to consumers how the program works. Under the BBB-CATA Advertising Review Program, such dealers who do not correct their ads after five days are referred to the attorney general’s office.