The Federal Trade Commission has targeted five car dealers in four states for deceiving consumers by promising to pay off their car loans, no matter what was owed on the cars traded in. According to the FTC, the balance was usually rolled right into the new car loan. One dealer later required customers to pay the balance out of pocket. This is the first case of this kind to be brought by the FTC. The FTC has previously brought cases against automobile dealers, but not for this kind of advertising.
Settlements agreed to by the dealers would require them to stop running the ads on their web pages and other sites such as YouTube. The settlements remain subject to a final vote by the Commission after a 30-day public comment period. The Commission named the following companies: Billion Auto, Inc., in Sioux Falls, S. D.; Frank Myers AutoMaxx, LLC, in Winston-Salem, N.C.; Key Hyundai of Manchester, LLC, in Vernon, Conn., and Hyundai of Milford LLC, in Milford, Conn., – which advertised jointly; and Ramey Motors, Inc., in Princeton, W.Va.
Rosemary Shahan, president of California-based Consumers for Auto Reliability and Safety, says this kind of a misleading advertising pitch is a common practice among dealers, and that people who are upside down on their loans – owing more on the old car than its actual value – are especially vulnerable. Ms. Shahan observed:
A huge percentage of people are upside down. What they don’t realize is that they are just getting deeper and deeper into debt.
According to the FTC, despite the claims, consumers still ended up being responsible for paying the difference between the trade-in loan balance and the vehicle’s value. As part of the proposed settlements, the dealers would be barred from future deceptive ads. They also would not be allowed to misrepresent any other facts in the leasing and financing of a car. It’s usually better – as a practical matter – to keep the old car and pay off the loan before buying a new car.
Source: Claims Journal
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