The complexities of advertising finance terms in a language other than English landed a dealership in regulatory problems with the Federal Trade Commission.
Cowboy AG, a Dallas company doing business as Cowboy Toyota and Cowboy Scion, recently agreed to settle FTC charges that it deceptively advertised financing and leasing terms in ads placed in a regional Spanish-language newspaper.
The FTC’s administrative complaint charged that Cowboy Toyota ran full-page Spanish-language ads claiming that consumers could buy or lease a vehicle at certain favorable terms that were prominently stated in Spanish in the ads, with material limitations to those terms provided only in fine-print English at the bottom of the ads. The complaint alleged the dealerships violated the FTC Act by misrepresenting many claims, including that:
—No down payment was required.
—The advertised low monthly payments were available to consumers who financed their purchases.
—The advertised interest rates, monthly payments and other terms were available to consumers with bad credit.
—Certain new 2016 Toyotas were available for purchase at the time of the ads in 2017.
According to the FTC, Cowboy Toyota’s misrepresentation of the cost of purchasing or leasing vehicles, qualifications or restrictions for financing or leasing vehicles, and the availability of cars violated the FTC Act. Officials indicated the dealership also failed to clearly and conspicuously disclose credit or lease terms they are required to state under the Truth in Lending Act (TILA) or the Consumer Leasing Act (CLA) when they touted certain “triggering” terms of the credit or lease, such as the monthly payment.
Officials believe the proposed order settling the FTC’s charges will ensure that Cowboy Toyota does not engage in the deceptive conduct alleged in the commission’s complaint in the future.
First, the order prohibits the dealership from misrepresenting the cost of financing or buying a vehicle, including terms related to the amount or percentage of the total price needed for a down payment, the number of payments required over the full financing term, and the amount of any payment or repayment obligation over the loan term, including any balloon payment.
Next, the order prohibits Cowboy Toyota from misrepresenting the cost of leasing a vehicle, including the total amount due at lease inception, the down payment required, the acquisition fee, any other payments required at the beginning of the lease and the amount of all monthly payments over the term of the lease. The order also requires the dealership to accurately represent any qualifications or restrictions on a consumer’s ability to obtain offered financing or lease terms, including restrictions based on their credit history.
Furthermore, the order instructs Cowboy Toyota to clearly and conspicuously disclose all financing and lease terms in its ads, as well as all related qualifications or restrictions. In addition, if most consumers likely will not qualify for the credit rate advertised, the order requires the dealership to clearly and conspicuously disclose that fact. It also requires that if a representation is made in one language, any material limitations must also be made in the same language.
Also, the order prohibits Cowboy Toyota from misrepresenting the number of vehicles, makes, or models that are available for purchase or lease, and bars them from violating TILA and its implementing Regulation Z by requiring clear and conspicuous disclosures regarding a variety of purchase or lease terms, including the percentage of any down payment required, the amount of any payment, the amount any finance charge, the terms of loan repayment and the annual percentage rate (APR) associated with a loan.
Finally, the order instructs Cowboy Toyota to comply with the CLA and its implementing Regulation M by prohibiting deceptive lease advertisements and requiring that all ads clearly and conspicuously disclose a range of facts, including that the advertised deal is a lease, the total amount due on delivery, the number and timing of scheduled payments, and whether or not a security deposit is required.
The commission vote to issue the administrative complaint and to accept the consent agreement was 2-0.
The FTC reiterated that the regulator issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the commission issues a consent order on a final basis, it carries the force of law with respect to future actions.
Each violation of such an order may result in a civil penalty of up to $40,654.