One of the fraudulent dealer ads cited by the FTC in Operation Steer Clear crackdown.
Buying a car can be one of the most expensive and complicated purchases a consumer ever makes – and some unscrupulous dealers are making it both more complicated and far more expensive than buyers might realize, according to Federal Trade Commission authorities who announced the results of a nationwide crackdown dubbed Operation Steer Clear.
Working with local authorities, the FTC has won consent decrees from nine dealers — with a tenth is facing a court challenge – alleging they engaged in a variety of deceptive practices that could, in some instances, inflate the price of a vehicle by as much as a third more than advertised.
A senior Trade Commission official warned such fraud is far more widespread and “could very well” cost American car buyers “billions” in higher vehicle prices and illegal fees.
“We’ve alleged these dealers used a variety of misleading ads…to get people into their showrooms,” explained Jessica Rich, the director of the FTC’s Bureau of Consumer Protection, during a news conference in Los Angeles.
Considering there are more than 20,000 new car franchised dealers in the U.S., finding fraud involving 10 retailers might seem a minor issue, but Rich stressed that while there are plenty of car dealers who want to do the right thing the problem of deceptive automotive advertising is “all over the country.” The FTC, she explained, received about 75,000 complaints regarding car dealers during the most recent year it tracked, making that the “eighth-largest category” for the agency.
Operation Steer Clear identified a variety of different fraudulent practices:
- Fake sweepstakes meant to draw buyers into the showroom to see if they won a big discount on a new car. But in one case the FTC targeted, Rich said, “not a single consumer, not one, won any of the listed prizes”;
- Hidden financing and other charges that could inflate the price of a car advertised at $15,000 by as much as another $5,000;
- Advertised teaser prices that didn’t make clear payments would balloon substantially after a few months.
Such practices are “a bad way to do business and (are) against the law,” stressed Rich.
The 9 dealers that have signed consent decrees are located in six states: California, Georgia, Illinois, North Carolina, Michigan and Texas, while a tenth dealer is located in Massachusetts. FTC officials said they are continuing their investigation though it is unclear if and when additional dealers might be charged.
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Under the law, the agency was not able to levy any initial fines, though in some cases, consumers can get redress on illegal charges, and as part of the consent decrees they signed, the nine dealers face “significant” injunctive relief should they violate the rules again – fines that could run as high as $16,000 a day.
Meanwhile, such illegal practices could lead to further consequences at the state and local level. Some states, such as California, could move to have a dealer’s operating license revoked for such deceptive practices.
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“Operation Steer Clear send a clear message this type of behavior will not be tolerated,” said Brian Steiger, director of the Los Angeles County Consumer Affairs Division.