Houston Independent Automobile Dealers Association October Issue: Marketing | Page 12

The CARLAWYER©
By Thomas B. Hudson and Nicole Frush Munro
The kids are back in school, and we’re back, passing on what we’ve recently learned about legal developments in the
auto sales, finance and lease world. This month, we feature developments from the Consumer Financial Protection
Bureau, the Federal Trade Commission, and the Department of Justice, as well as our “Case of the Month.”
Remember – we aren’t reporting every recent legal development, only those we think might be particularly important
or interesting to industry.
Why do we include items from other states? We want to show you new legal developments and trends. Also, another
state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types
of claims in other states, those claims might soon appear in your state.
Note that this column does not offer legal advice. Always check with your own lawyer to learn how what we report
might apply to you, or if you have questions.
This Month’s CARLAWYER© Compliance Tip
Note below the item about the FTC hammering a dealer on advertising violations. Does your dealership have an
advertising compliance manual that sets forth federal and state advertising laws and regulations, along with
everything that appears on the FTC’s website about ad requirements and any other helpful ad compliance material
you can locate? Does the manual set forth a process for a legal review of each ad your dealership uses to make sure
that the FTC won't be taking a big bite out of your wallet? Given the size of some of the penalties levied against
dealers in recent months, putting together such a resource is likely the single most cost-efficient compliance step you
can take.
Federal Developments
DOJ Moves to Protect Servicemembers. On August 8, the DOJ announced a proposed consent order with HSBC
Finance Corporation, successor to HSBC Auto Finance, Inc., resolving allegations that it failed to obtain required
court orders before repossessing vehicles owned by servicemembers, in violation of the Servicemembers Civil Relief
Act. The SCRA requires a court to review and approve any repossession if the servicemember financed a vehicle
purchase and made a payment before entering military service.
FTC Slams Yet Another Dealer for Ad Violations. On August 18, the FTC announced that three Texas dealerships
agreed to pay $85,000 to settle charges that they violated an FTC administrative order barring them from deceptively
advertising the cost of buying or leasing a car. The FTC charged that the dealerships concealed sale and lease
terms that added significant costs or limited who could qualify for vehicles at advertised prices, in violation of a 2014
FTC order. The FTC cited a television ad offering two cars for "under $200 per month," but, in fine print that
appeared for two seconds, disclosed that the offer applied only to leases, not sales, and required a $1,999 payment
at lease signing. Another ad claimed a new car could be bought for $179 per month, but, in print too small to read
without magnification, disclosed that $1,999 would be due up front, along with tax, title, and license fees, and that
$8,271 would be due at the end of a 38-month financing term. The FTC also alleged that the dealerships advertised
credit and lease terms without clearly and conspicuously disclosing information required by federal law and failed to
keep records required by the 2014 order. The proposed order also prohibits the dealerships from misrepresenting in
ads the cost of purchase with financing, the cost of leasing, or any other material fact about price, sale, financing, or
leasing, and prohibits misrepresentations that anyone, including those with poor credit, is likely to receive financing or
leasing, including particular finance or lease terms. Finally, it bars the dealers from violating the Truth in Lending Act
and the Consumer Leasing Act, which require clear and conspicuous disclosure of credit and lease terms.
Do Disclosures Work? On August 22, the FTC released the agenda for its September 15 public workshop in
Washington, D.C., called “Putting Disclosures to the Test,” which will examine the testing and evaluation of
advertising disclosures, privacy-related disclosures (such as privacy policies), and disclosures in specific industries
designed to prevent deceptive claims. The workshop, aimed at encouraging and improving the evaluation and testing
of disclosures by industry, academics, and the FTC, will explore how to test the effectiveness of disclosures to ensure
consumers notice them, understand them, and can use them in their decision-making.
DOD Explains Itself. On August 26, the DOD published in the Federal Register a rule interpreting its July 2015
amendments to its regulation implementing the Military Lending Act. The MLA limits the military annual percentage