Federal Trade Commission Targets Car Dealer Ads
5 dealerships are accused of running ads that misleadingly promised to pay off customer loans.
By Claire_Martin Mar 15, 2012 1:39PM
"Everybody rides!" comes the refrain from the dozens of ads posted on YouTube by Frank Myers Automaxx in Winston Salem, N.C. Ironically, one of these ads goes on to promise to help consumers ferret out scams by other car dealers (see below). But Frank Myers has been targeted in a new investigation by the Federal Trade Commission for misleading car buyers with a deceptive advertising campaign of his own. Four other dealerships in West Virginia, Connecticut and South Dakota were also part of the investigation. The ads in question pledge to pay off the loans on prospective buyers' trade-in vehicles, regardless of the amount still owed -- a promise on which all the dealers subsequently reneged.
"The FTC charged that the ads, which ran on the dealers' websites and on sites such as YouTube.com, deceived consumers into thinking they would no longer be responsible for paying off the loan balance on their trade-in, even if it exceeded the trade-in's value (i.e., the trade-in had 'negative equity')," according to a press release on the FTC website. "Instead, the dealers rolled the negative equity into the consumer's new vehicle loan or, in the case of one dealer, required consumers to pay it out of pocket."
The language in the ads went like this: "Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car." (This was a claim by Billion Auto in Sioux Falls, S.D.) Frank Myers Automaxx promised, "Uncle Frank wants to pay [your trade] off in full, no matter how much you owe." Key Hyundai of Manchester, in Vernon, Conn., told consumers, "I want your trade no matter how much you owe or what you're driving. In fact, I'll pay off your trade when you upgrade to a nicer, newer vehicle." And Ramey Motors, in Princeton, W.Va., said, "Ramey will pay off your trade no matter what you owe ... even if you're upside down, Ramey will pay off your trade."
At least one of the ads specifically targeted buyers who were upside down -- had negative equity -- on their car loans, a group that's particularly vulnerable to this type of advertisement, says Rosemary Shahan, president of California-based Consumers for Auto Reliability and Safety.
"A huge percentage of people are upside down," Shahan told The Associated Press, adding that it's usually preferable to pay off the loan on an old car before buying a new one.
"A huge percentage of people are upside down," Shahan told The Associated Press, adding that it's usually preferable to pay off the loan on an old car before buying a new one.
The five dealers have agreed to stop running the ads as part of their settlement agreements with the FTC, and they will be required to file compliance reports to show that they're following the terms of the settlement for the next 20 years.
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