A second dealership group has reached a compliance agreement with the FTC, the agency announced Monday (Nov. 9).
Driving the news: Stream Auto Outlet, one of the 97 dealer groups to receive a March warning letter from the FTC, will not pay a monetary fine nor did it admit to any wrongdoing, according to court filings.
The Long Island, New York, group owns three dealerships in the cities of Amityville, Valley Stream, and Islip, according to the FTC’s complaint.
The FTC alleged the group lured shoppers with online prices it wouldn’t honor, then charged thousands more in required down payments, dealer fees and add-ons.
This marks the second such settlement shared by the agency.
In October, the FTC settled with Orlando-based Greenway Auto Group, saying the group was charging consumers more than $3,350 over the advertised price in more than 90% of transactions.
Neither settlement carried a monetary penalty, Adam Crowell, chief strategy and legal officer at KPA, told CDG News. But, he said, the agency is sending dealers a message.
“They’re certainly trying to catch the attention of the dealers if they hadn’t already caught it with the warning letters, but also catching it with these unfortunate actions that they’re also taking,” Crowell said.
FTC’s complaint: Stream advertised “INTERNET SPECIAL” prices online, but charged consumers thousands more, according to the agency’s filings.
Buyers had to pay a $3,995 down payment on top of the advertised price. That disclosure sat five lines into small-print text, reached only by clicking “Details,” then scrolling down a pop-up.
Other alleged charges included a $1,995 “dealer prep” fee, a $2,700 LoJack add-on the dealer said was required, and an $895 “Theft Protection DNA” product.
Stream listed a “Doc Fee (State Regulated)” of $175, and told at least one consumer it was required by the state. New York caps the fee at $175, but it’s charged and kept by the dealer, and dealers can’t say it’s required.
After the FTC’s March 11 warning letter, Stream added “NO FEES. NO GAMES. JUST CARS.” to its websites while continuing the charges, the complaint said.
Stream’s agreement: The order bars Stream from misrepresenting the costs or terms of buying, financing or leasing a vehicle, including whether fees or products are required.
Any advertised amount must show the total price, including all mandatory fees and excluding only government charges, as the most prominent item.
Stream must keep five years of records, including every ad, every “pencil, four square, or worksheet” used to negotiate a deal, and all consumer complaints.
It must file a sworn compliance report in a year, and the FTC can pose as consumers to check.
The order was filed in the U.S. District Court for the Eastern District of New York after a 2-0 commission vote, and takes effect once a judge signs it.
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Settling without a fine still has teeth, Crowell said. Stream can no longer argue in court that its ads were acceptable.
“They’re now locking themselves into the position of the FTC, which is where all the fees have to be included in the most prominent price that is being advertised,” Crowell said.
To review: The FTC sent the now-infamous 97 warning letters in March.
In August, the FTC and Connecticut announced a $4 million settlement with Manchester City Nissan, in a case filed before the letters.
The FTC released price transparency FAQs for dealers on Sept. 15, saying fees must be included in the advertised price and that “price transparency is not a new requirement.”
That’s what Crowell expected.
“I think with them coming out with these FAQs, I would expect that we are going to see some enforcement actions, and we are going to see those enforcement actions drop very soon,” Crowell told CDG News in September.
Even without a federal fine, states could still act. The FTC and state attorneys general share jurisdiction, so New York could pursue Stream separately, Crowell said.
What they’re saying: “Buying a car is one of the largest purchases many consumers make, and they deserve clear, transparent information about what they will pay,” Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in a release.
What dealers should do: These actions are almost always driven by consumer complaints, Crowell said.
Steady complaints are a warning sign. “If you’re a dealership and you're receiving steady consumer complaints, that should be a signal to the dealership that there’s practices that they need to change to prevent those consumer complaints from happening,” Crowell said.
Resolve those complaints quickly.
Not every unhappy customer will get back to the right person at the dealership, he said, and some will turn to private attorneys, the FTC or state attorneys general.
Put every fee in the advertised price. That’s the standard the FTC is holding both groups to.
Bottom line: Crowell expects more actions, and he said some will likely carry financial penalties, typically in the seven or eight figures.
“The waiting for everyone else to do it time frame is over,” Crowell said. “I think this is what the clear message is from the agency.”
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