FTC puts brakes on car-loan flim­flams

5 deal­ers run trade-in scams

The Washington Times Daily - - Business - BY JEN­NIFER C. KERR

Be­ware of car dealer ads that prom­ise to pay off the loan on your trade-in.

In a first-of-its-kind case, the Fed­eral Trade Com­mis­sion tar­geted five car deal­ers in four states that reg­u­la­tors say de­ceived con­sumers by promis­ing to pay off their loans, no mat­ter what was owed on the cars. The bal­ance, the FTC said, was usu­ally rolled right into the new car loan.

One dealer later re­quired cus­tomers to pay the bal­ance out of pocket.

Set­tle­ments agreed to by the deal­ers would re­quire them to stop run­ning the ads on their web­pages and other sites such as Youtube. The set­tle­ments re­main sub­ject to a final vote by the com­mis­sion af­ter a 30-day public com­ment pe­riod.

Wed­nes­day’s an­nounce­ment from the com­mis­sion named the fol­low­ing com­pa­nies: Bil­lion Auto in Sioux Falls, S.D.; Frank My­ers Au­tomaxx in Win­ston-salem, N.C.; Key Hyundai of Manch­ester in Ver­non, Conn.; Hyundai of Mil­ford in Mil­ford, Conn.; and Ramey Mo­tors in Prince­ton, W.VA. The two Con­necti­cut deal­ers ad­ver­tised jointly.

The FTC has brought cases against auto deal­ers pre­vi­ously, but not for this kind of ad­ver­tis­ing.

“Buy­ing a new car or truck is a ma­jor fi­nan­cial com­mit­ment, and the last thing con­sumers need is to be tricked into think­ing that a dealer will pay off what they owe on their cur­rent ve­hi­cle, when they re­ally won’t,” said David Vladeck, head of the com­mis­sion’s con­sumer pro­tec­tion bureau.

The prom­ises might sound at­trac­tive to any­one fac­ing tough fi­nan­cial times.

Rose­mary Sha­han, pres­i­dent of Cal­i­for­nia-based Con­sumers for Auto Re­li­a­bil­ity and Safety, said this kind of mis­lead­ing ad­ver­tis­ing pitch is a com­mon prac­tice among deal­ers, and that peo­ple who are up­side down on their loans — ow­ing more on the old car than its ac­tual value — are es­pe­cially vul­ner­a­ble.

“A huge per­cent­age of peo­ple are up­side down,” Ms. Sha­han said. “What they don’t re­al­ize is that they are just get­ting deeper and deeper into debt.”

She said it’s usu­ally bet­ter to keep the old car and pay off the loan be­fore buy­ing a new car. “The thing about cars is that they de­pre­ci­ate, so it’s a bad place to put a lot of money,” she said.

Dow Nas­daq S&P 500 Rus­sell 2000 13,194.10 3,040.73 1,394.28


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