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Financial Services Law Insights and Observations

FTC announces charges against auto dealerships for falsifying consumer information on auto financing documents

Lending Consumer Finance FTC Auto Finance FTC Act TILA Consumer Leasing Act

Lending

On August 1, the FTC announced charges against a group of four auto dealers (defendants) with locations in Arizona and New Mexico near the Navajo Nation’s border alleging, among other things, that the defendants advertised misleading discounts and incentives through their vehicle advertisements, and falsely inflated consumers’ income and down payment information on certain financing applications. The charges brought against the defendants allege violations of the FTC Act, the Truth in Lending Act, and the Consumer Leasing Act. According to the complaint, by allegedly falsifying the customers’ income and down payments, the defendants “inaccurately made consumers appear more creditworthy” on the false financing applications. Moreover, the FTC claims the defendants often prevented consumers from reviewing the falsified information provide in the financing applications prior to signing. As a result, credit was extended to consumers—many of whom are members of the Navajo Nation—who then subsequently “defaulted at a higher rate than properly qualified buyers.” Furthermore, the complaint asserts that the defendants’ deceptive advertising practices concealed the true nature and terms of the financing or leasing offers, and were in violation of federal law for failing to disclose the required terms. The complaint seeks, among other remedies, a permanent injunction to prevent future violations, restitution, and disgorgement.

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