Automotive Digital Marketing

Professional Community for Car Dealers, Marketing, Advertising and Sales Leaders

Loading... Be Patient!

Since the news broke earlier this week about the FTC citing 5 auto dealers for deceptive advertising, I’ve been asked a number of questions by folks in the industry. Here’s my take on the situation:


What’s the big deal about advertising that the dealership will pay off a trade-in no matter what the customer owes? It’s a true statement.


The problem is not so much what the ads say, but what they don’t say. As far as regulators are concerned, if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive. While it may seem obvious to us that the customer is responsible for negative equity, some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value.


Some basic principles that regulatory agencies consider are 1) advertising is considered deceptive if the advertisement has a “tendency or capacity to mislead the public”; 2) if an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive and; 3) statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.


We always fully disclose negative equity on our contracts and leases, why isn’t that good enough?


If regulators feel that the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he or she enters into a purchase or lease. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.


Dealers have been using this type of advertising for years – did the FTC recently change the rules?


No, these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time by both federal and state regulators, so this is nothing new. Bear in mind that the fact that others were, or are, engaged in like practices is not considered a defense.


As to why the Feds decided to take action against dealers now - your guess is as good as mine. The FTC has been threatening to step up enforcement against dealers for the last year or so, but to be honest; I’ve been a bit skeptical. The Feds have traditionally gone after bigger fish and left car dealers to state regulators. So, while this action may just be a flash in the pan, it can also be a major game changer.


How do we avoid this happening to us? I mean, if the regulators decide to go on a witch hunt, they’re going to get you one way or another.


I disagree. Again, the violations the FTC cited are not new or surprising to anyone who understands advertising regulations. If you have ever read or listened to my ramblings in the past you know that I have a tendency to harp on two issues - Education and Due Diligence.  Please forgive me for once again repeating myself, but this is important:


Protect yourself by doing the following:


  • Ensure that any member of your staff involved with advertising is properly trained in all applicable regulations.
  • Never assume that your ad agencies or vendors know, or are following, the rules. If you write the check, you’re responsible.
  • If you’re not sure, don’t guess! Have your advertisements reviewed, and edited if necessary, by someone knowledge before publication (this should done for all of your advertising including websites, YouTube, social media, etc.). It may cost a few bucks, but it’s a small price to pay.

Views: 516


Oops... You need to stop "Lurking" on ADM and become a more genuine Automotive Professional by completing your membership registration. As a registered ADM Member, you can post comments, publish your own articles (be a star!) and start Forum discussions. Stop being an online "Peeping Tom" and JOIN ADM RIGHT NOW!

Join Automotive Digital Marketing

Comment by Keith Shetterly on March 19, 2012 at 12:29pm

Jim, you "hired" me as a fan the first time I was paid by the truth you wrote about the car biz.  Honest, direct, and understanding of a dealer.  Much appreciated!

Comment by Jim Radogna on March 19, 2012 at 12:09pm

Thanks Keith, appreciate your kind words!

Comment by Clayton R Perry, Sr on March 19, 2012 at 8:26am

Thank You Mr. Radogna

Comment by Keith Shetterly on March 18, 2012 at 3:06pm

All this is really difficult for some to comprehend, but luckily we have Jim R and others who lead the pack on making it easy to see.  Let me put one more out there:  It's what I call "magic money".

We see it when people come in upside down $11k and they think they can see the payment the same or lower than they have now.  We see it when other people take a 0% deal that they qualify for but we know that, in their case, the subvented rate was actually not the best financing deal for them.  

The OEMs and US advertise this "magic money" all the time, and then when impossible deals hit the showrooms I've seen salespeople and sales managers talk about how it is so hard to understand how these people don't know where they are.

And the same week they'll get somebody financed who is upside down and we're sending them to the same future showroom landing that we are frustrated with today.

It's Magic Money, folks.  And we encourage it.  It gets worse, if I keep going on this topic, so I'll leave it alone . . . for now.

I will say, in closing on this comment, that Jim Radogna needs to be listened to.  He cuts through the, er, Magic BS very well.  Financing advertising . . . it's next. 

Comment by Tom Gorham on March 18, 2012 at 11:00am

@Jim Radogna - you don't post often here but when you do, it is powerful!  I am passing this on to my dealer and GM.

@Thomas Kelly, you are oh so right when you say, "I submit, it IS exactly who many of us are. Using the excuse that "we all do it" is no excuse, there will be no safety in numbers.  As a group, the dealer body is long overdue for a culture change in my opinion..."

As for the other story, by David Johnson, I like that Tracy took it upon himself to personally address the issue to his customers.  Whether he is right or wrong on the ad charge, he is right in facing it head on.  His customers will be the true judge.

Is this a lesson in ethics or just a legal issue?

Comment by David Ruggles on March 18, 2012 at 10:30am

It may be a true statement but it uses parsing with the express intent to deceive.  Same with the "guaranteed trade in."  We all know what we are doing when we do these things. 

The ones that are the worst, IMHO, are the ones where a speed reader provides the disclaimer in a gutteral voice at the speed of sound in an effort to make the disclaimer seem completely separate from the ad itself.

I haven't attended a compliance workshop yet where someone didn't say, "We brought this on ourselves." 

Comment by Jim Radogna on March 18, 2012 at 10:05am

Tom, you certainly didn't butcher or take it out of context! Thanks as always for your valuable feedback.

Randy Hendrick, DealerTrack's Regulatory and Compliance Counsel, was kind enough to leave a comment on our blog which gives great insight as to the direction the FTC is taking:

"I think this is a "game changer" as the FTC's three roundtable meetings on auto finance last year were likely intended for two purposes. First, to facilitate the goal of transparency in consumer finance and to perhaps expand its interpretation of "unfair and deceptive" in anticipation of the Consumer Financial Protection Bureau issuing regulations prohibiting "abusive" practices which will focus on transparency and a consumer's knowledge relative to the product. Second, the FTC has new streamlined authority to issue new unfair and deceptive acts and practices regulations against auto dealers under the Dodd-Frank Act and beginning with a series of enforcement proceedings may be a prelude to their doing so. I have seen many dealer ads that don't include the triggering terms required by Truth in Lending or the Consumer Leasing Act (this was also a part of the consent decrees last week) and a reasonable consumer being lured into a dealership on an unqualified promise that a dealer will pay off its trade is deceptive. I think it is critical that dealers pay close attention to their advertising and other aspects of compliance as 2012 is shaping up to be the year of enforcement and the CFPB has not even weighed in yet".

Comment by Thomas A. Kelly on March 18, 2012 at 8:05am

Some key points I took from Jim's post:

the violations the FTC cited are not new

these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time

the first contact with a consumer is secured by deception

if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive

some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes

"Apparently"?....It is the last snippet that I took that I focus on, We run these ads knowing/hoping to make the consumer believe something that will not happen. Plain and simple, it is deceptive, to claim otherwise is just plain BS in my opinion. We got caught and it was reported fairly in my opinion. The video response clearly says there was no intention to mislead or deceive, "that's not who we are"...I submit, it IS exactly who many of us are. Using the excuse that "we all do it" is no excuse, there will be no safety in numbers.

As a group, the dealer body is long overdue for a culture change in my opinion....if the FTC action, some TV stations and print articles helps it along, I am good with that.

More important than how the FTC views our ads is how the consumer views our ads.

Great article Jim, I did not intend to butcher it or take it out of context, if I did, I apologize.

Comment by Jim Setele on March 18, 2012 at 7:38am
It's simply, deceptive. There's no way to explain it away.
Don't do it and you won't have to worry about it.

Comment by Aj Maida on March 18, 2012 at 7:34am

Every week we look over our advertisements with 4 sets of eyes. The Ad agency, the Dealer, The GSM and myself. I wasn't ever comfortable that we were 100% correct. Now I'm only going to be holding my breath just a little longer! Because of all the "room" on our websites I have disclaimers all over the place but on a video or in a newspaper ad I'm always a little nervous that we missed something!

Automotive Professional Network and Resource Exchange for Car Dealers, Managers, OEM and Marketing Practitioners seeking Best Practices.

ADM Sponsor

William B. Terry
Rated by Super Lawyers

loading ...

ADM Badge


Based On Your Interests...

ADM Consulting, LLC

Onsite/Offsite Combination ADM Consulting, LLC Professional Services
Select the maximum monthly investment you plan to make
Sign up for

Automotive Marketing Tools

Get ADM Toolbar

Click here to take the ADM Member Survey

Getting too many emails from ADM? Click mailbox below to control which types of alerts and updates you are sent......



ADM Professional Services
Phone Consultation
Topic or Issue:

Top Automotive Marketing Forum Discussions

1. BDC or Virtual BDC

Posted by Peter Stratton on February 26, 2020

Share the Best Content w/AutoMarketing Community

© 2020   Created by Ralph Paglia.   Powered by

ADM Badges  |  Report an Issue  |  Terms of Service