- within Insolvency/Bankruptcy/Re-Structuring topic(s)
On August 19, the FTC and the State of Connecticut announced a proposed $4 million settlement with a Connecticut auto dealer and certain owners and managers to resolve allegations that the dealership charged consumers unauthorized or duplicative fees. The underlying complaint alleged violations of Section 5 of the Federal Trade Commission Act and the Connecticut Unfair Trade Practices Act. The stipulated order has been filed in the U.S. District Court for the District of Connecticut and remains subject to court approval.
The FTC and Connecticut alleged that consumers were frequently charged thousands of dollars in fees that were not properly disclosed or authorized. Specifically, the agencies alleged that the dealership:
- Charged additional certification fees. Some consumers allegedly were required to pay additional amounts to “certify” vehicles that had already been advertised as certified pre-owned.
- Added unauthorized products and charges. The agencies alleged that certain products, including total loss protection, were inserted into financing agreements without consumers’ knowledge or consent.
- Misrepresented vehicle pricing and transaction terms. The complaint alleged deceptive and unfair practices in connection with the advertising, sale, lease, and financing of motor vehicles.
Under the proposed order, the defendants would pay $4 million to Connecticut for consumer redress and related purposes. The order also would prohibit misrepresentations regarding vehicle prices, fees, certification status, warranties, and other material terms. In addition, the dealer would be required to prominently disclose the maximum total price consumers must pay, excluding required government charges, and obtain express, informed consent before imposing any charge.
Putting It Into Practice: The settlement follows the FTC’s March warning to auto dealership groups regarding allegedly deceptive vehicle-price advertising (previously discussed here). Although the FTC withdrew its CARS Rule after the Fifth Circuit vacated the rule on procedural grounds, the agency has continued to pursue pricing transparency and add-on practices through its existing Section 5 enforcement authority. Auto dealers should review advertised prices, add-on disclosures, and procedures for obtaining consumer consent, and continue monitoring federal and state enforcement activity concerning vehicle pricing and fees.
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