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Feds Crack Down on Misleading Car Ads

Buying a car can be one of the most expensive and complicated purchases a consumer ever makes – and some unscrupulous dealers are making it more complicated and far more expensive than buyers might realize, according to federal authorities who announced results Thursday of a nationwide crackdown.

Working with local authorities, the Federal Trade Commission won consent decrees from nine dealers – with a 10th facing a court challenge – alleging that they engaged in a variety of deceptive practices that could, in some instances, inflate the price of a vehicle by as much as a third more than advertised.

A senior FTC official warned such fraud is far more widespread and “could very well” cost American car buyers billions of dollars in higher vehicle prices and illegal fees.

“We’ve alleged these dealers used a variety of misleading ads … to get people into their showrooms,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, at a news conference in Los Angeles announcing “Operation Steer Clear.”

It identified a variety of fraudulent practices:

  • Fake sweepstakes meant to draw buyers into the showroom to see if they won a big discount on a new car. But in one case the FTC targeted, Rich said, “not a single consumer, not one, won any of the listed prizes.”
  • Hidden financing and other charges that could inflate the price of a car advertised at $15,000 by as much as another $5,000.
  • Advertised teaser prices that didn’t make clear that payments would balloon substantially after a few months.

The nine dealers that signed consent decrees are in California, Georgia, Illinois, North Carolina, Michigan and Texas, while the 10th dealer is in Massachusetts.

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