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NADA Issues Compliance Guide on Federal Advertising Rules

January 27, 2015

SAN FRANCISCO — The National Automobile Dealers Association (NADA) issued a new publication last week — the first day of its annual convention — designed to assist new-car dealers in complying with federal advertising requirements on the sale, financing and leasing of automotive products and services.

“A Dealer Guide to Federal Advertising Requirements” was released about a month after the Federal Trade Commission took action against an auto dealer in suburban Dallas. It was the third dealer targeted in December and occurred less than year after the agency completed an enforcement sweep that netted 10 dealers in seven states for violating the FTC Act’s prohibition on deceptive advertising.

According to the association’s press release, the guide provides examples of “bad” ads and “good” ads, as well as chapters on 41 different federal advertising topics, such as the use of discount claims, e-mail advertising, green marketing claims, Internet advertising, satisfaction guarantees and trigger terms. Readers can access the content quickly by clicking here.

“The guide is user friendly and is a valuable resource for the entire auto industry,” said NADA Chairman Forrest McConnell. “We are encouraging dealers to provide the publication to their advertising agencies, manufacturers, finance companies and others involved in advertising operations.”

On Dec. 23, 2014, Dallas-based Trophy Nissan settled FTC charges that it used deceptive ads to promote the sale and lease of its vehicles, including an ad that claimed consumers could get out of their current loan or lease for $1. In its complaint, the FTC claimed the ads, which appeared on the dealership’s website, social media pages and in print and TV ads, violated the FTC Act, the Consumer Leasing Act, Regulation M and Z, and the Truth In Lending Act (TILA).

The settlement was announced 11 days after Billion Auto, a 20-store retail chain with stores in Iowa, Montana and South Dakota, and Ramey Motors, a chain with stores in Virginia and West Virginia, were charged by the agency with deceptive advertising — the second time in two years.

The organizations were among five dealer groups that settled with the FTC in March 2012 over ads that promised to pay a consumer’s trade-in no matter what the consumer owed on the vehicle. Both groups agreed to settle the FTC’s latest charges that they violated the its 2012 administrative order prohibiting them from misrepresenting costs and terms of vehicle finance and lease offers.

Since 2012, the FTC has initiated five separate rounds of advertising enforcement actions against 18 dealers in 12 states for multiple types of advertising violations.  

“The guide does not address additional advertising requirements that may be imposed at the state or local level, which vary considerably and need to be fully addressed when dealer ads are reviewed for legal compliance,” said Paul Metrey, NADA chief regulatory counsel. “It’s essential that dealers consult with their legal counsel to determine – and to ensure that their advertisements are consistent with – the full scope of their advertising responsibilities.”

The guide is part of NADA’s Management Series, Driven. It is available at www.nada.org and will be included in the suite of compliance products at NADA University Online at www.nadauniversity.com.

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