Last week, New York Attorney General Eric Schneiderman announced settlements with six auto dealers imposing fines ranging from $7,500 to $15,000 for allegedly engaging in deceptive and misleading advertising practices. The Attorney General alleged that the dealers advertised automobile sales and lease prices that were misleading because they included discounts or rebates that were generally unavailable to most customers. Specifically, the Attorney General alleged that the prices advertised to the public generally included the following discounts, in some cases, totaling approximately $3,000:

  • A “military” rebate
  • A “college graduate” rebate
  • A “competitive lease” rebate
  • A “NE balloon cash” discount

According to the Attorney General, however, these rebates were in fact available only to select customers, so the vast majority ended up paying significantly more than the advertised price. Mr. Schneiderman also claimed the auto dealers:

  • Used footnotes or asterisks that contradicted or altered the main content of the advertisement
  • Failed to clearly and conspicuously provide required disclosures, including the annual percentage rate and percentage of the down payment
  • Restricted prices to “qualified buyers” without disclosing the qualifications
  • Used a font size that was difficult to read

The Attorney General has recently issued advertising guidelines for automobile dealers.

This action is another example of the State of New York regulating entities (auto dealers) that are outside Consumer Financial Protection Bureau (CFPB) jurisdiction. Both Mr. Schneiderman and the New York Department of Financial Services (DFS) Superintendent, Benjamin Lawsky, have emphasized that a central mission of their agencies is to fill these regulatory gaps. We anticipate that these agencies will continue to target for enforcement those areas that are outside CFPB jurisdiction.

On Tuesday, April 15, 2014, Ballard Spahr will host a webinar, “The Consumer Financial Services Industry in the Crosshairs of NY Regulators,” that will focus on increased activity by DFS and the New York Attorney General.

The firm’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). Our attorneys, including the attorneys who joined us from the New York City litigation firm Stillman & Friedman, P.C., to form Ballard Spahr Stillman & Friedman LLP, have substantial experience in handling litigation with DFS and the New York Attorney General.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, James A. Mitchell at 212.223.0200 x8006 or mitchellj@bssfny.com, or Marjorie J. Peerce at 212.223.0200 x8039 or peercem@bssfny.com.


Copyright © 2014 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Related Practice

Consumer Financial Services

CFPB

Visit CFPB Monitor, our blog on the Consumer Financial Protection Bureau >

Subscribe to the blog via e-mail >