The Federal Trade Commission recently announced that it has entered into proposed settlements with two auto title lenders that were charged with deceptive advertising in violation of Section 5 of the FTC Act and the Truth in Lending Act. According to the FTC’s press release, the cases represent the agency’s first actions against auto title lenders. The FTC is seeking comments on the proposed settlements, which must be filed online on or before March 3, 2015. (Links for filing comments are included in the press release.)

In its administrative complaints issued against the two title lenders, the FTC alleged that the lenders advertised, both online and in print, zero percent interest rates for a 30-day car title loan without adequately disclosing the specific conditions a borrower would have to meet to obtain that rate. In particular, the FTC alleged that the lenders failed to disclose that the zero percent rate would not apply if the loan was not paid in full in 30 days and that the borrower would then have to pay a finance charge for the initial 30 days in addition to any finance charges incurred after that period. In addition, the FTC alleged that the lenders failed to disclose what the finance charge would be for the initial 30-day period and after its expiration.

The FTC further alleged that one of the lenders failed to disclose other conditions for obtaining a zero percent rate, including that the borrower had to be a new customer and had to repay the loan with a money order or certified funds, not by cash or personal check. The FTC charged that the lenders’ failure to disclose this information was a deceptive act or practice in violation of Section 5 of the FTC Act.

One of the lenders was also alleged by the FTC to have violated the Truth in Lending Act (TILA) and Regulation Z by advertising “rates as low as 9.5%” next to its claim of zero percent interest without stating the 9.5 percent rate as an annual percentage rate. The FTC did not allege that the promotion of zero-interest financing triggered the need for additional disclosures under Regulation Z.

The proposed settlements would prohibit both lenders from engaging in similar deceptive practices and, for the lender charged with TILA and Regulation Z violations, would prohibit that lender from engaging in similar or other such  violations. The settlements did not include any monetary relief.

Ballard Spahr’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, and its skill in litigation defense and avoidance.

If you have questions, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or, CFS Practice Leader Jeremy T. Rosenblum at 215.864.8505 or, Mark J. Furletti at 215.864.8138 or, or Daniel JT McKenna at 215.864.8321 or

Copyright © 2015 by Ballard Spahr LLP.
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