Stupid Mistakes Lead to 10 Years of FTC Scrutiny

Peter J. McNamara, NHADA President

In the past few years, several dealerships across the country have been forced into 10-year consent decrees with the Federal Trade Commmission (FTC) simply because they failed to properly advertise credit offers for retail installment contracts. Messing up in this area is simply stupid and lazy. Compliance is easy. If the FTC wants into your shop, the first play they make is to look at your ads ­— paper, TV, radio or internet. This article will walk you through the Truth in Lending Act’s requirements for advertising retail installment credit terms. (Next month we’ll cover lease ads.)

The following is an excerpt from the NH Legal Guide, available at your NHADA store online:

When advertising retail installment sale terms the ad must generally include four separate disclosures. These disclosures are:

  • The amount of or percentage of any downpayment;
  • The number of or periods of repayment;
  • The amount of the monthly payment; and
  • The annual percentage rate (APR).

If any of the first three disclosures is advertised alone, then that “triggers” the disclosure of the remaining three. Note, however, that the fourth term, the Annual Percentage Rate (APR), may be advertised without triggering the other three.

A common violation occurs when dealers advertise, for example, “0% financing for 60 months on all Chevy Tahoes!” without any further disclosures. The “60 months” triggers the two remaining TILA disclosures discussed above. Therefore, a better way to advertise this kind of promotion is to leave out the “60 months.” However, in the event the term is less than 60 months, it is a good idea to include a phrase such as “limited term financing.” This is not technically required, but will help avoid claims that the ad is misleading.

Of course, dealers can still advertise the finance term so long as proper disclosures are included in the ad. In the example promotion stated above, a proper disclosure would read: “$16.67 per month, per $1,000 financed with a 10% down payment. On approved credit.” Such a disclosure should be clear and conspicuous.

Advertisements of terms that include escalated payments, deferred payments, balloon payments, or pickup payments shall clearly identify the amounts of and due dates for these payments.

Credit Qualifier

All installment sale and lease offers should include a prominent credit qualifier. For example, the simple statement “on approved credit” will properly qualify most offers. Of course, if the offer is available to only highly qualified applicants, additional disclosures may be required (e.g., “above average credit required,” “for well-qualified buyers only,” etc.)

Clear and Conspicuous Standard

Disclaimers and disclosures relating to retail installment sales and leases must be “clear and conspicuous.” For print advertising, this means that disclosures must be legible and reasonably understandable. For audio disclosures, this means that disclosures must be made in a volume and cadence sufficient for an ordinary customer to hear and understand them. For video advertisements, disclosures must be of a size and contrast, and must appear on the screen for a duration and in a location, sufficient for an ordinary person to read and understand them.

To evaluate whether a particular disclosure is clear and conspicuous, consider:

  • The placement of the disclosure in an advertisement and its proximity to the claim it is qualifying;
  • The prominence of the disclosure;
  • Whether items in other parts of the advertisement distract attention from the disclosure;
  • Whether the advertisement is so lengthy that the disclosure needs to be repeated; and
  • Whether disclosures in audio messages are presented in an adequate volume and cadence, visual disclosures appear for a sufficient duration, and whether the intended audience can understand the language of the disclosure.

The FTC has labeled as deceptive, television ads with fine print too small to read and audio disclosures too fast to hear. The FTC has asserted that unreadable disclaimers and incomprehensible disclosures were inadequate to correct the misleading statements that did appear in the advertisements. Furthermore, the FTC has charged that disclosures appearing in small type, for a short duration, or accompanied by distracting or obscuring sounds or images, are also not clear and conspicuous.

If an Inspector Stopped by Today, Would You Be Prepared?

A failure to affix a Buyers Guide (FTC stickers) onto used cars for sale is a major “no-no” and a visible violation that can flag your dealership and gain an inspector’s unwelcome attention.

A Buyers Guide has to be printed and affixed in a window of each and every used vehicle for sale or trade on your lot. No matter how well you have the situation covered, sometimes the notices don’t get printed or handwritten upon arrival of the vehicle. Sometimes, they come off and are not replaced in the UCI process, when windows are rolled up and down.

To help with this dilemma, use an adhesive “Not for Sale...” sticker, which is easy to slap on a windshield and is immediately available when a vehicle arrives at your store. It stays on the car until it gets to the detail shop, where the printed buyer’s guide, and any other window stickers, are affixed properly. The lot manager or product specialist can carry these; if they see a vehicle on the lot without the Buyer’s Guide, they can affix a “Not for Sale Sticker” and note that a buyer’s guide is needed.

This practice could eliminate future infractions. The stickers are available from NHAD Services, Inc. for $20.00 for the first 100, and are well worth the investment. To place an order call 800-852-3372 and ask for item #8245-01, or visit our store, or

For more information, contact Brian Duplesses, NHAD Services - Products Division director at at or call 800-852-3372.