Beuckman Ford, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MA TIER OF BEUCKMAN FORD, IKC., ET AL.

CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLA Tron OF THE CONSUMER LEASING ACT, Tile TRUTH 11' LENDING ACT AJ\D SEC. 5 OF THE FEDERAL TRADE COMMISSIO:\ ACT Docket C-3777. Camplaillt, Jan. 1998--Decisioll. Jail. , 1998 This consent order prohibits, among other things, the St. Louis Missouri-area automobile dealership and its officer from omitting or burying key cost information in small, and at times, unreadable print in their automobile Jcase advertisements and from misrepresenting the costs of leasing, including the total amount due at lease signing. The consent order requires the respondents to disclose certain information clearly and conspicuously and to comply with all provisions of the specified acts and regulations. Appearances For the Commission: Lauren Steinfeld and David Medine. For the respondents: Joe D. Jacobson, Green, Schaaf Margo St. Louis, MO.

COMPLAINT The Federal Trade Commission, having reason to believe that Beuekman Ford, Inc. , a corporation, and Fred J. Beuekman, III individually and as an offcer ofthe corporation ("respondents ), have violated the provisions of the Federal Trade Commission Act, 15 e. 45- , as amended, the Consumer Leasing Act, 15 USe. 1667- 1667e, as amended, and its implementing Regulation M , 12 CFR 213, as amended, and the Truth in Lending Act, 15 U. e. 1601- 1667, as amended, and its implementing Regulation Z, 12 CFR 226 as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Beuekman Ford, Inc. is a Missouri corporation with its principal offce or place of business at 15675 Manchester Road, Ballwin, Missouri. Respondent offers automobiles for sale or lease to consumers.

2. Respondent Fred J. Beuekman, II is an offcer of the corporate respondent. Individually or in concert with others, he formulates directs, or controls the policies, acts, or practices of the corporation , , Complaint 125 FTC including the acts or practices alleged in this complaint. His principal office or place of business is the same as that ofBeuekman Ford, Inc. 3. Respondents have disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and consumer lease" are defined in Section 213.2 of Regulation M, 12 CFR 213. , as amended.

4. Respondents have disseminated advertisements to the public that promote credit sales and other extensions of closed-end credit in consumer credit transactions, as the terms "advertisement credit sale " and "consumer credit" are defined in Section 226.2 of Regulation Z, 12 CFR 226. , as amended. 5. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S. e. 44. LEASE ADVERTISING 6. Respondents have disseminated or have caused to be disseminated consumer lease advertisements ("Jease advertisements for automobiles in the print media, including but not necessarily limited to the attached Exhibits A , B, and e. These lease advertisements contain the following statements: A. " 1994 AEROSTAR STARTING AT 514 988 OR $278.80**24 MONTH RCL INCLUDES ALL TAXES, LICENSE & FEES"

fA fme print statement at the bottom of the ad states, "**10% ofMSRP down plus 1st & security, iucludcs all rebates and incentives to qualified buyers. ) (Exhibit A) B. "' 95 WrNDSTAR GL $17 588* or $273* PER MO. 24 MONTH RCL mCLUDES ALL TAXES & FEES'"

fA fine print statement at the bottom of the ad states All prices include Ford rebates, college graduate or commercial rebates where applicable. All payments based on 9.5 APR to qualified buyers. 60 months. No money down. **10% of MSRF plus rebates."! (Exhibit B) C " 1995 WTl)STAR GL $16 986 OR 5259.99 PERMO. 24 MONTH RCL DlCLUDES TAX AND LICD/SE"

(A fine print statement at the bottom of the ad states Windstar lease payment in lieu of purchase rebate. Reg. 10% of YISRP down plus 1 st month and security deposit."J (Exhibit C) FEDERAL TRADE COMMISSIO:\ ACT VIOLATIO:\S COUNT I: FAILURE TO DISCLOSE ADEQUA TEL Y INCEPTION FEES 7. In lease advertisements, including but not necessarily limited to Exhibits A, B , and C, respondents have represented, expressly or by implication, that consumers can lease the advertised vehicles at the BEUCKMAN FORD, INe., ET AL Complaint tenns prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount. 8. These lease advertisements do not adequately disclose additional tenns pertaining to obligations at lease inception, including but not necessarily limited to one or more of the following charges: a required downpaymcnt, security deposit, first month' s payment, and taxes. This infonnation does not appear at all, appears in very fine print, and/or is referenced by asterisks that do not correspond to the asterisks depicted in the main text of the advertisements. 9. These additional tenns would be material to consumers in deciding whether to visit respondents' dealership and/or whether to lease an automobile from respondents. The failure to disclose adequately these additional tenns, in light ofthe representation made was, and is, a deceptive practice.

10. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U. e. 45(a).

COU:-T ll: FAILURE TO DISCLOSE THAT THE TRANSACTIOI' ADVERTISED IS A LEASE II. In lease advertisements, including but not necessarily limited to Exhibits A, B, and C, respondents have represented, expressly or by implication, that consumers can purchase the advertised vehicles by financing the vehicles through credit at the advertised monthly payment and tenn.

12. These lease advertisements fail to disclose that the tenn RCL" is an abbreviation for "Red Carpet Lease" or to otherwise disclose that the advertised monthly payment and tenn are components of a lease offer. The existence of this additional information would be material to consumers in deciding whether to visit respondents' dealership and/or whether to lease or purchase an automobile from respondents. The failure to disclose adequately this additional tenn, in light of the representation made, was, and is, a deceptive practice.

13. Respondents' practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U. e. 45(a).

, FEDERAL TRADE COVIMISSJON DECISIONS Complaint 125 FTC. CONSUMER LEASING ACT AXD REGULATION M VIOLATIONS COUNT II: FAILURE TO DISCLOSE REQUJRED INFORJvlA TION CLEARLY AND CONSPICUOUSLY 14. In lease advertisements, including but not necessarily limited to Exhibits A, B, and C, respondents have stated a monthly payment amount, the number of required payments, and/or an amount "down. 15. These lease advertisements have failed to disclose clearly and conspicuously the following items of information required by Regulation M: that the transaction advertised is a lease; the total amount of any payment such as a security deposit or capitalized cost reduction required at the consummation of the lease or that no such payments are required; the total of scheduled payments due under the lease; a statement of whether or not the Jessee has the option to purchase the leased property and at what price and time or, in lieu of disclosure of the price, the method of determining the purchaseoption price; and a statement of the amount or method of determining the amount of any liabilities the lease imposes upon the Jessee at the end of the term.

16. Respondents' practices have violated Section 184 of the Consumer Leasing Act, 15 U.S. e. 1667e, and Section 213.5(e) of Regulation M, 12 CFR 213.5(e).

CREDIT ADVERTISING 17, Respondents have disseminated or have caused to be disseminated credit sale advertisements ("credit advertisements ) for automobiles in the print media, including but not necessarily limited to the attached Exhibit B. These advertisements contain the following statements:

95 ML'STANG GT COUPE $17 988* OR $37799 PER MO NO MONEY DOWN"

(A fine print statement at the bottom of the ad states All payments based on 9. APR to qualified buyers. 60 months, no money down. "J (Exhibit B) TRUTH 1:\ LENDlXG ACT AND REGULATION Z VIOLA TrONS COUNT IV: F AILL'RE TO DISCLOSE REQUIRED INFOR'\A 1'10"1 CLEARLY AND CONSPICUOUSLY 18. In credit advertisements, including but not necessarily limited to Exhibit B, respondents have stated a monthly payment amount and/or an amount "down" as terms for financing the purchase of the advertised vehicles.

BEUCLl\AN FORD me. ET AL.

Complaint 19. These credit advertisements have failed to disclose clearly and conspicuously the following items of infonnation required by Regulation Z: the annual percentage rate and the tenns of repayment. 20. The items of infonnation required by Regulation Z are not clear and conspicuous because they appear in very fine print. 21. Respondents' practices have violated Section 144 ofthe Truth in Lending Act, 15 D. C. 1664, and Section 226.24(c) of Regulation , 12 CFR 226.24(e).

Commissioner Thompson and Commissioner Swindle not participating.

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Complaint EXHIBIT B Beuc Exhi it B Dc.IAirS.gs ,M;LEAGECHAMP TAR rsa I YourSignalureGivesVI;,"J.M UsJIlm.MPNEY-'AuthcntyToRun Credil I 14988' B5! 'YR O NGS"- I $3 os NO MONEY DOWN t;r a t::r J J IT H", J MO. C"p b.u('.."l.'"",,, 0".. PER W"" OF DOWN '''aCP''u''on5''u'FtontEMCoo.",. AVAILABLE U'."I'h ASPIRE 'M.pem" SHORT MONEY I--E"g'l\ UNITS 1995 $149NO 15 r-rom$6978 3LEF'50HC Du"'AIrB8Q'F,,,,wn..,o,,,,o AND OR II: g . o. .,,. TAX H G' a... n c C.""" T"" GL BSWTir... RCL MPH6ump~.. . '5" So,., 'In,. 5 O'y".''u"hn". LICENSE MO. PERMO.24INCLUDESAND ' S.a"o 'w,no"w. "!lri'.Y8."rf' , AVAILABLE "".0" ,, ONG. . 'Co'DQ", Lo FI'PV P.", B' S"J.'""","OOv"",to"Bm,"un'Wh"u'DmeAn"7loa,W","owW'perU"'d WINDSTAR UNITS 16,986 $259 1995 140 Fro rfps I BEUCKc\1N FORD me. ET AL.

Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge the respondents with violation of the Federal Trade Commission Act the Consumer Leasing Act and its implementing Regulation M, and the Truth in Lending Act and its implementing Regulation Z; and The respondents, their attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by the respondents that the law has been violated as alleged in such complaint, or that the facts as alleged in such eomplaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Acts and Regulations, and that a complaint should issue stating its charges in that respect, and having thereupon accept cd the cxeeuted consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order: 1. Respondent Beuekman Ford, Inc. is a Missouri corporation with its principal office or place of business at 15675 Manchester Road, Ballwin, Missouri.

2. Fred 1. Beuekman, II is an officer of the corporate respondent. His principal office or place of business is the same as that of Beuekman Ford, Inc.

3. The Federal Trade Commission has jurisdiction of the subject matter ofthis proceeding and of the respondents, and the proceeding is in the public interest.

FEDERAL TRADE COM'vISSION DECISIONS Decision and Order 125 FTC. ORDER DEFINITIONS For the purposes of this order, the following definitions shall apply:

1. "Clearly and conspicuously shall mean as follows: a. In a television or video advertisement, the audio disclosure shall be delivered in a volume and cadence suffcient for an ordinary consumer to hear and comprehend it. The video disclosure shall be of a size and shade, and shall appear on the screen for a duration suffcient for an ordinary consumer to read and comprehend it. b. In a print advertisement, the disclosure shall be in a type size location, and in print that contrasts with the background against which it appears, suffcient for an ordinary consumer to notice, read and comprehend it.

e. In a radio advertisement, the disclosure shan be delivered in a volume and cadence suffcient for an ordinary consumer to hear and comprehend it.

Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement. 2. "Equal prominence shan mean as follows: a. In a television or video advertisement, the video disclosure shall be presented in the same or similar format, including but not necessarily limited to type size, shade, contrast, duration, and placement. The audio disclosure shan be delivered in the same or similar manner, including but not necessarily limited to volume cadence, pace, and placement.

b. In a print advertisement, the disclosure shall be presented in the same or similar format, including but not necessarily limited to type size, shade, contrast, and placement.

e. In a radio advertisement, the disclosure shan be delivered in the same or similar manner, including but not necessarily limited to volume, cadence, pace, and placement.

Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement. 3. "Total amount due at lease inception shan mean the total amount of any initial payments required to be paid by the lessee on BEUCKMAN FORD me. ET AL.

Decision and Order or before consummation of the lease or delivery of the vehicle whichever is later.

4. "Commerce shall mean as defined in Section 4 of the Federal Trade Commission Act, IS USe. 44.

5. Unless otherwise specified respondents shall mean Beuekman Ford, Inc., a corporation, its successors and assigns and its offcers; Fred J. Beuekman, II, individually and as an officer of the corporation; and each of the above s agents, representatives, and employees.

It is ordered That respondents, directly or through any corporation, subsidiary, division, or any other device, in connection with any advertisement to promote, directly or indirectly, any consumer lease in or affecting commerce, as "advertisement" and consumer lease" are defined in Section 213.2 of Regulation M , 12 CFR 213. , as amended, shall not, in any manner, expressly or by implication:

A Misrepresent the costs ofleasing a vehicle, including but not necessarily limited to the total amount due at lease inception. B. State any amount due at lease inception (or that no such amount is required), except for the statement of a periodic payment unless the advertisement also states with equal prominence the total amount due at lease inception.

without disclosing clearly and e. State the term "RCL" conspicuously that such term refers to a lease transaction. D. State the amount of any payment, the number of required payments, or that any or no downpayment or other payment is required at consummation of the lease unless alj of the following items arc disclosed, clearly and conspicuously, as required Regulation M, as amended:

(1) That the transaction advertised is a lease; (2) The total amount of any payment such as a security deposit or capitalized cost reduction required at the consummation of the lease or that no such payments are required;

(3) The number, amounts, due dates or periods of scheduled payments, and the total of such payments under the lease; (4) A statement of whether or not the lessee has the option to purchase the leased property and at what price and time (the method Decision and Order 125 FTC. of deteDlining the price may be substituted for disclosure of the price); and (5) A statement of the amount or method of deteDlining the amount of any liabilities the lease imposes upon the lessee at the end of the tell and a statement that the lessee shall be liable for the difference, if any, between the estimated value ofthe leased property and its realized value at the end of the lease tell, if the lessee has such liability.

For all lease advertisements, respondents may comply with the requirements of this subparagraph by utilizing Section 1 84(a) of the Consumer Leasing Act ("CLA"), 15 US.e. 1 667e(a), as amended by Title II, Section 2605 of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997, Pub. L. NO. 1 04-208, 110 Stat. 3009, 3009- 473 (Sept. 30 1996) (to be codified at 15 US. C. 1667e(a))("Section 184(a) of the revised CLA"), as amended, or by utilizing Section 213.7(d) of revised Regulation M, 61 Fed. Reg. 52246, 52261 (October 7, 1996) and 62 Fed. Reg. 15364 , 15368 (Apr. 1 , 1997) (to be codified at 12 CFR 213.7(d)) ("revised Regulation M" ), as amended. For radio lease advertisements, respondents may also comply with the requirements of this subparagraph by utilizing Section 184(b) of the CLA, 15 US.e. 1667e(b), as amended by Title , Section 2605 of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997, Pub. L. No. 104-208, 110 Stat. 3009, 3009-473 (Sept. 30, 1996)(to be codified at 15 US. e. 1667e(e))("Seetion 184(e) of the revised CLA"), as amended, or by utilizing Section 213.7(1) of revised Regulation M (to be codified at 12 CFR 2137(1)), as amended. For television lease advertisements, respondents may also comply with the requirements ofthis subparagraph by utilizing Section 213.7(1) of revised Regulation M, as amended. E. Fail to comply in any other respect with Regulation M, 12 CFR 213 , as amended, and the CLA, 15 US. e. 1667- 1667e, as amended. Respondents may comply with the requirements of this subparagraph regarding Regulation M by utilizing revised Regulation M, 61 Fed. Reg. 52246 (Oct. 7, 1996) and 62 Fed. Reg. 15364 (Apr. 1 , 1997) (to be codified at 12 CFR 213), as amended.

II.

It is further ordered That respondents, directly or through any corporation, subsidiary, division, or any other device, in connection BEUCKMAN FORD, INe. , ET AL.

Dccision and Order with any advertisement to promote, directly or indirectly, any asextension of consumer credit in or affecting commerce, advertisement" and "consumer credit" are defined in Section 226. of Regulation Z, 12 CFR 226. , as amended, shall not, in any manner expressly or by implication:

A. State the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge, without disclosing clearly and conspicuously all ofthe terms required by Section 144 of the Truth in Lending Act ("TILA"), 15 U.S. e. 1664, as amended, and Section 226.24(e) of Regulation Z, 12 CFR 226.24(e), as amended as more fully set out in Section 226.24(e) of the Federal Reserve Board' s Offcial Staff Commentary to Regulation Z, 12 CFR 226.24(e), as amended, as follows:

1. The amount or percentage of the downpayment; 2. The terms ofrepaymcnt; and 3. The annual percentage rate, using that term or the abbreviation APR. " If the annual percentage rate may be increased after consummation of the credit transaction, that fact must also be disclosed.

B. Fail to comply in any other respect with Regulation Z, 12 CFR 226, as amended, and the TILA, 15 U. e. 1601- 1667, as amended. It ;s further ordered That respondent Beuekman Ford, Inc. , and its successors and assigns, and respondent Fred J. Beuekman, III shall, for five (5) years after the last date of dissemination of any representation covered by this order, maintain and upon request make available to the Federal Trade Commission for inspection and copying all records that will demonstrate compliance with the requirements of this order.

IV.

It is further ordered That respondent Bcuekman Ford, Inc. , and its successors and assigns, and respondent Fred J. Beuekman, II shall deliver a copy of this order to all current and future principals officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with Decision and Order 125 FT.C. respect to the subject matter of this order, and shah secure from each such person a signed and dated statement acknowledging receipt of the order. Respondents shah deliver this order to such current personnel within thirty (30) days after the date of service of this order, and to such future personnel within thirty (30) days after the person assumes such position or responsibilities. It is further ordered That respondent Beuekman Ford, Inc. , and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not necessarily limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affliate that engages in any acts or practices subject to this order; the proposed filing of a bankrptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place respondent shah notify the Commission as soon as is practicable after obtaining such knowledge. AH notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.

VI.

It is further ordered That respondent Fred 1. Beuekman, II, for a period of ten (10) years after the date of issuance of this order, shah notify the Commission of the discontinuance of his current business or employment, or of his affliation with any new business or employment involving the advertising and/or extension of a consumer lease " as that term is defined in the CLA and its implementing Regulation M, or the advertising and/or extension of consumer credit " as that term is defined in the TILA and its implementing Regulation Z. The notice shah include respondents new business address and telephone number and a description of the nature of the business or employment and his duties and responsibilities. AH notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement BEUCKMAN FORD, INC., ET AL.

Decision and Order Bureau of Consumer Protection, Federal Trade Commission Washington, D.

VII.

It is further ordered That respondent Beuekman Ford, Inc. , and its successors and assigns, and respondent Fred 1. Beuckman, III shall within sixty (60) days after the date of service ofthis order, and at such other times as the Federal Trade Commission may require file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. VII This order will terminate on Januar 5 , 2018, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Par in this order that terminates in less than twenty (20) years;

B. This order s application to any respondent that is not named as a defendant in such complaint; and e. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, cxeept that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

Commissioner Thompson and Commissioner Swindle not participating.

Complaint 125 FTC.