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Historic FTC Charge Against Four Auto Dealerships with Deceptive Business Practices

The Federal Trade Commission (FTC) has the authority to file complaints against individuals when the law is being violated and when it believes doing so would be in the public interest.  This month, the FTC flexed that power by bringing strong enforcement actions against several auto dealerships that allegedly ripped off consumers.

In court filings, the FTC alleged that Tate Auto, a collection of auto dealerships—Tate’s Auto Center of Winslow, Tate’s Automotive, Tate Ford-Lincoln-Mercury, and Tate’s Auto Center of Gallup—engaged in illegal business practices since 2014. Tate apparently doctored financial information after consumers signed documents by inflating income information consumers provided during the sales process in order to be more likely to be accepted for third-party financing companies. In one example cited in the complaint, a consumer reported his monthly income as $1,000, but the application stated income to be $4,896. As a result, consumers were approved for financing based on false information—that they had adequate income to pay back the loans—but then ended up defaulting on their loans at higher rates than qualified buyers. Many of the impacted consumers came from a nearby Navajo reservation, from which Tate’s would solicit customers.

In addition to falsifying consumer finance information, the complaint alleged that Tate engaged in deceptive advertisement offers by, for example, failing to disclose thousands of dollars in upfront fees for purchasing or leasing vehicles and did not disclose the conditions needed to meet discount offers on certain vehicles.

In these overly partisan times, it was striking that all five FTC commissioners voted unanimously to bring this action against Tate’s. Also, it was an historic action since, as the Commission noted, this is the first action that it has taken alleging income falsification by auto dealers. Notably, the FTC worked closely with the Navajo Nation Human Rights Commission to investigate the claim.

This investigation proved that the FTC can be a strong bipartisan enforcer against unfair and deceptive practices, and we hope that the agency will continue to take bold enforcement action like this on behalf of consumers.