Busted: FTC Speaks About Auto Dealer Fraud and “Operation Ruse Control”

On March 26, the Federal Trade Commission conducted a media call regarding the completion of “Operation Ruse Control,” a joint effort targeting deceptive auto dealer practices involving approximately 252 enforcement actions executed by the FTC and approximately 30 other government agencies. During the media call, two individuals – Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, and Joyce Vance, U.S. Attorney for the Northern District of Alabama – spoke for about an hour.

Rich described six FTC enforcement actions this year totaling about $200 million in civil penalties. Two of these actions targeted deceptive “add-ons”. These involve products and services that auto dealers gratuitously add to existing manufacturer packages and agreements. Examples include undercoating, rust-proofing, and roadside assistance. Because consumers often overlook these additions, Rich highlighted them as a “serious concern” for the agency.

Three of the FTC enforcement actions this year concerned so-called “bait and switch” advertising practices. Rich claimed that the targeted dealers publicly advertised attractive discounts and rebates that were not honored at the point of sale.

The final relevant action highlighted by the FTC involved a fraudulent auto loan modification scheme allegedly operated by Regency Financial Services of Florida. Rich asserted that this company was illegally charging up-front fees without securing the claimed modifications. The FTC successfully obtained a permanent injunction against the company regarding this practice.

In her portion of the call, Vance clarified that her office’s purview extended only to criminally prosecuting auto dealers submitting false information to auto lenders. Specifically, her office was responsible for charging certain identified entities with criminal conspiracy, wire fraud, and bank fraud. These charges respectively carry five, 20-, and 30-year statutory maximum incarceration sentences. Vance concluded by noting that her office recommends that consumers ask auto dealers for an itemized list of the various provisions included in their auto loan agreements.

After their presentations, both Rich and Vance answered questions from the media. Of note, Rich divulged that the FTC discovered the illegal practices mentioned not only through an extensive system of consumer complaints, but also from competitors and from independent agency analysis. Deceptive “bait and switch” advertising was the most common targeted practice. Vance, in turn, noted that the most common practices prosecuted by her office involved false auto dealer representations to auto lenders, including artificially inflating consumer income, relying on straw purchasers, and adding non-vehicle accessories to boost loan amounts.