Car dealers apparently don’t know, or don’t care, that their ads violate federal advertising laws. Consider these real-life examples:

  • A Honda dealer in South Carolina lines up cars in front of the dealership and hangs a sign on each car showing the monthly payment for the car, with no other text.
  • A Mercedes-Benz dealer, also in the Palmetto State, has a billboard display on the way out of town showing a flashy new Mertz and a monthly payment — again, with no other text.
  • An ultra-highline used-car dealer sends out a mailer showing a lot of really nice cars, each sporting a monthly payment but with no other financing information anywhere in the mailer.
  • A used-car dealer in Arizona displays a sign on the side of a car offered for sale that says “$6,777 Cash Price — Has Been Discounted for Cash-Paying Customers!”
  • An Arizona dealer’s website shows a car with a “showroom price” of $18,783 and an “Internet special” price of $17,283, then says, “The Internet cash special is exactly that — all cash, plus applicable sales tax, license and title fees and a dealer documentation fee,” and “When financing, refer to the regular sales price and interest and applicable fees may increase the overall cost of the vehicle.”

Let’s consider two basic rules imposed by the federal Truth in Lending Act. Rule One: Showing the amount of a monthly payment in an ad “triggers” a requirement to disclose other financing terms. Displaying only the monthly payment, without more, is about as basic a TILA advertising violation as I can think of. Rule Two: You cannot have one cash price for cash deals and a higher price for financed deals. The higher amount for the financed deal is a finance charge, not part of the cash price. Again, it’s hard to imagine a more basic TILA violation.

All the examples listed above are ones that I have seen with my own sparkly blue eyes or ones that friends have sent me. I wish I could tell you that they are atypical and that most dealers follow the rules when they advertise. Alas, I can’t. These ads are much more typical than not.

So are these dealers being blindsided by new rules enacted by the Consumer Financial Protection Bureau and the Federal Trade Commission, the newly active federal agencies that enforce TILA? Nope. These rules, in essentially the form in which they appear today, have been around for nearly 50 years.

What has changed is that the agencies, and particularly the FTC, have ramped up enforcement of the rules to a level we have not seen before. State attorneys general, following the lead of the feds, have jumped on the advertising prosecution bandwagon as well.

And why not? The cases against the dealers whose ads are described above would be open and shut. In each instance, all the evidence a prosecuting agency would need to prove a violation has been thoughtfully provided by the dealer. There are simply no easier regulatory cases the agencies can bring. This is the lowest-hanging fruit for them.

But, dealers tell me, “I’m below the radar of the federal agencies. They aren’t looking at my ads.” I tell them to think again. FTC and CFPB staffers are on the same mailing lists that I am on, see the same billboards and lot displays that I do, and just love to review dealer websites. Keep on running noncompliant ads and you’ll see how good the regulatory radar is.

Thomas B. Hudson is a partner in the firm of Hudson Cook LLP and the author of several widely read compliance manuals. [email protected] [email protected]

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Tom Hudson

Tom Hudson


Thomas B. Hudson Esq. was a founding partner of Hudson Cook LLP and is now of counsel in the firm’s Maryland office. He is the CEO of LLC and a frequent speaker and writer on a variety of consumer credit topics.

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