People often think of beacons as radiating lights that attract attention. But the Federal Trade Commission accused two Ohio car dealers of using the term (among other things) in a way that kept consumers in the dark.
Advertisements by Progressive Chevrolet Company and Progressive Motors prominently claim “Sign & Drive Leases ZERO DOWN!!!!!” The word “z” appears 31 times in total. Plus, every vehicle picture comes with a compelling monthly fee.
Now let’s clarify the “lighthouse” issue in litigation. The small print at the bottom of the ad says “Requires 800 beacon score or higher.” In this case, the “beacon” in question is actually “beacon,” an industry-specific credit score that auto finance institutions rely on.
But do consumers know their BEACON scores? Do they know what a BEACON score is? We can tell you this much. Less than 20% of consumers have a BEACON score of 800 or higher, the minimum requirement to qualify for advertised payments and “zero” transactions.
The complaint alleges that Progressive Chevrolet and Progressive Motors violated the FTC Act by stating or implying that consumers could lease the advertised cars with the down payment and monthly payments prominently featured in the ads. According to the FTC, the companies failed to adequately disclose how few people were eligible.
The FTC also charged the dealer with violating the Consumer Lease Act and Reg M by setting monthly payment amounts, a term that triggers certain disclosures, without providing additional information required by law.
To resolve the case, the companies agreed not to misrepresent lease or financing costs. In addition to enforcing compliance with the Consumer Leasing Act and Reg M regulations, the proposed order prohibits any material misrepresentation about the price, sale, financing or lease of a vehicle. The Company is also prohibited from advertising payment amounts, or the need for any or no down payment, whether a security deposit is required, and Additional charges may be applied at lease end with the consumer’s liability, if any, based on the difference between the vehicle’s residual value and its value at lease end.
What about those offers that only a select few can actually get? In the future, if companies choose to advertise monthly payments, recurring payments, down payments, or any length of payment term, they must also clearly disclose any limitations or qualifications on an individual’s ability to obtain an ad deal. If an ad states that a consumer must meet a certain credit score to qualify for an offer and that most consumers are unlikely to achieve that score, the ad must clearly and conspicuously disclose this fact.
What are the gains for other dealers? Clearly and conspicuously disclose material qualifications or limitations of the advertising transaction. (The fine print footnote is unlikely to meet this criterion.) Also, you may be able to use “zebra” and “zombie” safely, but be careful before using “zero” or one of the other “z” words without a clear explanation Be careful with possible preceding strings. Please see the Automotive page of the Business Center for compliance resources.
