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Federal Trade Commission targets car dealers for misleading ads

In a first-of-its-kind case, the Federal Trade Commission targeted five car dealers in four states that regulators say deceived consumers by promising to pay off their loans, no matter what was owed on the cars. The balance, the FTC said, was usually rolled right into the new car loan.
By JENNIFER C. KERR Published: March 15, 2012
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The promises might sound attractive to anyone facing tough financial times. Rosemary Shahan, president of California-based Consumers for Auto Reliability and Safety, says this kind of misleading advertising pitch is a common practice among dealers, and that people who are upside down on their loans — owing more on the old car than its actual value — are especially vulnerable.

“A huge percentage of people are upside down,” said Shahan. “What they don't realize is that they are just getting deeper and deeper into debt.”

Shahan says it's usually better to keep the old car and pay off the loan before buying a new car.

“The thing about cars is that they depreciate, so it's a bad place to put a lot of money,” she said.

Despite the claims, consumers still ended up being responsible for paying the difference between the trade-in loan balance and the vehicle's value, the commission said.


A huge percentage of people are upside down. What they don't realize is that they are just getting deeper and deeper into debt.”

Rosemary

Shahan

President of California-based Consumers for

Auto Reliability

and Safety

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