We recently blogged about “Operation Steer Clear,” where the FTC targeted automobile dealerships for false or misleading advertising. The FTC charged a number of dealers with violations leading to litigation and consent agreements. For more on the federal crackdown, see our blog by clicking here.
Iowa Law Update: More Headaches
Iowa dealers must comply with the Iowa Consumer Fraud Act and the Iowa Consumer Credit Code (ICCC), which incorporates the Truth in Lending Act at the state level. Because these laws are meant to protect consumers, the court, and law enforcement generally, will construe the code liberally so that consumers receive the maximum protections possible under the law.
Iowa consumer protection laws are enforced by the Attorney General and some protection laws fall under the Iowa Criminal Code. Like the FTC, the Attorney General can seek injunctions and a fine of up to $40,000 for each occurrence. Iowa also has special protections for elderly citizens and veterans; there is an additional $5,000 fine provision if the violation is against an older person (defined in the code as over age 65). As of 2009, Iowa also provides a private cause of action for consumers. This means that, in addition to the state action, the consumers with claims may also sue the dealership individually for damages.
Here’s the BrakeDown: What to do, What to do?
Know that Iowa Code Chapter 322 makes compliance with the ICCC a condition of maintaining your dealer license. Although the consumer protection laws in Iowa and at the federal level focus on fraud and financing, they apply throughout the car-buying experience. The consumer’s first interaction with a dealership is usually through its advertising. Therefore, the consumer protection laws extend to advertising as well as the negotiations and sales after the customer walks in the door.
From a defense perspective, note that a “misrepresentation” is only a violation if it relates to a “material fact.” A material fact is a fact that, if the buyer had known or understood it, would have caused the buyer to act differently during the sale. For example, a material fact might be one that would change the price the customer is willing to pay or whether the customer would even purchase the vehicle. If you question whether the information is a “material fact,” then it probably is. Further, liability for a violation of the consumer protection laws does not depend on whether the dealership had an intent to deceive their customers. Occasionally, an ad that you think is crystal-clear may be confusing or misleading to a potential customer. Be careful and review your ads!
Of course, in the government’s overzealousness to protect consumers, it may drag automobile dealerships into litigation where the dealership did not even know it was to deceiving its customers. These advertising concerns can be avoided if experienced auto dealer counsel reviews advertising that you deem to be questionable. The NADA specifically recommended that dealerships ensure “their legal counsel review all advertising.”