On August 1, 2018, the Federal Trade Commission filed criminal charges against four dealerships operating in Arizona and New Mexico. The allegations include a wide array of illegal activity including submitting false credit applications, altering credit applications, and deceptively advertising vehicles. Along with the four dealers, two individuals, owners of the dealerships, were also named. This is the first time the FTC has brought an enforcement action for falsifying credit applications.
According to the complaint, since at least 2014, the dealership staff have falsified monthly income and down payments on credit applications submitted to financial institutions. The FTC charges that the dealership staff would include the false information and take steps to prevent customers from reviewing it, or would insert the false information after the customer signed the application.
The four dealerships include one new car dealership and three used car dealerships, all under common ownership. They are located near the border of the Navajo Nation. The FTC noted in its press release that many of the affected consumers were members of the Navajo Nation and that consumers extended credit under false information defaulted at a higher rate than qualified applicants. It also notes that the Navajo Nation Human Rights Commission, which had issued a report on this group of dealerships in 2014, provided assistance during the investigation.
These criminal charges underscore the importance of ensuring good credit application processes. Dealership staff should know not only that they may not engage in these types of illegal practices, but that they must also take extra precautions to demonstrate compliance with the law. Speak to your qualified automotive attorney about credit application best practices to implement at your dealership.