Federal Trade Commission cracks down on “deceptive” auto lending

As part of an ongoing crackdown on deception and fraud in auto sales, finance and leasing, the Federal Trade Commission (FTC) has ordered National Payment Network (NPN) to issue $1.5 million in consumer refunds and waive another $949,000 in fees to current customers, after the vendor was judged to have used deceptive lending practices

The FTC claimed that NPN’s advertising of its add-on biweekly auto payment plan was misleading, stating that the company failed to adequately disclose that sign-up fees for the payment program could outweigh the savings.

Biweekly payments save money on interest because consumers effectively make 13 monthly payments annually instead of 12. Payments are made via automatic money transfers every two weeks.

Customers pay fees to join the program and to set up the automatic payments. The National Automobile Dealers Association (NADA) warned its members last year the FTC was investigating such arrangements. A May 2014 memo from the NADA said dealerships should “accurately and adequately disclose all fees and costs, and not … overstate any potential benefits.”

The FTC’s order requires NPN to issue $1.5 million in consumer refunds within 30 days of service of the order, and says the company must waive another $949,000 in fees to current customers.

NPN customers who participated in the biweekly payment program for 48 months or more are eligible for refunds of cancellation fees. The company is required to provide these and other refunds and the fee waivers under the terms of the order without any need for consumers to apply.

As part of the settlement order, NPN is also prohibited from making deceptive claims about its payment program or other add-on products or services.

The case forms part of Operation Ruse Control, a nationwide and cross-border multi-partner law enforcement sweep announced in March 2015 to tackle deception and fraud in auto sales, leasing, and financing.