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American Government

Opening Statement

Speaker: Robert Pitofsky
Agency: Federal Trade Commission
Date: 21 November 1996
AT A PRESS CONFERENCE ON AUTO LEASE ADVERTISING ON NOVEMBER 21, 1996

Today, the Federal Trade Commission and 23 state Attorneys General announce law enforcement actions against several major automobile manufacturing companies in this country. These actions follow our investigation into the advertising of car lease and finance deals on television and in the print media. Our goal is to make sure that consumers have the information they need as they make the very important decision to buy or lease a car. The actions announced today will ensure that important lease costs are taken out of the blur of unreadable print in this advertising. They also will help foster competition among car companies on the basis of truthful cost information for consumers.

We’ve all seen the ads I’m talking about -- ads that feature low monthly payments or low amounts down in large bold print, while burying additional costs and sometimes contradictory information in a blur of mouse print that is difficult or impossible to read. Sometimes it’s several lines of print that scroll very quickly across the screen. Sometimes the print appears over a moving or otherwise distracting background. But the information in that fine print is important -- it often discloses hundreds or thousands of additional dollars in payments or fees that consumers must make before the dealer will hand over the keys to a brand new car.

I saw one of these ads on television a while ago and I got down on my hands and knees in front of the TV set to try and read the fine print. Well, I couldn’t. I think it’s safe to conclude that consumers interested in buying or leasing a new car wouldn’t have been able to read it either. Let me just show you some of the ads we’re challenging. The videotape we are about to run has seven ads on it -- the videotape in your press packet has all of the commercials we challenged.

What’s important to know about these ads is that there were large additional costs consumers had to pay at the inception of a lease, and balloon payments amounting to thousands of dollars for the finance deals being advertised. All critical information; none of it clear and conspicuous.

Now, I also think it’s only fair to say that car companies have been in somewhat of a difficult position. In the past, it may not have been easy to include all the disclosures that are required to be in a 30-second commercial touting lease terms such as a low down payment, low initial lease charge or low monthly payment. But it could be done. We’ve seen it done. And new regulations announced by the Federal Reserve Board and recent changes in the Consumer Leasing Act by Congress streamline the required disclosures making it easier to do, yet still ensuring that consumers get key cost information.

The FTC law enforcement actions announced today are settlement agreements with five car companies. These agreements require that new ads for car leasing give consumers lease cost information in a manner that they can see, read and understand. The FTC settlements are with General Motors Corporation, Mitsubishi Motor Sales of America, American Honda Motor Company, American Isuzu Motors and Mazda Motor of America. The states also have settled with the first four companies, and are pursuing litigation against Mazda. The cases with Mitsubishi and GM also address fine print in advertisements for their finance plans, in addition to their leasing ads. In particular, they address the practice of prominently stating a low monthly payment while putting the disclosure of a substantial balloon payment in the fine print. In the future, consumers will be able to see both the monthly payment and the balloon payment clearly disclosed in the ads.

Under the FTC settlements, the five car makers are prohibited from misrepresenting what a consumer has to pay at lease inception. Ads that highlight a low amount down or other amounts due at lease inception will also have to disclose with equal prominence the total amount due before they drive away with a car. Other triggering disclosures will give consumers additional information in a clear and conspicuous manner, as consistent with the changes in the Consumer Leasing Act and Regulation M.

Full information about costs is a critical part of the consumer decision-making process. The FTC orders will codify the commitment of these manufacturers to provide this information in a manner that consumers can read and understand. And the FTC will continue its work in this area so that others in the industry comply with the law.

Special recognition should go to Senator Howard Metzenbaum and his organization, the Consumer Federation of America. They have served a valuable role in emphasizing the importance of doing away with the blur in automobile lease advertising and providing readable and understandable disclosures for consumers. I also would like to congratulate the states on their efforts to bring cost information out of hiding in the fine print.

[Chairman Pitofsky then introduces Arizona Attorney General Grant Woods; Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection; and David Medine, Associate Director for Credit Practices in the FTC’s Bureau of Consumer Protection.]

* This may not be an exact transcript of the Chairman’s remarks. These remarks reflect the Chairman’s own views and not necessarily those of the Commission or any other individual Commissioner.




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