The Federal Trade Commission is launching an investigation into biweekly payments sold as a product by dealership finance departments on the basis that consumers may not be getting their money’s worth with such payments.
Automotive News reports the National Automobile Dealers Association’s Legal and Regulatory Affairs unit “received a number of questions and comments about biweekly payment F&I products,” and that the FTC recently issued civil investigative demands — requests for documents and/or testimonies — to dealerships regarding how biweekly payments are marketed by the latter’s finance departments. The organization emphasized to its members that finance employees are aware of and are properly trained “to accurately and adequately disclose all fees and costs, and not to overstate any potential benefits.”
Though biweekly payments are meant to bring consumers out of negative equity and the overall loan debt faster than other methods, NADA delivered an example where the fees associated with such payments ultimately hinder any savings on interest. The example given has a consumer save $656.61 on interest for a $27,342.96 loan on a vehicle, but pays $613.50 in total fees over 110 payments, providing little value for the consumer.
NADA concludes by warning dealers that deceptive marketing of savings allegedly offered by biweekly payments would land the dealers and their finance managers under the gun of the FTC.