FTC Launches Investigation Into Deceptive Marketing Of Biweekly Payments

Cameron Aubernon
by Cameron Aubernon
ftc launches investigation into deceptive marketing of biweekly payments

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.

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  • Lorenzo Lorenzo on May 23, 2014

    I'm most concerned with the line in red. The FTC is supposed to deter and prevent fraud. The example shows that the bi-weekly payment DOES reduce interest and the total amount paid, but not by much, or as much as the customer may think. There's an ethical component, but no fraud. The most that can be charged is misrepresentation, if the savings amount before fees is mentioned and the reduction amount due to fees is not. Is the FTC going to monitor supermarkets that offer an item for $3.49 each, but 3 for $9.99 and decide that the 48 cent saving isn't enough? The bottom line is that it's not the FTC's job to make sure customers get their money's worth. That's the customers' job.

    • See 1 previous
    • Lorenzo Lorenzo on May 25, 2014

      @Hillman As I said, it's not fraudulent. The POTENTIAL misrepresentation - it depends on what's said in the dealer's office vs. what the customer signs, is what they're looking at. What I pointed out was the part in red: they're investigating "on the basis that consumers may not be getting their money’s worth with such payments." Customers are free to enter into a good deal or a bad deal. There's no guarantee the consumer must get his money's worth. The FTC mission statement does NOT cover guaranteeing the customer a good deal, but that's the stated reason for the FTC's investigation. Unless they have complaints of material misrepresentation, they have no basis to investigate, and are on a fishing expedition. No business, not even car dealers, should have to put up with intrusive government investigations WITHOUT CAUSE.

  • Frantz Frantz on May 23, 2014

    Everyone is different I'm sure. At our dealership, most times we use bi-weekly it is at the customers request. I have never once had a single person ask about the interest advantage and have not sold it under that premise. Most folks like it because it makes it easier to budget if you live paycheck to paycheck. For those that are bad with money, bills are easier to pay on payday than the day before.

  • Mypoint02 Mypoint02 on May 24, 2014

    I guess I don't understand why this is even a product in the first place. I make bi-weekly auto loan payments by dividing the monthly payment in two and scheduling recurring payments on pay day. I don't even have to think about it. I make an extra payment a year by virtue of there being 26 pay periods. What's the bank selling you? Why not just keep it a monthly payment and make bi-weekly payments at your discretion? Why would anyone pay for this?

  • Realdeal Realdeal on Jun 25, 2014

    mypoint - I guess you never eat out since you have the ability to cook your own food?

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