North Carolina: (919) 847-8632

For the first time FTC brings charges against auto dealer related to falsifying consumer income on financing applications

By: Micah Andrews

For the first time FTC brings charges against auto dealer related to falsifying consumer income on financing applications


For the very first time, the Federal Trade Commission (“FTC”) has brought charges against an auto dealer related to income falsification on its financing applications. In July 2018, the FTC brought charges against four auto dealerships operating in Arizona and New Mexico making allegations that the dealerships were falsifying consumer income and down payment information on vehicle financing applications. The dealerships at issue are each owned by Tate’s Auto Group and charges were also brought individually against the companies’ owners.  

According to the FTC Complaint, since 2014 each of the four dealerships: (1) falsified consumers’ income on vehicle financing applications; (2) falsified consumers’ down payment information on consumers’ financing applications and contracts; and (3) disseminated deceptive advertisements offering vehicles for sale, financing, and lease.

Like most auto dealers, Tate’s Auto customers frequently executed a retail installment sales contract (“RISC”) which the dealer sought to assign to a third party—such as a bank, finance company or credit union.  The financing application requires a statement disclosing the consumer’s monthly income and the down payment, and the financing contract requires a statement disclosing the consumer’s down payment.

According to the FTC, in numerous instances, instead of using the information that consumers provided to complete the financial paperwork, Tate’s Auto used inflated numbers falsely representing that consumers had higher monthly incomes. The dealership representatives also allegedly inflated the amount of the consumer’s cash down payment and altered documents after they had been signed.  In some instances, consumers reported to the FTC that they told Tate’s Auto the information on an application was incorrect, and that although Tate’s Auto assured them the information would be corrected, it was not.

The FTC acknowledged the assistance of the Navajo Nation Human Rights Commission during the investigation of the case making reference to behavior specifically targeted at residents of an Arizona Navajo Reservation.  However, a close reading of the Complaint reveals that the unlawful behavior was initially flagged when a major financing company to which Tate’s Auto had regularly assigned financing contracts, conducted fraud review of Tate’s Auto dealerships revealing:

  • Tate’s Auto Center of Winslow – 44.83% of applications listed inflated income
  • Tate’s Nissan Buick GMC – 38.71% of applications listed inflated income
  • Tate’s Auto Center – 37.50% of applications listed inflated income
  • Tate’s Auto Center of Gallup – 17.9% of applications listed inflated income

The financing company experienced a disproportionate amount of defaults from Tate’s Auto customers and eventually stopped accepting assignments from the dealer group.

Statutory Violations

The FTC brought charges under Section 5(a) of 15 U.S.C. § 45(a), (the “Unfair and Deceptive Trade Practices Act”) which prohibits “unfair or deceptive acts or practices in or affecting commerce.” The FTC alleges that the dealer’s actions were false and misleading and constituted deceptive acts or practices in violation of the Act.

The FTC also brought claims under the Federal Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1666j, which establishes disclosure and calculation requirements for consumer credit transactions.  The FTC alleges that the dealer’s advertisements promoting closed end credit failed to disclose, or failed to disclose clearly and conspicuously, terms required by the TILA and Regulation Z.

Individual Claims

Significantly, the Complaint also names Richard Berry as a defendant and Linda Tate as a relief defendant. According to the FTC, acting as owner of the four dealerships, Berry formulated, directed, controlled, had the authority to control, or participated in Tate’s Auto’s allegedly illegal conduct. The FTC alleges that Tate received hundreds of thousands of dollars from the other defendants, including funds directly connected to the alleged unlawful conduct. The FTC is seeking damages against Tate’s Auto including disgorgement of all funds and assets, or the value of the benefit it received from the funds and assets, which are traceable to the alleged deceptive acts or practices.


Auto dealers are likely familiar with FTC deceptive practices claims related to advertising, which have frequently been brought against auto dealers in the past.  However, the FTC’s most recent actions may indicate a new focus on targeting deceptive behavior related to inflated financing applications.

Auto Dealers are likely use to adjusting APR, down-payment, and other figures in RISC contracts given “Right to Cancel” provisions regularly used in RISC agreements expressly acknowledge that these amounts can be adjusted (with buyer approval) in order to secure assignment of the financing.  The FTC’s recent complaint makes clear that a dealer is wise to make sure financing applications are not being inflated and accurately reflect the consumer’s financial information. Questions about financing applications or contract execution procedures and their possible State or Federal law implications should be directed to your dealer lawyer.