After hitting an impasse with auto industry skeptics, TrueCar is facing another setback. The embattled company and its dealers were notified by the Colorado Department of Revenue that they could be in violation of five of the state’s advertising rules, according to a letter released on Dec. 15.

According to the Colorado Automobile Dealers Association, TrueCar had initiated a meeting with the Department’s Motor Vehicle Dealer Board in late November to find out if its service was in compliance with Colorado state laws. “That seemed to be a discovery meeting to tell the [state’s] Auto Industry Division (AID) how the TrueCar model works,” said Tim Jackson, Colorado Automobile Dealers Association (CADA) president.

The Department of Revenue’s legislative liaison, Mark Couch, stated that the AID is currently investigating a complaint that it received last week regarding TrueCar and could not comment until the investigation was completed.

Jackson said that his association was not involved in the meeting, but was notified soon after by the AID about a number of issues regarding TrueCar’s business relationship with dealers. Some of the topics mentioned in the AID’s letter include concerns over access to dealer’s inventory information, possible “bait and switch” situations and concerns regarding unlicensed sales activity.

The five advertising violations identified included failure to include vehicle stock numbers, using the word “invoice” in advertisements, small font size on disclaimers, failure to disclose all costs associated with purchasing a vehicle, and not listing an expiration date or time limit for offers.

The association’s new-car dealers were notified about the situation over the weekend. “I’ve been on the phone all day,” Jackson said. “Out of those 250 or so dealers, I’ve probably fielded between 25 to 35 calls so far.”

The AID’s letter also indicated that it has been instructed  to “pursue licensure by TrueCar as either a Used Motor Vehicle Dealer or to have individuals associated with TrueCar licensed as salespersons or both.”

The reason for this, Jackson adds, is that anyone who is negotiating the price of a car in Colorado needs to be licensed to do so.

Though the alleged violations originated from TrueCar’s materials, the AID states that any dealer using the company’s services to promote and list vehicles will ultimately be responsible for any violations of the state’s compliance rules.

“It’s up to the dealers who they do business with and we don’t tell them who to do business with or not to do business with,” Jackson says. “But it’s our role to help them stay in compliance.”

Group 1 Automotive was recently reported to have ended its business relationship with TrueCar, but did not immediately return F&I and Showroom’s requests for comment. Last week, Honda confirmed that it warned its dealers over the summer that marketing dollars will be withheld if dealers violate the company’s stated advertising guidelines. A company spokesman, however, denied that Honda is prohibiting its dealers from using TrueCar.