PROPOSED FTC TRADE REGULATION RULE ON AUTO DEALER SALES PRACTICES

On June 23, 2022, the Federal Trade Commission (FTC) issued a notice of a proposed rule that will, if issued, curb auto dealer abuses. Violations constitute violations of the Federal Trade Commission  Act.  The key provisions include:

Specific new price and financing disclosures. The proposed rule would go beyond existing disclosure requirements under Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing Act) by requiring clear and conspicuous disclosure of additional information about the purchase price of the vehicle and prices for optional products. The dealer would have to disclose an "offering price," for which the dealer will sell the vehicle, excluding only required government charges such as taxes and title, in all advertisements that reference a specific vehicle and in response to any consumer inquiry regarding a specific vehicle. A price list for optional products such as service contracts must be posted on the dealership’s website. Any quotation of a monthly payment would have to be accompanied by the total of payments that would have to be made to purchase or lease the vehicle at that monthly payment.

Require dealers to obtain consumers’ “express informed consent” to any charges related to the sale or lease. The proposed rule would require truthful, clear, and conspicuous disclosure, both in writing and (for in-person transactions) orally, of the reason for the charge and the amount of the charge, followed by affirmative, unambiguous assent to be charged. In addition, for optional products such as service contracts and guaranteed auto protection (GAP) plans, the rule would require the dealer to obtain the consumer’s written rejection of an offer to sell the vehicle at a specific price without optional products before the dealer could charge a borrower for the options the buyer has accepted.

Prohibit the sale of add-on products and services that “provide no benefit” to the consumer. The proposed rule targets both products and services that the FTC believes provide no value to any consumer—such as nitrogen tire products that do not include more nitrogen than already present in the atmosphere —and those that provide no value to the specific consumer—such as guaranteed asset protection (GAP) agreements when the loan-to-value (LTV) ratio is already low, and duplicative warranty coverage.