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Consumer Advocates Critical of FTC’s Used Car Rule Proposals

January 24, 2013

WASHINGTON, D.C. — If it were up to consumer advocates and state regulators, the Federal Trade Commission (FTC)’s proposed changes to its Used Car Rule would include a requirement that dealers add vehicle history reports to the Buyers Guide window stickers. But that’s not the only recommendation consumer advocates are making.

The period for the public to submit comments on the FTC’s proposed modifications to the Used Car Rule ends on Feb. 11. So far, about 24 of the 30 comments the FTC has received say the agency’s proposal doesn’t go far enough. And 23 of those comments want the buyers guides to disclose more information about the condition of the used vehicle for sale.

“The original [Used Car] rule is fundamentally flawed to begin with,” said Rosemary Shahan, president of Consumers of Auto Reliability and Safety (CARS). “We were hoping that the agency would do something more proactive, such as require the dealers disclose defects that they know about.”

Under the FTC’s Dec. 17 proposal, the Buyers Guide would advise customers to consult the National Motor Vehicle Title Information System (NMVTIS) for the history of the vehicle, but Shahan said that responsibility should be placed on the shoulders of dealers.

“When you think about the reality of [putting] the onus on the consumer to check the databases, how many consumers have even heard of the National Motor Vehicle Title Information System?” Shahan said of the federally mandated vehicle database, which is maintained by the U.S. Department of Justice. “It's not exactly a household name.”  

The FTC is attempting to balance the needs of consumers while also trying not to overburden dealers. Consumer advocates want more information disclosed so consumers can avoid purchasing damaged or salvaged automobiles, but Bill Underriner, chairman of the National Automobile Dealers Association (NADA), said what consumer advocates want would make dealers liable for the accuracy of the vehicle history reports they provide.

“It does not help consumers to require dealers to disclose information about a vehicle that may not be available to a dealer or that may not be accurate,” he said.

In its comments submitted to the FTC, which were not listed on the FTC’s website, the NADA said the proposals made by consumer advocacy groups would “transform the rule beyond its current format and purpose, and impose significant, costly, and, in some cases, impossible burdens on used car dealers.”

“Today, for car buyers who are interested and who understand its limitations, vehicle title history information is widely available through NMVTIS or through private providers such as Autocheck or Carfax,” Underriner explained. “The Buyers Guide is not the appropriate tool for such disclosures.”

But Shahan of CARS argued that requiring customers to check the databases themselves assumes that customers have ready access to smartphones and credit cards. “When you look at the universe of car buyers, I would venture to guess that some people have language issues, some people don't even have a cell phone … there could be all kinds of issues there.”

Part of the FTC’s proposed modification to the rule, the Buyers Guide would include a statement in Spanish that directs Spanish-speaking car buyers to ask dealers for a copy of the Buyers Guide in Spanish. The proposal would also call for catalytic converters and airbags to be included in the list of systems on the back of the guide.

Additionally, check boxes would be placed on the back of the Buyers Guide to allow dealers to disclose whether the manufacturer’s warranty, the manufacturer’s used-vehicle warranty, or some other used-car warranty still applies. But consumer advocates and those against the FTC proposal want more. At least two comments received by the FTC suggest that dealers should be required to include a warranty, as well as conduct safety inspections on the vehicles they sell. But Shahan said she simply doesn’t like the location of those checked boxes.

 “Why would you allow anything important to be checked if it's on the back of a document?” Shahan argued. “Nobody expects anything of any importance to be on the back because you're very unlikely to see it, and you're not even looking for it there.”

The National Association of Attorneys General (NAAG) also submitted comments to the FTC. It believes the Used Car Rule needs to be scrapped, calling the current Buyers Guide “archaic” and of “limited value.” Like a majority of comments the FTC has received, the NAAG wants vehicle history and title brand information to be included on the Buyers Guide.

The NADA responded, saying not only does the NAAG’s proposal go beyond the scope and intent of the rule, they would require that dealers provide information to which they would not, in most cases, have access.

Underriner also pointed out that vehicle titles are regulated by state laws involving long-established, and vastly differing statutory schemes, which makes “any national disclosure standard nearly impossible.”

“The Used Car Rule Buyers Guide is a document intended to disclose one thing: the warranty a dealer is offering on a used car,” Underriner noted. “It has been very effective because it discloses information that is important to a used car consumer’s purchasing decision and the dealer knows and controls.”

Comments

  1. 1. howell clark [ January 24, 2013 @ 02:00PM ]

    The original intent for the Moroni form "buyers guide" was to force new car stores to disclose any existing warranty left on a vehicle at time of sale. New car warranties varied from 1/12000 to 6/60000 on power train components. It never was a form for disclosure of accidents ,water or any other damage,although many dealers used it as such. At the time congessman Moroni thought new car stores sold excessive after market policies that a consumer might not buy if they knew any factory warranty of any kind was left. Like anything else government starts ,some folks will always want to expand it for different reasons. On another note outfits that provide these service would love to be able to have a captive market of dealerships that are forced to use there services and i guarantee you the price would triple. wonder how many of those service providers are backing these demand from the usual suspects.

  2. 2. Kevin Jacobs [ January 25, 2013 @ 05:55AM ]

    Mr. Clark, the Monroney and the Buyers Guide are two different stickers. The Monroney (named after Senator Mike Monroney) is required on new vehicles. The Buyer's Guide (which is the subject of this article) is required by "The Used Car Rule" to be placed on any used vehicle offered for sale at a dealership (except in Maine and Wisconsin). I suggest that you reference The Magnuson–Moss Warranty Act for the definition of "used vehicle" because it can become tricky.

  3. 3. Manuel [ January 25, 2013 @ 11:25AM ]

    The best and only real defense is that any information made available is only what is input by some party or parties involved with the vehicle in question thus subject to tampering and suspect

 

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