WASHINGTON, D.C. — On May 22, at U.S. district court there granted the Federal Trade Commission’s motion for summary judgment against an action brought by NADA that challenged the agency’s broad interpretation of the federal Risk-Based Pricing Rule. Officials with the dealer group said the association will appeal the court’s decision.

At the center of the case was the federal agency’s interpretation of “uses a consumer report,” a phrase that appears in the amended Fair Credit Reporting Act. United States District Judge Ellen Segal Huvelle upheld the FTC’s interpretation and mandate that dealers must disclose to buyers with bad credit that negative information on their credit report was the reason they were charged more interest.

The law that the rule implements (section 311 of the FACT Act) applies to persons, including dealer who, use a credit report to complete a credit transaction. Last July, the FTC issued interpretation, which stated that dealers who do not obtain a credit report must still comply with the Risk-Based Pricing Rule’s notice requirement.

Believing this interpretation to be flawed, unnecessary and burdensome to many dealers by requiring them to purchase credit reports for no purpose other than to comply with the Risk Based Pricing Rule, the NADA subsequently initiated its challenge.

In its complaint, the NADA argued that Congress never intended the word “use” to extend to this subgroup of dealers, and that the FTC lacked authority to issue such an interpretation. Although the court found that the statute is capable of supporting the NADA’s interpretation, it held that the FTC possessed authority to issue its interpretation and that its interpretation is reasonable.

Officials with the NADA said the association has directed its outside counsel to commence the appeal.