D.C. District Court upholds FTC on Risk-Based Pricing Rule

D.C. District Court upholds FTC on Risk-Based Pricing Rule

The U.S. District Court for the District of Columbia ruled this week (May 20) that the Federal Trade Commission has the authority to require that new automobile dealers comply with its Risk-Based Pricing rule on credit report disclosure. The National Automobile Dealers Association had challenged the legality of the requirement on the grounds that the rule was 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 Federal Trade Commission issued the rule in July 2011 requiring dealers engaged in three-party vehicle financing transactions to comply with the Risk-Based Pricing Rules credit report notice requirement even though NADA argued that many dealerships do not themselves obtain, receive, or review a credit report.

In its ruling the court found that while the statute is capable of supporting NADAs interpretation, the FTC possessed authority to issue its interpretation of the law requiring credit report disclosure and that its interpretation was reasonable.

NADA says it will appeal the decision to the Court of Appeals, D.C. Circuit.