State AGs press the FTC to focus on certain dealer practices

State AGs press the FTC to focus on certain dealer practices

The Federal Trade Commissions Roundtable fact finding meetings on dealer practices and advertising that took place in three cities last year may be over, but pressure on the agency to regulate dealers continues as evidenced by recommendation made to the FTC by the Attorneys General of 31 states and the District of Columbia.

The AGs specifically are asking the FTC to:

1. Adopt rules to prompt enforcement actions to deter failed vehicle credit sales where the terms change adversely for the buyer, or so called yo-yo sales,

Specifically, the AGs want the FTC to adopt rules that:

Require dealers to retain consumers trade-in until financing is approved;

preclude dealers from threatening to repossess vehicles, while prohibiting charges for wear and tear pending financing approval;

Require dealers to offer the consumer either a complete unwinding of the deal, or more favorable credit;

Bar dealers from retaining any portions of incentive payments or deposits when a deal unwinds;

Require dealers to tell the consumer that if the first attempt to get financing is rejected, he/she has the right to walk away; and

Require dealers to disclose, before completing a spot delivery, that financing has not been finalized and what the potential consequences are for the consumer if financing doesnt go through.

2. Adopt a rule requiring that all advertised pricing and price quotes to consumers for motor vehicles include all non-governmental fees, while defining as an unfair and deceptive trade practice any representation by a dealer of a sales price or monthly payment number which includes optional purchases or the cost of financing optional purchases without disclosing that the quoted payment price includes optional purchases and financing costs.

3. Adopt rules regulating rent-to-own and lease-to-own auto transactions.

4. Join with the state attorneys general in enforcement actions against false automotive advertising.

5. Take action against dealers who fail to include in disclosed interest rates certain fees the dealers pay lenders in connection with subprime loans.

6. Bring enforcement actions against dealers who engage in unfair and deceptive practices in connection with yield spread premiums in auto loans.

7. Act against lenders which fail to comply with the FTCs Rule Concerning Preservation of Consumers Claims and Defenses, more commonly known as the Holder in Due Course Rule.

In their letter to the FTC, the AGs urged the agency to focus its resources on specific areas which they believe are of the greatest import in the marketplace – those practices that affect the most consumers, are the most prevalent and harmful, or may target more vulnerable consumers, such as those in the subprime category.

The FTC has made no response to the AGs recommendation and has indicated since it completed its Roundtable discussions that it will act regarding automobile sales and advertising practices only where a demonstrated need is indicated.

The AGs who signed the letter to the FTC, all members of the National Association of Attorneys General (NAAG), are from the following jurisdictions: Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Washington and West Virginia.