New Dealership Advertising and F&I Regulations

New dealership advertising and F&I rules

Recently, FTC (Federal Trade Commission) has proposed a set of rules which will target how dealerships advertise and sell vehicles to customers. The proposal also addresses financing options, mandating how F&I products are offered, fees collected, and recommends a complex set of regulations.

In essence, although this is only an initial proposal, there does not seem to be any benefit to the dealership advertising process either protecting to helping consumers and there doesn’t seem to offer the customer any real benefits, requiring an online list of optional add-ons and pricing, banning misleading ads, and more.

In essence, this DOES NOT EFFECT large reputable dealerships, but it will causing changes in business practices of small used car sales dealerships.

Once the proposal is published in the Federal Register, the FTC will take public comments for 60 day. It will be clearer to see what these rules were intended to accomplish.

For the moment, we have to either wait for the proposals to be published fully, or guess what may be the new norm in dealership advertising. One exception is that the FTC’s Used Car Rule requires California Dealers to post a Buyers Guide in every used car they offer for sale. You must post a Buyers Guide before you display a vehicle for sale or let a customer inspect it for the purpose of buying it, even if the car is not fully prepared for delivery. This is a little bit of an oxymoron. Many reputable dealerships offer far more protection for consumers shopping in their showroom or on their lot.

The agency recommends posting a complete list of optional add-ons and their prices online. If the price of the F&I products vary, dealerships can post a range. The FTC defines add-ons as anything sold by a dealership not provided by the automaker, including intangible F&I coverage.

The FTC has also proposed barring some finance & insurance coverage and vehicle add-ons that it suggests “provide no benefit.” Well, who is to say what benefits a car buyer, other than the car buyer. If they want extended warranty, should the not have it? If car buyers want GAP Insurance, or tire & wheel protection, key replacement, interior and exterior protection, or anti-theft, or lease damage waiver – should the car buyer be denied and told that FTC thinks that they should not have it?

The FTC approved the June 27, 2002 notice of proposed regulations , in which Commissioner Christine Wilson dissented. The proposed new rule, if passed, will be the agency’s first regulation since the Dodd-Frank Act of 2010, which continued and expanded the FTC’s authority over auto dealerships. The proposed rule also will allow the FTC to seek financial redress for customers, something prohibited earlier by the Supreme Courts in AMG Capital Management LLC v. FTC.

The National Independent Automobile Dealers Association (NIADA) subsequently said the Federal Trade Commission’s proposal for the new advertising and F&I rules would hurt consumers and make vehicles more expensive.

The trade association estimated compliance would require at least $1.4 billion during the next 10 years, “driving up prices for consumers and making the car-buying process longer and more difficult.” It said many of the issues the Federal Trade Commission sought to address already fall under existing regulations.

“Independent auto dealers are small business owners and the proposed rule from the FTC has the potential to negatively impact the ability of our members to operate their businesses,” NIADA CEO Robert Voltmann said in a statement.

“We look forward to working with the commissioners and their staff to ensure NIADA members’ voices are heard.”

The other industry heavy weight, the National Automobile Dealers Association (NADA) has challenged the FTC’s proposed rules on dealership advertising and finance and insurance.

NADA claims the disclosures are unsupported, sloppy and inconsistent in regulating the industry. The agency’s justification for the rule changes is “woefully inadequate,” suggested Paul Metrey, NADA senior vice president of regulatory affairs. Regulation is meant to fill a hole in the law, but in this case, “it’s things they can go after” already, he said.

NADA maintains the FTC hasn’t studied the effectiveness of its proposed solutions, and these rules also fail to capture the entire industry, suggesting they apply only to the franchised and independent dealerships over which the FTC has jurisdiction, not independent dealerships regulated by the Consumer Financial Protection Bureau (CFPB). This means the FTC made the new rules without conducting joint rule-making with the CFPB.