FTC announces results of first compliance sweep for newly amended used car rule

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On July 12, 2018, the Federal Trade Commission (FTC), working with partner agencies, announced the results of a national “compliance sweep” of car dealerships that occurred between April and June of 2018. Many of the dealers involved in the sweep are located in California. The purpose of the sweep was to evaluate compliance with the new Used Car Rules that took effect earlier this year. The most significant change to the rule was the adoption of an updated Buyers Guide.

Overall the sweep showed that car dealers have made significant strides in adopting and using the updated Buyers Guide:

  • 70% of all vehicles inspected displayed a Buyers Guide, with almost half using the updated Buyers Guide.
  • 14% of dealers had updated Buyers Guides on all of their used vehicles, as required by the Rule.

Following the sweep the FTC will contact dealerships to detail the results of the inspection and provide material to help with compliance. Dealerships that were not displaying the updated Buyers Guide can expect a follow-up inspection. Dealers who are found to still not be in compliance face penalties up to $41,484 per violation.

What is different about the updated Buyers Guide?

The Updated Buyers Guide differs from the former Guide in all of the following ways:

  • There are two versions of the Buyer’s Guide available: an “as is” version and an “implied warranties only” version.
  • The new Buyer’s Guide emphasizes disclosing dealer warranties, though there are boxes to disclose manufacturer and other third-party warranties.
  • The new Buyer’s Guide recommends consumers to obtain a vehicle history report and check safercar.gov for safety recall information before buying a used vehicle.
  • The new English-language version of the Buyer’s Guide adds a Spanish statement advising Spanish-speaking consumers to ask for the Buyer’s Guide in Spanish if the dealer is conducting the sale in Spanish.
  • On the back of the revised Buyer’s Guide, air bags and catalytic converters are added to the list of major defects that may occur in used vehicles.

What do dealers need to do to comply?

Under the Used Car Rule, a Buyers Guide must be displayed on every used vehicle offered for sale. The first step to compliance with the Rule is to ensure your dealership has an appropriate process in place to task individuals with the placement and monitoring of Buyers Guide - so that every used vehicle is displayed for sale only after an appropriate Buyers Guide is affixed to the vehicle.

Dealers must also decide which version of the Buyers Guide they will use. This depends on whether your dealership offers a dealer warranty on a vehicle, whether the vehicle is sold as certified pre-owned, and whether the vehicle is offered “as-is.” Contact your experienced automotive attorney to review your practices and determine which version your dealership should adopt.

Dealers are not required, but may choose to, disclose information regarding manufacturer warranties on Buyers Guides. If you choose to disclose this information, ensure the information is accurate and specific to each vehicle. Failure to do so may result in a lawsuit for negligent or fraudulent misrepresentation.

Dealers should also consider displaying a Spanish version of the guide on every vehicle. The new regulations require that the Spanish Buyer’s Guide be posted before any negotiations in Spanish begin. The easiest way to comply with this requirement is to post the Spanish guide with the English guide on every car.

Finally, dealers should not modify the language of the Buyers Guide unless with the advice of counsel. Failure to comply with strict formatting rules could lead dealers to face penalties of over $40,000 per vehicle.