What the FTC’s proposals on car dealer ads, F&I mean
FTC commissioners voted 4-1 on Wednesday, June 27, to go beyond federal advertising law and the federal prohibition on unfair and deceptive dealership practices.
“This proposed rule is another example of how the FTC is using the full set of tools granted us by Congress to protect Americans from deceptive or unfair practices,” the four commissioners in favor wrote, noting it was the agency’s first regulation on dealerships since at least 2010.
The FTC said in its notice of rule-making that it received more than 100,000 complaints each of the past three years related to vehicle sales, service, rentals, leasing and warranties and transactions.
“It just sounds like [the FTC is] angry,” said Ryan Daly, who oversees 42 states as KPA’s F&I compliance district manager. Daly, who once worked in auto retail, said he was “relieved to see something like this” but disliked “how they’re painting the car industry in a bad light.”
Articulating specifics could ultimately help dealerships. “If there was a structured … ‘You can or cannot do this,’ it’d be easier for dealers to follow,” Daly said.
The proposed regulations go beyond existing federal law and offer more specificity than the law that forbids unfair and deceptive dealership practices, according to Shannon Robertson, executive director of the Association of Finance and Insurance Professionals, an industry compliance and certification organization.
Robertson said good dealers adopt practices that protect them in all scenarios and felt his organization’s adherents wouldn’t be fazed by the new rules for F&I presentations.
“For an AFIP-certified dealer, none of these changes have any impact or surprise if the dealer’s doing the things the way that we teach,” he said.
Other compliance experts and dealers saw a greater burden upon dealerships and consumers, with one — a former FTC regulator — noting it appeared to upend contract law.
Among the new regulations under consideration is one that requires dealerships to produce a true “Offering Price” for any vehicle they promote. It’s effectively the “out-the-door” price a dealership would charge to purchase the vehicle, not counting any government taxes and fees.
Dealerships also are prohibited from misleading customers on whether the advertised terms are for a lease, include rebates not available to all or for a vehicle that isn’t available.
Konrad Koncewicz, business manager of BurlingtonCars.com Auto Group in Vermont, said he supported the transparent advertising aspect of the proposal. “Rules like that are very sensible,” he said.
Koncewicz said his state has stricter disclosure requirements and advertising rules — but neighboring states don’t.
“There are places that will advertise some crazy cutthroat price, maybe on a car [that] doesn’t even exist,” Koncewicz said.
Burlington Cars will attempt to tell customers it’s a fantasy. But only 10 percent of them return and admit his group was right. The other 90 percent visit the misleading dealership and ultimately do business there, he said.
Further FTC prohibitions would target other “bait-and-switch” behavior.
Any misrepresentations on “material information on or about a consumer’s application for financing” and whether a transaction is final would be illegal. The FTC also would forbid dealerships from keeping “cash down payments or trade-in vehicles, charging fees, or initiating legal process or any action if a transaction is not finalized or if the consumer does not wish to engage in a transaction.”
“This’ll probably kill spot deliveries,” said David Robertson, chairman of the Association of Finance and Insurance Professionals.