The Federal Trade Commission has announced plans to conduct a survey of consumers regarding their experiences in buying and financing automobiles at dealerships. 

According to the supplementary information in the notice soliciting comments on the proposed survey, the survey "is intended to inform the [FTC] about current consumer protection issues that may exist and that could be addressed through FTC action, including enforcement initiatives, rulemaking, or education." The survey will involve in-person interviews of consumers located by a survey research firm, who had purchased an automobile from a dealer in the previous six months and used financing offered or arranged by the dealer to make the purchase. 

The interview subjects must have kept the credit documentation he or she received as part of the financing transaction. After conducting five sample interviews to test the survey questionnaire, the FTC plans to interview 40 consumers, with the option to interview 40 more if it deems additional interviews are likely to be helpful. The FTC wants approximately half of the initial 40 consumers to have "prime" credit scores and the balance to have "subprime" credit scores.

The areas on which the interviews will focus include:

  • the consumer's experience in shopping for and selecting an automobile;

  • the process of agreeing to a price for the automobile;

  • the trade-in process, if applicable;

  • the consumer's experience in obtaining financing;

  • additional products or services offered by the dealer;

  • post-purchase contacts between the consumer and the dealer; and

  • the consumer's overall perception of the purchase experience.

The FTC is soliciting comments in advance of seeking clearance for the survey from the Office of Management and Budget. Comments will be due on or before 60 days after the FTC’s notice is published in the Federal Register

In addition to its authority to enforce the FTC Act's general prohibition of unfair or deceptive acts or practices, the FTC has authority to enforce various other consumer protection regulatory statutes against auto dealers, including the Truth in Lending Act, the Consumer Leasing Act, and the Equal Credit Opportunity Act (ECOA). In recent years, the FTC has been aggressively using such authority by bringing enforcement actions against auto dealers for deceptive advertising and other allegedly unlawful practices.

During 2011, the FTC conducted three motor vehicle "roundtables" at which panelists discussed consumer protection issues related to the selling, financing, and leasing of motor vehicles. In connection with the roundtables, the FTC requested and received public comments on specific consumer protection issues. The FTC also has produced consumer education materials concerning vehicle purchasing and financing, including an informative booklet "Understanding Vehicle Financing," it produced in cooperation with the American Financial Services Education Foundation and the National Automobile Dealers Association.

With the FTC now signaling its intent to step up its involvement in regulating the practices of auto dealers, the Consumer Financial Protection Bureau (CFPB) should reconsider its extra-jurisdictional efforts to regulate auto dealers through actions against assignees of retail installment contracts. Those actions have been strongly criticized by Congress. In November 2015, the House of Representatives passed H.R. 1737, the "Reforming CFPB Indirect Auto Financing Guidance Act," which would nullify indirect auto finance guidance that the CFPB issued in March 2013. Also in November 2015, Republican members of the House Financial Services Committee released a Staff Report that is highly critical of the CFPB’s automotive ECOA enforcement initiative with respect to what the guidance characterized as "dealer markup."

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance.

For more information, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky, John L. Culhane, Jr., or Christopher J. Willis.

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