FTC Decided to Retain its Used Car Rule, which Requires Automobile Dealers to Post Important Warranty Information in "Buyers Guides"...

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The Federal Trade Commission has decided to retain its Used Car Rule, which requires automobile dealers to post important warranty information in "Buyers Guides" on any used cars they offer for sale. According to FTC Bureau of Consumer Protection Director Jodie Bernstein, "The FTC's Used Car Rule gives consumers critical information about who will pay for repairs when something goes wrong, and that's key to avoiding consumer confusion and dissatisfaction."

The FTC also made several amendments to the rule, including one that will permit dealers to hang Buyers Guides on rear-view or side mirrors, for example, rather than requiring that they be posted on side windows. This amendment will provide car dealers with greater flexibility in posting, yet still allow consumers to view the Buyers Guides easily.

A discussion of the FTC's decision is published in the Dec. 5 Federal Register and the effective date of these amendments will be Jan. 4, 1996.

The Commission's Used Car Rule, which became effective in May 1985, requires that dealers post a completed Buyers Guide at all times on each used car they offer for sale. Dealers must disclose on the Buyers Guide whether the vehicle is covered by a warranty and, if so, the type and duration of the warranty coverage, or whether the vehicle is being sold "as is -- no warranty." The information in the Buyers Guide also becomes a part of the sales contract and overrides any contrary provisions contained in this contract, under the FTC rule.

In recent years, the FTC has enforced the rule using a "sweep" approach, under which the Commission teams up with law- enforcement officials at the state level and check several or all of the car lots in a given area to determine whether they are providing this important pre-purchase information as required by the rule. The FTC also uses individual complaints about rule violations as a means of targeting non-complying dealers for enforcement action. As a result of both enforcement sweeps and following up on consumer complaints, the FTC has brought 81 cases against dealers for rule violations. The states have supplemented this federal effort with hundreds more actions, often using their authority to write citations on the spot. The FTC's Bernstein urged consumers to look for the Buyers Guides when shopping for used cars, adding that the warranty -- how long it lasts and what it covers -- is something that they may be able to negotiate with the dealer, just as they can negotiate the price.

In May 1994, the Commission sought public comment regarding a number of questions pertaining to the operation and effectiveness of the rule, whether it has had a significant impact on a substantial number of small entities, and whether it should be modified or rescinded. After considering the 26 comments received, the FTC found that the rule has served a valuable function and, given that used automobiles are generally one of the most frequently complained about consumer topics, that there is a continuing need for it. The Commission also found that the rule has not imposed significant costs on dealers who are governed by it (the average cost of a Buyers Guide is 7.6 cents). Because the Commission's review has demonstrated that the rule is a cost effective means of providing valuable information to consumers, the Commission has decided to retain the rule.

The Commission, however, is amending the rule to:

  • permit dealers to post Buyers Guides anywhere on a used vehicle, instead of requiring that they be posted on a side window, provided that the Guides are conspicuously and prominently displayed and that both sides can be read easily;
  • allow, but not require, dealers to obtain a consumer's signature on the Buyers Guide, if accompanied by a disclosure that the buyer is acknowledging receipt of the Buyers Guide at the close of the sale. (Prior to this amendment, dealers were prohibited from changing the Buyers Guide in any way, although the FTC had not brought any enforcement actions against dealers who chose to keep copies of consumer-signed Buyers Guides on file to demonstrate that consumers had received the information. The amended rule clarifies that this practice is permissible.); and
  • make several minor grammatical changes to the Spanish language version of the Buyers Guide.

The Commission vote to retain the Used Car Rule with the amendments was 5-0.

Copies of the Federal Register notice, as well as other documents associated with this rule review, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

 

(FTC Matter No. P944202)