Of 14 Dealers Surveyed, Only Two-thirds Were in Compliance with Commission's Rule
Staff of the Federal Trade Commission and the State of Illinois inspected 14 used car dealers near the Great Lakes Naval Training Center in Waukegan, North Chicago and Park City last Wednesday to determine whether they are complying with the FTC's Used Car Rule and the state's consumer protection laws. Of the dealers surveyed, only nine, or about two-thirds, were in compliance with the FTC's Used Car Rule and state regulations, with two of the dealers posting no "Buyers Guides" at all - one of the Rule's key requirements. In all, of the 637 cars surveyed in the joint law enforcement sweep, 151 had no Buyers Guides in place, and 57 had Guides that were either incomplete or inaccurate. As a result of the sweep, Illinois will seek fees from noncomplying dealers and will have each sign an Assurance of Voluntary Compliance (AVC). If in the future the dealers violate the AVC, they can be held in contempt, and their name will be forward to the FTC for possible further enforcement action.
"Dealers need to understand the Used Car Rule and bring themselves into compliance," said Steven Baker, Director of the FTC's Midwest office. "While these are not the worst compliance levels we have seen nationwide, what is disturbing is that the dealers are located in an area where the consumers - such as new military trainees - may not understand their rights to this information."
The FTC's Used Car Rule is a consumer protection measure covering all used car dealers in the country. The Rule requires that used car dealers post a one page Buyers Guide in each car that ensures that consumers get information in writing about any warranty protection they have if there is a problem with the car after they buy it. Last week's unannounced inspections are part of the FTC's ongoing efforts to work in partnership with state and local officials around the country to ensure that dealers comply with the Rule. More than 80 FTC actions have been brought since the Used Car Rule became effective in 1985, with civil penalties totaling over $1 million. In addition, hundreds of state actions have been brought to enforce the Rule.
Used cars are a major purchase for most consumers. Data suggests that consumers buy 41 million used cars each year, at a cost of $361 billion. Thus, it is important the consumers shop wisely and obtain accurate information about the cars they buy.
The FTC's Used Car Rule requires that Buyers Guides be posted at all times on each vehicle offered for sale. The Buyers Guide states:
- whether the vehicle comes with a warranty and, if so, whether it is a "full" or limited warranty;
- which systems are covered by the warranty and the duration of the warranty period;
- if it is a limited warranty, what percentage of the cost for covered parts and labor the dealer will pay for;
- whether the car is sold with no written or implied warranty or, in other words, the car is sold "As Is;" or
- whether the car is sold with no written warranty, but with implied warranties. (Some areas do not allow dealers to sell cars without implied warranties.)
The Rule also provides that the Buyers Guide becomes a part of the sales contract and overrides any contrary provisions contained in that contract.
The Buyers Guide also contains a number of important warnings and suggestions for consumers. For instance, it suggests that a consumer ask the dealer if it is possible to have the car they're considering inspected by a mechanic. The Buyers Guide also warns consumers not to rely on spoken promises, which may be impossible to enforce. Instead, consumers should ask the dealer to put any promises in writing on the Buyers Guide and in the sales contract.
The FTC thanks the Illinois Attorney General's Office for its cooperation in conducting this investigation. As per the Commission's procedure in its investigations, the names of the individual dealers will remain nonpublic unless a formal complaint is brought against them.
Copies of the consumer publication, "Buying a Used Car," and the guide for used car dealers, "A Dealer's Guide: The Used Car Rule," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (1-877-382-4357); TDD 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.
Office of Public Affairs
FTC Bureau of Consumer Protection
John C. Hallerud
FTC Midwest Regional Office