Two-Thirds of Dealers' Lots Found to Have 'Significant' Compliance Problems
Staff of the Federal Trade Commission and the District of Columbia inspected 32 used car dealers in Washington, D.C. last Thursday to determine whether they are complying with the FTC's Used Car Rule and the District's consumer protection laws. Of the dealers surveyed, 20, or almost two-thirds, were significantly out of compliance, and as a result may face enforcement action by the D.C. Corporation Counsel. In addition, their lack of compliance may be considered when the city is determining whether to reissue their dealers' licenses in the future, according to the D.C. Department of Consumer and Regulatory Affairs. The inspections were conducted jointly by the FTC staff, the D.C. Office of Corporation Counsel, and the D.C. Department of Consumer and Regulatory Affairs.
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 were 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 40 million used cars each year, at a cost of $366 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. (Washington, D.C. does 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.
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
D.C. Corporation Counsel
FTC Bureau of Consumer Protection