16 CFR Part 455 Used Motor Vehicle Trade Regulation Rule; Project No. P087604
Although not specifically at issue in this regulatory review notice, it is worthwhile to address concerns regarding access to vehicle information from dealers at least to show the continued consumer alarm for the lack of this type of information and to understand reasons for opposing such disclosure. While I understand the concerns of the majority of public commenters on Used Car Rule Regulatory Review, Project No. P087604, I support the FTCs position in not adding a known defect requirement to the rule and suggest other approaches the FTC could consider that might help address concerns regarding the disclosure of defects by dealers. It would seem that by obligating used car dealers to disclose known defects consumers would be better off. This may not be the case. As the FTC has mentioned, buyers might mistakenly infer that if a dealer discloses no defect, then none must exist. This is a dangerous assumption that may hurt used car buyers more than if dealers were not obligated to disclose defects. For example, dealers may take advantage of the fact that consumers will reach the conclusion that a car must be in great condition if no defects are disclosed when in fact the car could be in terrible condition because the dealer did not inspect the car knowing he would have to disclose any defects found. Additionally, the lack of defect disclosures by the dealer might induce buyers to not subject the car to an independent inspection. An alternative option to enhance the position of consumers in used car transactions might be to require both that the dealer disclose known defects and to disclose whether the dealer inspected the car himself and to disclose the rigorousness of his inspection. Additionally, a statement on the Buyers Guide sticker warning buyers that absence of defect disclosures by the dealer does not guarantee the car is free from defects. This information could help consumers offset costs of inspecting the car themselves and obtaining vehicle histories. At the same time, it would put a used car buyer in the ultimate consumer position of having all the knowledge available at the point-of-sale so that she can determine for herself the costs and benefits of continuing with the purchase. The proposed rulemaking does address the concern for more access to vehicle history information by directing buyers to seek this information themselves or accessing it at the FTC website. My concern is that the real-world application of this rule might not address those concerns. Ideally, point-of-sale access to this sort of information would rectify those concerns given that some people may not have access to Internet or the costs of obtaining an independent inspection or CarFax report may be prohibitive. As I suggested above, at minimum, dealers should be required to sell in good faith and disclose the extent of their knowledge regarding the vehicles they sell. The very fact that this concern has persisted and resurfaced at each stage of rulemaking concerning the Used Car Rule for over 25 years speaks volumes about the consumer injury that has resulted from lack of access to this sort of information. Although I, like many commenters, feel the proposed rulemaking does not go far enough, it is a positive step forward from the 1995 rule in attempting to address the deficiencies in used car dealer and car buyer interactions and I support the rule. Lastly, I applaud the FTCs efforts in protecting Spanish-speaking consumers who are a group that is particularly vulnerable to a car dealerships deceptive and unfair practices considering a large portion of them fall within the low-income bracket and are unlikely to seek legal remedies if they are wronged through consumer transactions.