16 CFR Part 455 Used Motor Vehicle Trade Regulation Rule; Project No. P087604
As an attorney practicing in the consumer law arena for thirty-something years, I would like to express my concerns about the proposed changes to the FTC used car rule. I have represented consumers as a legal services attorney in two states, Alabama and Wisconsin, worked for two state attorneys general in consumer protection, Indiana and Tennessee, and have been in private practice representing consumers for about seventeen years. While I agree the current form of the rule needs improvement, I am concerned that the proposed changes will make a bad situation worse. My first concern is with the proposed language which states The dealer is not responsible for any repairs regardless of what anybody tells you. This is an inaccurate statement of the law in many states, including Tennessee. Here an AS-IS disclaimer operates only to disclaim implied warranties of merchantability and fitness for particular purpose under the Uniform Commercial Code (UCC). It does not absolve a selling dealer of liability for fraud or violation of an unfair trade practice law such as the Tennessee Consumer Protection Act, Tenn. Code Ann. sec. 47-18-101 et seq. This was made clear in Morris v. Macks Used Cars, 824 S.W.2d 538 (Tenn. 1992), where the court held that an AS-IS disclaimer operates only to disclaim implied warranties under the UCC and nothing more. The court noted the remedial purposes of the Tennessee Consumer Protection Act and thus held the dealer would be liable under the Act for failing to disclose that the vehicle was a reconstructed vehicle, a fact known by the dealer at the time of sale. My objections to the FTC adopting the proposed language are that it will discourage consumers from pursuing claims which may well be legally viable and, further, that the language of the newly adopted language will be used by dealers defensively claiming the rule insulates them from liability even if they are otherwise liable under state law for fraud or unfair or deceptive acts or practices. Second, the proposed rule should require dealers to check the National Motor Vehicle Title Information System (NMVTIS) database. This database acquires information directly from insurers, recyclers and junkyards rather than from state motor vehicle databases where information is filtered by a patchwork of state salvage laws that define terms such as salvage, rebuilt, junk, etc., in different ways and thus impose a multitude of different standards. Dealers should be required to disclose any title brands, e.g., salvage vehicle, rebuilt vehicle, flood damage, odometer not actual, lemon law buyback vehicle, etc., and other damage information revealed by NMVTIS. Additionally, dealers should be required to disclose title brands set forth on incoming title certificates; this is especially important in the majority of states where lenders hold title certificates and thus consumers dont see the title certificate until after the loan is paid off. If dealers choose to run optional checks with commercial databases, e.g., Carfax or Autocheck, they should likewise be required to disclose title branding and other damage information obtained thereby. Third, dealers should be required to disclose whether a manufacturers warranty still applies and, if so, the time and mileage limits remaining. If the dealer is offering a third-party warranty, i.e., a warranty from a source other than the manufacturer or the dealer itself, the dealer should likewise disclose the time and mileage limits remaining and include a statement that third-party warranties often do not pay the full cost of repairs. This latter point is important because such warranties routinely provide for warranty allowances substantially below the flat rate charges imposed by repair shops. Fourth, dealers should be required to disclose whether the vehicle has been the subject of a recall and, if so, whether the recall repair has been performed. Dealers are in a much better position to obtain this information and act upon it to ensure that consumers are not being sold vehicles with unrepaired safety defects. Complaints to state consumer protection agencies reveal that automobile purchases continue to remain among the top category of problems experienced by consumers. Dealers are in a much better position than consumers to ascertain information about used vehicles. Accordingly, any changes to the Buyers Guide sticker should require that they disclose all such available information.