Automobile and other impacted motor vehicle sellers and related businesses should begin preparations to comply with a recently proposed Federal Trade Commission (“FTC”) consumer protection rules targeting certain motor vehicle seller’s marketing, sales, leasing and financing practices proposed in the recently published FTC Motor Vehicle Dealers Trade Rule Notice of Proposed Rulemaking (“Proposed Rule”) as well as submit any relevant comments on the Proposed Rule by the September 12, 2022 comment deadline.

If adopted as currently proposed, the Motor Vehicle Dealers Trade Rules would impose substantial new compliance, training and documentation requirements automobile and other vehicle businesses.  Among other things, the Proposed Rule will:

• Prohibit motor vehicle dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing for motor vehicles;
• Require “accurate pricing disclosures” in dealers’ advertising and sales discussions;
• Require dealers to obtain consumers’ express, informed consent for charges;
• Prohibit the sale of any add-on product or service that confers no benefit to the consumer; and
• Require dealers to keep specified records of advertisements and customer transactions.

The Commission says the Proposed Rule is needed to protect service members and other consumers against “unscrupulous auto dealers” using “payment packing” (slipping unwanted add-ons into a purchase agreement), bait-and-switch tactics, extra junk fees and other unscrupulous and predatory auto sales practices.  To combat these practices, the Proposed Rule would:

• Ban bait-and-switch claims: The proposal would prohibit dealers from making a number of deceptive advertising claims to lure in prospective car buyers such as the cost of a vehicle or the terms of financing, the cost of any add-on products or services, whether financing terms are for a lease, the availability of any discounts or rebates, the actual availability of the vehicles being advertised, and whether a financing deal has been finalized, among other areas. Once in the door or on the hook, consumers face the fallout of false promises that don’t pan out.
• Ban fraudulent junk fees:  The proposal would prohibit dealers from charging consumers junk fees for fraudulent add-on products and services that provide no benefit to the consumer (including “nitrogen filled” tires that contain no more nitrogen than normal air).
• Ban surprise junk fees: The proposal would prohibit dealers from charging consumers for an add-on without their clear, written consent and would require dealers to inform consumers about the price of the car without any of optional add-ons.
• Require full upfront disclosure of costs and conditions: The proposal would require dealers to make key disclosures to consumers, including providing a true “offering price” for a vehicle that would be full price a consumer would pay, excluding only taxes and government fees. It would also require dealers to make disclosures about optional add-on fees, including their price and the fact that they are not required as a condition of purchasing or leasing the vehicle, along with disclosures to consumers with key information about financing terms.
• Recordkeeping Requirements.  Require dealers to maintain specific records of marketing, sales and leasing and other activities.
• Authorize FTC Recoveries.  The proposed rule also would allow the Commission to recover money when consumers are misled or charged without their consent.

Dealers impacted by the Proposed Rules should anticipate that the Proposed Rule, if adopted as proposed, the Proposed Rule will require significant changes in their marketing, sales, disclosure, recordkeeping, training and compliance practices.

Dealers concerned about the scope and burden of these proposed requirement should consider submitting well-reasoned comments on the Proposed Rule before the September 12, 2022 comment deadline.  Pending the finalization of the Proposed Rule, dealers should keep in mind that significant risk already arises from the enforcement of existing laws against perceived abuses in motor vehicle marketing, sales and leasing, financing and other business practices by the Commission, state regulators and private litigants.  Consequently, in addition to preparing to comply with the Proposed Rules when adopted, dealers should review and tighten their current practices to minimize their already existing exposures from lax or overreaching practices.

The Proposed Rule and related automobile marketing and sales consumer protection efforts is only one of a plethora of stepped up regulatory and consumer protection initiatives targeting a broad range of industries and practices the FTC currently is pursuing. All organizations and their leaders should review and monitor these FTC activities and take the appropriate documented steps to ensure that their organizations practices are updated and backed by compliance and risk management programs and practices with the necessary internal and external controls, governance and oversight to monitor and maintain compliance and identify and respond to new requirements and incidents with appropriate process, intervention and documentation to defend compliance and mitigate other cyber-related risks for their organizations, their investors and their leaders.

More Information

We hope this update is helpful. For more information about or assistance with these or other workforce, internal controls and compliance or other legal, management or public policy developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

Solutions Law Press, Inc. invites you receive future updates by registering on our Solutions Law Press, Inc. Website and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of  management work, public policy leadership and advocacy, coaching, teachings, and publications on workforce, compliance and other management related performance, risk management, compliance, governance, crisis, regulatory and public policy and operational concerns.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer’s work throughout her 30 plus year career has focused heavily on working with private and public companies of all types and sizes, health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns.  In the course of this work, she has had extensive involvement in the design, administration and defense of payroll, employee benefit, insurance, securities, lending, occupational injury, trade secret and other confidential information and other internal and external record and data systems and processes as well as investigation, reporting, redress and mitigation of a host of industry and operation specific internal and external compliance, risk management and operations concerns.

As a part of this work, she also has worked closely with automobile and other retailers and wholesalers, banks and other finance, real estate, health care, insurance, manufacturing, technology and data, advertising and marketing and a host of other highly regulated businesses, their leaders, investors, creditors, employee benefit plans, consultants to design, administer and defend a broad array of industry and operation-specific internal and external compliance, risk management, governance and other controls and practices as well as to anticipate and respond to federal and state legislative, regulatory, investigatory and enforcement including the Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; private litigation and other enforcement.

Ms. Stamer also has decades of leadership experience in a wide range of professional, civic and community organizations including service as incoming American Bar Association (ABA) International Section Life Sciences Committee Chair, continuing ABA Intellectual Property Section Law Practice Management Committee Chair, Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, incoming ABA TIPS Medicine & Law Committee Chair-Elect, returning incoming RPTE Law Practice Management Chair and Welfare Benefit Committee Co-Chair and former Chair of its Fiduciary Responsibility, Plan Terminations and Distributions and Defined Contribution Plan Committees, a former JCEB Council Representative, Past Chair of the ABA Managed Care & Insurance Interest Group, former SHRM Consultants Board and Region IV Chair, former Texas Association of Business Board, BACPAC Board and Dallas Chapter Chair, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas.

Ms. Stamer also shares her extensive publications and thought leadership as well as leadership involvement in a broad range of other professional and civic organizations. For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources available here.

IMPORTANT NOTICE ABOUT THIS COMMUNICATION

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.

NOTICE:   These statements and materials are for general informational and purposes only. They do not establish an attorney-client relaationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstance at any time. No comment or statement in this publication is to be construed as legal advice or an admission. The author and Solutions Law Press, Inc.™ reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any situation and does not necessarily address all relevant issues. Because developments could impact the currency and completeness of this discussion, the author and Solutions Law Press, Inc.™ disclaim, and have no responsibility to provide any update or otherwise notify anyone any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.  Readers acknowledge and agree to the conditions of this Notice as a condition of their access of this publication.  Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein. ©2022 Cynthia Marcotte Stamer. Limited non-exclusive right to republish granted to Solutions Law Press, Inc.™