FTC Conducts First Compliance Sweep Since Amendment to Used Car Rule

The Federal Trade Commission (FTC) announced in mid-July that it conducted the first compliance sweep of car dealerships since the effective date of its revised Used Car Rule requiring the use of a new Buyer’s Guide sticker. The sweep occurred between April and June 2018 in 20 cities nationwide. The FTC partnered with 12 agencies in seven states to ensure dealers are displaying a revised version of the Buyer’s Guide, which contains warranty and other information for consumers.

In the sweep, the FTC inspected over 2,300 vehicles at 94 car dealerships in seven states. Inspectors found that approximately 70 percent of vehicles displayed Buyer’s Guides and roughly half of those displayed the appropriate revised Buyer’s Guide. Just 33 dealerships posted the revised Buyer’s Guide on more than half of their vehicles, and only 14 dealerships were compliant in having revised Buyer’s Guides on all their used vehicles for sale.

The FTC and its partners inspected dealerships in California, Florida, Illinois, New York, Ohio, Texas, and Washington. For those dealerships that were not compliant, the FTC reports that they can expect follow-up inspections to ensure compliance.

For background, on November 18, 2016, the FTC amended the Used Car Rule. Under the amended Rule, effective January 28, 2018, dealers are required to display a revised Buyer’s Guide on all used vehicles they offer for sale.

The revised Buyer’s Guide:

• Changes the description of an “As Is” sale;
• Places boxes on the face of the Buyer’s Guide that dealers can check to indicate whether a third-party warranty covers a vehicle and whether a service contract may be available;
• Provides a box that dealers can check to indicate that an unexpired manufacturer’s warranty applies;
• Adds airbags and catalytic converters to the Buyer’s Guide’s list of major defects that may occur in used vehicles;
• Adds a statement that directs consumers to obtain a vehicle history report and to check for open recalls;
• Adds a statement, in Spanish, to the English-language Buyer’s Guide, advising Spanish-speaking consumers to ask for the Buyer’s Guide in Spanish if the dealer is conducting the sale in Spanish; and
• Provides a Spanish translation of the statement that dealers may use to obtain a consumer’s acknowledgment of receipt of the Buyer’s Guide.

The FTC Act provides for penalties of up to $41,484 per violation for those dealerships that do not adequately comply with the Used Car Rule. Additionally, many states have laws or regulations that are similar to the Used Car Rule and some states incorporate the Rule by reference in their state laws, meaning that state and local law enforcement officials may have the authority to ensure dealers substantively comply with the Rule.

The FTC maintains staff compliance guidelines for the Used Car Rule which can help explain certain aspects of the Rule in more detail. The Rule and the compliance guidelines are both available in their entirety at ftc.gov.

Additional reporting by Virginia Bell Flynn, an associate at Troutman Sanders LLP and Anna Jane Zarndt, a staff attorney at Troutman Sanders LLP.