FTC’s First Used Car Rule Compliance Sweep

The Federal Trade Commission has announced that, along with state partner agencies, it has conducted the first compliance sweep of car dealerships since the amended Used Car Rule was enacted.

Under the amended the Used Car Rule, dealers must display a revised Buyers Guide window sticker on all used vehicles. The revised Buyers Guide, without limitation, modifies the description of an “As Is” sale, has warranty and service contract boxes, adds a statement that directs consumers to obtain a vehicle history report and adds statement in Spanish.

FTC defense lawyer Richard B. Newman reports that the compliance sweep was conducted recently in 20 cities, including Burbank, North Hollywood, Richmond, San Bruno, San Jose, San Pablo and Van Nuys, California; Jacksonville, Florida; Chicago, Illinois; New York, New York (Queens); Brooklyn Heights, Cleveland, East Cleveland, and Cleveland Heights, Ohio; Arlington, Dallas, and Grand Prairie, Texas; and Lakewood, Puyallup, and Tacoma, Washington.

Following the inspections, the FTC sent letters to dealerships detailing the results of the inspections and providing material to assist them come into full compliance.

The FTC Act provides for penalties of up to $41,484 per violation.

State and local law enforcement agencies also enforce the amended Used Car Rule. Whether dealerships are permitted to sell a used vehicle “As Is” (in other words, without any warranty, including implied warranties) is governed by state law. States that permit “As Is” sales also have laws that govern how to make an effective “As Is” sale and the disclosures required for an “As Is” sale.

The New York Attorney General also actively polices the auto industry, including deceptive advertising practices and price advertising. NY OAG investigations and enforcement seek to ensure that automobile advertising is free from deception, and the use of materially false or misleading representations.

The NY OAG advertising guidelines for auto dealers are based primarily on three consumer protection statutes, Executive Law §63(12), General Business Law Article 22A (§350) and General Business Law §396. These statutes, however, do not specifically enumerate proscribed advertising practices. Rather, they contain general prohibitions against false, deceptive or bait and switch advertising.

In short, all automobile advertising by dealers should be in plain language, clear and conspicuous and non-misleading. Deception may result from direct statements in the advertisement or from reasonable inferences that may be drawn from an advertisement. It can also result from disclaimers that contradict, confuse unreasonably limit or materially modify a principal message of the advertisement.

Deception can also result from the failure to clearly and conspicuously disclose any material facts, including limitations, exclusions, disclaimers, qualifications or conditions.

Richard B. Newman is an FTC compliance and defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. 

Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

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