FTC Clarifies the Meaning of Motor Vehicle in the Combating Auto Retail Scams Rule
by Jennifer Smith, Assistant Chief Counsel
On June 23, 2022, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking (NPRM) on the Motor Vehicle Trade Regulation. The NPRM is related to the sale, financing, and leasing of motor vehicles by motor vehicle dealers. The NPRM would prohibit motor vehicle dealers from making certain misrepresentations, require accurate pricing disclosures in dealers’ advertising and sales discussions, require dealers to obtain consumers’ express and informed consent for charges, prohibit the sale of any add-on product or service that provides no benefit to the consumer, and require dealers to keep records of advertisements and customer transactions.
Small entities contacted the Office of Advocacy (Advocacy) because they were concerned about the broad nature of the proposed rule. For example, the Marine Retailers Association expressed concerns about whether the term “motor vehicle” applied only to automobiles or if it included boats.
On September 8, 2022, Advocacy submitted a comment letter that encouraged the FTC to perform threshold analyses to determine whether the costs associated with the proposal were significant. Although the majority of the commissioners specifically referenced the sale of “cars” in the FTC’s statement, the proposal referenced “motor vehicle,” a term that includes boats, motor homes, and motorcycles.
Advocacy asserted that the proposal went beyond the intent of the FTC without providing any evidence to indicate that vehicle sales other than car sales were a problem. Advocacy encouraged the FTC to clarify that the definition of “dealer” does not include a bank or financial institution because some finance companies maintain dealer licenses to facilitate leased vehicle sales. Advocacy also encouraged the FTC to work with the industry to develop a safe harbor so that finance companies are not liable for activities of which they have no knowledge or control.
On December 12, 2023, the FTC issued the final rule. In the final rule, the FTC provided additional information about the costs of the rule. The FTC also reduced some of the disclosures and stated that the rule does not apply to the following: (1) recreational boats and marine equipment; (2) motorcycles, scooters, and electric bicycles; (3) motor homes, recreational vehicle trailers, and slide-in campers; or (4) golf carts. In total, the changes made by the FTC in response to Advocacy’s comments amount to an annualized cost savings of $107.1 million per year.
If you have concerns about a proposed regulation’s potential impact on small entities, please don’t hesitate to reach out to Assistant Chief Counsel Jennifer Smith at Jennifer.Smith@sba.gov.