Combating Auto Retail Scams Trade Regulation Rule, 590-695 [2023-27997]
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
FEDERAL TRADE COMMISSION
16 CFR Part 463
RIN 3084–AB72
Combating Auto Retail Scams Trade
Regulation Rule
Federal Trade Commission.
Final rule.
AGENCY:
ACTION:
The Federal Trade
Commission (‘‘FTC’’ or ‘‘Commission’’)
is issuing this Combating Auto Retail
Scams Trade Regulation Rule (‘‘CARS
Rule,’’ ‘‘Rule,’’ or ‘‘Final Rule’’) and
Statement of Basis and Purpose (‘‘SBP’’)
related to the sale, financing, and
leasing of covered motor vehicles by
covered motor vehicle dealers. The
Final Rule, among other things,
prohibits motor vehicle dealers from
making certain misrepresentations in
the course of selling, leasing, or
arranging financing for motor vehicles,
requires accurate pricing disclosures in
dealers’ advertising and sales
communications, requires dealers to
obtain consumers’ express, informed
consent for charges, prohibits the sale of
any add-on product or service that
confers no benefit to the consumer, and
requires dealers to keep records of
certain advertisements and customer
transactions.
SUMMARY:
DATES:
This rule is effective July 30,
2024.
Copies of this document are
available on the Commission’s website,
www.ftc.gov.
FOR FURTHER INFORMATION CONTACT:
Daniel Dwyer or Sanya Shahrasbi,
Division of Financial Practices, Bureau
of Consumer Protection, Federal Trade
Commission, 202–326–2957 (Dwyer),
202–326–2709 (Shahrasbi), ddwyer@
ftc.gov, sshahrasbi@ftc.gov.
SUPPLEMENTARY INFORMATION:
ADDRESSES:
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Table of Contents
I. Background
A. Statutory Authority
B. Commission Actions Following the
Dodd-Frank Act and the Rulemaking
Process
II. Motor Vehicle Financing and Leasing
A. Overview of the Motor Vehicle
Marketplace
B. Deceptive and Unfair Practices in the
Motor Vehicle Marketplace
1. Bait-and-Switch Tactics
2. Unlawful Practices Relating to Add-On
Products or Services and Hidden Charges
C. Law Enforcement and Other Responses
III. Section-by-Section Analysis
A. § 463.1: Authority
B. § 463.2: Definitions
1. Overview
2. Definition-by-Definition Analysis
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(a) Add-On or Add-On Product(s) or
Service(s)
(b) Add-On List
(c) Cash Price Without Optional Add-Ons
(d) Clearly and Conspicuously
(e) Motor Vehicle (finalized as ‘‘‘Covered
Motor Vehicle’ or ‘Vehicle’ ’’)
(f) Dealer or Motor Vehicle Dealer
(finalized as ‘‘‘Covered Motor Vehicle
Dealer’ or ‘Dealer’ ’’)
(g) Express, Informed Consent
(h) GAP Agreement
(l) Government Charges
(j) Material or Materially
(k) Offering Price
C. § 463.3: Prohibited Misrepresentations
1. General Comments
2. Paragraph-by-Paragraph Analysis of
§ 463.3
(a) The Costs or Terms of Purchasing,
Financing, or Leasing a Vehicle
(b) Any Costs, Limitation, Benefit, or Any
Other Aspect of an Add-On Product or
Service
(c) Whether Terms Are, or Transaction Is,
for Financing or a Lease
(d) The Availability of Any Rebates or
Discounts That Are Factored Into the
Advertised Price but Not Available to All
Consumers
(e) The Availability of Vehicles at an
Advertised Price
(f) Whether Any Consumer Has Been or
Will Be Preapproved or Guaranteed for
Any Product, Service, or Term
(g) Any Information on or About a
Consumer’s Application for Financing
(h) When the Transaction Is Final or
Binding on All Parties
(i) Keeping Cash Down Payments or Tradein Vehicles, Charging Fees, or Initiating
Legal Process or Any Action If a
Transaction Is Not Finalized or If the
Consumer Does Not Wish To Engage in
a Transaction
(i) Keeping Cash Down Payments or Tradein Vehicles, Charging Fees, or Initiating
Legal Process or Any Action If a
Transaction Is Not Finalized or If the
Consumer Does Not Wish To Engage in
a Transaction
(j) Whether or When a Dealer Will Pay Off
Some or All of the Financing or Lease on
a Consumer’s Trade-in Vehicle
(k) Whether Consumer Reviews or Ratings
Are Unbiased, Independent, or Ordinary
Consumer Reviews or Ratings of the
Dealer or the Dealer’s Products or
Services
(l) Whether the Dealer or Any of the
Dealer’s Personnel or Products or
Services Is or Was Affiliated With,
Endorsed or Approved by, or Otherwise
Associated With the United States
Government or Any Federal, State, or
Local Government Agency, Unit, or
Department, Including the United States
Department of Defense or Its Military
Departments
(m) Whether Consumers Have Won a Prize
or Sweepstakes
(n) Whether, or Under What
Circumstances, a Vehicle May Be Moved,
Including Across State Lines or Out of
the Country
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(o) Whether, or Under What
Circumstances, a Vehicle May Be
Repossessed
(p) Any of the Required Disclosures
Identified in This Part
D. § 463.4: Disclosure Requirements
1. Overview
2. Paragraph-by-Paragraph Analysis of
§ 463.4
(a) Offering Price
(b) Add-On List
(c) Add-Ons Not Required
(d) Total of Payments and Consideration
for a Financed or Lease Transaction
(e) Monthly Payments Comparison
E. § 463.5: Dealer Charges for Add-Ons and
Other Items
1. Overview
2. Paragraph-by-Paragraph Analysis of
§ 463.5
(a) Add-Ons That Provide No Benefit
(b) Undisclosed or Unselected Add-Ons
(c) Any Item Without Express, Informed
Consent
F. § 463.6: Recordkeeping
G. § 463.7: Waiver Not Permitted
H. § 463.8: Severability
I. § 463.9: Relation to State Laws
IV. Effective Date
V. Paperwork Reduction Act
A. Add-On List Disclosures
B. Disclosures Relating to Cash Price
Without Optional Add-Ons
C. Prohibited Misrepresentations and
Required Disclosures
D. Recordkeeping
E. Capital and Other Non-Labor Costs
1. Disclosures
2. Recordkeeping
VI. Regulatory Flexibility Act
A. Significant Impact Analysis
1. Comments on Significant Impact
2. Certification of the Final Rule
(a) Industry Averages
(b) Dealer Size Based on the Number of
Employees
B. Initial and Final Regulatory Flexibility
Analysis
1. Comments on the Initial Regulatory
Flexibility Analysis
(a) Description of the Reasons Why Action
by the Agency Is Being Considered
(b) Succinct Statement of the Objectives of,
and Legal Basis for, the Proposed Rule
(c) Description of and, Where Feasible,
Estimate of the Number of Small Entities
to Which the Proposed Rule Will Apply
(d) Description of the Projected Reporting,
Recordkeeping, and Other Compliance
Requirements of the Proposed Rule
(e) Duplicative, Overlapping, or Conflicting
Federal Rules
(f) Description of Any Significant
Alternatives to the Proposed Rule Which
Accomplish the Stated Objectives of
Applicable Statutes and Which
Minimize Any Significant Economic
Impact of the Proposed Rule on Small
Entities
2. Final Regulatory Flexibility Analysis
(a) Statement of the Need for, and
Objectives of, the Rule
(b) Issues Raised by Comments, Including
Comments by the Chief Counsel for
Advocacy of the SBA, the Commission’s
Assessment and Response, and Any
Changes Made as a Result
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(c) Description and Estimate of the Number
of Small Entities to Which the Final Rule
Will Apply or an Explanation of Why No
Such Estimate Is Available
(d) Description of the Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
(e) Description of the Steps the
Commission Has Taken To Minimize the
Significant Economic Impact on Small
Entities Consistent With the Stated
Objectives of Applicable Statutes
VII. Final Regulatory Analysis Under Section
22 of the FTC Act
A. Introduction
B. Estimated Benefits of Final Rule
1. Consumer Time Savings When Shopping
for Motor Vehicles
2. Reductions in Deadweight Loss
3. Framework
4. Estimation
5. Benefits Related to More Transparent
Negotiation
C. Estimated Costs of Final Rule
1. Prohibited Misrepresentations
2. Required Disclosure of Offering Price in
Advertisements and in Response to
Inquiry
3. Disclosure of Add-On List and
Associated Prices
4. Required Disclosure of Total of
Payments for Financing/Leasing
Transactions
5. Prohibition on Charging for Add-Ons
that Provide No Benefit
6. Requirement to Obtain Express,
Informed Consent Before Any Charges
7. Recordkeeping
D. Other Impacts of Final Rule
E. Conclusion
F. Appendix: Derivation of Deadweight
Loss Reduction
G. Appendix: Uncertainty Analysis
VIII. Other Matters
I. Background
A. Statutory Authority
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (‘‘DoddFrank Act’’) was signed into law in
2010.1 Section 1029 of the Dodd-Frank
Act authorizes the FTC to prescribe
rules with respect to unfair or deceptive
acts or practices by motor vehicle
dealers.2 The FTC is authorized to do so
under the FTC Act and in accordance
with section 553 of the Administrative
Procedure Act (‘‘APA’’).3 The grant of
1 Public
Law 111–203, 124 Stat. 1376 (2010).
U.S.C. 5519(d). See 12 U.S.C. 5519(f)(1) and
(2) for definitions of the terms ‘‘motor vehicle’’ and
‘‘motor vehicle dealer’’ under section 1029 of the
Dodd-Frank Act, respectively.
3 See 12 U.S.C. 5519(a) (discussing the authority
over ‘‘motor vehicle dealer[s] that [are]
predominantly engaged in the sale and servicing of
motor vehicles, the leasing and servicing of motor
vehicles, or both’’); 12 U.S.C. 5519(d)
(‘‘Notwithstanding section 57a of title 15, the
Federal Trade Commission is authorized to
prescribe rules under sections 45 and 57a(a)(1)(B)
of title 15[ ] in accordance with section 553 of title
5, with respect to a person described in subsection
(a).’’); 5 U.S.C. 553. Because the Commission has
authority to promulgate this Rule in accordance
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APA rulemaking authority set forth in
section 1029 of the Dodd-Frank Act
became effective as of July 21, 2011—
the designated ‘‘transfer date’’
established by the Treasury
Department.4
B. Commission Actions Following the
Dodd-Frank Act and the Rulemaking
Process
Following enactment of the DoddFrank Act, the Commission published in
the Federal Register a notice discussing
its authority to prescribe rules with
respect to unfair or deceptive acts or
practices by motor vehicle dealers and
announcing that it would be hosting a
series of public roundtables to explore
consumer protection issues pertaining
to motor vehicle sales and leasing,
including what consumer protection
issues, if any, exist that could be
addressed through a possible
rulemaking.5 The Commission sought
participation from regulators, consumer
advocates, industry participants, and
other interested parties and ultimately
held three such public roundtables.6
The Commission subsequently
focused on enforcement and business
guidance in the motor vehicle dealer
marketplace. As discussed in SBP II.C,7
with the APA, it is not required to include a
statement as to the prevalence of the acts or
practices treated by the Rule under section 18(d) of
the FTC Act. Compare 12 U.S.C. 5519(d) and (a)
(providing the FTC with APA rulemaking authority
for purposes of section 1029 of the Dodd-Frank
Act), with 15 U.S.C. 57a(b)(3) (requiring a statement
as to prevalence for certain rulemaking proceedings
by the Commission under non-APA procedures),
and 15 U.S.C. 57a(b)(1) (establishing that certain
rulemaking proceedings by the Commission under
non-APA procedures are subject to requirements in
addition to those under the APA).
4 See 12 U.S.C. 5411(a).
5 76 FR 14014, 14015 (Mar. 15, 2011).
6 See Fed. Trade Comm’n, ‘‘The Road Ahead:
Selling, Financing & Leasing Motor Vehicles’’ (Apr.
12, 2011), https://www.ftc.gov/news-events/events/
2011/04/road-ahead-selling-financing-leasingmotor-vehicles (providing materials from
roundtable in Detroit, Michigan); Fed. Trade
Comm’n, ‘‘The Road Ahead: Selling, Financing &
Leasing Motor Vehicles’’ (Aug. 2, 2011), https://
www.ftc.gov/news-events/events/2011/08/roadahead-selling-financing-leasing-motor-vehicles
(providing materials from roundtable in San
Antonio, Texas); Fed. Trade Comm’n, ‘‘The Road
Ahead: Selling, Financing & Leasing Motor
Vehicles’’ (Nov. 17, 2011), https://www.ftc.gov/
news-events/events/2011/11/road-ahead-sellingfinancing-leasing-motor-vehicles (providing
materials from roundtable in Washington, District
of Columbia).
7 As used herein, references to the ‘‘Statement of
Basis and Purpose’’ or ‘‘SBP’’ refer to the portions
of this document that precede the regulatory text of
the Final Rule. References to the ‘‘Rule,’’ ‘‘Final
Rule,’’ or ‘‘CARS Rule’’ refer to the text in part
463—Combating Auto Retail Scams (‘‘CARS’’)
Trade Regulation Rule. Because the Final Rule is
narrower than the proposed Motor Vehicle Dealers
Trade Regulation Rule in the NPRM, the
Commission has modified the Rule title to reflect
the more limited scope.
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591
however, certain unfair and deceptive
acts or practices have persisted, despite
more than a decade of enforcement and
education. Accordingly, on June 23,
2022, the Commission announced a
notice of proposed rulemaking
(‘‘NPRM’’) addressing unfair or
deceptive acts or practices by motor
vehicle dealers.8 That notice was
published in the Federal Register on
July 13, 2022.9 The NPRM, among other
things, proposed to (i) prohibit motor
vehicle dealers from making certain
misrepresentations, (ii) require accurate
pricing disclosures, (iii) prohibit the
sale of any add-on product or service
that confers no benefit to the consumer,
(iv) require express, informed consent
for add-ons and other charges, and (v)
impose certain recordkeeping
requirements. The comment period for
the NPRM closed on September 12,
2022.
In response to the NPRM and
proposed rule, the Commission received
more than 27,000 comments from
stakeholders representing a wide range
of viewpoints.10 These stakeholders
included numerous individual
consumers who described deceptive
practices during recent car purchases
and many who discussed current or
former military service and deceptive
and predatory practices common near
military installations.11 Commenters
8 See Press Release, Fed. Trade Comm’n, ‘‘FTC
Proposes Rule to Ban Junk Fees, Bait-and-Switch
Tactics Plaguing Car Buyers’’ (June 23, 2022),
https://www.ftc.gov/news-events/news/pressreleases/2022/06/ftc-proposes-rule-ban-junk-feesbait-switch-tactics-plaguing-car-buyers.
9 See Fed. Trade Comm’n, Notice of Proposed
Rulemaking, Motor Vehicle Dealers Trade
Regulation Rule, 87 FR 42012 (released June 23,
2022; published July 13, 2022) [hereinafter NPRM],
https://www.govinfo.gov/content/pkg/FR-2022-0713/pdf/2022-14214.pdf.
10 The Commission received 27,349 comment
submissions filed online in response to its NPRM.
See Gen. Servs. Admin., Dkt. No. FTC–2022–0046,
Proposed Rule, Motor Vehicle Dealers Trade
Regulation Rule (July 13, 2022), https://
www.regulations.gov/document/FTC-2022-00460001 (noting comments received). To facilitate
public access, over 11,000 such comments have
been posted publicly on Regulations.gov at https://
www.regulations.gov/document/FTC-2022-00460001/comment (noting posted comments). As
explained at Regulations.gov, agencies may choose
to redact or withhold certain submissions (or
portions thereof) such as those containing private
or proprietary information, inappropriate language,
or duplicate/near duplicate examples of a massmail campaign. See Gen. Servs. Admin.,
Regulations.gov Frequently Asked Questions, Find
Dockets, Documents, and Comments FAQs, ‘‘How
are comments counted and posted to
Regulations.gov?,’’ https://www.regulations.gov/
faq?anchor=downloadingdata (last visited Dec. 5,
2023). The Commission has considered all timely
and responsive public comments it received in
response to its NPRM.
11 See, e.g., Individual commenter, Doc. No. FTC–
2022–0046–4648 (‘‘As a young Marine stationed in
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also included dealerships and their
employees, industry groups, consumer
and community groups, and Federal and
State lawmakers and law enforcement
agencies. Many commenters, such as
consumers, some dealers and dealer
employees, consumer groups, and
lawmakers and enforcers, were
supportive of the proposed rule in
whole or in part. Many of these
commenters also urged the FTC to
include additional protections for
consumers and law-abiding businesses,
while others, such as industry groups,
dealers, and dealer employees, asked
questions or criticized the proposal.12
These comments and responses to
comments are discussed primarily in
the discussion of the Final Rule in SBP
III.
The Commission notes that it has
undertaken careful review and
consideration of each of the comments
it received in response to its NPRM. The
Commission has dedicated the majority
of its section-by-section analysis to
descriptions of, and responses to,
comments or portions thereof that were
a military town I was taken advantage of by a
dealership when purchasing my first car. It set me
back financially for years. I know of many young
military people who purchased vehicle[ ]s and
we[ ]re instantly so far upside down after leaving
the dealership with thousands of dollars in add on
junk charges . . . .’’); Individual commenter, Doc.
No. FTC–2022–0046–0542 (‘‘As a former member of
the Military, the amount of scams and horror stories
I have heard regarding young service members
buying cars is absurd. . . . Someone shouldn’t
have to do hours of research on how to buy a car
so they don’t get taken advantage of.’’); Individual
commenter, Doc. No. FTC–2022–0046–0637 (‘‘As a
small business owner and active duty military
member I have played the role of both a buyer,
toiling for hours to just reach fair deals on vehicles,
as well as that of an advocate for my Sailors who
have been preyed upon by local dealerships.
Nowhere else in our society do so many average
citizens have to mentally prepare for a battle over
fair pricing and treatment for something that is
realistically a modern necessity.’’); Individual
commenter, Doc. No. FTC–2022–0046–9840 (‘‘I
can’t list the number of times I have either seen, or
have stepped in a situation, where car dealers have
either attempted to take, or have successfully taken,
advantage of a young military member or their
family by baiting and switching when it came to the
price of a car, or stated that the price was one
amount, only to be charged, and over-charged a
higher amount. These dealers have even attempted
to pull unethical tricks on me and my wife, even
after they found out that I was a military member,
a combat veteran, that was serving this great
nation.’’); Individual commenter, Doc. No. FTC–
2022–0046–0845 (‘‘Predatory practices like [baitand-switch pricing] are common near military
installations . . . .’’).
12 Industry commenters claimed that many of the
areas covered by the proposed rule are already
addressed in industry guidance. The Commission
notes that, although industry guidance can provide
helpful information to dealers, dealers who choose
not to follow such guidance, or who engage in
deceptive or unfair practices, subject their
customers to significant harm. The Rule addresses
such practices, thus protecting consumers and lawabiding dealers.
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critical of the Commission’s proposal or
that urged the Commission to adopt
additional requirements. Thus, to
ensure that this document also reflects
the many comments in the public record
from stakeholders who supported the
proposal as is, the Commission has
excerpted a number of such comments
in portions of its SBP.
II. Motor Vehicle Financing and
Leasing
A. Overview of the Motor Vehicle
Marketplace
For many consumers, buying or
leasing a motor vehicle is essential,
expensive, and time-consuming.13
Americans rely on their vehicles for
work, school, childcare, groceries,
medical visits, and many other
important tasks in their daily lives.14
These vehicles have become
increasingly costly: the average price of
a new vehicle sold at a new car
dealership in 2022 was more than
$46,000,15 while the average price of a
used vehicle sold at such dealerships
was more than $30,000.16 By the second
quarter of 2023, the average monthly
payment for used cars reached $533,
and the average monthly payment for
new cars reached $741—both record
highs.17 Vehicles are now many
13 Unless otherwise indicated, the terms ‘‘auto,’’
‘‘automobile,’’ ‘‘car,’’ ‘‘motor vehicle,’’ and
‘‘vehicle,’’ as used in this SBP and the
Commission’s final regulatory analysis, refer to
‘‘Covered Motor Vehicle’’ as defined in this part.
14 During 2017 to 2022, an average of 91% of
American workers who did not work from home
drove to work. See U.S. Census Bureau, ‘‘American
Community Survey: Means of Transportation to
Work by Selected Characteristics, 2022: ACS 1-Year
Estimates Subject Tables’’ (2023), https://data.
census.gov/table?q=Commuting&tid=
ACSST1Y2022.S0802 (reporting 110,245,368
workers 16 years and over who drove alone to work
in a car, truck, or van, and 13,881,067 workers 16
years and over who drove by carpool to work in a
car, truck or van, together accounting for 91% of the
total of 136,196,004 workers 16 years and over who
did not work from home); U.S. Census Bureau,
‘‘American Community Survey: Means of
Transportation to Work by Selected Characteristics,
2021: 2017–2021 ACS 5-Year Estimates Subject
Tables’’ (2022), https://data.census.gov/
table?q=Commuting&tid=ACSST5Y2021.S0802
(reporting 113,724,271 workers 16 years and over
who drove alone to work in a car, truck, or van, and
13,340,838 workers 16 years and over who drove by
carpool to work in a car, truck or van, together
accounting for 91% of the total of 140,223,271
workers 16 years and over who did not work from
home).
15 Nat’l Auto. Dealers Ass’n, ‘‘NADA Data 2022’’
7, https://www.nada.org/media/4695/download
?inline (noting average retail selling price of
$46,287 for new vehicles sold by dealerships in
2022).
16 Id. at 10 (noting average retail selling price of
$30,736 for used vehicles sold by new-vehicle
dealerships in 2022).
17 Lydia DePillis, ‘‘How the Costs of Car
Ownership Add Up,’’ N.Y. Times (Oct. 6, 2023),
https://www.nytimes.com/interactive/2023/10/07/
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consumers’ largest expense—on a par
with housing, child care and food, and
accounting for 16% of the median
annual household income before
taxes.18 In 2022 alone, Americans spent
more than $720 billion on motor
vehicles and vehicle parts.19
Given these costs, many consumers
who purchase a motor vehicle rely on
financing to complete their purchases.
According to public reports, 81% of
new motor vehicle purchases, and
nearly 35% of used vehicle purchases,
are financed.20 By the first quarter of
2023, Americans had more than 107
million outstanding auto financing
accounts and owed more than $1.56
trillion thereon,21 making auto finance
the third-largest source of debt for U.S.
consumers, and the second-largest for
U.S. consumers ages 40 and over.22
Servicemembers have an average of
twice as much auto debt as civilians—
particularly young servicemembers,
who generally require vehicles for
transportation while living on military
bases.23 By the age of 24, around 20
business/car-ownership-costs.html (citing average
monthly payment figures from TransUnion).
18 Id. (citing data from AAA and the U.S. Census
Bureau).
19 Bureau of Econ. Analysis, ‘‘National Data:
National Income and Product Accounts, Personal
Consumption Expenditures by Major Type of
Product’’ tbl. 2.3.5, https://apps.bea.gov/iTable/
?reqid=19&step=2&isuri=1&categories=survey
#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNd
LCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5I
l0sWyJOSVBBX1RhYmxlX0xpc3QiLCI2NSJdXX0=
(last revised July 27, 2023) (listing estimated annual
expenditure rates of between $713.1 billion and
$737.1 billion in 2022).
20 Melinda Zabritski, Experian Info. Sols., Inc.,
‘‘State of the Automotive Finance Market Q4 2020’’
5, https://www.experian.com/content/dam/
marketing/na/automotive/quarterly-webinars/
credit-trends/2020-quarterly-trends/v2-2020-q4state-automotive-market.pdf (on file with the
Commission).
21 Fed. Rsrv. Bank of N.Y., ‘‘Quarterly Report on
Household Debt and Credit, 2023: Q1’’ 3–4 (May
2023), https://www.newyorkfed.org/medialibrary/
interactives/householdcredit/data/pdf/HHDC_
2023Q1; Fed. Rsrv. Bank of N.Y., ‘‘Data Underlying
Report’’ on ‘‘Page 3 Data’’ and ‘‘Page 4 Data’’ tabs,
https://www.newyorkfed.org/medialibrary/
interactives/householdcredit/data/xls/HHD_C_
Report_2023Q1 (last visited Dec. 5, 2023) (listing
number of open ‘‘Auto Loan’’ accounts and total
outstanding balance in such accounts).
22 Fed. Rsrv. Bank of N.Y., ‘‘Quarterly Report on
Household Debt and Credit, 2023: Q1’’ 3, 21 (May
2023), https://www.newyorkfed.org/medialibrary/
interactives/householdcredit/data/pdf/HHDC_
2023Q1; Fed. Rsrv. Bank of N.Y., ‘‘Data Underlying
Report’’ on ‘‘Page 3 Data’’ and ‘‘Page 21 Data’’ tabs,
https://www.newyorkfed.org/medialibrary/
interactives/householdcredit/data/xls/HHD_C_
Report_2023Q1 (last visited Dec. 5, 2023) (listing
total ‘‘Auto Loan’’ debt balance compared to other
product type categories).
23 See Consumer Fin. Prot. Bureau, ‘‘Financially
Fit? Comparing the Credit Records of Young
Servicemembers and Civilians’’ 27 (July 2020),
https://files.consumerfinance.gov/f/documents/
cfpb_financially-fit_credit-young-servicememberscivilians_report_2020-07.pdf.
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percent of young servicemembers have
at least $20,000 in auto debt, which
equates to nearly two-thirds of an
enlisted soldier’s typical base salary at
that age.24
In addition to the expense, the
process of buying or leasing a vehicle is
often time-consuming and arduous. It
can take several hours or days to finalize
a transaction,25 on top of the hours it
can take, particularly in rural areas, to
drive to a dealership.26 Consumers may
need to take time off work or arrange
childcare, and families with a single
vehicle may be forced to delay other
important appointments due to the
length of the vehicle-buying or -leasing
process.
Most consumers—approximately
70%—finance vehicle purchases
through a motor vehicle dealer,27 using
what is known as dealer-provided
‘‘indirect’’ financing.28 This financing is
24 See Consumer Fin. Prot. Bureau, ‘‘Protecting
Servicemembers from Costly Auto Loans and
Wrongful Repossessions’’ (July 18, 2022), https://
www.consumerfinance.gov/about-us/blog/
protecting-servicemembers-from-costly-auto-loansand-wrongful-repossessions/.
25 Mary W. Sullivan, Matthew T. Jones & Carole
L. Reynolds, Fed. Trade Comm’n, ‘‘The Auto Buyer
Study: Lessons from In-Depth Consumer Interviews
and Related Research’’ 15 (July 2020) [hereinafter
Auto Buyer Study], https://www.ftc.gov/system/
files/documents/reports/auto-buyer-study-lessonsdepth-consumer-interviews-related-research/
bcpreportsautobuyerstudy.pdf (noting that the
purchase transactions in the FTC’s qualitative study
often took 5 hours or more to complete, with some
extending over several days); Cf. Cox Auto., ‘‘2020
Cox Automotive Car Buyer Journey’’ 6 (2020)
[hereinafter 2020 Cox Automotive Car Buyer
Journey], https://b2b.autotrader.com/app/uploads/
2020-Car-Buyer-Journey-Study.pdf (reporting
average consumer time spent shopping for a vehicle
at 14 hours, 53 minutes); Cox Auto., ‘‘2022 Car
Buyer Journey: Top Trends Edition’’ 6 (2023)
[hereinafter 2022 Car Buyer Journey], https://
www.coxautoinc.com/wp-content/uploads/2023/01/
2022-Car-Buyer-Journey-Top-Trends.pdf (reporting
average consumer time spent shopping for a vehicle
at 14 hours, 39 minutes).
26 For example, consumers have complained
about going to a dealership based on an offer that
the dealer refuses to honor only after they have
spent hours driving there and additional time on
the lot. See, e.g., Complaint ¶¶ 23–26, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
0169 (N.D. Ill. Mar. 31, 2022) (alleging that many
consumers drive hours to dealerships based on the
advertised prices; that test-driving and selecting a
vehicle, and negotiating the price and financing
terms, is an often hours-long process; and that, after
this time, dealers falsely told consumers that addon products or packages were required to purchase
or finance the vehicle, even though they were not
included in the low prices advertised or disclosed
to consumers who called to confirm prices).
27 Unless otherwise indicated, the terms ‘‘dealer,’’
‘‘dealership,’’ and ‘‘motor vehicle dealer’’ as used
in this SBP and the Commission’s final regulatory
analysis refer to ‘‘ ‘Covered Motor Vehicle Dealer’ or
‘Dealer’ ’’ as defined in this part.
28 See Nat’l Auto. Dealers Ass’n, ‘‘Dealer-Assisted
Financing Benefits Consumers,’’ https://
www.nada.org/autofinance/[https://
web.archive.org/web/20220416131718/https://
www.nada.org/autofinance/] (Apr. 16, 2022) (noting
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typically offered through dealers’
financing and insurance (‘‘F&I’’) offices,
which may also offer leasing and addon products or services. In the dealerprovided financing scenario, the dealer
collects financial information about the
consumer and forwards that information
to prospective motor vehicle financing
entities. These financing entities
evaluate this information and, in the
process, determine whether, and on
what terms, to provide credit.29 These
terms include the ‘‘buy rate’’: a riskbased finance charge that reflects the
interest rate at which the entity will
finance the deal.30 Dealers often add a
finance charge called a ‘‘dealer reserve’’
or ‘‘markup’’ to the buy rate.31 Unlike
the buy rate, the markup is not based on
the underwriting risk or credit
characteristics of the applicant, and
dealers retain the markup as profit.32
New vehicle dealers average a gross
profit of about $2,444 per vehicle,33
more than half of which comes from the
dealers’ F&I offices. Independent used
vehicle dealers averaged a gross profit of
more than $6,000 per vehicle, as of
2019.34 While some used vehicle
dealerships do not have a separate F&I
office, more than half of such
dealerships sell add-on products.35
Six to eight percent of financed
vehicle purchases use what is called
that 7 out of 10 consumers finance through their
dealership). This is also known as ‘‘dealer
financing,’’ because consumers obtain financing
through the dealer that partners with other entities
in the financing process.
29 Dealers often originate the contract governing
the extension of retail credit or retail leases and
then sell, or otherwise assign, these contracts to
unaffiliated third-party finance or leasing sources,
including such third parties the dealer may have
contacted in the course of arranging dealerprovided ‘‘indirect’’ financing. See Consumer Fin.
Prot. Bureau, ‘‘Automobile Finance Examination
Procedures’’ 3 (Aug. 2019), https://files.consumer
finance.gov/f/documents/201908_cfpb_automobilefinance-examination-procedures.pdf.
30 See Nat’l Auto. Dealers Ass’n, Nat’l Ass’n of
Minority Auto. Dealers & Am. Int’l Auto. Dealers
Ass’n, ‘‘Fair Credit Compliance Policy & Program’’
2 (2015), https://www.nada.org/media/4558/
download?inline. (defining ‘‘buy rate’’ as ‘‘the rate
at which the finance source will purchase the credit
contract from the dealer’’).
31 See, e.g., id. at 1 n.4 & accompanying text.
32 Id. (describing this as the amount dealers earn
for arranging financing, measured as the difference
between the consumer’s annual percentage rate
(‘‘APR’’) and the wholesale ‘‘buy rate’’ at which a
finance source buys the finance contract from the
dealer, and noting that finance sources typically
permit dealers to retain the dealer participation).
33 Nat’l Auto. Dealers Ass’n, ‘‘Average Dealership
Profile’’ 1 (2020), https://www.nada.org/media/
4136/download?attachment[https://web.archive.org/
web/20220623204158/https://www.nada.org/
media/4136/download?attachment] (June 23, 2022).
34 Nat’l Indep. Auto. Dealers Ass’n, ‘‘NIADA Used
Car Industry Report 2020’’ 21 (2020).
35 Id. at 8, 10.
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593
‘‘buy here, pay here’’ dealers.36 In this
scenario, consumers typically borrow
from, and make their payments directly
to, the dealership.
The remainder of financed vehicle
transactions use what is commonly
referred to as ‘‘direct’’ financing,
provided by a credit union, bank, or
other financing entity.37 In this scenario,
consumers typically receive an interest
rate quote from the financing entity
prior to arriving at a dealership to
purchase a vehicle, and use the
financing to pay for their chosen
vehicle.38 Dealerships do not profit on
the financing portion of the vehicle sale
transaction when a consumer arranges
financing directly.
Finally, consumers may choose to
lease a vehicle from a dealership rather
than purchase one. In this scenario,
consumers may drive a vehicle for a set
period of time—typically around three
years 39—and for a certain maximum
number of miles—typically 10,000–
15,000 miles per year—in exchange for
an upfront payment, a monthly
payment, and fees before, during, and at
the end of the lease, including for excess
wear and usage over the mileage limit.40
When consumers lease a vehicle, they
do not own it, and they must return the
vehicle when the lease expires, though
they may have the option to purchase
36 Melinda Zabritski, Experian Info. Sols., Inc.,
‘‘State of the Automotive Finance Market Q2 2020’’
8 (2020), https://www.experian.com/content/dam/
marketing/na/automotive/quarterly-webinars/
credit-trends/2020-q2-safm-final.pdf [https://
web.archive.org/web/20201106002015/https://
www.experian.com/content/dam/marketing/na/
automotive/quarterly-webinars/credit-trends/2020q2-safm-final.pdf] (Mar. 6, 2023).
37 Consumer Fin. Prot. Bureau, ‘‘Automobile
Finance Examination Procedures’’ 4 (Aug. 2019),
https://files.consumerfinance.gov/f/documents/
201908_cfpb_automobile-finance-examinationprocedures.pdf.
38 Consumer Fin. Prot. Bureau, ‘‘Consumer Voices
on Automobile Financing’’ 5 (June 2016), https://
files.consumerfinance.gov/f/documents/201606_
cfpb_consumer-voices-on-automobile-financing.pdf.
39 Melinda Zabritski, Experian Info. Sols., Inc.,
‘‘State of the Automotive Finance Market Q4 2020’’
26 (2020), https://www.experian.com/content/dam/
marketing/na/automotive/quarterly-webinars/
credit-trends/2020-quarterly-trends/v2-2020-q4state-automotive-market.pdf [https://
web.archive.org/web/20210311174922/https://
www.experian.com/content/dam/marketing/na/
automotive/quarterly-webinars/credit-trends/2020quarterly-trends/v2-2020-q4-state-automotivemarket.pdf] (Mar. 6, 2023).
40 See Fed. Trade Comm’n, ‘‘Financing or Leasing
a Car,’’ https://www.consumer.ftc.gov/articles/0056financing-or-leasing-car (last visited Dec. 5, 2023)
(‘‘The annual mileage limit in most standard leases
is 15,000 or less.’’); Consumer Fin. Prot. Bureau,
‘‘What should I know about the differences between
leasing and buying a vehicle?,’’ https://
www.consumerfinance.gov/ask-cfpb/what-should-iknow-about-the-differences-between-leasing-andbuying-a-vehicle-en-815/ (last visited Aug. 24, 2023)
(‘‘Most leases restrict your mileage to 10,000–15,000
miles per year.’’).
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the vehicle at the end of the lease
period. Nearly 27% of new vehicles are
leased, as are just over 8% of used
vehicles.41
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B. Deceptive and Unfair Practices in the
Motor Vehicle Marketplace
Section 5 of the Federal Trade
Commission Act (‘‘FTC Act’’), as
amended (15 U.S.C. 45), authorizes the
FTC to address deceptive or unfair acts
or practices in or affecting commerce,
including in the motor vehicle
marketplace.
An act or practice is deceptive if there
is a representation, omission, or other
practice that is likely to mislead
consumers acting reasonably under the
circumstances and is material to
consumers—that is, it is likely to affect
consumers’ conduct or decisions with
regard to a product or service.42
Deceptive conduct can involve omission
of material information, the disclosure
of which is necessary to prevent the
claim, practice, or sale from being
misleading.43
An act or practice is considered unfair
under section 5 of the FTC Act if: (1) it
causes, or is likely to cause, substantial
injury to consumers; (2) the injury is not
reasonably avoidable by consumers; and
(3) the injury is not outweighed by
countervailing benefits to consumers or
to competition.44
In each of the past four years, the FTC
received more than 100,000 complaints
regarding motor vehicle sales, financing,
service and warranties, and rentals and
leasing.45 This industry is also
41 Melinda Zabritski, Experian Info. Sols., Inc.,
‘‘State of the Automotive Finance Market Q4 2020’’
5 (2020), https://www.experian.com/content/dam/
marketing/na/automotive/quarterly-webinars/
credit-trends/2020-quarterly-trends/v2-2020-q4state-automotive-market.pdf [https://
www.experian.com/content/dam/marketing/na/
automotive/quarterly-webinars/credit-trends/2020quarterly-trends/v2-2020-q4-state-automotivemarket.pdf] (Mar. 6, 2023).
42 See Fed. Trade Comm’n, ‘‘FTC Policy
Statement on Deception’’ 2, 5, 103 F.T.C. 174 (1984)
[hereinafter FTC Policy Statement on Deception]
(appended to Cliffdale Assocs., Inc., 103 F.T.C. 110,
183 (1984)), https://www.ftc.gov/system/files/
documents/public_statements/410531/831014
deceptionstmt.pdf.
43 Id.
44 15 U.S.C. 45(n).
45 See, e.g., Fed. Trade Comm’n, ‘‘Consumer
Sentinel Network Data Book 2022’’ app. B3 at 85
(Feb. 2023) [hereinafter Consumer Sentinel Network
Data Book 2022], https://www.ftc.gov/system/files/
ftc_gov/pdf/CSN-Data-Book-2022.pdf (reporting
complaints about new and used motor vehicle sales,
financing, service & warranties, and rentals &
leasing, collectively, of more than 100,000 in 2020,
2021, and 2022); Fed. Trade Comm’n, ‘‘Consumer
Sentinel Network Data Book 2021’’ app. B3 at 85
(Feb. 2022) [hereinafter Consumer Sentinel Network
Data Book 2021], https://www.ftc.gov/system/files/
ftc_gov/pdf/CSN%20Annual%20Data%20
Book%202021%20Final%20PDF.pdf (reporting
complaints about new and used motor vehicle sales,
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consistently at or near the top of private
sources of consumer complaints.46
Many of these complaints concerned
deceptive or unfair acts or practices
affecting U.S. consumers. Complaints
about motor vehicle transactions are
regularly in the top ten complaint
categories tracked by the FTC.47 For
military consumers as well, auto-related
complaints are among the top 10
complaint categories outside of identity
theft.48
Moreover, law enforcement
experience shows that complaints are
just the tip of the iceberg.49 The
Commission’s recent enforcement action
against a large, multistate dealership
group is illustrative of this point in the
motor vehicle marketplace: in that
financing, service & warranties, and rentals &
leasing, collectively, of more than 100,000 in 2019,
2020, and 2021).
46 According to commenters, complaints to the
Better Business Bureau about new and used auto
dealers, when combined, have been either the first
or second highest regarding any industry in the U.S.
for the past twenty years. See Comment of Nat’l
Consumer L. Ctr. et al., Doc. No. FTC–2022–0046–
7607 at ii; see also Better Bus. Bureau, ‘‘BBB
Complaint and Inquiry Statistics,’’ https://
www.bbb.org/all/bbb-complaint-statistics (last
visited Dec. 5, 2023) (listing complaint statistics
from 2010 through 2022, sorted by industry). In
addition, for the past seven years annual surveys of
State and local consumer protection agencies have
reported that auto-related complaints were the top
complaint received from consumers. See Comment
of Nat’l Consumer L. Ctr. et al., Doc. No. FTC–2022–
0046–7607 at 13; Consumer Fed’n of Am., ‘‘2022
Consumer Complaint Survey Report’’ 4–5 (May
2023), https://consumerfed.org/wp-content/
uploads/2023/05/2022-Consumer-ComplaintSurvey-Report.pdf (‘‘For the seventh year in a row,
auto sales, leases and repairs are the #1 complaint
category. Consumers filed complaints about add-on
products and services, bait and switch pricing, and
mechanical condition issues.’’).
47 See Consumer Sentinel Network Data Book
2021, supra note 45, at 8 (listing vehicle-related
complaints as the seventh most common report
category, outside of identity theft, in 2021);
Consumer Sentinel Network Data Book 2022, supra
note 45, at 8 (listing motor vehicle-related
complaints as the fifth most common report
category, outside of identity theft, in 2022).
48 See Consumer Sentinel Network Data Book
2021, supra note 45, at 18 (listing vehicle-related
complaints as the eighth most common complaint
category for military consumers, outside of identity
theft categories, in 2021); Consumer Sentinel
Network Data Book 2022, supra note 45, at 18
(listing vehicle-related complaints as the ninth most
common complaint category for military
consumers, outside of identity theft categories, in
2022).
49 See, e.g., United States v. Brien, 617 F.2d 299,
308 (1st Cir. 1980); United States v. Offs. Known as
50 State Distrib. Co., 708 F.2d 1371, 1374–75 (9th
Cir. 1983); Keith B. Anderson, Fed. Trade Comm’n,
‘‘Consumer Fraud in the United States: An FTC
Survey’’ 80 (2004), https://www.ftc.gov/sites/
default/files/documents/reports/consumer-fraudunited-states-ftc-survey/040805confraudrpt.pdf
(staff report noting consumers who reported they
were victims of fraud complained to an official
source only 8.4 percent of the time, filing
complaints with the BBB in 3.5 percent of incidents
and to a Federal agency, including the FTC, in only
1.4 percent of cases).
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matter, the Commission received 391
complaints—about add-ons and other
issues—over a several-month period
prior to filing a complaint against the
thirteenth largest dealership group in
the country by revenue as of 2020.50
However, in a survey of the dealer’s
customers over the same time period,
83% of respondents—or at least 16,848
customers—indicated they were subject
to the dealer’s unlawful practices
related to add-ons alone.51
Similarly, in other contexts where
companies were charged with making
misrepresentations or engaging in
misconduct regarding add-on products,
information obtained after filing has
shown widespread harm far beyond the
initial consumer complaint volumes
reported prior to filing.52
As examined in greater detail in the
paragraphs that follow, consumers in
the motor vehicle marketplace are
confronted with chronic deceptive or
unfair practices, including bait-andswitch tactics and hidden charges.53
1. Bait-and-Switch Tactics
Advertisements for motor vehicles are
often consumers’ first contact in the
vehicle-buying or -leasing process.
Dealers utilize a variety of means to
50 See Complaint, Fed. Trade Comm’n v. N. Am.
Auto. Servs., Inc., No. 1:22–cv–0169 (N.D. Ill. Mar.
31, 2022); see also WardsAuto, ‘‘WardsAuto 2020
Megadealer 100,’’ https://www.wardsauto.com/
dealers/wardsauto-2020-megadealer-100-industryforce (last visited Dec. 5, 2023) (listing Napleton
Automotive Group as the 13th-ranked dealership
group by total revenue).
51 Complaint ¶ 27, Fed. Trade Comm’n v. N. Am.
Auto. Servs., Inc., No. 1:22–cv–0169 (N.D. Ill. Mar.
31, 2022) (alleging that defendants buried charges
for add-ons in voluminous paperwork, making them
difficult to detect); see Press Release, Fed. Trade
Comm’n, ‘‘FTC Returns Additional $857,000 To
Consumers Harmed by Napleton Auto’s Junk Fees
and Discriminatory Practices’’ (Nov. 20, 2023),
https://www.ftc.gov/news-events/news/pressreleases/2023/11/ftc-returns-additional-857000consumers-harmed-napleton-autos-junk-feesdiscriminatory-practices.
52 For example, in a recent action involving
deceptive pre-approval claims, the FTC had
received roughly 30 complaints about the
company’s pre-approval conduct in the five-year
period prior to announcing its action. But in the
five months following announcement of the action,
more than 900 additional consumers came forward
with complaints about the conduct. See Press
Release, Fed. Trade Comm’n, ‘‘FTC Announces
Claims Process for Consumers Harmed by Credit
Karma ‘Pre-Approved’ Offers for Which They Were
Denied’’ (Dec. 5, 2023), https://www.ftc.gov/newsevents/news/press-releases/2023/12/ftc-announcesclaims-process-consumers-harmed-credit-karmapre-approved-offers-which-they-were (‘‘[W]ithin
five months of that announcement, the agency
received nearly 900 more such complaints’’).
53 While other issues exist in the motor vehicle
sales, financing, and leasing space, including issues
involving discrimination, financing application
falsification, data privacy and security, and yo-yo
financing, this Rule’s core focus is on
misrepresentations and add-on and pricing
practices.
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reach consumers, including social
media and online advertisements,
television and radio commercials, and
direct mail marketing. New vehicle
dealers spend an average of more than
$700 on advertising per vehicle
sold 54—more than two-thirds of which
goes toward online advertising.55
The FTC has brought many law
enforcement actions involving motor
vehicle dealers’ deceptive advertising
and other unlawful tactics. Such actions
have charged dealers with, inter alia,
making misrepresentations regarding
the price of a vehicle, the availability of
discounts and rebates, the monthly
payment amount for a financed
purchase or lease, the amount due at
signing, and whether an offer pertains to
a purchase or a lease.56 Other such
actions have charged dealers with
misrepresentations regarding whether
the dealer or consumer is responsible
for paying off ‘‘negative equity,’’ i.e., the
outstanding debt on a vehicle that is
being ‘‘traded in’’ as part of another
vehicle purchase.57 And in other FTC
actions, some dealers have lured
54 Nat’l Auto. Dealers Ass’n, ‘‘NADA Data 2022’’
15, https://www.nada.org/media/4695/download?
inline (listing average dealership advertising per
new vehicle sold of $718 in 2022, and $602 in
2021).
55 Id. at 16 (listing 68.2% of estimated advertising
expenditures by medium as internet expenditures).
56 See, e.g., Complaint, Timonium Chrysler, Inc.,
No. C–4429 (F.T.C. Jan. 28, 2014) (alleging
dealership advertised internet prices and dealer
discounts that were only available through rebates
not applicable to the typical consumer); Complaint,
Ganley Ford West, Inc., No. C–4428 (F.T.C. Jan. 28,
2014) (alleging dealership advertised discounts on
vehicle prices, but failed to disclose that discounts
were only available on the most expensive models);
Complaint, Progressive Chevrolet Co., No. C–4578
(F.T.C. June 13, 2016) (alleging deceptive failure to
disclose material conditions of obtaining the lease
monthly payment in their online and print
advertising); Complaint ¶¶ 38–46, Fed. Trade
Comm’n v. Tate’s Auto Ctr. of Winslow, Inc., No.
3:18–cv–08176–DJH (D. Ariz. July 31, 2018)
(alleging that company issued advertisements for
attractive terms but concealed that the terms were
only applicable to lease offers); Complaint ¶¶ 36–
38, United States v. New World Auto Imports, Inc.,
No. 3:16–cv–02401–K (N.D. Tex. Aug. 18, 2016)
(alleging misrepresentation that terms were for
financing instead of leasing); Complaint ¶¶ 85–87,
Fed. Trade Comm’n v. Universal City Nissan, Inc.,
No. 2:16–cv–07329 (C.D. Cal. Sept. 29, 2016)
(alleging that dealerships claimed consumers could
finance the purchase of vehicles with attractive
terms and buried disclosures indicating that such
terms were applicable to leases only).
57 Complaint ¶¶ 82–84, Fed. Trade Comm’n v.
Universal City Nissan, Inc., No. 2:16–cv–07329
(C.D. Cal. Sept. 29, 2016) (alleging
misrepresentation that dealer would pay off a
consumer’s trade-in when in fact consumers were
still responsible for outstanding debt on trade-in
vehicles); Complaint ¶¶ 17–19, TXVT Ltd. P’ship,
No. C–4508 (F.T.C. Feb. 12, 2015) (alleging
misrepresentation in leasing advertising that the
dealership would pay off the negative equity of a
consumer’s trade in vehicle, when in fact, it was
merely rolled into the financed amount for the
consumer’s newly financed vehicle).
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potential buyers through financial
incentives incidental to the purchase,
such as deceptive promises of a valuable
prize that is redeemable only by visiting
the dealership.58
Deceptive tactics can cause significant
consumer harm and impede
competition, competitively
disadvantaging law-abiding dealers.
When dealerships advertise prices,
discounts, or other terms that are not
actually available to typical consumers,
consumers who select that dealership
instead of others spend time visiting the
dealership or otherwise interacting with
the dealership under false pretenses.
2. Unlawful Practices Relating to AddOn Products or Services and Hidden
Charges
Another key consumer protection
concern is the sale of add-on products
or services in a deceptive or unfair
manner. Add-ons in connection with
the sale or financing of motor vehicles
include extended warranties, service
and maintenance plans, payment
programs, guaranteed automobile or
asset protection (‘‘GAP’’) agreements,
emergency road service, VIN etching
and other theft protection devices, and
undercoating. Individual add-ons can
cost consumers thousands of dollars and
can significantly increase the overall
cost to the consumer in the
transaction.59 Moreover, in the past two
years, dealers have substantially
increased prices for these add-ons,
notwithstanding that such products or
services largely are not constrained by
supply.60
A significant consumer protection
concern is consumers paying for addons without knowing about, or
expressly agreeing to, these products or
services.61 This type of payment
58 See, e.g., Complaint ¶¶ 12, 17–19, Traffic Jam
Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020);
Complaint ¶¶ 4, 7–9, Fowlerville Ford, Inc., No. C–
4433 (F.T.C. Feb. 20, 2014).
59 See, e.g., Complaint ¶¶ 25, 27–28, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
0169 (N.D. Ill. Mar. 31, 2022).
60 See Ben Eisen, ‘‘Car Dealer Markups Helped
Drive Inflation, Study Finds,’’ Wall St. J., Apr. 23,
2023, https://www.wsj.com/articles/car-dealermarkups-helped-drive-inflation-study-finds7c1d5a2d; U.S. Bureau of Labor Statistics,
‘‘Automotive Dealerships 2019–2022: Dealer
Markup Increases Drive New-Vehicle Consumer
Inflation’’ (Apr. 2023), https://www.bls.gov/opub/
mlr/2023/article/automotive-dealershipsmarkups.htm.
61 See Nat’l Consumer L. Ctr., ‘‘Auto Add-ons
Add Up: How Dealer Discretion Drives Excessive,
Arbitrary, and Discriminatory Pricing’’ (Oct. 1,
2017), https://www.nclc.org/images/pdf/car_sales/
report-auto-add-on.pdf; Adam J. Levitin, ‘‘The Fast
and the Usurious: Putting the Brakes on Auto
Lending Abuses,’’ 108 Geo. L.J. 1257, 1265–66
(2020), https://www.law.georgetown.edu/
georgetown-law-journal/wp-content/uploads/sites/
26/2020/05/Levitin_The-Fast-and-the-Usurious-
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595
packing has been a particular concern in
the military community.62 The
protracted and paperwork-heavy
vehicle-buying or -leasing process can
make it difficult for consumers to spot
add-on charges, particularly when
advertised prices or payment terms do
not mention add-ons.63 If consumers are
financing or leasing the vehicle, they
undergo a separate financing process
after selecting a vehicle, which can
include wading through a thick stack of
dense paperwork filled with fine
print.64 For example, according to an
FTC law enforcement action, consumers
visiting one large dealership group were
required to complete a stack of
paperwork that ran more than sixty
pages and required more than a dozen
signatures.65 This paperwork can
include hidden charges for add-on
products or services, causing consumers
Putting-the-Brakes-on-Auto-Lending-Abuses.pdf
(discussing ‘‘loan packing’’ as the sale of add-on
products that are falsely represented as being
required in order to obtain financing); Complaint
¶¶ 12–19, Fed. Trade Comm’n v. Liberty Chevrolet,
Inc., No. 1:20–cv–03945 (S.D.N.Y. May 21, 2020)
(alleging deceptive and unauthorized add-on
charges in consumers’ transactions); Complaint
¶¶ 59–64, Fed. Trade Comm’n v. Universal City
Nissan, Inc., No. 2:16–cv–07329 (C.D. Cal. Sept. 29,
2016) (alleging deceptive and unauthorized add-on
charges in consumers’ transactions); Complaint
¶¶ 6, 9, TT of Longwood, Inc., No. C–4531 (F.T.C.
July 2, 2015) (alleging misrepresentations regarding
prices for added features); see also Auto Buyer
Study, supra note 25, at 14 (‘‘Several participants
who thought that they had not purchased add-ons,
or that the add-ons were included at no additional
charge, were surprised to learn, when going through
the paperwork, that they had in fact paid extra for
add-ons. This is consistent with consumers’
experiencing fatigue during the buying process or
confusion with a financially complex transaction,
but would also be consistent with dealer
misrepresentations.’’).
62 Consumers for Auto Reliability and Safety,
Comment Letter on Motor Vehicle Roundtables,
Project No. P104811 at 2–3 (Apr. 1, 2012), https://
www.ftc.gov/sites/default/files/documents/public_
comments/public-roundtables-protectingconsumers-sale-and-leasing-motor-vehicles-projectno.p104811-00108/00108-82875.pdf (citing a U.S.
Department of Defense data call summary that
found that the vast majority of military counselors
have clients with auto financing problems and cited
‘‘loan packing’’ and yo-yo financing as the most
frequent auto lending abuses affecting
servicemembers).
63 Complaint ¶¶ 17–19, Fed. Trade Comm’n v.
Liberty Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y.
May 21, 2020); Complaint ¶ 60, Fed. Trade Comm’n
v. Universal City Nissan, Inc., No. 2:16–cv–07329
(C.D. Cal. Sept. 29, 2016); Carole L. Reynolds &
Stephanie E. Cox, Fed. Trade Comm’n, ‘‘Buckle Up:
Navigating Auto Sales and Financing’’ (2020)
[hereinafter Buckle Up], https://www.ftc.gov/
reports/buckle-navigating-auto-sales-financing.
64 See, e.g., Buckle Up, supra note 63, at 10–11
(noting the long, complex transaction process);
Complaint ¶¶ 23–28, Fed. Trade Comm’n v. N. Am.
Auto. Servs., Inc., No. 1:22–cv–01690 (N.D. Ill. Mar.
31, 2022) (same).
65 Complaint ¶ 24, Fed. Trade Comm’n v. N. Am.
Auto. Servs., Inc., No. 1:22–cv–01690 (N.D. Ill. Mar.
31, 2022); see also Buckle Up, supra note 63, at 10–
11.
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to purchase those add-ons without
knowing about or agreeing to them, or
without knowing or agreeing to their
costs or other key terms.66
Unscrupulous dealers are able to slip
the often considerable additional costs
66 Complaint ¶¶ 25, 27, 29–32, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
01690 (N.D. Ill. Mar. 31, 2022); see also Complaint
¶¶ 17–19, Fed. Trade Comm’n v. Liberty Chevrolet,
Inc., No. 1:20–cv–03945 (S.D.N.Y. May 21, 2020);
Dale Irwin, Slough Connealy Irwin & Madden LLC,
Comment Letter on Public Roundtables: Protecting
Consumers in the Sale and Leasing of Motor
Vehicles, Project No. P104811, Submission No.
558507–00060 (Dec. 29, 2011), https://
www.regulations.gov/comment/FTC-2022-00360051 (consumer protection lawyer noting ‘‘payment
packing’’ among problems ‘‘that cry out for scrutiny
and regulation’’); Michael Archer, Comment Letter
on Public Roundtables: Protecting Consumers in the
Sale and Leasing of Motor Vehicles, Project No.
P104811, Submission No. 558507–00041 at 3 (Aug.
6, 2011), https://www.regulations.gov/comment/
FTC-2022-0036-0014 (workshop panelist stating, ‘‘I
have seen cases wherein the dealer uses financing
to pack in extra costs or to wipe out trade-in
value.’’); Dawn Smith, Comment Letter on Public
Roundtables: Protecting Consumers in the Sale and
Leasing of Motor Vehicles, Project No. P104811,
Submission No. 558507–00027 (July 27, 2011),
https://www.regulations.gov/comment/FTC-20220036-0043 (‘‘Confusing or misleading sales terms[.]
Extra fees was [sic] added at the time of purchase
and to this day I still do not understand what the
fee was for; it made the payment higher.’’); Carrie
Ferraro, Legal Servs. of N.J., Comment Letter on
Public Roundtables: Protecting Consumers in the
Sale and Leasing of Motor Vehicles, Project No.
P104811, Submission No. 558507–00061 (Dec. 29,
2011), https://www.regulations.gov/comment/FTC2022-0036-0059 (citing ‘‘[d]ealers engage[d] in
packing’’ as an example of the common consumer
complaints of car-sales-related fraud received by
LSNJ’s legal advice hotline); Rosemary Shahan,
Consumers for Auto Reliability and Safety,
Comment Letter on Public Roundtables: Protecting
Consumers in the Sale and Leasing of Motor
Vehicles, Project No. P104811, Submission No.
558507–00069 at 3 (Jan. 31, 2012), https://
www.regulations.gov/comment/FTC-2022-00360069 (noting that ‘‘[m]any common auto scams do
not generate complaints in proportion to how
pervasive or costly the practices are, simply because
the consumers generally remain unaware they have
been scammed,’’ including as a result of ‘‘[l]oan
packing’’); Mary W. Sullivan, Matthew T. Jones &
Carole L. Reynolds, Fed. Trade Comm’n, ‘‘The Auto
Buyer Study: Lessons from In-Depth Consumer
Interviews and Related Research,’’ Supplemental
Appendix: Redacted Interview Transcripts at 525
(2020) [hereinafter Auto Buyer Study: Appendix],
https://www.ftc.gov/system/files/documents/
reports/buckle-navigating-auto-sales-financing/
bcpstaffreportautobuyerstudysuppappendix.pdf
(Study participant 169810: consumer had
‘‘additional items’’ charges on contract that
consumer could not identify); id. at 730, 740–42
(Study participant 188329: dealer did not tell
consumer about GAP or service contract but
consumer was charged $599 and $1,950 for those
add-ons, respectively); Press Release, N.Y. State
Att’y Gen., ‘‘A.G. Schneiderman Announces Nearly
$14 Million Settlement with NYC and Westchester
Auto Dealerships for Deceptive Practices that
Resulted in Inflated Car Prices’’ (June 17, 2015),
https://ag.ny.gov/press-release/2015/agschneiderman-announces-nearly-14-millionsettlement-nyc-and-westchester-auto (‘‘This
settlement is part of the [New York] attorney
general’s wider initiative to end the practice of
‘jamming,’ unlawfully charging consumers for
hidden purchases by car dealerships.’’).
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for these items past consumers
unnoticed and into purchase contracts
through a variety of means, including by
not mentioning them at all,67 or by
focusing consumers’ attention on other
aspects of the complex transaction, such
as monthly payments, which might
increase only marginally with the
addition of prorated add-on costs, or
may even be made to decrease if the
financing term is extended.68 This type
of conduct can target immigrants,
communities of color, and
servicemembers.69 In other instances,
67 Under the Truth in Lending Act (‘‘TILA’’) and
its implementing Regulation Z, required add-on
products or services must be factored into the APR
and the finance charge disclosed during the
transaction. See 15 U.S.C. 1605, 1606, 1638; 12 CFR
226.4, 226.18(b), (d), (e), and 226.22. It is legally
impermissible for dealers to include charges for
such products in a consumer’s contract without
disclosing them. See, e.g., Complaint ¶¶ 57–60, Fed.
Trade Comm’n v. Stewart Fin. Co. Holdings, Inc.,
No. 1:03–CV–2648 (N.D. Ga. Sept. 4, 2003) (alleging
violations for failure to include the cost of required
add-on products in the finance charge and annual
percentage rate disclosed to consumers).
68 See, e.g., Buckle Up, supra note 63, at 6; Fed.
Trade Comm’n, Military Consumer Financial
Workshop, Panel 1, Tr. 19:25–41 (July 19, 2017),
https://www.ftc.gov/news-events/events-calendar/
military-consumer-workshop; Fed. Trade Comm’n,
‘‘The Road Ahead: Selling, Financing & Leasing
Motor Vehicles,’’ Public Roundtable, Session 2, Tr.
at 40–41 (Aug. 2 2011), https://www.ftc.gov/newsevents/events/2011/08/road-ahead-sellingfinancing-leasing-motor-vehicles (noting that
optional products and services are often already
included in the monthly payment prices advertised
or quoted); Christopher Kukla, Ctr. for Responsible
Lending, Comment Letter on Public Roundtables:
Protecting Consumers in the Sale and Leasing of
Motor Vehicles, Project No. P104811, Submission
No. 558507–00071 at 10 (Feb. 1, 2012), https://
www.regulations.gov/comment/FTC-2022-00360068 (discussing how dealers conceal packing by
expressing an increase in price in terms of monthly
payment); Att’ys General of 31 States & DC,
Comment Letter on Public Roundtables: Protecting
Consumers in the Sale and Leasing of Motor
Vehicles, Project No. P104811, Submission No.
558507–00112 at 5 (Apr. 13, 2012), https://
www.regulations.gov/comment/FTC-2022-00360124 (discussing the ‘‘age-old auto salesperson’s
trick’’ of quoting monthly payment prices without
disclosing that the quote includes the cost of
optional items that the customer has not yet agreed
to purchase).
69 See, e.g., Complaint ¶¶ 9, 26, Fed. Trade
Comm’n v. Liberty Chevrolet, Inc., No. 1:20–cv–
03945 (S.D.N.Y. May 21, 2020) (charging defendants
with discriminating on the basis of race, color, and
national origin by charging higher interest rates and
inflated fees); Press Release, N.Y. State Att’y Gen.,
‘‘Attorney General James Delivers Restitution to
New Yorkers Cheated by Auto Dealership’’ (Nov.
17, 2020), https://ag.ny.gov/press-release/2020/
attorney-general-james-delivers-restitution-newyorkers-cheated-auto-dealership (dealership
targeted Chinese speakers for unlawful payment
packing or ‘‘jamming’’); Military Consumer
Financial Workshop, Tr. 19:21 (July 19, 2017),
https://www.ftc.gov/news-events/events/2017/07/
military-consumer-workshop (panelist discussing
servicemembers experiencing payment packing);
see also Fed. Trade Comm’n, ‘‘Staff Perspective: A
Closer Look at the Military Consumer Financial
Workshop’’ 2–3 (Feb. 2018), https://www.ftc.gov/
system/files/documents/reports/closer-lookmilitary-consumer-financial-workshop-federal-
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dealers might wait until late in the
transaction to mention add-ons, and
then do so in a misleading manner. For
example, participants in an FTC
qualitative study on consumers’ carbuying experiences cited situations
where dealers waited until the financing
stage to mention add-ons, after
consumers believed they had agreed on
terms, and even though many add-ons
have nothing to do with financing and
were not mentioned at all during the
sales process or when prices were
initially negotiated.70 According to FTC
enforcement actions, dealers also have
represented that add-ons are required
when in fact they are not,71 have
misrepresented the purported benefits
of add-ons, and have failed to disclose
material limitations.72
trade-commission-staff-perspective/military_
consumer_workshop_-_staff_perspective_2-2-18.pdf
(explaining the unique situation of servicemembers
whose steady paychecks make them attractive
customers for dealers, while having no or minimal
credit history, meaning they qualify for less
advantageous credit terms and higher interest rate
financing).
70 See, e.g., Buckle Up, supra note 63, at 6
(observing that the introduction of ‘‘add-ons during
financing discussions caused several participants’
total sale price to balloon from the cash price’’); id.
at 9 (observing that, for most consumers in the
study, ‘‘add-ons did not come up until the financing
process, if at all, after a long car-buying process and
at a time when the consumer often felt pressure to
close the deal’’); id. (noting that most study
participants’ contracts included add-ons charges,
but that many ‘‘were unclear what those add-ons
included, and sometimes did not realize they had
purchased any add-ons at all’’); id. at 7 (explaining
situations where the consumer reached the
financing office after negotiating with the sales staff
and were then told that the agreed upon price was
not compatible with key financing terms—for
example, a promised rebate or discount could not
be combined with an advertised interest rate).
71 Complaint ¶¶ 12–19, Fed. Trade Comm’n v.
Liberty Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y.
May 21, 2020) (alleging deceptive and unauthorized
add-on charges in consumers’ transactions);
Complaint ¶¶ 59–64, Fed. Trade Comm’n v.
Universal City Nissan, Inc., No. 2:16–cv–07329
(C.D. Cal. Sept. 29, 2016) (alleging deceptive and
unauthorized add-on charges in consumers’
transactions); Complaint ¶¶ 6, 9, TT of Longwood,
No. C–4531 (F.T.C. July 2, 2015) (alleging
misrepresentations regarding prices for added
features); see also Auto Buyer Study, supra note 25,
at 14.
72 Complaint ¶¶ 4–14, Nat’l Payment Network,
Inc., No. C–4521 (F.T.C. May 4, 2015) (alleging
failure to disclose fees associated with financing
program; misleading savings claims in
advertisements); Complaint ¶¶ 4–13, Matt Blatt Inc.,
No. C–4532 (F.T.C. July 2, 2015) (alleging failure to
disclose fees associated with financing program;
misleading savings claims); Buckle Up, supra note
63, at 10 (noting that some Auto Buyer Study
participants did not fully understand material
aspects of extended warranties or service plans they
purchased and ‘‘were surprised to discover during
the interview that their plans had unexpected
limitations’’ or that ‘‘they had to pay out-of-pocket
for repairs or services that were not covered’’; for
example, one ‘‘consumer purchased a ‘Lifetime’
maintenance plan, only to discover later that he
received a one-year plan that covered periodic oil
changes’’). Cf. Consent Order ¶¶ 10–16, Santander
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Indeed, as previously noted, in a
recent FTC enforcement action, the
Commission cited a survey finding that
83% of consumers from the named
dealers were charged for add-on
products or services that they did not
authorize or as a result of deceptive
claims.73
One participant in an FTC qualitative
study of consumers’ car-buying
experiences summed up these issues
during an interview after having
purchased a vehicle.74 The consumer
purchased a $2,000 service contract that
the dealer falsely said was free, and a
$900 GAP agreement that the dealer
falsely said was mandatory. The
consumer only learned about these
purchases during the study interview.
This consumer remarked:
I feel I’ve been taken advantage of, to be
honest with you. Even though I thought that
I was getting a great deal with the interest
rate, but I know [sic] see that they’re also
very sneaky about putting stuff on your
paperwork. They only let you skim through
the paperwork that you have to sign and they
just kind of tell you what it is. This is this,
this is that, this is this, and then you just sign
it away. You’re so tired, you’re so worn
down, you don’t want to be there no more.
You just want to get it done and over with.
They take advantage of that. Yes, they still
play this friendly card, you know, thank you
for your business card kind of thing. Like I
said, they never lose. They never lose.75
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Similarly, in response to the
Commission’s notice of proposed
rulemaking, thousands of commenters
described issues they faced when
purchasing, financing, or leasing a
vehicle. Many comments the
Commission received in support of the
NPRM were from self-identified military
Consumer USA, Inc., CFPB No. 2018–BCFP–0008
(Nov. 20, 2018) (finding that defendant sold GAP
product allegedly providing ‘‘full coverage’’ to
consumers with loan-to-value ratios (‘‘LTVs’’) above
125%, when in fact coverage was limited to 125%
of LTV).
73 Complaint ¶ 27, Fed. Trade Comm’n v. N. Am.
Auto. Servs., Inc., No. 1:22–cv–01690 (N.D. Ill. Mar.
31, 2022).
74 The study is described in the Commission’s
reports: Auto Buyer Study, supra note 25, and
Buckle Up, supra note 63. Some industry
commenters critiqued the FTC’s reliance on this
qualitative study. The Commission notes that the
study provides helpful qualitative insight from
consumer interviews regarding their recent motor
vehicle purchases and is one of the many sources
the Commission has considered, including
consumer complaints, enforcement actions,
outreach and dialogue with stakeholders and
consumer groups, among others, as described in
this SBP and in the NPRM.
75 Auto Buyer Study: Appendix, supra note 66, at
130 (Study participant 152288); see also id. at 202–
03 (Study participant 180267: dealership included
a charge for GAP in the final paperwork but not in
retail sales contract); id. at 296 (Study participant
146748: consumer learned during interview with
FTC that consumer purchased GAP: ‘‘maybe they’re
just throwing that in there without telling you’’).
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consumers and dealership employees.
Examples of supportive comments
include the following:
• As a young Marine stationed in a
military town I was taken advantage of
by a dealership when purchasing my
first car. It set me back financially for
years. I know of many young military
people who purchased vehicle[]s and
we[]re instantly so far upside down after
leaving the dealership with thousands
of dollars in add on junk charges . . . .
Please make it more difficult for
dishonest dealers like these to
financially burden young Americans
and Americans of any age for that
matter.76
• Imagine going to a restaurant
franchise and order[ing] a burger and
fries for $10 and the franchise
employees say[,] ‘Sorry that will be $25
dollars, there is a $10 restaurant
adjustment price due to market
conditions and $5 for us to place and
document your order.’ You would walk
away without hesitation because that
would [be] absolutely ridiculous. Yet,
dealerships are allowed to do exactly
that. . . . IT IS TIME TO CHANGE
AND PROTECT CONSUMERS[.]77
• As in many other areas, it is the
vulnerable in our society who are
probably most affected by such
deceptive practices. . . . Sadly, it is
often these very people who desperately
need a dependable, affordable car for
transportation to work, school,
shopping, or medical care. To entice,
pressure, or trick people into buying a
car that is more than they can afford sets
them up for financial failure, not only
in possibly having a needed car
repossessed, but in long-term damage to
their credit. . . . In closing, I would be
extremely happy to see rules such as
those described above enacted, and
don’t think these could come a day too
soon. It’s a step in the right direction for
the protection of the consumer.78
• None of us working here at the
dealership in sales benefit from [unfair
and deceptive practices]. We cringe as
much as every customer and have to
show up to work every[ ]day and hope
we are not forced to screw someone
with these BS products. . . . I would
hope when [t]he regulators are making
their decisions, they understand the
positive implications this would have
for dealership employees both
financially and mentally.79
76 Individual commenter, Doc. No. FTC–2022–
0046–4648.
77 Individual commenter, Doc. No. FTC–2022–
0046–0016.
78 Individual commenter, Doc. No. FTC–2022–
0046–1216.
79 Individual commenter, Doc. No. FTC–2022–
0046–3615.
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597
• Generally, I’m not a person in favor
of government regulation. However, as a
potential customer and cash buyer, I feel
there is certainly a need to bring car
dealers back into check. I’m just looking
for a more honest and transparent
process. I don’t want to be taken
advantage of. I certainly don’t want my
family members or [s]oldiers to be taken
advantage of. Therefore, I feel it is in the
best interest of future customers to
support this regulation.80
• I cannot stress enough my support
for these new rules. Currently,
dealerships across the US, including the
one I work for, have made the car
buying process needlessly confusing,
expensive, and frustrating by engaging
in false advertising and hidden add-on
products.81
• I can tell you after many years of car
buying I have NEVER walked out of a
dealership feeling good. Even worse,
I’ve never purchased a car feeling like
I fully understood what I was
getting. . . . Looking forward to seeing
the change happen SOON! 82
• When I buy a gallon of milk from
the store, the price is written next to the
milk. When I go pay, I pay the price
advertised next to the milk. Would it be
OK if I go up to pay and that gallon of
milk had anywhere between 1% and
1,200% markup depending on the day,
what you look like, what you drove to
the store in, if you’re a man or a
woman? 83
• We ended up having to drive 3
hours to the [vehicle we] wanted. Upon
arriving to pick[ ]up the car we were
told there was a [$]4,300 increase over
MSRP. We were told if we didn’t take
it they had someone else waiting to
purchase it. We needed the car and
didn’t have time to hunt down another
one so ended up purchasing it. Very
disappointed in the long and awful
process.84
• The worst is dealing with car
dealers. You never know what the real
price is on a vehicle until you spend a
few hours with them. Mandatory
add[-] on[ ]s, market availability
surcharges, doc fees that vary from
dealer to dealer. . . . Then dealing with
the finance manager who tr[ie]s to sell
you everything you don’t[ ]need. They
high pressure the consumer on
purchasing extend[ed] warranties. There
80 Individual commenter, Doc. No. FTC–2022–
0046–7366.
81 Individual commenter, Doc. No. FTC–2022–
0046–3693.
82 Individual commenter, Doc. No. FTC–2022–
0046–3678.
83 Individual commenter, Doc. No. FTC–2022–
0046–1479.
84 Individual commenter, Doc. No. FTC–2022–
0046–1878.
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needs [to be] some sort of policing [of]
these unscrupulous car dealers to
protect the buyers.85
• This is a good start to making car
purchasing a better experience. . . . I
remember looking at a Lexus and being
told by the dealership, the only one in
the state, that [S]cotchguard and
undercoating were mandatory and they
refused to sell any vehicles without
them. There were two Acura dealerships
in town and one of them included ‘free’
lifetime oil changes that I didn’t learn
about until negotiating the price and
had already spent two hours in
negotiations. All of these services/price
adjustments were not disclosed at the
start of the negotiation and were only
revealed either in the manager’s office
or when the purchase agreement was
presented to me by the salesperson.
After spending time on the test drive
and negotiating the price, it felt that
these last minute price adjustments
were being revealed that late in the
process so that I wouldn’t leave.86
• Please enact and enforce these
regulations to protect vulnerable
consumers from predatory business
practices enjoyed by dealers. Our family
experienced such practices when trying
to purchase a vehicle in early 2022. It
was only after five hours at the
dealership that we discovered the dealer
had added on a $3,000 market
adjustment and $3,100 in other add-ons
(nitrogen-filled tires, LoJack, paint
protection) to MSRP. This raised the
price by about $6,000 and caused us to
use extra PTO over that week to find a
new vehicle at a price within our
budget. Greater transparency in the carbuying process is desperately needed to
protect vulnerable consumers—who
usually lack any bargaining power—
against power dealer networks and their
special interest groups. . . .87
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C. Law Enforcement and Other
Responses
The Commission has taken action to
protect consumers from deceptive and
unfair acts or practices in the motor
vehicle marketplace. As noted in the
NPRM, the Commission has brought
more than 50 auto law enforcement
actions; 88 led two law enforcement
85 Individual commenter, Doc. No. FTC–2022–
0046–0825.
86 Individual commenter, Doc. No. FTC–2022–
0046–4833.
87 Individual commenter, Doc. No. FTC–2022–
0046–1690.
88 Complaint, Fed. Trade Comm’n v. Rhinelander
Auto Ctr., Inc., No. 3:23–cv–00737 (W.D. Wis. Oct.
24, 2023); Complaint, Fed. Trade Comm’n v.
Passport Auto. Grp., Inc., No. 8:22–cv–02670–GLS
(D. Md. Oct. 18, 2022); Complaint, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
01690 (N.D. Ill. Mar. 31, 2022); Complaint, Traffic
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Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020);
Complaint, Fed. Trade Comm’n v. Liberty
Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y. May
21, 2020); Complaint, Federal-Mogul Motorparts
LLC, No. C–4717 (F.T.C. May 12, 2020); Complaint,
LightYear Dealer Techs., LLC, No. C–4687 (F.T.C.
Sept. 3, 2019); Complaint, Fed. Trade Comm’n v.
Passport Imports, Inc., No. 8:18–cv–03118 (D. Md.
Oct. 10, 2018); Complaint, Fed. Trade Comm’n v.
Tate’s Auto Ctr. of Winslow, Inc., No. 3:18–cv–
08176–DJH (D. Ariz. July 31, 2018); Complaint,
Cowboy AG, LLC, No. C–4639 (F.T.C. Jan. 4, 2018);
Complaint, Fed. Trade Comm’n v. Norm Reeves,
Inc., No. 8:17–cv–01942 (C.D. Cal. Nov. 3, 2017);
Complaint, Asbury Auto. Grp., Inc., No. C–4606
(F.T.C. Mar. 22, 2017); Complaint, CarMax, Inc., No.
C–4605 (F.T.C. Mar. 22, 2017); Complaint, WestHerr Auto. Grp., Inc., No. C–4607 (F.T.C. Mar. 22,
2017); Complaint, Fed. Trade Comm’n v.
Volkswagen Grp. of Am., Inc., No. 3:16–cv–01534
(N.D. Cal. Jan. 31, 2017); Complaint, Fed. Trade
Comm’n v. Uber Techs., Inc., No. 3:17–cv–00261
(N.D. Cal. Jan. 19, 2017); Complaint, Gen. Motors
LLC, No. C–4596 (F.T.C. Dec. 8, 2016); Complaint,
Jim Koons Mgmt. Co., No. C–4598 (F.T.C. Dec. 8,
2016); Complaint, Lithia Motors, Inc., No. C–4597
(F.T.C. Dec. 8, 2016); Complaint, Fed. Trade
Comm’n v. Universal City Nissan, Inc., No. 2:16–
cv–07329 (C.D. Cal. Sep. 29, 2016); Complaint,
United States v. New World Auto Imports, Inc., No.
3:16–cv–02401–K (N.D. Tex. Aug. 18, 2016);
Complaint, Progressive Chevrolet Co., No. C–4578
(F.T.C. June 13, 2016); Complaint, BMW of N. Am.,
LLC, No. C–4555 (F.T.C. Oct. 21, 2015); Complaint,
United States v. Tricolor Auto Acceptance, LLC, No.
3:15–cv–3002 (N.D. Tex. Sept. 15, 2015);
Complaint, JS Autoworld, Inc., No. C–4535 (F.T.C.
Aug. 13, 2015); Complaint, TC Dealership, L.P., No.
C–4536 (F.T.C. Aug. 13, 2015); Complaint, Matt
Blatt Inc., No. C–4532 (F.T.C. July 2, 2015);
Complaint, TT of Longwood, Inc., No. C–4531
(F.T.C. July 2, 2015); Complaint, Fin. Select, Inc.,
No. C–4528 (F.T.C. June 2, 2015); Complaint, First
Am. Title Lending of Ga., LLC, No. C–4529 (F.T.C.
June 2, 2015); Complaint, City Nissan Inc., No. C–
4524 (F.T.C. May 4, 2015); Complaint, Jim Burke
Auto., Inc., No. C–4523 (F.T.C. May 4, 2015);
Complaint, Nat’l Payment Network, Inc., No. C–
4521 (F.T.C. May 4, 2015); Complaint, TXVT Ltd.
P’ship, No. C–4508 (F.T.C. Feb. 12, 2015);
Complaint, Fed. Trade Comm’n v. Regency Fin.
Servs., LLC, No. 1:15–cv–20270–DPG (S.D. Fla. Jan.
26, 2015); Complaint, United States v. Billion Auto,
Inc., No. 5:14–cv–04118–MWB (N.D. Iowa Dec. 11,
2014); Complaint, Fed. Trade Comm’n v. Ramey
Motors, Inc., No. 1:14–cv–29603 (S.D. W. Va. Dec.
11, 2014); Complaint, Fed. Trade Comm’n v.
Consumer Portfolio Servs., Inc., No. 14–cv–00819
(C.D. Cal. May 28, 2014); Complaint, Nissan N. Am.,
Inc., No. C–4454 (F.T.C. May 1, 2014); Complaint,
TBWA Worldwide, Inc., No. C–4455 (F.T.C. May 1,
2014); Complaint, Bill Robertson & Sons, Inc., No.
C–4451 (F.T.C. Apr. 11, 2014); Complaint,
Paramount Kia of Hickory, LLC, No. C–4450 (F.T.C.
Apr. 11, 2014); Complaint, Fed. Trade Comm’n v.
Abernathy Motor Co., No. 3:14–cv–00063–BRW
(E.D. Ark. Mar. 12, 2014); Complaint, Fowlerville
Ford, Inc., No. C–4433 (F.T.C. Feb. 20, 2014);
Complaint, Infiniti of Clarendon Hills, Inc., No. C–
4438 (F.T.C. Feb. 20, 2014); Complaint, Luis
Alfonso Sierra, No. C–4434 (F.T.C. Feb. 20, 2014);
Complaint, Mohammad Sabha, No. C–4435 (F.T.C.
Feb. 20, 2014); Complaint, Norm Reeves, Inc., No.
C–4436 (F.T.C. Feb. 20, 2014); Complaint, Ganley
Ford West, Inc., No. C–4428 (F.T.C. Jan. 28, 2014);
Complaint, Timonium Chrysler, Inc., No. C–4429
(F.T.C. Jan. 28, 2014); Complaint, Courtesy Auto
Grp., Inc., No. 9359 (F.T.C. Jan. 7, 2014); Complaint,
Franklin’s Budget Car Sales, Inc., No. C–4371
(F.T.C. Oct. 3, 2012); Complaint, Fed. Trade
Comm’n v. Matthew J. Loewen, No. 2:12–cv–01207–
MJP (W.D. Wash. July 13, 2012); Complaint, Key
Hyundai of Manchester, LLC, No. C–4358 (F.T.C.
May 4, 2012); Complaint, Billion Auto, Inc., No. C–
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sweeps, including one that involved 181
State enforcement actions; 89 published
two reports on a qualitative study of
consumer experiences while purchasing
motor vehicles; and held workshops
with various stakeholders to discuss the
motor vehicle marketplace.90
4356 (F.T.C. May 1, 2012); Complaint, Frank Myers
AutoMaxx, LLC, No. C–4353 (F.T.C. Apr. 19, 2012);
Complaint, Ramey Motors, Inc., No. C–4354 (F.T.C.
Apr. 19, 2012); Complaint, Fed. Trade Comm’n v.
Hope for Car Owners, LLC, No. 2:12–cv–00778–
GEB–EFB (E.D. Cal. Mar. 27, 2012); Complaint, Fed.
Trade Comm’n v. NAFSO VLM, Inc., No. 2:12–cv–
00781–KJM–EFB (E.D. Cal. Mar. 27, 2012);
Complaint, Fed. Trade Comm’n v. Stewart Fin. Co.
Holdings, Inc., No. 1:03–CV–2648 (N.D. Ga. Sept. 4,
2003); Complaint, Pacifico Ardmore, Inc., No. C–
3920 (F.T.C. Feb. 7, 2000).
89 Operation Steer Clear and Operation Ruse
Control, brought with State law enforcement
partners around the nation and Canada,
encompassed 252 enforcement actions. See Press
Release, Fed. Trade Comm’n, ‘‘Multiple Law
Enforcement Partners Announce Crackdown on
Deception, Fraud in Auto Sales, Financing and
Leasing’’ (Mar. 26, 2015), https://www.ftc.gov/newsevents/press-releases/2015/03/ftc-multiple-lawenforcement-partners-announce-crackdown.
90 For example, the FTC has held public
workshops: (1) in conjunction with the National
Highway Traffic Safety Administration to examine
the consumer privacy and security issues posed by
automated and connected motor vehicles, see Fed.
Trade Comm’n, ‘‘Connected Cars: Privacy, Security
Issues Related to Connected, Automated Vehicles’’
(June 28, 2017), https://www.ftc.gov/news-events/
events-calendar/2017/06/connected-cars-privacysecurity-issues-related-connected; (2) to explore
competition and related issues in the U.S. motor
vehicle distribution system including how
consumers and businesses may be affected by State
regulations and emerging trends in the industry, see
Fed. Trade Comm’n, ‘‘Auto Distribution: Current
Issues & Future Trends’’ (Jan. 19, 2016), https://
www.ftc.gov/news-events/events-calendar/2016/01/
auto-distribution-current-issues-future-trends; (3)
on military consumer financial issues, including
automobile purchases, financing, and leasing, see
Fed. Trade Comm’n, ‘‘Military Consumer
Workshop’’ (July 19, 2017), https://www.ftc.gov/
news-events/events-calendar/military-consumerworkshop; and (4) through a series of three
roundtables on numerous issues in selling,
financing, and leasing automobiles, see Fed. Trade
Comm’n, ‘‘The Road Ahead: Selling, Financing &
Leasing Motor Vehicles’’ (Apr. 12, 2011), https://
www.ftc.gov/news-events/events-calendar/2011/04/
road-ahead-selling-financing-leasing-motorvehicles; Fed. Trade Comm’n, ‘‘The Road Ahead:
Selling, Financing & Leasing Motor Vehicles’’ (Aug.
2, 2011), https://www.ftc.gov/news-events/eventscalendar/2011/08/road-ahead-selling-financingleasing-motor-vehicles; Fed. Trade Comm’n, ‘‘The
Road Ahead: Selling, Financing & Leasing Motor
Vehicles’’ (Nov. 17, 2011), https://www.ftc.gov/
news-events/events-calendar/2011/11/road-aheadselling-financing-leasing-motor-vehicles; see also
Consumers for Auto Reliability and Safety,
Comment Letter on Motor Vehicle Roundtables,
Project No. P104811, at 6 (Apr. 1, 2012), https://
www.ftc.gov/sites/default/files/documents/public_
comments/public-roundtables-protectingconsumers-sale-and-leasing-motor-vehicles-projectno.p104811-00108/00108-82875.pdf (stating that
the Director of the Navy-Marine Corps Relief
Society in San Diego indicated before the California
Assembly Committee on Banking and Finance that
‘‘the number one issue they are confronted with is
used car dealers who are taking advantage of
military personnel’’). These events, and others, have
included speakers representing consumers, dealers,
regulators, and other industry stakeholders.
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As discussed in the NPRM, the
Commission’s law enforcement partners
have also brought actions addressing
unfair, abusive, and deceptive practices
in the motor vehicle industry. For
example, the Consumer Financial
Protection Bureau (‘‘CFPB’’) has taken
action against third-party motor vehicle
financing entities in matters that raise
similar, and sometimes identical, claims
of deceptive and unfair acts or practices
as have been at issue in FTC
enforcement actions.91
91 The CFPB has brought at least 23 enforcement
actions involving motor vehicles, financing, or addon products or services. See Consent Order ¶¶ 3,
13–57, Toyota Motor Credit Corp., CFPB No. 2023–
CFPB–0015 (Nov. 20, 2023) (finding auto lender
engaged in unfair or abusive acts or practices by
making it unreasonably difficult for consumers to
cancel unwanted add-ons; failing to ensure
consumers received refunds of payments they had
made for certain add-ons that had become void and
worthless; and failing to provide refunds owed to
consumers who canceled their vehicle service
agreements);
Complaint ¶¶ 75–104, CFPB v. USASF Servicing,
LLC, No. 1:23–cv–03433–VMC (N.D. Ga. Aug. 2,
2023) (alleging auto loan servicer illegally disabled
and repossessed consumers’ vehicles, wrongfully
double-billed consumers, misapplied payments,
and failed to ensure refunds of unearned GAP
premiums to which consumers were entitled);
Consent Order ¶¶ 7–33, TMX Finance LLC, CFPB
No. 2023–CFPB–0001 (Feb. 23, 2023) (finding auto
lender understated and inaccurately disclosed the
finance charge and annual percentage rate on loans
and unfairly charged borrowers for a product that
provided no benefit); Complaint ¶¶ 33–135, 171–
226, CFPB v. Credit Acceptance Corp., No. 1:23–cv–
00038 (S.D.N.Y. Jan. 4, 2023) (alleging indirect auto
lender misrepresented key terms of loans provided
to subprime and deep-subprime consumers and
substantially assisted dealers in the deceptive sale
of add-on products); Consent Order ¶¶ 7–22, Wells
Fargo Bank, N.A., CFPB No. 2022–CFPB–0011 (Dec.
20, 2022) (finding bank incorrectly applied
borrowers’ auto loan payments, erroneously
assessed fees and interest, wrongly repossessed
borrowers’ vehicles, and failed to ensure borrowers
received refunds of unearned GAP fees at early
payoff); Consent Order ¶¶ 4–55, Hyundai Capital
America, CFPB No. 2022–CFPB–0005 (July 26,
2022) (finding auto finance company furnished
inaccurate information about consumers to credit
reporting agencies); Consent Order ¶¶ 4–14, 3rd
Generation, Inc., CFPB No. 2021–CFPB–0003 (May
21, 2021) (finding subprime auto loan servicer
charged interest on late payments of fees without
the knowledge or consent of consumers); Consent
Order ¶¶ 8–50, Santander Consumer USA Inc.,
CFPB No. 2020–BCFP–0027 (Dec. 22, 2020) (finding
auto finance company provided inaccurate records
to credit reporting agencies); Consent Order ¶¶ 11
–52, Nissan Motor Acceptance Corp., CFPB No.
2020–BCFP–0017 (Oct. 13, 2020) (finding auto
finance company misrepresented financing
extension agreements, repossessions, and
limitations to consumer bankruptcy protections);
Consent Order ¶¶ 8–22, Lobel Fin. Corp., CFPB No.
2020–BCFP–0016 (Sept. 21, 2020) (finding autoloan servicer unfairly charged delinquent
consumers add-on charges in the form of Loss
Damage Waiver premiums); Consent Order ¶¶ 6–30,
Santander Consumer USA Inc., CFPB No. 2018–
BCFP–0008 (Nov. 20, 2018) (finding auto finance
company sold GAP to consumers with LTV over
125%, misrepresenting that such consumers would
be fully covered with total loss);
Consent Order ¶¶ 27–39, Wells Fargo Bank, N.A.,
CFPB No. 2018–BCFP–0001 (Apr. 20, 2018) (finding
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In addition, States have engaged in
enforcement actions alleging similar
dealer misconduct in the motor vehicle
dealer marketplace, and have
implemented legislative and regulatory
measures to address corresponding
consumer protection issues. With regard
to law enforcement, State regulators and
Attorneys General have participated in
law enforcement sweeps with the FTC,
and have filed hundreds of actions
alleging unlawful conduct by motor
vehicle dealerships across the
country.92 Furthermore, with regard to
bank imposed duplicative or unnecessary forcedplaced auto loan insurance on consumers); Consent
Order ¶¶ 12–23, Toyota Motor Credit Corp., CFPB
No. 2016–CFPB–0002 (Feb. 2, 2016) (finding auto
finance company engaged in discriminatory pricing
markup for motor vehicle financing, without regard
to creditworthiness); Consent Order ¶¶ 73–75, Y
King S Corp., CFPB No. 2016–CFPB–0001 (Jan. 21,
2016) (finding used car dealer failed to disclose
mandatory add-ons as financing charges); Consent
Order ¶¶ 12–51, Interstate Auto Grp., Inc., CFPB
No. 2015–CFPB–0032 (Dec. 17, 2015) (finding
dealership and financing company reported
information they knew or had reasonable cause to
believe was inaccurate to credit reporting entities,
harming consumer credit); Consent Order ¶¶ 7–90,
Westlake Servs., LLC, CFPB No. 2015–CFPB–0026
(Sept. 30, 2015) (finding indirect auto financing
entity used illegal debt collection tactics); Consent
Order ¶¶ 8–23, Fifth Third Bank, CFPB No. 2015–
CFPB–0024 (Sept. 28, 2015) (finding discrimination
against loan applicants in credit applications based
on characteristics such as race and national origin);
Consent Order ¶¶ 9–24, Am. Honda Fin. Corp.,
CFPB No. 2015–CFPB–0014 (July 14, 2015) (same);
Consent Order ¶¶ 4–60, DriveTime Auto. Grp.,
Inc., CFPB No. 2014–CFPB–0017 (Nov. 19, 2014)
(finding buy-here-pay-here dealership made
harassing debt collection calls and provided
inaccurate credit information to credit reporting
agencies); Consent Order ¶¶ 4–37, First Investors
Fin. Servs. Grp., Inc., CFPB No. 2014–CFPB–0012
(Aug. 20, 2014) (finding auto financing company
provided inaccurate records to credit reporting
agencies); Consent Order ¶¶ 7–27, Ally Fin. Inc.,
CFPB No. 2013–CFPB–0010 (Dec. 20, 2013) (finding
auto lender engaged in discriminatory pricing);
Consent Order ¶¶ 14–29, U.S. Bank Nat’l Ass’n,
CFPB No. 2013–CFPB–0004 (June 26, 2013) (finding
bank failed to properly disclose all the fees charged
to participants in the companies’ Military
Installment Loans and Educational Services auto
loans program, and misrepresented the true cost
and coverage of add-on products financed along
with the auto loans); Consent Order ¶¶ 10–22,
Dealers’ Fin. Servs., LLC, CFPB No. 2013–CFPB–
0004 (June 26, 2013) (finding financing company
made deceptive statements regarding the cost of
add-on products and the scope of coverage of the
vehicle service contract).
92 Operation Steer Clear and Operation Ruse
Control, brought with State law enforcement
partners around the nation and Canada,
encompassed 252 enforcement actions. See Press
Release, Fed. Trade Comm’n, ‘‘Multiple Law
Enforcement Partners Announce Crackdown on
Deception, Fraud in Auto Sales, Financing and
Leasing’’ (Mar. 26, 2015), https://www.ftc.gov/newsevents/press-releases/2015/03/ftc-multiple-lawenforcement-partners-announce-crackdown.
Separately, the California Attorney General’s office
sued a dealership chain under State consumer
protection laws for deceiving consumers about addon product charges and misrepresenting consumers’
income on credit applications; the alleged practices
specifically targeted low-income consumers with
subprime credit. Complaint ¶¶ 37–86, People v.
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599
legislative and regulatory efforts, at least
four States have enacted consumer
protection measures relating to pricing
or add-ons by motor vehicle dealers.93
For example, to ‘‘ensure that dealers do
not add in hidden or undisclosed costs
after the price for a vehicle has been
advertised,’’ Oregon promulgated a rule
that requires dealerships to state an
‘‘offering price’’ that is the actual offer
and amount the consumer can pay to
own the vehicle, excluding only taxes
and other specific items.94 California
and Wisconsin have similarly enacted
laws that make it unlawful for
dealerships to advertise a total price
without including additional costs to
the purchaser outside the mandatory
tax, title, and registration fees.95 Other
States, such as Indiana, have enacted
codes that prohibit the sale of add-ons
in certain circumstances.96
The Commission and its law
enforcement partners also regularly
provide business guidance and
consumer education regarding the motor
vehicle marketplace. The Commission
has compiled its motor vehicle business
guidance into a portal on its website,
with links to guidance documents,
frequently asked questions, and legal
resources.97 Likewise, the Commission
provides a web page for consumers to
learn more about buying, financing, and
leasing motor vehicles.98 Several States
have published similar such guidance
manuals for motor vehicle dealers,99
Paul Blanco’s Good Car Co. Auto Grp., No. RG–
19036081 (Cal. Super. Ct. Sept. 23, 2019).
93 See, e.g., Cal. Veh. Code 11713.1(b), (c); Or.
Admin. R. 137–020–0020(3)(c); Wis. Admin. Code
Trans. 139.03(3); Ind. Code 24–4.5–3–202.
94 Or. Admin. R. 137–020–0020(3)(c); Official
Commentary, Or. Admin. R. 137–020–0020(3)(c).
95 Cal. Veh. Code 11713.1(b), (c); Wis. Admin.
Code Trans. 139.03(3).
96 Ind. Code 24–4.5–3–202(3)(e)(ix) (prohibiting
the sale of any GAP coverage when the LTV is less
than 80%); Cal. Civ. Code 2982.12(a)(5)(B)
(prohibiting the sale of any GAP waiver in three
scenarios, including when the amount financed for
the vehicle exceeds the amount covered by the GAP
waiver).
97 See Fed. Trade Comm’n, Business Guidance,
‘‘Automobiles,’’ https://www.ftc.gov/businessguidance/industry/automobiles (last visited Dec. 5,
2023).
98 See Fed. Trade Comm’n, ‘‘Buying and Owning
a Car,’’ https://consumer.ftc.gov/shopping-anddonating/buying-and-owning-car (last visited Dec.
5, 2023).
99 See, e.g., Ill. Sec’y of State Police, Dealer
Handbook (Apr. 2022), https://www.ilsos.gov/
publications/pdf_publications/sos_dop66.pdf; Wis.
DOT—Div. of Motor Vehicles, Motor Vehicle
Salesperson Manual—2020, https://wisconsin
dot.gov/Documents/dmv/shared/salesmanual20.pdf; Enf’t Div. of the Tex. Dep’t of Motor
Vehicles, Motor Vehicle Dealer Manual (2017),
https://www.txdmv.gov/sites/default/files/bodyfiles/Motor_Vehicle_Dealer_Manual.pdf.
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while others have provided online
consumer education resources.100
While some commenters stated that
existing Federal and State efforts are
sufficient, recent Commission and
partner actions indicate that misconduct
has persisted despite prior law
enforcement and other efforts, and
despite the NPRM’s detailed description
of chronic problems relating to bait-andswitch tactics and hidden add-on and
other charges. For example, in a recent
enforcement action, filed after
publication of the NPRM, the
Commission charged several auto dealer
locations in an auto dealership group
with misrepresenting the price of
vehicles. According to the complaint,
the dealers advertised one price to lure
consumers to their dealerships, then
charged them hundreds to thousands of
dollars more than the advertised price
by tacking on bogus extra fees for
inspection, reconditioning, preparation,
and certification.101 The action also
addressed the practice of dealers
charging Black and Latino consumers
these fees more often and in higher
amounts.102
100 See, e.g., Cal. Dept. of Just., ‘‘Buying and
Maintaining a Car,’’ https://oag.ca.gov/consumers/
general/cars (last visited Dec. 5, 2023); Fla.
Highway Safety & Motor Vehicles, ‘‘Buying from a
Licensed Dealer,’’ https://www.flhsmv.gov/safetycenter/consumer-education/buying-vehicle-florida/
buying-licensed-dealer (last visited Dec. 5, 2023);
Or. Dep’t of Just., ‘‘Buying a Vehicle,’’ https://
www.doj.state.or.us/consumer-protection/motorvehicles/buying-a-vehicle/ (last visited Dec. 5,
2023).
101 Complaint ¶ 17, Fed. Trade Comm’n v.
Passport Auto. Grp., Inc., No. 8:22–cv–2670 (D. Md.
Oct. 18, 2022).
102 Id. ¶ 18. Recent actions outside the auto
marketplace, even in transactions that may not be
as complex and time consuming as motor vehicle
transactions, further illustrate unfair and deceptive
practices related to advertising, add-ons, and
hidden charges. In one such action, the court noted
‘‘the realities of the disparate bargaining power’’
between the corporate defendant and its customers,
adding that customers ‘‘might have believed the
[add-on] fees were mandatory,’’ and ‘‘might not
have had the time’’ to negotiate or complain about
them. Fed. Trade Comm’n v. FleetCor Techs., Inc.,
1:19–cv–5727, 2022 WL 3350066, at *13 (N.D. Ga.
Aug. 9, 2022) (granting the Commission’s motion to
exclude the defendant’s expert testimony); see also
Fed. Trade Comm’n v. FleetCor Techs., Inc., 620 F.
Supp. 3d 1268, 1337 (N.D. Ga. 2022) (finding on
summary judgment that (1) defendants did not tell
consumers about fees at sign-up; (2) disclosures
about fees in contractual documents were
inadequate; and (3) defendants failed to get consent
to add-on charges); id. at 1334 (concluding that
defendants had ‘‘charged a slew of fees that: were
never discoverable to customers [and] were
obscured by undecipherable language’’); Complaint
¶¶ 41–43, Fed. Trade Comm’n v. Harris Originals of
NY, Inc., No. 2:22–cv–4260 (E.D.N.Y. July 20, 2022)
(alleging that a jewelry company charged military
consumers for add-on products without their
consent or under false pretenses); Complaint ¶¶ 61–
73, Fed. Trade Comm’n v. Benefytt Techs., Inc., No.
8:22–cv–1794 (M.D. Fla. Aug. 8, 2022) (alleging
illegal add-on charges by healthcare companies);
Complaint ¶¶ 1–4, Fed. Trade Comm’n v. First Am.
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Multiple actions by partners since
publication of the Commission’s NPRM
have involved auto add-ons. The
Commission and the State of Wisconsin
alleged that a dealership group, its
current and former owners, and its
general manager deceived consumers by
tacking on hundreds or even thousands
of dollars for add-ons without those
consumers’ authorization or by leading
the consumers to believe the add-ons
were mandatory, and doing so
disproportionately more frequently with
American Indian customers.103 The
CFPB and the New York State Office of
the Attorney General alleged that a
subprime auto lender knew or recklessly
disregarded that dealers were tricking
borrowers into purchasing add-on
products without their knowledge or
consent and had incentivized such
behavior.104 In addition, the
Commonwealth of Massachusetts has
brought two recent cases involving
unfair add-on pricing practices.105 In
one such case, Massachusetts
emphasized the dynamics of auto
transactions that frequently lead to
deceptive and unfair practices,
particularly with respect to add-ons,
noting that add-on products ‘‘are often
sprung on consumers in the final steps
of completing a transaction’’ after
‘‘multiple rounds of negotiation on the
price of a car and/or car financing.’’ 106
Efforts to combat deceptive and unfair
practices in the motor vehicle industry
since the NPRM have gone beyond
enforcement actions. The CFPB
announced that it uncovered several
unlawful practices through supervisory
examinations, including auto loan
servicers charging for add-ons that
provide no benefit to the consumer 107
Payment Sys., LP, No. 4:22–cv–654 (E.D. Tex. July
29, 2022) (alleging that a payment processing
company misrepresented the terms and costs of its
services, resulting in unexpected and unauthorized
fees); Fed. Trade Comm’n, Notice of Proposed
Rulemaking, Trade Regulation Rule on Unfair or
Deceptive Fees, 88 FR 77420, 77435–37 (released
Oct. 11, 2023; published Nov. 9, 2023), https://
www.govinfo.gov/content/pkg/FR-2023-11-09/pdf/
2023-24234.pdf.
103 Complaint ¶¶ 3–5, 11–18, 33–43, 48–51, Fed.
Trade Comm’n v. Rhinelander Auto Ctr., Inc., No.
3:23–cv–00737 (W.D. Wis. Oct. 24, 2023).
104 Complaint ¶¶ 128–30, CFPB v. Credit
Acceptance Corp., No. 1:23–cv–38 (S.D.N.Y. Jan. 4,
2023).
105 Complaint ¶ 3, Massachusetts v. Jaffarian’s
Serv., Inc., No. 2277–cv–881 (Mass. Super. Ct. Sept.
15, 2022); Assurance of Discontinuance ¶¶ 7–9, In
re Hometown Auto Framingham, Inc., No. 2384–cv
–116 (Mass. Super. Ct. Jan. 17, 2023).
106 Complaint ¶ 5, Massachusetts v. Jaffarian’s
Serv., Inc., No. 2277–cv–881 (Mass. Super. Ct. Jan.
17, 2023).
107 Consumer Fin. Prot. Bureau, ‘‘Supervisory
Highlights: Issue 24, Summer 2021’’ 3–4 (June
2021), https://files.consumerfinance.gov/f/
documents/cfpb_supervisory-highlights_issue-24_
2021-06.pdf (finding servicers added and
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and failing to ensure consumers
received refunds for add-on products
that no longer offered any benefits.108 In
addition, the State of California enacted
new legislation that regulates a
particular type of add-on product—GAP
agreements.109 A press release
introducing the legislation cited
concerns about unfair practices in the
sale of GAP agreements, stating that this
add-on has little value and is often
targeted at consumers with lower
incomes and subprime credit.110
California’s law requires several
disclosures related to GAP agreements,
including disclosures pertaining to their
financed cost and informing consumers
that such products are optional.111 The
law also prohibits the sale of GAP
agreements that will not actually cover
consumers’ debt.112
Despite the array of actions by the
Commission and its partners, unfairness
and deception continue in the motor
vehicle marketplace, including (1)
deceptive or unfair sales and advertising
tactics and (2) hidden charges,
particularly with respect to add-on
products or services. To address the
harm these issues inflict on consumers
and on law-abiding dealers, the Final
Rule, in general:
• Prohibits dealers from making
misrepresentations regarding material
information, including about the cost of
the vehicle, the financing terms, and the
availability of rebates or discounts;
• Requires dealers to disclose the
offering price of the vehicle—its full
cash price, provided that dealers may
exclude required government charges;
that optional add-ons are not required;
the total of payments for the vehicle
when making a representation about
monthly payment; and that a discussed
lower monthly payment will increase
maintained unnecessary collateral protection
insurance (CPI) when consumers had adequate
insurance and thus the CPI provided no benefit to
the consumers, and also when consumers’ vehicles
had been repossessed even though no actual
insurance protection was provided after
repossession).
108 Consumer Fin. Prot. Bureau, ‘‘Supervisory
Highlights: Issue 28, Fall 2022’’ 4–5 (Nov. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_supervisory-highlights_issue-28_2022-11.pdf
(finding consumers paid off their vehicle financing
early but servicers failed to ensure consumers
received refunds for unearned fees related to addon products which no longer offered any possible
benefit to consumers after payoff).
109 Cal. Civ. Code 2982.12.
110 Press Release, Off. of the Att’y Gen. of Cal.,
‘‘Attorney General Bonta and Assemblymember
Maienschein Announce Legislation to Strengthen
Protections for Car Buyers’’ (Feb. 16, 2022), https://
oag.ca.gov/news/press-releases/attorney-generalbonta-and-assemblymember-maienscheinannounce-legislation.
111 Cal. Civ. Code 2982.12.
112 Id.
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the total amount the consumer will pay,
if true;
• Prohibits dealers from charging for
add-on products or services that provide
no benefit to the consumer; and
• Requires dealers to obtain express,
informed consent from the consumer for
any charge.
As discussed in the section-by section
analysis in SBP III and in response to
comments, the Commission is declining
to finalize certain provisions proposed
in the NPRM, including the provision
that dealers must disclose a list of prices
for all optional add-on products or
services, and the provision that dealers
must obtain certain signed declinations
from consumers prior to charging for
optional add-on products or services.
The Commission also is finalizing the
defined terms ‘‘Covered Motor Vehicle’’
and ‘‘Covered Motor Vehicle Dealer’’ to
reflect edits to narrow the scope of these
definitions compared to the scope of the
terms ‘‘Motor Vehicle’’ and ‘‘Motor
Vehicle Dealer’’ in the NPRM.
III. Section-by-Section Analysis
The following discussion provides a
section-by-section analysis that states
the provisions proposed in the NPRM,
and discusses the comments received,
the Commission’s responses to
comments, and the provisions adopted
in the Final Rule.113
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A. § 463.1: Authority
Section 463.1 states that the Final
Rule is promulgated pursuant to section
1029 of the Dodd-Frank Act, and that it
is an unfair or deceptive act or practice
within the meaning of section 5(a)(1) of
the FTC Act to violate, directly or
indirectly, any provision of the Final
Rule, including the recordkeeping
requirements, which are necessary to
prevent such unfair or deceptive acts or
practices and to enforce this Rule.114
The prohibition against violating any
applicable provision ‘‘directly or
indirectly’’ applies to each section of
part 463. As discussed in SBP I.A,
113 Regarding the thousands of comments
received, the Commission notes that many
commenters raised similar concerns or addressed
overlapping issues. To avoid repetition, the
Commission has endeavored to respond to issues
raised in similar comments together. Responses
provided in any given section apply equally to
comments addressing the same subject in the
context of other sections. Moreover, throughout the
SBP, the Commission discusses justifications for the
Final Rule that are informed by its careful
consideration of all comments received, even where
that discussion is not linked to a particular
comment.
114 The proposed authority provision in the
NPRM omitted the second reference to ‘‘unfair’’ acts
or practices with regard to the proposed
recordkeeping requirements; the Final Rule
consistently refers to both ‘‘unfair’’ and ‘‘deceptive’’
acts or practices together.
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section 1029 authorizes the FTC to
prescribe rules under Sections 5 and
18(a)(1)(B) of the FTC Act with respect
to motor vehicle dealers predominantly
engaged in the sale and servicing of
motor vehicles, the leasing and
servicing of motor vehicles, or both.115
115 One industry group argued that the proposed
rule violated the APA because it did not comply
with the FTC’s rule requiring publication of an
Advance Notice of Proposed Rulemaking (‘‘ANPR’’),
16 CFR 1.10. Section 1.10, however, like the rest of
subpart B of part 1 of the Commission’s Rules of
Practice, applies only to ‘‘proceedings for the
promulgation of rules as provided in section
18(a)(1)(B) of the Federal Trade Commission Act.’’
16 CFR 1.7. The ANPR requirement in section 1.10
implements section 18(b)(2) of the FTC Act, which
requires an ANPR when the Commission
promulgates rules under the procedures set forth in
that section. In this case, the FTC is acting under
statutory authority under section 1029(d) of the
Dodd-Frank Act, see NPRM at 42031, which
authorizes the Commission to promulgate rules
using the APA’s informal notice-and-comment
procedure, see 5 U.S.C. 553, notwithstanding the
additional procedural requirements set forth in
section 18. Accordingly, this rulemaking is
governed by subpart C of part 1 of the Commission’s
Rules of Practice, which ‘‘sets forth procedures for
the promulgation of rules under authority other
than section 18(a)(1)(B) of the FTC Act.’’ 16 CFR
1.21. Neither subpart C nor the APA requires
publication of an ANPR.
This is consistent with Commission practice in
prior notices to issue or amend regulations,
including with the Made in USA Labeling Rule, the
Children’s Online Privacy Protection Act Rule, and
the Telemarketing Sales Rule. See, e.g., Fed. Trade
Comm’n, Notice of Proposed Rulemaking, Made in
USA Labeling Rule, 85 FR 43162 (July 16, 2020),
https://www.govinfo.gov/content/pkg/FR-2020-0716/pdf/2020-13902.pdf (issuing original notice of
proposed rulemaking that was not preceded by an
advance notice of proposed rulemaking); Fed. Trade
Comm’n, Notice of Proposed Rulemaking,
Children’s Online Privacy Protection Rule, 64 FR
22750 (Apr. 27, 1999), https://www.govinfo.gov/
content/pkg/FR-1999-04-27/pdf/99-10250.pdf
(same); Fed. Trade Comm’n, Notice of Proposed
Rulemaking, Telemarketing Sales Rule, 60 FR 8313
(Feb. 14, 1995), https://www.govinfo.gov/content/
pkg/FR-1995-02-14/pdf/95-3537.pdf (same); Fed.
Trade Comm’n, Notice of Proposed Rulemaking,
Telemarketing Sales Rule, 78 FR 41200 (July 19,
2013), https://www.govinfo.gov/content/pkg/FR2013-07-09/pdf/2013-12886.pdf (issuing notice of
proposed rulemaking for rule amendment that was
not preceded by an advance notice of proposed
rulemaking); Fed. Trade Comm’n, Proposed Rule,
Children’s Online Privacy Protection Rule, 76 FR
59804 (Sept. 27, 2011), https://www.govinfo.gov/
content/pkg/FR-2011-09-27/pdf/2011-24314.pdf
(same); Fed. Trade Comm’n, Notice of Proposed
Rulemaking, Telemarketing Sales Rule, 74 FR 41988
(Aug. 19, 2009), https://www.govinfo.gov/content/
pkg/FR-2009-08-19/pdf/E9-19749.pdf (same); Fed.
Trade Comm’n, Notice of Proposed Rulemaking,
Children’s Online Privacy Protection Rule, 70 FR
2580 (Jan. 14, 2005), https://www.govinfo.gov/
content/pkg/FR-2005-01-14/pdf/05-877.pdf (same);
Fed. Trade Comm’n, Notice of Proposed
Rulemaking, Telemarketing Sales Rule, 69 FR 67287
(Nov. 17, 2004), https://www.govinfo.gov/content/
pkg/FR-2004-11-17/pdf/04-25470.pdf (same); Fed.
Trade Comm’n, Notice of Proposed Rulemaking,
Telemarketing Sales Rule, 69 FR 7330 (Feb. 13,
2004), https://www.govinfo.gov/content/pkg/FR2004-02-13/pdf/04-3287.pdf (same); Fed. Trade
Comm’n, Notice of Proposed Rulemaking,
Telemarketing Sales Rule, 67 FR 4492 (Jan. 30,
2002), https://www.govinfo.gov/content/pkg/FR-
PO 00000
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601
2002-01-30/pdf/02-1998.pdf (same); Fed. Trade
Comm’n, Notice of Proposed Rulemaking,
Children’s Online Privacy Protection Rule, 66 FR
54963 (Oct. 31, 2001), https://www.govinfo.gov/
content/pkg/FR-2001-10-31/pdf/01-27390.pdf
(same). This is also true of regulation amendments
pursuant to the authority under which this Final
Rule is promulgated—that which Congress granted
to the Commission under section 1029 of the DoddFrank Act, 15 U.S.C. 5519, pertaining to motor
vehicle dealers. See, e.g., Fed. Trade Comm’n,
Notice of Proposed Rulemaking, Used Motor
Vehicle Trade Regulation Rule, 77 FR 74746, 74748
(Dec. 17, 2012), https://www.govinfo.gov/content/
pkg/FR-2012-12-17/pdf/2012-29920.pdf (‘‘Because
the Dodd-Frank Act authorized the Commission to
use APA procedures for notice and public comment
in issuing or amending rules with respect to motor
vehicle dealers, the FTC will not use the procedures
set forth in Section 18 of the FTC Act, 15 U.S.C.
57a, with respect to these proposed revisions to the
Used Car Rule and the Used Car Buyers Guide.
Accordingly, the Commission is publishing this
Notice of Proposed Rulemaking pursuant to Section
553 of the APA.’’); see also Fed. Trade Comm’n,
Notice of Proposed Rulemaking, Privacy of
Consumer Financial Information Rule Under the
Gramm-Leach-Bliley Act (‘‘Privacy Rule’’), 84 FR
13150 (Apr. 4, 2019), https://www.govinfo.gov/
content/pkg/FR-2019-04-04/pdf/2019-06039.pdf
(issuing notice of proposed rulemaking for rule
amendment that was not preceded by an advance
notice of proposed rulemaking).
This same commenter argued the FTC had not
complied with the ‘‘Principles of Regulation’’
enumerated in section 1(b) of Executive Order
12866. See Comment of Nat’l Auto. Dealers Ass’n,
Doc. No. FTC–2022–0046–8368 at 34–36 & n.123;
E.O. 12866 3(b) (defining ‘‘Agency’’ to mean an
authority of the United States ‘‘other than those
considered to be independent regulatory agencies’’).
This provision of the Executive Order does not
apply to independent agencies such as the FTC.
Regardless, the Commission did take into account
the principles set forth in section 1(b), as is evident
throughout the NPRM. See, e.g., NPRM at 42015–
17 (identifying problems in the marketplace); id. at
42028–42031 (soliciting comments on alternative
approaches); id. at 42036–42044 (assessing costs
and benefits).
The same commenter also argued that the
Commission’s denial of its request to extend the
comment period prejudiced the commenter’s ability
to collect and provide data pertaining to the
proposed rule and was inconsistent with the
Commission’s grant of extensions in other
rulemakings. As described in its letter, the
Commission also received requests opposing an
extension of the comment period. See Letter, Fed.
Trade Comm’n, ‘‘Duration of the Public Comment
Period in Matter No. P204800’’ (Aug. 23, 2022),
https://www.ftc.gov/system/files/ftc_gov/pdf/
Matter%20No.%20204800%20-%20Letter%
20re%20Extension%20for%20publication.pdf. In
the letter, the Commission noted its ongoing
engagement with stakeholders on issues relating to
the sale, financing, and lease of motor vehicles,
since before its 2011 Federal Register notice
inviting stakeholder feedback on these issues and
continuing since that time. See Fed. Trade Comm’n,
Public Roundtables: Protecting Consumers in the
Sale and Leasing of Motor Vehicles, 76 FR 14,014
(Mar. 15, 2011), https://www.federalregister.gov/
documents/2011/03/15/2011-5873/publicroundtables-protecting-consumers-in-the-sale-andleasing-of-motor-vehicles. The Commission
determined that a sixty-day comment period, along
with an additional twenty days following the public
announcement and release of the NPRM and prior
to its publication in the Federal Register, provided
meaningful opportunity to comment. See also
Steven J. Balla, ‘‘Public Commenting on Federal
Agency Regulations: Research on Current Practices
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The Final Rule defines with specificity
certain unfair or deceptive acts or
practices; the Final Rule provisions are
also ‘‘prescribed for the purpose of
preventing such acts or practices.’’ 116
B. § 463.2: Definitions
1. Overview
The proposed rule included
definitions for the following terms:
‘‘Add-on’’ or ‘‘Add-on Product(s) or
Service(s)’’; ‘‘Add-on List’’; ‘‘Cash Price
without Optional Add-ons’’; ‘‘Clearly
and Conspicuously’’; ‘‘Dealer’’ or
‘‘Motor Vehicle Dealer’’; ‘‘Express,
Informed Consent’’; ‘‘GAP Agreement’’;
‘‘Government Charges’’; ‘‘Material’’ or
‘‘Materially’’; ‘‘Motor Vehicle’’; and
‘‘Offering Price.’’ In the definition-bydefinition analysis in SBP III.B.2, the
Commission discusses each definition
proposed in the NPRM, relevant
comments that are not otherwise
addressed in the discussion of the
corresponding substantive provisions of
the Final Rule, and the definition the
Commission is finalizing.
2. Definition-by-Definition Analysis
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(a) Add-On or Add-On Product(s) or
Service(s)
The proposed rule defined ‘‘Add-on’’
or ‘‘Add-on Product(s) or Service(s)’’ as
‘‘any product(s) or service(s) not
provided to the consumer or installed
on the vehicle by the motor vehicle
manufacturer and for which the Motor
Vehicle Dealer, directly or indirectly,
charges a consumer in connection with
a vehicle sale, lease, or financing
transaction.’’ This term appeared in the
following definitions and substantive
provisions of the rule proposal: the
definitions of ‘‘Add-on List’’ and ‘‘Cash
Price without Optional Add-ons’’; the
Prohibited Misrepresentations provision
at proposed § 463.3(b); the add-on list
disclosure provision at proposed
§ 463.4(b); the requirement to disclose
that add-ons are not required at
proposed § 463.4(c); the prohibition
against charging for add-ons that
provide the consumer no benefit at
proposed § 463.5(a); and the proposed
provision relating to undisclosed or
unselected add-ons at § 463.5(b). As
and Recommendations to the Administrative
Conference of the United States’’ App. A (2011),
https://www.acus.gov/sites/default/files/
documents/Consolidated-Reports-%2BMemoranda.pdf (reporting data from a pool of 703
comment periods associated with actions by dozens
of Federal agencies, and finding that the average
duration of comment periods for proposed agency
actions was 38.7 days, and 45.1 days for actions that
are economically significant).
116 15 U.S.C. 57a(a)(1)(B) (the Commission ‘‘may
include requirements prescribed for the purpose of
preventing’’ unfair or deceptive acts or practices).
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discussed in the following paragraphs,
in response to stakeholder comments,
the Commission declines to finalize
certain of these provisions; in the Final
Rule, this term appears in paragraph (a)
of the Prohibited Misrepresentations
section (§ 463.3); the Disclosure
Requirements provision in paragraph (c)
of § 463.4; and the provision in
§ 463.5(a) titled ‘‘Dealer Charges for
Add-ons and Other Items’’ and subtitled
‘‘Add-ons that provide no benefit.’’
For the following reasons, the
Commission adopts the definition of
‘‘Add-on’’ or ‘‘Add-on Product(s) or
Service(s)’’ largely as proposed, with
conforming modifications to reflect
changes to the defined terms ‘‘‘Covered
Motor Vehicle’ or ‘Vehicle’’’ and
‘‘‘Covered Motor Vehicle Dealer’ or
‘‘Dealer’’’ as described in more detail in
the discussion of § 463.2(e) and (f), in
SBP III.B.2(e) and (f).
The Commission received several
comments relating to the scope of its
proposed definition for ‘‘Add-on’’ or
‘‘Add-on Product(s) or Service(s).’’
Industry association and other
commenters recommended that the
Commission broaden the definition to
include manufacturer-provided
products or services, expressing concern
that exclusion of such products or
services would put other companies that
provide such items at a competitive
disadvantage. Products or services
provided by manufacturers, however,
are already covered by several
provisions of the Final Rule. Under the
substantive provisions the Commission
is finalizing, dealers are prohibited from
making misrepresentations regarding
material information, including about
the ‘‘costs or terms of purchasing,
financing, or leasing a Vehicle’’
(§ 463.3(a)); must disclose the vehicle’s
true ‘‘Offering Price,’’ which includes
any amounts dealers charge for items
already installed or provided by the
manufacturer (§§ 463.4(a) and 463.2(k));
and are required to obtain ‘‘Express,
Informed Consent’’ for charges for any
item (§§ 463.5(c) and 463.2(g)). The
additional substantive add-on-specific
provisions 117 address harms associated
with products or services not provided
to the consumer or installed on the
vehicle by the motor vehicle
manufacturer. Commenters did not
provide evidence that the proposed
provisions covering manufacturerprovided products or services would be
insufficient to address consumer harm.
Accordingly, the Commission has
determined not to include
manufacturer-provided products or
services within this defined term. The
117 §§ 463.3(b),
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Commission will continue to monitor
this issue to determine whether
additional action is warranted.
One individual commenter expressed
concern that, under the Commission’s
proposed definition, dealers could raise
the price of a vehicle by advertising
additional products or services, such as
‘‘free lifetime benefits’’ with the vehicle,
and that dealers could mislead
consumers by charging more for the
vehicle based on a supposedly ‘‘free’’
add-on.118 The Commission notes that
the Rule the Commission is finalizing
contains several provisions relating to
this concern. For example, dealers are
prohibited from making
misrepresentations under § 463.3,
including misrepresentations regarding
‘‘costs, limitation, benefit, or any other
aspect’’ of add-ons.119 Furthermore,
dealers are required to disclose a
vehicle’s offering price, which must
include charges for required add-ons;
this disclosure will allow consumers to
know the true price of the vehicle and
comparison shop before selecting and
visiting a particular dealership.120
Several dealership association
commenters expressed concern that the
proposed definition was too broad,
contending that it might apply to
hundreds of items and include fees,
such as a processing or document fee,
that a dealer charges a consumer. As
discussed in SBP III.B.2(b), III.D.2(b),
and III.E.2(b), upon careful review of
comments, including comments
regarding the breadth of this
requirement, the Commission has
determined not to finalize the provision
that would have required listing all
optional add-ons—the ‘‘Add-on List’’
definition and the associated
requirement that dealers disclose such a
list—as well as proposed § 463.5(b)
relating to undisclosed or unselected
add-ons.121 The remaining substantive
provisions that use the term ‘‘Add-ons’’
prohibit misrepresentations (§ 463.3(b));
require dealers to disclose, if true, that
add-ons are not required (§ 463.4(c));
and prohibit charges for add-ons that
provide the consumer no benefit
(§ 463.5(a)). The law already prohibits
misrepresentations, regardless of the
product or service at issue; dealers that
offer consumers additional products or
services are already required to ask
118 Individual commenter, Doc. No. FTC–2022–
0046–7445 at 10–11.
119 § 463.3(b) (emphasis added).
120 See §§ 463.2(k) (defining Offering Price),
463.4(a) (requiring disclosure of Offering Price); see
also § 463.3(p) (prohibiting misrepresentations
regarding the disclosures required by the Final
Rule).
121 See NPRM at 42044, 42046 (proposed
§§ 463.2(b), 463.4(b), 463.5(b)).
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consumers if they want such products,
rather than suggesting that such
products or services are mandatory,
when they are not; and any hardship
associated with refraining from charging
for products or services that provide
consumers no benefits are outweighed
by the harms to consumers and
competition from permitting this
practice, as explained in the analysis of
§ 463.5(a).
Commenters including an industry
association suggested limiting the
definition to products or services sold at
the ‘‘point of vehicle purchase’’ to
clarify that indirect charges, such as the
inclusion of a one-year subscription to
a satellite radio service, need not be
separately itemized.122 The industry
association commenter suggested that,
as proposed, the definition would
include charges for which dealers and
consumers ‘‘would otherwise not
account.’’ 123 The Commission has
determined not to finalize the add-on
list and form requirements in proposed
§§ 463.4(b) and 463.5(b). For the
provisions being finalized, excluding
subscription charges, or including only
items added to the vehicle at the ‘‘point
of vehicle purchase,’’ would narrow the
definition of ‘‘Add-on’’ and the
corresponding requirements in a
manner that would allow for deceptive
or unfair practices, including by
allowing dealers to represent a price
that is not the offering price, or to
deceptively state that add-ons are
required. In the example provided by
the commenter, if the satellite radio
subscription service is mandatory, it
needs to be included in the offering
price of the vehicle, as required by
§ 463.4(a) of the Final Rule; if it is not
mandatory, the dealer needs to disclose,
when making any representations about
the service, that it is not required under
§ 463.4(c). Further, regardless of
whether such a product or service is
mandatory or optional, dealers must
follow other aspects of the Final Rule,
including by not making any
misrepresentations about the
subscription under § 463.3 and by
obtaining the express, informed consent
of the consumer for the associated
charges under § 463.5(c).
Another industry association
commenter contended that add-ons sold
in the marine industry are typically
different than those offered in the
context of automobile sales and
described in the NPRM. While all motor
122 Comment of Serv. Cont. Indus. Council,
Guaranteed Asset Prot. All., & Motor Vehicle Prot.
Prods. Ass’n, Doc. No. FTC–2022–0046–8113 at 13–
14.
123 Id. at 13.
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vehicle dealers must refrain from
engaging in deceptive or unfair conduct
relating to add-ons, the Commission is
excluding recreational boats and marine
equipment from the Final Rule’s
definition of ‘‘ ‘Covered Motor Vehicle’
or ‘Vehicle,’ ’’ as discussed in additional
detail in the definition-by-definition
analysis of § 463.2(e) in SBP III.B.2(e).
An industry association commenter
and comments from a number of
dealership associations noted that
certain State laws already regulate the
sale of add-ons, including, for example,
laws in many States that regulate
vehicle sales contracts or deceptive
sales practices generally or that regulate
insurance products. To the extent that
the Final Rule’s add-on provisions may
duplicate State law, commenters have
provided no evidence that any such
duplication in the provisions that
incorporate this defined term—which
prohibit misrepresentations, require
disclosures in the event add-ons are not
required, and prohibit charges for addons from which the consumer would
not benefit—will harm consumers or
competition. Moreover, the Final Rule
provides additional remedies that will
benefit consumers who encounter
conduct that is already illegal under
State or Federal law, including by
adding a mechanism for the
Commission to redress consumers
injured by a dealer’s violation of the
rule, and will assist law-abiding dealers
that presently lose business to
competitors that act unlawfully. Under
the Final Rule, State laws may provide
more or less specific requirements as
long as such requirements are not
inconsistent with part 463, as set forth
at § 463.9, and in the event of an
inconsistency, the Rule only affects
such State law to the extent of the
inconsistency.124
A few dealership association
commenters expressed concern that the
proposed definition of ‘‘Add-on
Products or Services’’ would include
insurance-related products, such as
credit life and credit disability
insurance, and as such, could implicate
the McCarran-Ferguson Act’s reversepreemption of certain Federal laws that
‘‘invalidate, impair, or supersede’’ State
laws enacted ‘‘for the purpose of
regulating the business of
insurance.’’ 125 Commenters have
provided no evidence that the Rule will
invalidate, impair, or supersede State
laws enacted for the purpose of
124 See, e.g., English v. Gen. Elec. Co., 496 U.S.
72, 79 (1990).
125 See 15 U.S.C. 1012(b).
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603
regulating the business of insurance.126
To the contrary, the Final Rule
addresses deceptive or unfair conduct—
it prohibits dealers, inter alia, from
making misrepresentations regarding
material information about add-ons,
from failing to disclose when add-ons
are not required, and from charging for
add-ons from which the consumer
would not benefit. Nor has the
Commission been presented with
evidence that the Rule’s other
substantive provisions (prohibiting
misrepresentations; requiring
disclosures of a vehicle’s offering price
and about total of payments; and
requiring consumers’ express, informed
consent before charging them)
invalidate, impair, or supersede State
laws enacted for the purpose of
regulating insurance.127
A number of industry and dealership
association commenters contended that,
as proposed, this definition may extend
to products or services that are provided
by the manufacturer but that are
installed by a distributor of motor
vehicles, or alternatively, by the dealer,
at the instruction of the manufacturer.
Relatedly, a State governmental
association commenter expressed
concern that the proposed definition
could create confusion with regard to
the sale of used vehicles, where a prior
owner of a vehicle may have added a
product to the vehicle. The commenter
contended that a motor vehicle dealer
selling the used vehicle may be unaware
of the added product, and further, that
listing any such items may confuse
buyers.
To the extent the commenters’
concerns stem from the proposed
provisions related to add-on lists and
proposed § 463.5(b)’s provisions related
to separate disclosures, the Commission
is not finalizing those provisions. Under
the provisions being finalized, if a
product is provided to the dealer by the
manufacturer or another entity, and a
consumer chooses to have the product
126 See Union Labor Life Ins. Co. v. Pireno, 458
U.S. 119, 129 (1982) (setting forth test for whether
an activity constitutes the ‘‘business of insurance’’);
Humana Inc. v. Forsyth, 525 U.S. 299, 307–08
(1999) (establishing criteria for whether a Federal
law operates to ‘‘invalidate, impair, or supersede’’
State law).
127 The Supreme Court has refused to interpret
the McCarran Ferguson Act to invalidate Federal
law when applied to remedy a misrepresentation
and undo the harm caused by alleged deception.
See SEC v. Nat’l Sec., Inc., 393 U.S. 453, 462 (1969).
Moreover, lower courts have rejected precisely the
concern raised by the commenter about credit life
insurance. See Fed. Trade Comm’n. v. Dixie Fin.
Co., 695 F.2d 926, 930 (5th Cir. 1983) (McCarran
Ferguson Act does not preclude FTC investigation
of ‘‘whether the sale of insurance is a precondition
to the arrangement of credit’’); Fed. Trade Comm’n
v. Mfrs. Hanover Consumer Servs., Inc., 567 F.
Supp. 992, 94 (E.D. Pa. 1983) (same).
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installed and pay for it, the dealer may
install it and charge for it, as long as the
dealer complies with the provisions of
the Final Rule, including by disclosing
that the product is not required and by
obtaining the consumer’s express,
informed consent for the charge. If the
manufacturer requires the dealer to
install the product or if the dealer
chooses to install the product, and the
dealer requires any consumer to pay
charges for it, the amount of the charge
must be included in the vehicle’s
offering price, and the dealer must
comply with other aspects of the Final
Rule, including the express, informed
consent requirement. Relatedly,
regarding used vehicles, if a prior owner
of such a vehicle installed an add-on,
and the dealer that subsequently sells
such a vehicle requires any consumer to
pay charges for the add-on, the amount
of those charges must be included in the
vehicle’s offering price and the dealer
must comply with other aspects of the
Final Rule, including the express,
informed consent requirement at
§ 463.5(c). If, alternatively, the dealer
does not require any consumers to pay
for the pre-installed add-on, then the
dealer does not have to add that amount
to the vehicle’s offering price, and there
is no charge for that add-on for which
the dealer must obtain express,
informed consent. Thus, the definition
of ‘‘Add-on’’ and the Rule requirements
being finalized address deceptive or
unfair price and add-on disclosures and
hidden charges without requiring
dealers to list or itemize charges that
they do not impose on consumers. For
the reasons explained in this section,
the Commission is finalizing the
definition of ‘‘Add-on’’ or ‘‘Add-on
Product(s) or Service(s)’’ largely as
proposed, with conforming
modifications to reflect changes to the
defined terms ‘‘‘Covered Motor Vehicle’
or ‘Vehicle’’’ and ‘‘‘Covered Motor
Vehicle Dealer’ or ‘Dealer’’’ as described
in more detail in the discussion of
§ 463.2(e) and (f), in SBP III.B.2(e) and
(f).
(b) Add-On List
The NPRM proposed defining the
term ‘‘Add-on List,’’ which appeared in
the associated Add-on List disclosure
provision at proposed § 463.4(b), as well
as in the recordkeeping provision at
proposed § 463.6(a)(2). Based on the
following, the Commission has
determined not to include this
definition in its Final Rule.
Several commenters supported the
substantive add-on list proposal and its
associated definition, and commenters
including consumer advocacy
organizations urged the Commission to
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finalize additional related restrictions or
disclosures, such as requiring add-on
prices to be fixed and non-negotiable, or
requiring a distinct add-on list for each
vehicle sold. Other commenters,
including dealership associations,
raised concerns that, as proposed, the
add-on list definition could impose
significant economic burdens on
dealerships for a disclosure that, in
some circumstances, might be too
voluminous to be optimally meaningful
to consumers, or permit price ranges
that could be too broad to prevent
abuses and effectively inform
consumers.
After careful consideration, and in
light of the concerns raised by
commenters, the Commission has
determined not to include the add-on
list disclosure provision at proposed
§ 463.4(b) or the recordkeeping
provision at proposed § 463.6(a)(2) in its
Final Rule, and therefore will not
include a definition of the term ‘‘Addon List’’ in its Final Rule. Here, as
elsewhere, the Commission remains
committed to promoting fair, nondeceptive, and competitive markets for
consumer products and services; it will
continue to monitor the marketplace for
add-on-related acts or practices that are
unfair or deceptive, and will evaluate
whether to propose additional measures
pertaining to such products and
services.
(c) Cash Price Without Optional AddOns
The NPRM proposed defining the
term ‘‘Cash Price without Optional Addons,’’ which appeared in the proposed
provision addressing undisclosed or
unselected add-ons at § 463.5(b). Based
on the following, the Commission is
declining to finalize this definition.
A number of commenters favored the
proposed provision and definition, and
several, including consumer advocacy
organizations, urged the Commission to
include additional requirements, such
as requiring the proposed disclosure
documents associated with this
proposed definition to be available in
different languages, while others,
including a dealership association,
raised concerns that the definition and
relevant provision were burdensome or
confusing for dealers.
As explained in additional detail in
SBP III.E.2(b) with respect to § 463.5(b),
in light of commenter concerns that the
proposed provision using this term
would increase costs for legitimate
dealers and add to the time and
paperwork for consumers in an already
lengthy, paperwork-heavy transaction,
the Commission has elected not to
include a Cash Price without Optional
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Add-ons disclosure requirement in its
Final Rule. Thus, after careful
consideration, and in light of the
concerns raised by commenters, the
Commission has determined not to
include a definition of ‘‘Cash Price
without Optional Add-ons’’ in its Final
Rule.
(d) Clearly and Conspicuously
The proposed rule defined the term
‘‘Clearly and Conspicuously’’ as ‘‘in a
manner that is difficult to miss (i.e.,
easily noticeable) and easily
understandable,’’ including in all of
seven enumerated ways, listing
proposed requirements for ‘‘any
communication that is solely visual or
solely audible,’’ ‘‘[a] visual disclosure,’’
‘‘[a]n audible disclosure,’’ and ‘‘any
communication using an interactive
electronic medium,’’ and providing,
inter alia, that such disclosures ‘‘must
use diction and syntax understandable
to ordinary consumers and must appear
in each language in which the
representation that requires the
disclosure appears’’ and ‘‘must not be
contradicted or mitigated by, or
inconsistent with, anything else in the
communication.’’ Based on the
following, the Commission is finalizing
this definition largely as proposed, with
a modification to clarify that the
definition applies whether the term
appears as an adjective or an adverb, by
adding the parentheses in the following
manner to the defined term: ‘‘Clear(ly)
and Conspicuous(ly).’’
Some consumer advocacy
organization commenters favored the
Commission’s proposed definition
while also suggesting that the
Commission include a provision
requiring translation of any deal
consummating documents, including
buyer’s orders and retail installment
sales contracts, into the language in
which the negotiations were conducted.
This issue, however, is addressed by
§ 463.5(c) of the Rule, which requires
express, informed consent for each item
charged.128 As explained in additional
detail in the paragraph-by-paragraph
analysis of § 463.5(c) in SBP III.E.2(c), if
a deal-consummating document is
provided in a language that the
consumer does not understand, and the
document’s contents are not otherwise
clearly understood by the consumer,
then the consumer is in no position to
give unambiguous assent to the charges
described therein. The Commission
therefore has determined not to add
128 The language requirements, as they relate to
obtaining express, informed consent, are further
explained in the discussion of § 463.5(c) in SBP
III.E.2(c).
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such a provision to its ‘‘Clear(ly) and
Conspicuous(ly)’’ definition. However,
the Commission will continue to
monitor the marketplace and determine
whether further language requirements
or additional measures are warranted to
address deceptive or unfair practices—
particularly those that target or
otherwise disproportionately impact
language-minority communities.
Commenters, including consumer
advocacy organizations, expressed
concern that proposed § 463.2(d)(5) may
be read to apply only to certain
disclosures with triggering
representations and only to disclosures
that are in writing. These commenters
also requested that the Commission
incorporate into its Final Rule the FTC’s
policy statement regarding foreign
language advertising and sales
materials, which is separately codified
at 16 CFR 14.9.129 In response, the
Commission notes that to be clear and
conspicuous, the disclosure must be
‘‘easily understandable,’’ as stated in the
definition. If a disclosure is being made
in a language the consumer does not
understand, it does not meet this
requirement. Further, the disclosures
highlighted by the commenters are
indeed subject to the language
requirements of § 463.2(d)(5), which
requires that disclosures ‘‘appear in
each language in which the
representation that requires the
disclosure appears.’’ With regard to the
offering price disclosure in § 463.4(a)(1),
the applicable ‘‘representation that
requires the disclosure’’ is the
‘‘advertisement that references . . . a
specific Vehicle’’; thus, for example, if
an advertisement that references a
specific vehicle is in Spanish, the
offering price disclosure must also be in
Spanish. Similarly, in § 463.4(a)(2), the
applicable representation that requires
the disclosure is an ‘‘advertisement that
represents . . . any monetary amount or
financing term for any Vehicle.’’ In
§ 463.4(a)(3), the applicable
representation is ‘‘any communication
. . . that includes a reference . . .
regarding a specific Vehicle, or any
monetary amount or financing term for
any Vehicle.’’ In § 463.4(c) and (d), ‘‘any
representation’’ regarding an add-on
product or service or a monthly
payment for any vehicle, respectively,
triggers the language requirement of
§ 463.2(d)(5). The monthly payments
comparison disclosure in § 463.4(e) is
required when there is a ‘‘comparison
129 16 CFR 14.9 is an enforcement policy
statement that provides information to advertisers
about clear and conspicuous disclosures in foreign
language advertisings and sales materials, including
ensuring the language of the disclosure matches the
language in the publication. See 16 CFR 14.9.
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between payment options . . . that
includes discussion of a lower monthly
payment.’’ Thus, the language
requirements in § 463.2(d)(5) apply.
In response to this concern regarding
the applicability of § 463.2(d)(5) to
disclosures that are not in writing, the
Commission notes that its use of the
word ‘‘appear’’ in § 463.2(d)(5)
incorporates common meanings, such as
‘‘to show up,’’ ‘‘to come into existence,’’
or ‘‘to become evident or manifest,’’
which cause this provision to apply
whether the representation requiring the
disclosure appears visually, orally, or
otherwise.130 Where the Commission
instead intended a provision to be
limited to a visual disclosure, as in
§ 463.2(d)(2), the Rule states so
explicitly.
In response to the request that the
Commission incorporate into this Rule
its policy statement regarding foreign
language advertising and sales
materials, separately codified at 16 CFR
14.9, the Commission emphasizes that
the enforcement statement sets out what
is already impermissible under current
law and is consistent with the
requirements the Commission is
finalizing. To the extent dealers take
actions that are inconsistent with
Commission statements about such law,
they are risking enforcement
proceedings by the Commission or
others. Accordingly, the Commission
has determined not to add to the Rule
further requirements regarding foreign
language advertising. The Commission
will continue to monitor the market to
determine whether further action is
warranted.
Industry association commenters
raised concerns about how the
Commission’s proposed definition
interacts with other Federal laws, such
as Regulations Z and M, which
implement the Truth in Lending Act
and the Consumer Leasing Act,
respectively, and contended that it
conflicts with a clear and conspicuous
definition in Commodity Futures
Trading Commission regulations.131
Industry and dealership association
commenters contended that State
advertising standards already address
what constitutes ‘‘clear and
conspicuous’’ advertising and provide
guidance on disclosures, such that the
130 See Appear (defs. 1b, 4, 6), MerriamWebster.com Dictionary, https://www.merriamwebster.com/dictionary/appear (last visited Dec. 5,
2023); see also Order ¶¶ 2–3, Asbury Auto. Grp.,
Inc., No. C–4606 (F.T.C. Mar. 22, 2017) (identical
usage in definition provision); Order ¶ 2, Lithia
Motors, Inc., No. C–4597 (F.T.C. Dec. 8, 2016)
(same); Order ¶¶ 2–3, Jim Koons Mgmt. Co., No. C–
4598 (F.T.C. Dec. 8, 2016) (same).
131 17 CFR 162.2.
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605
FTC’s proposal will cause confusion or
possible conflict with State law.
The Commission’s definition of
‘‘Clear(ly) and Conspicuous(ly)’’ is not
inconsistent with the existing Federal
legal requirements raised by these
commenters. Dealers can comply with
these laws to the extent they apply as
well as with the requirements that
follow from the Commission’s
definition. Regarding State law,
commenters did not provide examples
of actual conflicts. Further, to the extent
there is truly an inconsistency between
the operation of the Commission’s
definition and any State law, the
Commission notes that the definition is
based on decades of Commission
experience policing deceptive and
unfair conduct; addresses harmful
practices including those related to
hidden disclosures and charges; and
that § 463.9 of the Final Rule sets out
the Rule’s relation to State laws.
Other industry association
commenters also contended that the
proposed definition of ‘‘Clearly and
Conspicuously’’ would be overly broad
and challenging for compliance, but did
not explain why or suggest alternative
language. In addition, some dealership
association commenters requested more
guidance to understand the definition.
The Commission’s definition spells out,
in seven subparts, what clear and
conspicuous means, using simple terms
that provide additional information
about how dealers can make a
disclosure in a manner that is easily
understandable and easily noticeable to
the consumer. The definition elaborates
basic, common-sense principles,
including that visual disclosures be in a
size that consumers will easily notice
and that audible disclosures be in a
volume, speed, and cadence such that
consumers will easily hear it. Thus, for
example, disclosures in an illegible font,
or that consumers cannot hear, are not
clear and conspicuous. The Commission
also notes that it did not mandate
specific fonts, volumes, or other
prescriptive measures. Thus, dealers
have the flexibility to determine the best
way to meet the definition’s
requirements for their consumers under
the circumstances.
A dealership association commenter
contended that the proposed definition
does not include a reasonableness
standard and may be interpreted as
prohibiting any limitations and
exclusions, given the requirement in
proposed § 462.3(d)(7) that a disclosure
must not be contradicted or mitigated by
or inconsistent with anything else in the
communication. The commenter further
asked whether a statement such as
‘‘with approved credit’’ would
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impermissibly mitigate an offer of low
financing under this proposed
definition.132 The Commission responds
as follows. The standard is an objective
one, evaluated from the perspective of a
reasonable consumer.133 The definition
does not prohibit all advertising that
contains limitations and exclusions, but
it does provide that if dealers are
advertising offers that are limited in
some way, they may not misrepresent
such offers. Thus, if a dealer presents
consumers with an unqualified
representation of low financing terms,
those terms must be available to typical
consumers. Alternatively, a dealer may
offer low financing terms to consumers
with particular credit characteristics if
that requirement is presented in a
manner that does not deceive reasonable
consumers. For example, a dealer may
offer ‘‘0% annual percentage rate (APR)
for consumers with a credit score above
800.’’ By contrast, it would be deceptive
if the dealer offered ‘‘0% APR,’’ and
then separately disclosed in fine print
that such terms are only available to
consumers with a credit score above
800, because the qualifying disclosure is
inconsistent with an offer of ‘‘0% APR’’
that contained no limitations and thus
indicated that 0% APR is available to
the typical consumer regardless of credit
score.134 Further, the Commission notes
that to qualify as clear and conspicuous,
‘‘disclaimers or qualifications in any
particular ad are not adequate to avoid
liability unless they are sufficiently
prominent and unambiguous to change
the apparent meaning of the claims and
to leave an accurate impression.
Anything less is only likely to cause
confusion by creating contradictory
double meanings.’’ 135
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132 Comment
of Ohio Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–6657 at 4.
133 See FTC Policy Statement on Deception, supra
note 42, at 2–5.
134 Complaint ¶¶ 5–7, Progressive Chevrolet Co.,
No. C–4578 (F.T.C. June 13, 2016) (alleging ads
touting attractive terms deceptively failed to
disclose high credit score requirement).
135 Removatron Int’l Corp. v. Fed. Trade Comm’n,
884 F.2d 1489, 1496–97 (1st Cir. 1989); see also
Fed. Trade Comm’n v. Brown & Williamson
Tobacco Corp., 778 F.2d 35, 42–43 (D.C. Cir. 1985)
(finding that a disclosure in virtually illegible form,
placed in an inconspicuous corner of Barclay
advertisements, did not eliminate deception); see
Fed. Trade Comm’n v. Cap. Choice Consumer
Credit, Inc., 2003 U.S. Dist. LEXIS 29086, at *5 (S.D.
Fla. June 2, 2003) (finding that, where
advertisements promised a general purpose credit
card, such as VISA or MasterCard, ‘‘fine print on
reverse side’’ of ad clarifying that the credit card
was a ‘‘merchandise card and not a major bank
card’’ was inadequate to modify net impression);
Fed. Trade Comm’n v. Cyberspace.com LLC, 453
F.3d 1196, 1200 (9th Cir. 2006) (rejecting
defendant’s argument that truthful fine print notices
on reverse side of checks, invoices, and marketing
inserts cured deception that check/invoice was a
refund rather than offer for services); Fed. Trade
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Lastly, another dealership association
commenter asked how the proposed
definition translates to visual, audible,
and electronic media disclosures and
expressed concern about subjectivity,
characterizing the terms ‘‘easily’’
understood and ‘‘unavoidable’’ within
the proposed definition as subjective
and open to different interpretations,
particularly in the context of websites
and internet promotions. Here, the
Commission declines to mandate more
prescriptive language regarding, for
example, font sizes, what volumes are to
be used, and where exactly the language
should appear on a website, such as on
an overlay with mandated color, size,
and location.136 As courts 137 have
recognized, whether a disclosure is clear
and conspicuous is an objective
standard rather than a subjective one.
While more prescriptive language
would provide additional objective
criteria, the Commission is concerned
such language might constrain dealers
from determining the best way to meet
the definition’s requirements for their
consumers under the circumstances
involved, and might require dealers that
are already making clear and
conspicuous disclosures to change their
existing disclosure materials.
The Commission reiterates that the
definition of ‘‘Clear(ly) and
Conspicuous(ly)’’ elaborates basic,
common-sense principles, such as
requiring visual disclosures in a size
consumers can see and audible
disclosures in a volume they can hear.
Regarding the requirement that internet
disclosures be unavoidable, this
language requires evaluating an
objective standard—whether or not
Comm’n v. Alcoholism Cure Corp., No. 3:10–cv–
266–J–34JBT, 2011 WL 13137951, at * 51 (M.D. Fla.
Sept. 16, 2011) (finding that ‘‘not MD’’ disclaimers
were inadequate to dispel net impression regarding
professional qualifications of defendant and other
employees as advertised); Fed. Trade Comm’n v.
Wash. Data Res., 856 F. Supp. 2d 1247, 1274–75
(M.D. Fla. 2012) (rejecting defendants’ argument
that retainer agreement contained sufficient
disclaimer to dispel a misrepresentation about
whether a home loan was guaranteed).
136 The Commission has included such
requirements elsewhere. See, e.g., Order ¶ 6, United
States v. Sunkey Publ’g, Inc., No: 3:18–cv–1444–
HNJ (N.D. Ala. Sept. 6, 2018).
137 See. e.g., Palmer v. Champion Mortg., 465 F.3d
24, 28 (1st Cir. 2006) (applying an objective
standard in evaluating Truth in Lending Act claim
regarding clear and conspicuous disclosure); Smith
v. Check-N-Go of Ill., Inc., 200 F.3d 511, 515 (7th
Cir. 1999) (same); Zamarippa v. Cy’s Car Sales, Inc.,
674 F.2d 877, 879 (11th Cir. 1982) (same);
Bustamante v. First Fed. Sav. & Loan Ass’n, 619
F.2d 360, 364 (5th Cir. 1980) (same); see also
Herrera v. First N. Sav. & Loan Ass’n, 805 F.2d 896,
900 (10th Cir. 1986) (resolving question of clear and
conspicuous disclosure under Truth in Lending Act
as a legal, rather than factual, matter); Dixey v.
Idaho First Nat’l Bank, 677 F.2d 749 (9th Cir. 1982)
(same).
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consumers could have avoided the
disclosure. In addition, the disclosure
must be easily noticeable and easily
understandable, as set forth expressly in
the definition. Disclosures that do not
meet this standard include those that
are buried in other text, including as
illustrated by many FTC actions against
dealers.138 Regarding the requirement
that disclosures be ‘‘easily’’ noticeable
and understandable, the standard is also
an objective one, evaluated from the
perspective of a reasonable consumer.
Determining how reasonable consumers
are likely to respond may be resolved on
the basis of the advertisement, context,
or disclosure itself, or based on extrinsic
evidence, such as consumer
complaints.139 To this end, as noted
previously, the definition enumerates in
seven subparts the meaning of clear and
conspicuous using simple terms that
provide additional guidance on how
dealers may make disclosures that are
easily understandable and easily
noticeable to the consumer.
After carefully considering the
comments, the Commission adopts
§ 463.2(d) with a modification to clarify,
through the addition of parentheses—
‘‘Clear(ly) and Conspicuous(ly)’’—that
the definition applies whether the term
is used as an adjective or adverb.
Consistent with the Commission’s
experience addressing unfair or
deceptive conduct, the Commission has
defined the term ‘‘Clear(ly) and
Conspicuous(ly)’’ to include disclosures
that are easily understandable and
easily noticeable, while also providing
dealers with additional information on
how to meet those requirements.140
138 Complaint ¶¶ 6–14, Jim Burke Auto., Inc., No.
C–4523 (F.T.C. May 4, 2015); Complaint ¶¶ 6, 9, TT
of Longwood, Inc., No. C–4531 (F.T.C. July 2, 2015);
Complaint ¶ 13, City Nissan Inc., No. C–4524
(F.T.C. May 4, 2015); Complaint ¶¶ 17–19, Fed.
Trade Comm’n v. Liberty Chevrolet, Inc., No. 1:20–
cv–03945 (S.D.N.Y. May 21, 2020); Complaint
¶¶ 4–9, 12–15, 18–20, Billion Auto, Inc., No. C–
4356 (F.T.C. May 1, 2012) (alleging false ads
promising to pay off consumers’ existing motor
vehicle debt and failing to disclose legally required
financing and leasing terms); see also Complaint
¶¶ 57–60, Fed. Trade Comm’n v. Stewart Fin. Co.
Holdings, Inc., No. 1:03–CV–2648 (N.D. Ga. Sept. 4,
2003) (alleging violations for failure to include the
cost of required add-on products in the finance
charge and annual percentage rate disclosed to
consumers).
139 See FTC Policy Statement on Deception, supra
note 42, at 2–5 (describing application of reasonable
consumer standard).
140 See, e.g., Decision and Order, JS Autoworld,
Inc., No. C–4535 (F.T.C. Aug. 13, 2015); Decision
and Order, Nat’l Payment Network, Inc., No. C–
4521 (F.T.C. May 4, 2015); Decision and Order, Matt
Blatt Inc., No. C–4532 (F.T.C. July 2, 2015);
Decision and Order, Ganley Ford West, Inc., No. C–
4428 (F.T.C. Jan. 28, 2014).
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(e) Motor Vehicle (Finalized as
‘‘ ‘Covered Motor Vehicle’ or ‘Vehicle’ ’’)
The proposed rule defined the term
‘‘Motor Vehicle’’ as ‘‘(1) any selfpropelled vehicle designed for
transporting persons or property on a
street, highway, or other road; (2)
Recreational boats and marine
equipment; (3) Motorcycles; (4) Motor
homes, recreational vehicle trailers, and
slide-in campers, as those terms are
defined in §§ 571.3(b) and 575.103(d) of
title 49, Code of Federal Regulations, or
any successor thereto; and (5) Other
vehicles that are titled and sold through
Dealers.’’ The Commission has
determined to finalize the definition
with the modifications discussed in the
following paragraphs.
The Commission received several
comments regarding the substance and
scope of this proposed definition. A
number of industry association
commenters requested that certain
vehicle types, including marine
vehicles, motorcycles, RVs, and other
recreational vehicles be excluded from
coverage. These commenters contended
that the dealerships that sell such
vehicles function differently from
automobile dealerships, and that
recreational vehicles are discretionary,
rather than essential, purchases. After
careful consideration, the Commission
is excluding recreational boats and
marine equipment; motorcycles; and
motor homes, recreational vehicle
trailers, and slide-in campers from the
definition of ‘‘ ‘Covered Motor Vehicle’
or ‘Vehicle.’ ’’ Moving forward, the
Commission will continue to monitor
for unfair and deceptive practices to
determine whether further action is
warranted to protect consumers,
through law enforcement, a future
rulemaking, or other measures. The
Commission notes that no dealer may
misrepresent material terms; deceive
customers about prices, add-ons, or
payments; charge for products that
provide no benefit; or charge consumers
without express, informed consent. To
the extent that dealers engage in such
conduct, they are in violation of the FTC
Act.
Another commenter contended it was
unclear whether all-terrain vehicles, gocarts, snowmobiles, scooters, electric
bicycles, and golf carts were covered by
the proposed definition. In response, the
Commission has modified the first
enumerated subpart of the definition to
refer only to vehicles designed for use
on a ‘‘public’’ street, highway, or road,
and to expressly exclude scooters,
electric bicycles, and golf carts. The
definition of ‘‘ ‘Covered Motor Vehicle’
or ‘Vehicle’ ’’ in the Final Rule does not
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cover all-terrain vehicles, go-carts, or
snowmobiles because such vehicles are
not designed for use on a ‘‘public’’
street, highway, or road.141
A number of industry association
commenters claimed that the proposed
definition conflicts with definitions of
motor vehicle under various State laws,
and one such commenter requested that,
rather than finalize a definition of
‘‘Motor Vehicle,’’ the Commission defer
to the definitions promulgated by each
State’s department of motor vehicles.
The commenters did not explain how
the Rule’s definition may actually
conflict with any laws, or how any
alleged duplication would harm
consumers or competition. To the extent
that States have broader or narrower
definitions, it is not clear why motor
vehicle dealers covered by the Rule
cannot comply with the Rule’s
provisions and applicable State laws.
Moreover, the Final Rule provides
additional remedies that will benefit
consumers who encounter conduct that
is already illegal under State or Federal
law, including by adding a mechanism
for the Commission to redress
consumers injured by a dealer’s
violation of the rule, and will assist lawabiding dealers that presently lose
business to competitors that act
unlawfully. Section 463.9 provides
further discussion of State laws.
Thus, after careful consideration of
the comments, the Commission is
finalizing the definition of ‘‘Motor
Vehicle’’ with modifications, including
adding the word ‘‘Covered’’ to the
definition to reflect the fact that the
definition is narrower than the term
‘‘Motor Vehicle’’ in the NPRM and
adding ‘‘or Vehicle’’ to the definition to
clarify that all references in the Rule to
the term ‘‘Covered Motor Vehicle’’ and
‘‘Vehicle’’ refer to the defined term.
(f) Dealer or Motor Vehicle Dealer
(Finalized as ‘‘ ‘Covered Motor Vehicle
Dealer’ or ‘Dealer’ ’’)
The proposed rule defined the term
‘‘Dealer’’ or ‘‘Motor Vehicle Dealer’’ as
‘‘any person or resident in the United
States, or any territory of the United
States, that: (1) Is licensed by a State, a
territory of the United States, or the
District of Columbia to engage in the
sale of motor vehicles; (2) Takes title to,
holds an ownership interest in, or takes
physical custody of motor vehicles; and
(3) Is predominantly engaged in the sale
and servicing of motor vehicles, the
leasing and servicing of motor vehicles,
141 According to the National Highway Traffic
Safety Administration, ‘‘Public road means any
road under the jurisdiction of and maintained by a
public authority and open to public travel.’’ 23 CFR
1300.3.
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607
or both.’’ Based on the following, the
Commission is finalizing this definition
in the Final Rule with modifications for
clarity.
Many stakeholders commented in
support of the proposed rule and
expressed no concern over this
definition. Other commenters expressed
views that the Commission examines in
the following paragraphs.
A few industry association
commenters contended that parts of the
proposed definition may have captured
certain financial entities, such as
financial entities that maintain licenses
to engage in the sale of motor vehicles,
and requested that the Commission
make clear that any rule does not apply
to such entities. In response, the
Commission notes that only entities that
meet all three components of the
definition are covered ‘‘Dealers.’’ Thus,
an entity that maintains an applicable
license to engage in the sale of Covered
Motor Vehicles but is not, for example,
predominantly engaged in the sale or
leasing of motor vehicles would not be
a covered ‘‘Dealer.’’
Another industry association
commenter similarly requested a ‘‘carveout’’ from any definition of ‘‘Dealer’’ for
trusts and trusts’ investors.142 This
commenter asserted that trusts and their
investors do not satisfy two of the
definition’s components and did not
describe how any part of the definition
creates concerns or is unclear. The
Commission reiterates that if an entity
meets the three parts of the ‘‘Covered
Motor Vehicle Dealer’’ definition, then
it is covered; if an entity does not meet
these three parts, it is not covered. The
Commission sees no benefit to adding
language stating that entities that do not
meet the definition are not covered.
Other commenters, including vehicle
association commenters, claimed that
dealerships specializing in RV, marine,
motorcycles, and other recreational
vehicles, including certain high-end
recreational vehicles,143 should be
excluded from coverage, generally
contending that such dealerships
operate differently from automobile
dealerships, and that these types of
vehicles are used for different purposes
than are automobiles. As explained in
the section-by-section analysis of the
definition of ‘‘Covered Motor Vehicle’’
in SBP III.B.2(e), after considering
stakeholder comments, the Commission
142 Comment of Structured Fin. Ass’n, Doc. No.
FTC–2022–0046–7646 at 3.
143 The Marine Retailers Association of the
Americas requested that transactions in excess of
$70,000 be excluded from coverage, as an
alternative to excluding marine transactions
altogether. See Comment of Marine Retailers Ass’n
of the Ams., Doc. No. FTC–2022–046–9291 at 4.
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is removing marine, motorcycle, RV,
and certain other vehicles from the
definition in § 463.2(e), and to reflect
this change, finalizing the defined term
as ‘‘ ‘Covered Motor Vehicle’ or
‘Vehicle,’ ’’ thereby excluding from the
Final Rule entities who otherwise
would have qualified as ‘‘Dealers’’
solely based on their sale and servicing,
or leasing and servicing, of such
vehicles. The Commission underscores
that, regardless of the definition of
‘‘Covered Motor Vehicle’’ under the
Final Rule, unfair and deceptive
practices remain unlawful under the
FTC Act. The Commission will continue
to monitor all vehicle markets to
determine whether additional action is
warranted to protect consumers.
Some dealership association
commenters argued that, under the
Commission’s proposal, this definition
exempted dealers subject to the
jurisdiction of the CFPB. Other such
commenters similarly contended that,
under the proposal, used car dealers
that do not engage in extensive post-sale
repairs do not ‘‘service’’ vehicles or that
do not have separate service
departments may have been excluded
from coverage, contending further that
excluding such dealers would put other
dealers at a competitive disadvantage.
Contrary to these commenters’
assertions, the definition does not
contain such exclusions. By its plain
terms, the definition applies to dealers
that meet its three enumerated
components. Nowhere does the
definition limit coverage of dealers
based on CFPB jurisdictional
considerations. Likewise, the definition
does not condition coverage on whether
a dealership has a service department or
include any other requirement or
limitation beyond those enumerated in
§ 463.2(f). By its plain meaning, the term
‘‘servicing’’ covers, for instance,
‘‘checking and repairing a vehicle,
machine, etc. to keep it in good
condition.’’ 144 As the Commission has
previously stated, the term ‘‘servicing’’
‘‘captures activities undertaken by
essentially all used car dealers.’’ 145
Thus, the definition does not place
dealers with separate servicing
departments at a competitive
disadvantage, and the Commission need
144 The Oxford Advanced American Dictionary
defines ‘‘servicing’’ as ‘‘the act of checking and
repairing a vehicle, machine, etc. to keep it in good
condition’’; see also 15 U.S.C. 5519(b)(3) (referring
to ‘‘the sale, financing, leasing, rental, repair,
refurbishment, maintenance, or other servicing of
motor vehicles, motor vehicle parts, or any related
or ancillary product or service’’).
145 Used Motor Vehicle Trade Regulation Rule
(‘‘Used Car Rule’’), 81 FR 81664, 81667 (Nov. 18,
2016).
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not remove the term ‘‘servicing of motor
vehicles’’ from the Final Rule.
One such commenter further
contended that the proposed definition
did not cover certain entities, including
certain direct sellers or manufacturers or
others not licensed in a particular State,
or lenders who offer add-on products
such as GAP agreements and debt
suspension products. As previously
discussed, the Final Rule applies to all
dealers that meet the three parts of this
definition.146 To the extent that the
definition does not apply to specific
entities, this reflects the scope and
bounds of the rulemaking authority
Congress delegated to the Commission
under the Dodd-Frank Act.147
Finally, some industry and dealership
association commenters posited that the
proposal conflicted with Federal and
State law or duplicated the regulatory
authority of State enforcement agencies.
These commenters did not provide
information regarding how duplicative
laws prohibiting misrepresentations,
requiring disclosures, or prohibiting
charges for items that would not benefit
the consumer or for items without
express, informed consent would create
harmful consequences, and the
Commission is not aware of any laws
that allow such conduct by those that
the Rule defines as ‘‘Covered Motor
Vehicle Dealer[s].’’ Moreover, the Final
Rule provides additional remedies that
will benefit consumers who encounter
conduct that is already illegal under
State or Federal law, including by
adding a mechanism for the
Commission to redress consumers
injured by a dealer’s violation of the
146 See
12 U.S.C. 5519(a), (f).
1029(d) of the Dodd-Frank Act defines
‘‘motor vehicle dealer’’ as ‘‘any person or resident
in the United States, or any territory of the United
States, who—(A) is licensed by a State, a territory
of the United States, or the District of Columbia to
engage in the sale of motor vehicles; and (b) takes
title to, holds an ownership in, or takes physical
custody of motor vehicles.’’ 15 U.S.C. 5519(f)(2).
Parts (A) and (B) of this definition are identical
to parts (1) and (2) of the definition of ‘‘ ‘Covered
Motor Vehicle Dealer’ or ‘Dealer’ ’’ in the Final
Rule.
Section 1029(d) of the Dodd-Frank Act states that
the Commission ‘‘is authorized to prescribe rules
under sections 5 and 18(a)(1)(B) of the Federal
Trade Commission Act in accordance with section
553 of title 5, United States Code, with respect to
a person described in subsection (a).’’ 15 U.S.C.
5519(d). Section 1029(a) in turn, provides the CFPB
‘‘may not exercise any rulemaking, supervisory,
enforcement or any other authority . . . over a
motor vehicle dealer that is predominantly engaged
in the sale and servicing of motor vehicles, the
leasing and servicing of motor vehicles, or both.’’
15 U.S.C. 5519(a). The last clause is identical to part
(3) of the definition in the Final Rule.
Several commenters requested that the
Commission allow consumers to buy vehicles
directly from manufacturers. Nothing in the Rule
prohibits consumers from doing so.
147 Section
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Rule, and will assist law-abiding dealers
that presently lose business to
competitors that act unlawfully. To the
extent the Rule may overlap with State
law, dealers can comply with these laws
and also with the requirements that
follow from the operation, in the Rule,
of the Commission’s definition. To the
extent there is truly an inconsistency
between the provisions of the Final Rule
and a State law, § 463.9 sets out the
Rule’s relation to State laws.
Thus, after careful consideration of
the comments, the Commission is
finalizing the definition of ‘‘ ‘Covered
Motor Vehicle Dealer’ or ‘Dealer’ ’’ with
modifications for clarity. The definition
in the Final Rule incorporates the
phrase ‘‘including any individual or
entity’’ to confirm that the term
‘‘person,’’ like all undefined terms in
this part, is used according to its
ordinary meaning and includes
individuals and corporate entities and
adds the word ‘‘Covered’’ to the
definition to reflect the narrowed scope
of ‘‘Covered Motor Vehicle.’’ 148
(g) Express, Informed Consent
The proposed rule defined the term
‘‘Express, Informed Consent’’ as ‘‘an
affirmative act communicating
unambiguous assent to be charged,
made after receiving and in close
proximity to a Clear and Conspicuous
disclosure, in writing, and also orally
for in-person transactions’’ of ‘‘(1) What
the charge is for’’ and ‘‘(2) The amount
of the charge, including, if the charge is
for a product or service, all fees and
costs to be charged to the consumer over
the period of repayment with and
without the product or service.’’ The
proposed rule also included in this
definition three examples of what does
not constitute express, informed
consent: ‘‘(i) A signed or initialed
document, by itself; (ii) Prechecked
148 See, e.g., Person, Black’s Law Dictionary (11th
ed. 2019) (defining ‘‘person’’ to include ‘‘[a] human
being’’ and ‘‘[a]n entity (such as a corporation) that
is recognized by law as having most of the rights
and duties of a human being.’’); Person, MerriamWebster.com Dictionary, https://www.merriamwebster.com/dictionary/person (last visited Dec. 5,
2023) (defining ‘‘person’’ to include ‘‘human’’ and
‘‘one (such as a human being, a partnership, or a
corporation) that is recognized by law as the subject
of rights and duties’’); see also 12 U.S.C. 5481(19)
(Dodd-Frank Act statutory authority for the Final
Rule defining ‘‘person’’ as ‘‘an individual,
partnership, company, corporation, association
(incorporated or unincorporated), trust, estate,
cooperative organization, or other entity’’); 1 U.S.C.
1 (Dictionary Act defining ‘‘person’’ to include
‘‘corporations, companies, associations, firms,
partnerships, societies, and joint stock companies,
as well as individuals’’). The application of covered
motor vehicle dealer and dealer to entities also is
consistent with these terms’ use in the NPRM and
commenter understanding of these terms in the
course of public comment.
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boxes; or (iii) An agreement obtained
through any practice designed or
manipulated with the substantial effect
of subverting or impairing user
autonomy, decision-making, or choice.’’
In both the NPRM and in the provisions
the Commission is finalizing, this
definition is used exclusively in
§ 463.5(c). As such, comments regarding
the definition are examined in the
discussion of that provision in SBP
III.E.2(c). As stated therein, the
Commission is finalizing this definition
substantively as proposed.
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(h) GAP Agreement
The proposed rule defined the term
‘‘GAP Agreement’’ as ‘‘an agreement to
indemnify a vehicle purchaser or lessee
for any of the difference between the
actual cash value of the insured’s
vehicle in the event of an unrecovered
theft or total loss and the amount owed
on the vehicle pursuant to the terms of
a loan, lease agreement, or installment
sales contract used to purchase or lease
the vehicle, or to waive the unpaid
difference between money received
from the purchaser’s or lessee’s motor
vehicle insurer and some or all of the
amount owed on the vehicle at the time
of the unrecovered theft or total loss.’’
The proposed definition also noted that
this included ‘‘products or services
otherwise titled ‘Guaranteed
Automobile Protection Agreement,’
‘Guaranteed Asset Protection
Agreement,’ ‘GAP insurance,’ or ‘GAP
Waiver[ ].’ ’’ This term appeared in two
sections of the rule proposal: in the
provision regarding dealer charges for
add-ons from which the consumer
would not benefit at proposed
§ 463.5(a), and in the recordkeeping
provision at proposed § 463.6(a)(4).
Comments regarding the proposed
definition are examined in the
discussion of § 463.5(a) in SBP III.E.2(a).
As stated therein, the Commission is
finalizing this definition substantively
as proposed, with typographical
modifications to correct a misplaced
period in the original proposal and a
modification removing the extraneous
term ‘‘insured’s’’ from the phrase
‘‘actual cash value of the insured’s
Vehicle.’’ In addition, the Final Rule
capitalizes the defined term ‘‘Vehicle’’
to conform with the revised definition
of ‘‘ ‘Covered Motor Vehicle’ or
‘Vehicle’ ’’ at § 463.2(e).
(i) Government Charges
The proposed rule defined
‘‘Government Charges’’ as ‘‘all fees or
charges imposed by a Federal, State or
local government agency, unit, or
department, including taxes, license and
registration costs, inspection or
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certification costs, and any other such
fees or charges.’’ This term appeared in
two provisions of the rule proposal: in
the proposed definition of ‘‘Offering
Price’’ at § 463.2(k), which pertains to
the proposed offering price disclosure
provision at § 463.4(a); as well as in the
proposed provision relating to
undisclosed or unselected Add-ons at
§ 463.5(b). As explained in further detail
in the paragraph-by paragraph analysis
of § 463.5(b) in SBP III.E.2(b), the
Commission has determined not to
finalize § 463.5(b), and as such will
refrain from examining this proposed
definition in relation to that provision.
Comments regarding the proposed
definition are examined in the
discussion of § 463.4(a) in SBP III.D.2(a).
As stated therein, the Commission is
finalizing this definition substantively
as proposed, with a typographical
modification to include a serial comma
for consistency.
(j) Material or Materially
The proposed rule defined ‘‘Material’’
or ‘‘Materially’’ as ‘‘likely to affect a
person’s choice of, or conduct regarding,
goods or services.’’ This term appeared
in the prohibited misrepresentations
provisions at § 463.3(b) and (g), and in
the recordkeeping provision at
§ 463.6(a). As described in detail in the
section-by-section analysis of § 463.3 in
SBP III.C, the Final Rule modifies the
introductory paragraph of § 463.3 from
the Commission’s original proposal to
add the word ‘‘Material,’’ such that the
Commission’s materiality standard
applies to all subparts of § 463.3. The
Final Rule accordingly removes the
word ‘‘Material’’ from § 463.3(b) and (g)
so as to avoid duplication. Based on the
following, the Commission is finalizing
this definition, now at § 463.2(j),
substantively as proposed.
A dealership association commenter
noted that the proposed definition did
not use the term ‘‘significance,’’ and
asserted that ‘‘Material’’ information
should be significant and not ‘‘rooted in
personal preference.’’ 149 The
Commission notes that this definition
adopts the meaning of the term as
articulated through decades of
enforcement actions 150 instead of using
a different term such as ‘‘significance,’’
and does not use the term ‘‘personal
preference’’ or rely on ‘‘personal
149 Comment of Ga. Auto. Dealers Ass’n, Doc. No.
FTC–2022–0046–10806 at 4.
150 See FTC Policy Statement on Deception, supra
note 42, at 1–2, 5; see also Fed. Trade Comm’n v.
Fleetcor Techs., Inc., 620 F. Supp. 3d 1268, 1303
(N.D. Ga. 2022); Fed. Trade Comm’n v. Crescent
Pub. Grp., Inc., 129 F. Supp. 2d 311, 321 (S.D.N.Y.
2001); Thompson Med. Co., Inc., 104 F.T.C. 648,
816 (1984).
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609
preference’’ any more than the phrase
‘‘likely to affect’’ or ‘‘significant’’ does.
Thus, the Commission is finalizing this
definition substantively as proposed.
(k) Offering Price
The proposed rule defined ‘‘Offering
Price’’ as ‘‘the full cash price for which
a Dealer will sell or finance the motor
vehicle to any consumer, excluding only
required Government Charges.’’ This
term appeared in two provisions of the
rule proposal: in the proposed offering
price disclosure provision at § 463.4(a),
as well as in the proposed provision
relating to undisclosed or unselected
add-ons at § 463.5(b). As explained in
further detail in the paragraph-byparagraph analysis of § 463.5(b) in SBP
III.E.2(b), the Commission has
determined not to finalize § 463.5(b),
and as such, will refrain from examining
this proposed definition in relation to
that provision. Comments regarding the
proposed definition are examined in the
discussion of § 463.4(a) in SBP
III.D.2(a).151 As stated therein, the
Commission is finalizing this definition
largely as proposed, with a modification
to clarify that dealers may, but need not,
exclude required government charges
from a motor vehicle’s offering price. In
addition, the definition in the Final
Rule substitutes ‘‘Vehicle’’ for ‘‘motor
vehicle’’ to clarify that the term
conforms with the revised definition of
‘‘ ‘Covered Motor Vehicle’ or ‘Vehicle’ ’’
at § 463.2(e).
C. § 463.3: Prohibited
Misrepresentations
1. General Comments
The proposed rule set forth
prohibitions against certain
misrepresentations by motor vehicle
dealers. Based on the following, the
Commission has determined to finalize
these prohibitions, with minor
revisions.
The following paragraphs discuss
comments relating to § 463.3 generally
and Commission responses to such
comments, followed by comments
relating to each paragraph of § 463.3 and
Commission responses to such
comments.
The NPRM proposed prohibiting
dealers from making any
misrepresentation, expressly or by
implication, regarding specific listed
categories. The Commission received
many comments regarding this
151 Some commenters, including certain industry
associations, requested that the Rule include
additional definitions, including for the terms
‘‘charged,’’ ‘‘item,’’ ‘‘discount,’’ ‘‘rebate,’’ ‘‘trade-in
value,’’ and ‘‘online service.’’ In response, the
Commission notes that for terms not defined in the
Rule, the plain meaning of the terms apply.
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proposal, including comments
supporting such a provision, comments
urging the Commission to broaden the
provision, and comments urging the
Commission to limit or forgo the
provision.
Thousands of commenters expressed
support for the proposed rule.152 Many
of these commenters specifically
expressed concern about misleading
advertisements and deceptive pricing.
Many individual commenters cited
examples of such conduct from their
own experiences purchasing or leasing
vehicles, and many commenters with
experience operating or working for a
dealership shared their observations or
experiences. For example:
• I have been looking for a car at
MSRP and most dealers[’] websites will
list it at that price. [T]hen when you
drive there the[y] will say well there is
a market adjustment from 5,000 to
20,000 dollars. [N]ow . . . you need a
car and have wasted 3–4 hours and
picked out what you thought was your
next car.153
• I am currently in discussions with
two dealerships for a new car. Both
assure me there is absolutely no dealer
markup, come to find out they are
adding 3/5k of ‘‘mandatory’’ add-ons
respectively once I get in the door.154
• The last vehicle I purchased 2 years
ago was a nightmare. Drove 5 hrs[.] to
a dealer in Southern California. I called
the dealer and confirmed the price on
their website was what I was going to
pay. When I arrived there, they had a
list of $2500 [i]n additional charges that
were not disclosed when I called and
before I started driving. Purchasing a
vehicle shouldn’t be such a stressful
process.155
• Most recently I started looking
myself for a new lease, and looked at the
RAV 4 prime. Went to my local dealer
after seeing an ad on their site for $450
a month. Not only did they not honor
the deal, but wouldn’t even discuss that
it was on their own site. I was told the
SE model was [$5000] over MSRP and
the XSE was [$8000] over.156
• I have contacted 10 different car
dealerships in the past month looking to
purchase a new or used SUV. 9 out of
the 10 dealerships I contacted online or
visited in-person in California changed
152 See Motor Vehicle Dealers Trade Regulation
Rule, Comment Docket, https://
www.regulations.gov/document/FTC-2022-00460001/comment.
153 Individual commenter, Doc. No. FTC–2022–
0046–0036.
154 Individual commenter, Doc. No. FTC–2022–
0046–0099.
155 Individual commenter, Doc. No. FTC–2022–
0046–0906.
156 Individual commenter, Doc. No. FTC–2022–
0046–1878.
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or lied about the online advertised price
of the vehicle I was inquiring about or
said the car was sold or not available
and tried to sell me a more expensive
vehicle.157
• Once I was led to the F&I office I
was told that I HAD to buy a $995 paint
protection product that I didn[’]t want
or need. I asked to see the contract for
this product which clearly stated in
bold letters ‘ACCEPTANCE OF THIS
CONTRACT IS VOLUNTARY AND
DOES NOT AFFECT THE FINANCING
OF THE VEHICLE’ I pointed this out to
the salesman and told him that I didn’t
want this product[.] [H]e looked me in
the eyes with my wife present and said
‘‘You have to buy it[.]’’ 158
• At the dealership, the salesman
offered a price of $38,000, over $8,000
more than the advertised price. When I
challenged the extra cost, he said the
advertisement included every possible
rebate and discount and no one could
receive them together (some were
exclusionary with other discounts).159
• While there are good honorable
dealerships, far too many play games.
Rarely is the price of [a] car advertised
online or via mail EVER the actual
price. Far too often in the F&I office the
finance manager tries to [gloss] over
add[-]ons that they just arbitrarily added
on without telling you OR state I cannot
get your loan approved without an
extended warranty as an example I
experienced. . . . I worked for a Toyota
dealership many years ago and left the
industry because it made me sick seeing
the games played taking advantage of
people. Change is needed and sooner
than later.160
• I work as a salesperson at a local
Nissan dealership. . . . Currently,
dealerships across the US, including the
one I work for, have made the car
buying process needlessly confusing,
expensive, and frustrating by engaging
in false advertising and hidden add-on
products. While these practices are very
unscrupulous, they are incredibly
effective at what they are designed to
do: drive revenue for the store. If these
regulations are passed, they would
certainly take a significant toll on my
personal finances. But the longer I work
in my position, the more I realize that
no one should be allowed to engage in
157 Individual commenter, Doc. No. FTC–2022–
0046–3686.
158 Individual commenter, Doc. No. FTC–2022–
0046–4752.
159 Individual commenter, Doc. No. FTC–2022–
0046–5580.
160 Individual commenter, Doc. No. FTC–2022–
0046–2378.
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such exploitative conduct in the course
of running a business.161
• I am in the auto industry and work
at a very transparent and honest
dealership. I think most of these rules
are great. I hear horror stories about
honest people seeing a car advertised for
one price, only to be told there are
additional a[d]d-ons and markups once
they arrive. I think this is unfair. I’m
also shocked every time I hear about a
dealership charging for mandatory
window etching and nitrogen filled
tires. I even know of reputable
dealerships that add GPS tracking and
theft recovery devices to every new car,
even though these cars come with GPS
theft recovery from the manufacturer.
Stopping these practices will help
restore consumers’ faith in car
dealerships, save them money, and lead
to a more honest and ethical
industry. . . .162
Other commenters expressed support
for transparent pricing generally,
stating, for example:
• A consumer should be able to see
a price, walk into a dealership, and pay
that price. Plain and simple, just like
ANY OTHER RETAILER.’’ 163
• If I walk into Best Buy and see a
price they HAVE to sell it to me for that
price or cheaper. These rules are long
over due.164
• I believe if they advertise a car, it
should be available for sale—at the
advertised price—just as a supermarket
can’t advertise a price for something
they don’t have, or add a ‘coupon
redemption fee’ to it. I believe these
rules are an extremely reasonable
approach to a long-standing problem
and urge you to adopt them.165
• I used to work in the retail auto
industry and these proposed rules will
help everyone (including the dealers
who are fighting them). Consumers will
benefit from the transaction
transparency, and over the long term
even the shady dealers will benefit by
treating consumers fairly and
developing long term relations.166
• These regulations would be the best
thing to happen for consumer protection
since the Mo[n]roney Label. I not only
have had to navigate and negotiate
erroneous fees at dealers, but I’ve also
161 Individual commenter, Doc. No. FTC–2022–
0046–3693.
162 Individual commenter, Doc. No. FTC–2022–
0046–4959.
163 Individual commenter, Doc. No. FTC–2022–
0046–0017.
164 Individual commenter, Doc. No. FTC–2022–
0046–0034.
165 Individual commenter, Doc. No. FTC–2022–
0046–0005.
166 Individual commenter, Doc. No. FTC–2022–
0046–1935.
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worked at dealers whose transparency
and forthrightness put them at a
disadvantage. Many dealers advertise
vehicles that can not [sic] be purchased
or leased at the advertised price due to
deceptive adverts either not disclosed or
in a print so fine it can’t be read. Please
pass this ruling. My grandma shouldn’t
have to pay more than someone else just
because she’s not a good negotiator.167
Consumer advocacy organization
commenters and individual commenters
urged the FTC to include additional
specific provisions in § 463.3, including
a prohibition against misrepresentations
regarding the safety, mechanical or
structural condition, odometer reading,
or history of a vehicle. Similarly,
commenters including a municipal
regulator urged the Commission to
specifically prohibit misrepresentations
regarding certification of used vehicles,
citing enforcement actions it brought
against dealers that misrepresented used
vehicles as ‘‘certified pre-owned’’ or
‘‘manufacturer certified.’’ The FTC takes
seriously deception relating to the safety
or condition of a vehicle and the
practice of charging consumers more
based on false claims or reassurances.168
Depending on the claim made by the
dealership and the specific facts at
issue, deceptive conduct in either of
these areas may be covered by the
enumerated misrepresentation
paragraphs the Commission is
finalizing, such as by § 463.3(a) if it
relates to the terms of the purchase,
lease, or financing. The FTC will
continue to monitor dealer
misrepresentations to determine
whether additional action is needed.
In addition, a number of credit union
commenters requested that the
Commission explicitly address
misrepresentations involving dealers’
refusal to accept outside financing to
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167 Individual
commenter, Doc. No. FTC–2022–
0046–10441.
168 See, e.g., Complaint, CarMax, Inc., No. C–4605
(F.T.C. Mar. 22, 2017) (alleging Defendants misled
consumers by representing that the used motor
vehicles Defendants sold had been subject to
rigorous inspection but omitting important safety
information about recalls); Complaint, West-Herr
Auto. Grp., Inc., No. C–4607 (F.T.C. Mar. 22, 2017)
(alleging Defendants failed to disclose, or disclose
adequately, that used motor vehicles it sold were
subject to open recalls for safety issues); Complaint,
Asbury Auto. Grp., Inc., No. C–4606 (F.T.C. Mar. 22,
2017) (alleging deceptive failure to disclose material
information about the safety of used motor vehicles
sold by Defendants); Complaint ¶¶ 20–24, Fed.
Trade Comm’n v. Passport Imports, Inc., No. 8:18–
cv–03118 (D. Md. Oct. 10, 2018) (alleging
Defendants misled consumers by mailing ‘‘Urgent
Recall’’ notices that were similar to and had the
same color scheme as notices manufacturers are
required by the U.S. Department of Transportation’s
NHTSA to use when sending information about
vehicle recalls, even though in the ‘‘vast majority
of instances’’ the recipients’ cars were not subject
to an open recall).
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purchase a vehicle. These commenters
cited several examples of consumers
being told that they could not use
outside financing, that they would not
receive a lower interest rate from an
outside financial institution, or that a
particular interest rate was the best rate
the consumer can get. The Rule already
covers such conduct. For example,
§ 463.3(a) of the Rule, which prohibits
dealers from misrepresenting the cost or
terms of financing a vehicle, covers
these and other misrepresentations
regarding financing, including the
availability of outside or ‘‘indirect’’
financing terms, or the costs of such
financing as compared to those of any
dealer-provided financing.
Two individual commenters posited
that any language prohibiting
misrepresentations should explicitly
include the word ‘‘omissions,’’ in order
to ensure that dealers do not sneak in
additional costs without consumers’
consent or understanding. The
Commission appreciates this concern,
and notes that the Rule has many
provisions prohibiting such misconduct,
including the required disclosures
regarding price, add-ons, and total
amount of payments in § 463.4 of the
Final Rule, as well as the requirement
in § 463.5(c) to obtain consumers’
express, informed consent before
charging for any items.
Other commenters, including
dealership associations, individual
commenters, and a United States
Representative, questioned whether
certain of the proposed
misrepresentation provisions were
duplicative of other laws, such as the
Truth in Lending Act (‘‘TILA’’), the
Consumer Leasing Act (‘‘CLA’’), or State
regulations, and in some instances
whether compliance with State
regulations should act as a safe harbor.
The Commission notes that another
statute—the FTC Act—already prohibits
misrepresentations in or affecting
commerce, and to the extent there is
duplication between the FTC Act and
other existing statutes pertaining to
deception, there is no evidence that
duplicative misrepresentation
prohibitions have harmed consumers or
competition.169 The Commission further
notes that the Final Rule provides
169 One commenter expressed concern that the
prohibited misrepresentations would cause
dealerships to provide less information, because
discussing pricing and quotes would result in
providing further documentation for every
conversation. However, as the FTC Act already
prohibits misrepresentations, and given that pricing
and financing information are among the most
salient aspects of a consumer’s shopping for a
vehicle, the Commission considers it unlikely that
§ 463.3 would result in less information or the
creation of additional documentation.
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additional remedies that will benefit
consumers who encounter conduct that
is otherwise already illegal under
Federal law, and will aid law-abiding
dealers that lose business to competitors
that act unlawfully.170 State laws may
provide more or less specific
requirements as long as those
requirements are not inconsistent with
part 463, as set forth in § 463.9, and in
the event of an inconsistency, the Rule
only affects such State law to the extent
of the inconsistency. Because dealers
are already prohibited from engaging in
‘‘deceptive acts or practices’’ under the
FTC Act, dealers should be able to
comply with these provisions without
the need for a safe harbor.
Industry association commenters also
claimed that the prohibited
misrepresentation proposal ignored the
materiality prong of the Commission’s
deception standard, and further
observed that some of the prohibited
misrepresentations in the proposed rule
explicitly included a materiality
requirement,171 while others did not. As
the NPRM made clear, the
Commission’s proposed
misrepresentation section, at § 463.3,
addressed misrepresentations that are
all material.172 The Commission need
not explicitly specify materiality in its
description of these misrepresentations;
indeed, the Commission has long
considered certain categories of
information, express claims, and
intended implied claims to be
presumptively material.173
Nevertheless, rather than using the term
‘‘Material’’ in certain individual
enumerated paragraphs, the
Commission has determined to modify
the introductory text of § 463.3 from the
Commission’s original proposal in order
170 Under section 19(a)(1) of the FTC Act, the
Commission may sue in Federal district court ‘‘any
person, partnership, or corporation’’ that ‘‘violates
any rule under [the FTC Act] respecting unfair or
deceptive acts or practices.’’ 15 U.S.C. 57b(a)(1).
Where such liability is found, under section 19(b)
a court may ‘‘grant such relief as [it] finds necessary
to redress injury . . . resulting from the rule
violation,’’ including the ‘‘rescission or reformation
of contracts, the refund of money or return of
property, [or] the payment of damages.’’ Id. 57b(b).
A few commenters requested that the Rule go
further in providing remedies, including by
allowing for a private right of action to enforce Rule
violations. The Commission notes that, depending
on State law, consumers may be able to use State
statutes that prohibit unfair or deceptive practices
to challenge conduct that violates this Rule.
There is nothing in the FTC Act or this Rule that
would preclude consumers from exercising any
such legal rights under State law. The Commission
will continue to monitor the market to determine
whether additional steps are needed.
171 See NPRM at 42045 (proposed § 463.3(b), (g)).
172 NPRM at 42019.
173 FTC Policy Statement on Deception, supra
note 42, at 5 & nn.47–55.
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to specifically prohibit
misrepresentations regarding material
information about the enumerated
paragraphs. As such, the Commission is
also removing what would otherwise be
redundant references to the term
‘‘Material’’ within paragraphs (b) and (g)
of § 463.3.
A national dealership association
incorrectly asserted that this section is
problematic because there is no
requirement that the representation or
omission be material or be viewed from
the perspective of a consumer acting
reasonably under the circumstances. As
adopted in the final rule, this section
adds the term ‘‘Material,’’ stating that it
is an unfair or deceptive practice for any
motor vehicle dealer to make any
misrepresentation, expressly or by
implication, regarding material
information about the specific categories
enumerated in § 463.3.174 The
Commission is not aware of situations
where dealers have made
misrepresentations expressly or by
implication regarding material
information about these specific
categories that are not deceptive or
unfair, nor did commenters describe any
such situations.
The Commission further notes that, by
the terms of this section, a court must
find that the dealer made an express or
implied misrepresentation regarding
material information for § 463.3 to be
violated. For an express or implied
misrepresentation regarding material
information to be made in violation of
the FTC Act and this Rule, there must
be a representation that misleads
consumers acting reasonably under the
circumstances regarding material
information. Whether such a
representation has occurred depends on
the facts. In the case of implied
representations, whether a
representation has occurred is often
evident from an examination of the
representation itself, including, for
example, an evaluation of the document
in which a representation is made, the
juxtaposition of language in that
document, the nature of the
representation, and the nature of the
transaction.175 In other situations,
174 The Final Rule prohibits misrepresentations in
specific categories. In contrast, some FTC rules go
further by prohibiting misrepresentations of ‘‘any
material aspect’’ of the transaction. See, e.g.,
Mortgage Assistance Relief Services Rule, 16 CFR
322.3(b); Telemarketing Sales Rule, 16 CFR
310.3(a)(2)(x).
175 FTC Policy Statement on Deception, supra
note 42, at 2 (citing Am. Home Prods., 98 F.T.C.
136, 374 (1981), aff’d, 695 F.2d 681, 687 (3d Cir.
1982) (evaluation of the entire document); Warner
Lambert, 86 F.T.C. 1398, 1489–90 (1975), aff’d 562
F.2d 749 (D.C. Cir. 1977), cert. denied, 435 U.S. 950
(1978) (juxtaposition of phrases); Firestone Tire &
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extrinsic evidence that it is reasonable
for consumers to reach the implied
representation may be helpful, such as
consumer testimony, surveys, or other
reliable evidence of consumer
interpretation.176
For example, if a dealer offers
discounted coffee for customers who
visit its dealership before 10 a.m. and
honors that offer, but makes no
representations, expressly or by
implication, about discounted cars, the
dealer will not have violated § 463.3(d),
which prohibits express or implied
misrepresentations regarding rebates
and discounts, even if a consumer holds
an unreasonable belief that the offer was
for discounted cars. On the other hand,
if a dealership’s advertisement depicts a
car with a consumer standing next to it
holding a cup of coffee, and states,
‘‘10% discount available before 10
a.m.,’’ such an advertisement can
convey several representations that may
mislead reasonable consumers,177
including that the car is available at a
10% discount.
Commenters including industry
associations opined on the term
‘‘implied,’’ contending for example that
the idea that a misrepresentation can be
implied is overly broad, and a
dealership association commenter
expressed concern that the inclusion of
‘‘implied’’ creates too much uncertainty.
As has been recognized under the law
for decades, however, representations
can mislead consumers, even without
making express claims.178 Take, for
Rubber Co., 81 F.T.C. 398, 456 (1972), aff’d, 481
F.2d 246 (6th Cir.), cert. denied, 414 U.S. 1112
(1973) (nature of the claim); see also Kraft, Inc. v.
Fed. Trade Comm’n, 970 F.2d 311, 319 (7th Cir.
1992) (‘‘Commission may rely on its own reasoned
analysis to determine what claims, including
implied ones, are conveyed in a challenged
advertisement, so long as those claims are
reasonably clear from the face of the
advertisement.’’).
176 FTC Policy Statement on Deception, supra
note 42, at 2 n.8.
177 The interpretation or reaction does not have to
be the only one; when a seller’s representation
conveys more than one meaning to reasonable
consumers, one of which is false, the seller is liable
for the misleading interpretation. See FTC Policy
Statement on Deception, supra note 42, at 3.
Further, an interpretation will be presumed
reasonable if it is the one the respondent intended
to convey. Id.
178 The FTC’s Policy Statement on Deception and
scores of FTC cases make clear that both express
and implied claims can be deceptive. See, e.g., ECM
Biofilms, Inc. v. Fed. Trade Comm’n, 851 F.3d 599
(6th Cir. 2017) (affirming Commission’s finding that
an additive manufacturer’s unqualified
biodegradability claim conveyed an implied claim
that its plastic would completely biodegrade within
five years); POM Wonderful LLC, No. C–9344
(F.T.C. Jan. 10, 2013) (Opinion of the Commission),
aff’d as modified, POM Wonderful, LLC v. Fed.
Trade Comm’n, 777 F.3d 478 (D.C. Cir. 2015)
(finding that company’s advertisements would
reasonably be interpreted by consumers to contain
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example, an advertisement that shows a
picture of a new sedan for sale. Even if
the advertisement does not expressly
state that consumers could use the
vehicle to drive at speeds higher than 25
miles per hour, there is an implied
representation that a product is fit for
the purposes for which it is sold.179
Thus, limiting the Rule to prohibit only
express misrepresentations would
significantly hamper its usefulness to
consumers.
One industry association commenter
further argued that the proposed rule
created a new deception standard that
ignored intent and reliance. This
argument, however, misstates the law,
which does not require intent 180 or
reliance 181 to establish deception.
Thus, the Commission is finalizing
the introductory paragraph of § 463.3
largely as proposed, with a modification
stating that it applies to
misrepresentations regarding material
information. For consistency with other
parts of the Rule, the Commission is
also removing the shorthand ‘‘FTC Act’’
that appeared in parentheses after ‘‘the
Federal Trade Commission Act’’ in the
introductory paragraph of the proposed
rule. For clarity and consistency with
the revised definition of ‘‘Covered
Motor Vehicle Dealer’’ (at § 463.2(f) and
discussed in SBP III.B.2(f)), the
Commission is adding the word
‘‘Covered’’ to ‘‘Motor Vehicle Dealer’’ in
the introductory paragraph. Finally,
without changing any substantive
requirements for covered entities, the
Commission is adding the following
sentence to the end of § 463.3, at newly
designated paragraph (q): ‘‘The
requirements in this section also are
prescribed for the purpose of preventing
the unfair or deceptive acts or practices
an implied claim that POM products treat, prevent,
or reduce the risk of certain health conditions and
for some ads that these effects were clinically
proven); Kraft, Inc. v. Fed. Trade Comm’n, 970 F.2d
311 (7th Cir. 1992) (affirming finding of deception
where Kraft ads juxtaposed references to the milk
contained in Kraft singles and the calcium content
of the milk, the combination of which implied that
each Kraft single contained the same amount of
calcium as five ounces of milk).
179 FTC Policy Statement on Deception, supra
note 42, at 2; Int’l Harvester Co., 104 F.T.C. 949,
1057–58 (1984).
180 See Fed. Trade Comm’n v. Freecom
Commc’ns, 401 F.3d 1192, 1202 (10th Cir. 2005)
(‘‘Because the primary purpose of § 5 is to protect
the consumer public rather than punish the
wrongdoer, the intent to deceive the consumer is
not an element of a § 5 violation.’’).
181 See Fed. Trade Comm’n v. Figgie Int’l, Inc.,
994 F.2d 595, 605–06 (9th Cir. 1993) (holding that
section 19 of the FTC Act does not require proof
of individual consumer reliance; rather, there is a
‘‘presumption of actual reliance’’ that arises once
the Commission has proved that a defendant made
material misrepresentations, that they were widely
disseminated, and that consumers purchased the
defendant’s product).
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defined in this part, including those in
§§ 463.4 and 463.5.’’
The Commission examines each
paragraph of § 463.3, including by
examining related comments and
Commission responses to those
comments. The Commission then
discusses the corresponding provisions
of the Final Rule.
2. Paragraph-by-Paragraph Analysis of
§ 463.3
(a) The Costs or Terms of Purchasing,
Financing, or Leasing a Vehicle
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Proposed § 463.3(a) prohibited
misrepresentations regarding the cost or
terms of purchasing, financing, or
leasing a vehicle. The Commission is
finalizing this provision largely as
proposed, with the minor modification
of capitalizing the defined term
‘‘Vehicle’’ to conform with the revised
definition at § 463.2(e) (explained in
SBP III.B.2(e)). As previously discussed,
the addition of ‘‘material’’ to the
introductory paragraph of § 463.3 will
apply to this paragraph and to all
paragraphs of § 463.3 that follow.
A number of commenters expressed
support for this proposed provision,
contending, inter alia, that it would
level the playing field for car buyers and
address unfair and deceptive practices
related to financing terms and
conditions.
The Commission received a number
of industry association comments
requesting that the Commission clarify
the operation of proposed § 463.3(a),
including for example, by clarifying
whether it would require dealers to
discuss all purchase, finance, or lease
terms, or whether it would require
dealers to read aloud all the terms of the
buyer’s order and finance or lease
agreement. Dealership association
commenters expressed a related concern
that this proposed provision lacked
specific guidance on dealer compliance.
To begin, misrepresentations
regarding ‘‘costs or terms of purchasing,
financing, or leasing a vehicle’’ refer to
the ordinary plain meaning of the words
used in the provision.182 Second, as the
182 Examples of ‘‘costs or terms of purchasing,
financing, or leasing a vehicle’’ include, among
other things, express or implied representations
regarding a vehicle’s total cost, down payments,
interest rates, repayment schedules, the price for
added features, other charges, certainty or finality
of terms, and the availability of discounts. The
Commission has brought numerous enforcement
actions where, for example, dealers have
misrepresented the total price a consumer could
pay for vehicles, or concealed a required down
payment or other restrictions on the offer. See, e.g.,
Complaint ¶¶ 10–11, Fed. Trade Comm’n v. Liberty
Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y. May
21, 2020) (alleging false ads stating a certain price
but charging consumers higher prices); Complaint
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language in the introductory paragraph
of § 463.3 makes clear, its paragraphs—
including paragraph (a) of § 463.3—
prohibit misrepresentations regarding
material information. By its terms, this
paragraph requires no particular
affirmative disclosures, whether written
or oral; rather, this paragraph obligates
dealers to refrain from
misrepresentations regarding material
information about the costs or terms of
purchasing, financing, or leasing a
vehicle.183
The Commission received comments
from industry associations requesting
that the Final Rule provide a safe harbor
from liability stemming from dealers’
violations of the Rule to vehicle credit
contract assignees, who take or receive
these contracts subject to all claims and
defenses consumers could assert against
the dealer under the Commission’s
Trade Regulation Rule Concerning
Preservation of Consumers’ Claims and
Defenses, also known as the ‘‘Holder
Rule.’’ 184 The Rule, however, does not
create liability for these entities under
the Holder Rule where it did not
previously exist; the Rule addresses
conduct that is unfair or deceptive
under the FTC Act. When enacting the
Holder Rule, the Commission did not
include a safe harbor or exceptions
involving any specific deceptive or
unfair conduct, and the Commission
declines to do so through this Rule.
A comment from a motor vehicle
industry association argued that this
provision would likely be inapplicable,
or less impactful, with regard to RV
sales because the RV industry rarely
offers leases, if at all, and because RV
sales are usually not financed through
RV manufacturer-controlled financing
companies. To the extent that specific
provisions do not apply to specific
entities, such provisions do not impose
¶¶ 38–46, Fed. Trade Comm’n v. Tate’s Auto Ctr.
of Winslow, Inc., No. 3:18–cv–08176–DJH (D. Ariz.
July 31, 2018) (alleging false ads touting attractive
terms but concealing (i) ads were for lease offers
only and required substantial initial payment, (ii)
discounts were subject to material limitations, or
(iii) other legally required disclosures); Complaint
¶¶ 7–16, Cowboy AG, LLC, No. C–4639 (F.T.C. Jan.
4, 2018) (alleging false ads touting attractive terms,
but concealing substantial down payments, offers
were for leases and not purchases, material
eligibility restrictions, and other legally required
disclosures).
183 Some commenters repeat this and similar
questions, regarding what types of disclosures are
required, through provision (o); the same response
applies—provisions (a) through (o) do not
affirmatively require particular disclosures. As with
all misrepresentations prohibited by the Rule, and
under section 5 of the FTC Act, misrepresentations
are barred whether they are made expressly or by
implication.
184 See Trade Regulation Rule Concerning
Preservation of Consumers’ Claims and Defenses, 16
CFR 433.2 [hereinafter Holder Rule].
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613
any obligations upon those entities.
Nevertheless, as explained in the
analysis of the ‘‘Covered Motor Vehicle’’
definition, § 463.2(e), the Commission is
excluding recreational vehicle dealers
from the definition of ‘‘Covered Motor
Vehicle.’’
After carefully considering the
comments, the Commission is finalizing
paragraph (a) of § 463.3 with the minor
modification of capitalizing ‘‘Vehicle.’’
This provision prohibits
misrepresentations regarding ‘‘[t]he
costs or terms of purchasing, financing,
or leasing a Vehicle.’’
Misrepresentations of the price,
discounts, or other terms are likely to
cause consumers to waste time pursuing
unavailable or inapplicable offers and to
spend more money on a vehicle rather
than undergoing the hours-long process
to begin the vehicle search and
shopping process anew at another
dealership. Prohibiting these
misrepresentations will save consumers
time and money and ensure that dealers
compete on a level playing field.185
(b) Any Costs, Limitation, Benefit, or
Any Other Aspect of an Add-On
Product or Service
Proposed § 463.3(b) prohibited
misrepresentations concerning any
costs, limitation, benefit, or any other
material aspect of an add-on product or
service. Section 463.3(b) of the Final
Rule adopts this provision without
substantive modification. As described
in detail in SBP III.C.1, the Commission
185 The National Automobile Dealers Association
commissioned a survey, released in May of 2023,
that asserted the Commission’s proposed rule
would lead to an increase in consumer transaction
time. Edgar Faler et al., Ctr. for Auto. Rsch.,
‘‘Assessment of Costs Associated with the
Implementation of the Federal Trade Commission
Notice of Proposed Rulemaking (RIN 2022—14214),
CFR part 463’’ (2023), https://www.cargroup.org/
wp-content/uploads/2023/05/CAR-Report_CFRPart-463_Final_May-2023.pdf. This survey was
released more than seven months after the closure
of the comment period for the notice of proposed
rulemaking on September 12, 2022, and is not part
of this rulemaking record. These facts
notwithstanding, the Commission observes that
each respondent to this survey was presented with
a leading statement at the beginning of the survey
asserting, inter alia, that the proposed rule would
impose ‘‘new duties [that] are expected to create
additional monitoring, training, forms, and
compliance review responsibilities as well as a
modification of record keeping systems and
coordination with outside IT and other vendors’’
and ‘‘increase the time of a motor vehicle
transaction, inhibit online sales, limit price
disclosures, and increase customer confusion and
frustration.’’ Id. at 34, 36 (introductory instructions
on the survey instrument sent to respondents). In
addition, this survey did not explain its selection
process or criteria for the 60 dealers it surveyed, nor
why only 40 such dealerships provided fully
completed survey responses. Moreover, the survey
report attributed much of this estimated increase to
proposed rule provisions that the Commission is
not finalizing.
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is modifying § 463.3 from the
Commission’s original proposal to
include the term ‘‘Material’’ in the
introductory paragraph rather than in
paragraphs (b) or (g) of § 463.3. Section
463.3(b) of the Final Rule therefore
deletes reference to the term ‘‘Material.’’
The Commission received a number
of comments expressing support for
prohibiting misrepresentations about
add-ons, including comments that
requested specific additional add-onrelated misrepresentation prohibitions.
For example, an auto dealer commenter
expressed support for prohibiting
misrepresentations about whether or not
a car has add-ons already installed.
Consumer advocacy organization
commenters recommended that the
Commission include a new paragraph in
§ 463.3 prohibiting misrepresentations
regarding the consumer’s right to cancel
add-on products or services. This
provision, however, already covers such
conduct: It prohibits misrepresentations
regarding material information about
any costs, limitation, benefit, or any
other aspect of an add-on product or
service. ‘‘Material’’ means likely to
affect a consumer’s conduct or
choices.186 A consumer’s right to cancel
is likely to affect the consumer’s
conduct regarding an add-on product or
service. Thus, § 463.3(b) includes
representations about a consumer’s right
to cancel an add-on product or service.
A number of dealership association
commenters argued that the language
used in this provision is vague or
confusing. The terms ‘‘Material’’ and
‘‘Add-on Product or Service,’’ however,
are specifically defined in § 463.2. The
remaining terms in this provision are
commonly used and can be understood
according to their plain meaning.187 The
NPRM examined misrepresentations
regarding the coverage and costs of addons, and enforcement actions by the
Commission and other agencies have
documented many instances of such
misrepresentations.188 Examples of the
186 See FTC Policy Statement on Deception, supra
note 42, at 2, 5; see also Fed. Trade Comm’n v.
Crescent Publ’g Grp., Inc., 129 F. Supp. 2d 311, 321
(S.D.N.Y. 2001).
187 E.g., Cost, Cambridge Dictionary, https://
dictionary.cambridge.org/us/dictionary/english/cost
(‘‘Cost’’ is defined as ‘‘the amount of money needed
to buy, do, or make something’’); Limitation,
Cambridge Dictionary, https://dictionary.
cambridge.org/us/dictionary/english/limitation
(‘‘Limitation’’ is defined as ‘‘something that controls
or reduces something’’); Benefit, Cambridge
Dictionary, https://dictionary.cambridge.org/us/
dictionary/english/benefit (‘‘Benefit’’ is defined as
‘‘a helpful or good effect, or something intended to
help’’).
188 See, e.g., Complaint ¶¶ 26–27, 70–71, Fed.
Trade Comm’n v. N. Am. Auto. Servs., Inc., No.
1:22-cv-01690 (N.D. Ill. Mar. 31, 2022) (alleging
deceptive and unauthorized add-on charges; unfair
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type of conduct prohibited include
misrepresenting whether add-ons are
required in order to purchase or lease a
vehicle, including by representing that
such charges are required when in fact
they are not, or misrepresenting that
advertised prices do not include fees
beyond routine taxes and fees only to
subsequently require the purchase of
add-ons; misrepresenting what is, or is
not, covered by, among others, an
extended warranty, service or
maintenance plan, or GAP
agreement; 189 and misrepresenting that
consumers have provided express,
informed consent to be charged for addons.
Commenters including a number of
motor vehicle dealership associations
requested that the Commission clarify
how extensive disclosures would need
to be to satisfy this provision. One such
commenter requested that the
Commission explain what conduct
would be required under this paragraph,
and expressed concern that, if the
paragraph required disclosures, such a
requirement would affect the length of
the transaction. Another industry
association commenter suggested that,
in the event dealers provide consumers
with a verbal or written disclosure
stating that such products have costs,
limitations, or benefits, and stating
information about other material
aspects, the Commission modify its
proposal to shift to consumers the
burden of proving any relevant dealer
misrepresentation. An individual
commenter expressed support for
applying § 463.3(a) and (b) to dealer
discrimination against minority consumers);
Complaint ¶¶ 12–19, Fed. Trade Comm’n v. Liberty
Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y. May
21, 2020) (alleging deceptive and unauthorized addon charges in consumers’ transactions); Complaint
¶¶ 59–64, Fed. Trade Comm’n v. Universal City
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29,
2016) (deceptive and unauthorized add-on charges
in consumers’ transactions); Complaint ¶¶ 4–14,
Nat’l Payment Network, Inc., No. C–4521 (F.T.C.
May 4, 2015) (alleging failure to disclose fees
associated with financing program; misleading
savings claims in advertisements); Complaint ¶¶ 4–
13, Matt Blatt Inc., No. C–4532 (F.T.C. July 2, 2015)
(alleging failure to disclose fees associated with
financing program; misleading savings claims). Cf.
Consent Order ¶¶ 10–16, Santander Consumer
USA, Inc., CFPB No. 2018–BCFP–0008 (Nov. 20,
2018) (finding defendant sold GAP product
allegedly providing ‘‘full coverage’’ to consumers
with loan-to-value ratios (‘‘LTVs’’) above 125%,
when in fact coverage is limited to 125% of LTV).
189 See, e.g., Consumer Fin. Prot. Bureau,
‘‘Supervisory Highlights: Issue 12, Summer 2016’’
5 (June 2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_12.pdf
(finding that one or more auto lenders deceptively
advertised the benefits of their GAP agreement
products, leaving the impression that these
products would fully cover the remaining balance
of a consumer’s loan in the event of vehicle loss
when, in fact, the product only covered amounts
below a certain loan to value ratio).
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advertisements of free lifetime benefits
programs and requiring dealers to make
disclosures about any costs, limitations,
benefits, or any other aspect of an addon product or service. The Commission
notes that paragraphs (a) and (b) of
§ 463.3 already apply to free lifetime
benefits programs. Regarding
disclosures, the Commission is
concerned about including additional
disclosure requirements beyond the few
areas included in the Rule, or shifting
the burden to consumers to hunt for and
decipher disclosures, given that the auto
finance and lease process is already
lengthy, complex, document-heavy, and
dense. Accordingly, as discussed in
regard to § 463.3(a), these provisions do
not mandate set disclosures or allow for
disclosures to be used as a shield when
there are misrepresentations to
consumers; rather, they prohibit express
or implied misrepresentations.190
Several dealership association
commenters pointed to State laws that,
they contended, may already prohibit
misrepresentations about add-ons or
may otherwise protect consumers. As
discussed previously, to the extent there
may be duplication between the
provisions the Commission is finalizing
and other laws, there is no evidence that
duplicative misrepresentation
prohibitions have harmed consumers or
competition. Moreover, the Final Rule
provides additional remedies that will
benefit consumers who encounter
conduct that is already illegal under
State or Federal law and will assist lawabiding dealers that presently lose
business to competitors that act
unlawfully. Under § 463.9, States may
provide more or less specific
requirements relating to motor vehicle
dealers so long as those requirements
are not inconsistent with part 463, and
in the event of an inconsistency, the
Rule only affects such State law to the
extent of the inconsistency.
Based on a review of the comments
and the responses discussed, the
Commission adopts paragraph (b) of
§ 463.3 without substantive
modification. As discussed in SBP
III.C.1, the Commission has determined
to modify the introductory paragraph of
§ 463.3 from the Commission’s original
proposal so that each paragraph of
§ 463.3 prohibits misrepresentations
regarding material information. As such,
the Commission is finalizing a version
of § 463.3(b) that removes what would
190 It is well-settled that, if one makes a claim
that, absent additional information, would mislead
a consumer acting reasonably under the
circumstances about a material fact, such conduct
would violate the law. See FTC Policy Statement on
Deception, supra note 42, at 2; Int’l Harvester Co.,
104 F.T.C. 949, 1057–58 (1984).
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otherwise be redundant explicit
reference to the term ‘‘Material.’’ This
provision prohibits misrepresentations
regarding ‘‘[a]ny costs, limitation,
benefit, or any other aspect of an Addon Product or Service.’’
Misrepresentations regarding add-ons
are likely to affect a consumer’s
conduct, including the consumer’s
decision to purchase the product or
service.
(c) Whether Terms Are, or Transaction
Is, for Financing or a Lease
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Proposed § 463.3(c) prohibited
misrepresentations regarding whether
the terms are, or the transaction is, for
financing or a lease. Upon review and
consideration of public comments, the
Commission is finalizing paragraph (c)
of § 463.3 without modification from the
Commission’s original proposal.
A few industry association and
individual commenters posited that this
proposed provision was unnecessary,
either because other statutes or
regulations, including TILA and some
State regulations, address this issue, or
because vehicle manufacturers already
monitor such misrepresentations. As
noted in SBP III.C.1, even given the
possibility of overlap between this
provision and existing Federal or State
law, there is no evidence that
duplicative misrepresentation
prohibitions have harmed consumers or
competition. Further, given that the
conduct covered by this provision is
already unlawful under the FTC Act and
may duplicate other laws, or be
prohibited by manufacturer rules, it
should not be difficult to follow this
provision.191
Accordingly, after careful
consideration, the Commission adopts
paragraph (c) of § 463.3 as proposed.
Misrepresentations regarding whether
terms are, or a transaction is, for
financing or a lease are likely to affect
a consumer’s conduct, including by
causing consumers to enter into a
monetary transaction for a product they
191 The FTC has alleged that misrepresentations
that particular terms are available for financing or
for a lease violate the FTC Act. See Complaint
¶¶ 38–39, Fed. Trade Comm’n v. Tate’s Auto Ctr.,
No. 3:18–cv–08176–DJH (D. Ariz. July 31, 2018)
(alleging false ads touting attractive terms but
concealing ads were for lease offers only);
Complaint ¶¶ 10, 13, TC Dealership, L.P., No. C–
4536 (F.T.C. Aug. 13, 2015) (same); Complaint
¶¶ 9–12, Cowboy AG, LLC, No. C–4639 (F.T.C. Jan.
4, 2018) (same); Complaint ¶¶ 36–38, United States
v. New World Auto Imports, Inc., No. 3:16–cv–
02401–K (N.D. Tex. Aug. 18, 2016) (alleging
misrepresentation that terms were for financing
instead of leasing); Complaint ¶¶ 28–37, 44, Fed.
Trade Comm’n v. Universal City Nissan, Inc., No.
2:16–cv–07329 (C.D. Cal. Sept. 29, 2016) (alleging
advertisements with key terms that were not
generally available).
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do not want, or, if the true
circumstances are revealed prior to
consummation of the transaction, to
waste time traveling to, and potentially
spending hours at, the dealership.
(d) The Availability of Any Rebates or
Discounts That Are Factored Into the
Advertised Price but Not Available to
All Consumers
Proposed § 463.3(d) prohibited
misrepresentations concerning the
availability of any rebates or discounts
that are factored into the advertised
price but not available to all consumers.
Upon review and consideration of
public comments, the Commission is
finalizing paragraph (d) of § 463.3
without modification from the
Commission’s original proposal.
Comments in support of this proposed
provision, including those from a group
of State attorneys general and from two
United States Senators, generally
contended that the proposed provision
would increase the transparency of the
purchase transaction by requiring
dealers to be honest when they advertise
the availability of discounts.
An individual commenter suggested
that the Commission modify proposed
§ 463.3(d) to require dealers to disclose
all representations regarding rebates or
discounts in writing, in a clear and
conspicuous manner. The Commission
notes this paragraph prohibits
misrepresentations regardless of the
medium. Further, this paragraph focuses
on misrepresentations; disclosures
regarding price, add-ons, and total of
payments are addressed in the
discussion of § 463.4, as is a discussion
of why the Commission has determined
not to include additional disclosure
requirements in this Final Rule. The
same commenter also requested that the
Final Rule text include examples of
situations where discounts or rebates
may not be available. The Commission
describes examples here rather than
adding them to the Final Rule text, as
it would be difficult to anticipate all
such examples and the text would
become unwieldy. Examples include
where an advertised rebate or discount
applies only to the most expensive
version of a particular vehicle make and
model or is only available to consumers
with high credit scores.
The Commission received comments
from a dealership association and an
individual commenter asking for
additional detail about proposed
§ 463.3(d), pointing to a State regulation
that includes disclosures and asking
which types of rebates the provision
covers. Here, the Commission notes
that, as the language in § 463.3(d) states,
this provision applies to ‘‘any rebates
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615
and discounts’’ advertised by dealers,
and is not limited to any particular type
of rebate or discount.192 The terms in
this provision may be interpreted
according to their plain meaning, as
they are commonly used and
understood.193 Additionally, the
language of this provision, the NPRM,
and Commission enforcement actions
provide further context. In proposing
§ 463.3(d) to specifically address the
availability of discounts and rebates, the
Commission included additional
language (‘‘that are factored into the
advertised price but not available to all
consumers’’) to describe the manner in
which such misrepresentations often
occur: a dealer represents an advertised
price which includes a discount or
rebate that is not generally available to
consumers.194 The NPRM’s discussion
of proposed § 463.3(d) described both a
scenario in which a dealer advertised a
rebate or discount separately, and one in
which rebates or discounts are factored
into the advertised price but the rebates
and discounts are not available to a
typical consumer. The conduct in either
such scenario would violate this
provision and, depending on the
circumstances, may violate other
provisions the Commission is finalizing,
such as paragraph (a) of § 463.3.
Enforcement actions cited in the NPRM
provide further illustration of deceptive
practices involving rebates and
discounts.195 The Commission declines
192 Section
463.3(d) (emphasis added).
e.g., Rebate, Cambridge Dictionary,
https://dictionary.cambridge.org/us/dictionary/
english/rebate (last visited Dec. 5, 2023) (defining
‘‘rebate’’ as ‘‘an amount of money that is returned
to you, especially by the government, for example
when you have paid too much tax’’ or ‘‘an amount
of money that is paid back to you after you have
paid too much’’); Discount, Cambridge Dictionary,
https://dictionary.cambridge.org/us/dictionary/
english/discount (last visited Dec. 5, 2023) (‘‘[A]
reduction in the usual price’’).
194 See NPRM section IV.C, 87 FR at 42020
(proposed § 463.3(d) prohibited misrepresentations
concerning ‘‘[t]he availability of any rebates or
discounts that are factored into the advertised price
but not available to all consumers,’’ and the NPRM
explained ‘‘[w]hen dealers advertise rebates and
discounts, or offer prices that factor in such rebates
and discounts, but in fact those rebates and
discounts are not available to the typical consumer,
but only a select set of customers, such conduct
induces the consumer to select and transact with
the dealer under false pretenses’’).
195 See, e.g., Complaint ¶¶ 6–13, Jim Burke Auto.,
Inc., No. C–4523 (F.T.C. May 4, 2015) (alleging
promises of prices and discounts not generally
available to consumers); Complaint ¶¶ 6, 9, TT of
Longwood, Inc., No. C–4531 (F.T.C. July 2, 2015)
(alleging promises of prices and discounts not
generally available to consumers); Complaint ¶¶ 8–
9, JS Autoworld, Inc., No. C–4535 (F.T.C. Aug. 13,
2015) (alleging false ads touting prices but
concealing discounts with material eligibility
limitations); Complaint ¶¶ 7–9, TC Dealership, L.P.,
No. C–4536 (F.T.C. Aug. 13, 2015) (alleging false
ads touting attractive prices but concealing
193 See,
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to add additional requirements, such as
disclosure requirements, to its Final
Rule, given the already lengthy,
complex, and document-heavy nature of
auto transactions.
A number of dealership association
commenters contended that the
proposed paragraph would prohibit
dealers from displaying beneficial
information to consumers or would
prohibit dealers from advertising rebates
and incentives of limited availability. In
addition, commenters including one
such dealership association requested
that the Commission adopt an approach
the commenter contended is used in
some States: allowing dealers to display,
below the advertised sales price, a
rebate or incentive that is not available
to all purchasers. Moreover, a number of
industry association and dealership
association commenters argued that the
proposed paragraph was more stringent
than, and inconsistent with, the
Commission’s prior articulation of the
deception standard, further noting the
existence of Commission orders that
prohibit defendants from representing
that a price, discount, rebate, or other
incentive is available, unless it is in fact
available to all or unless a defendant
provides a clear and conspicuous
disclosure of any qualifications or
restrictions. Section 463.3(d) prohibits
misrepresentations; it does not prohibit
a dealer from advertising, in a truthful
manner, rebates or discounts with
limitations. Thus, this paragraph allows
for the representation of limited offers,
as long as such representation is
truthful, and any limitations are clear
and conspicuous to consumers. The
paragraph is also consistent with the
Commission’s prior enforcement order
practice in this area, which both
prohibits misrepresentations regarding
rebates and prohibits representations
regarding rebates without disclosing any
material qualifications or restrictions.196
The paragraph simply contains one of
these prohibitions but not the second.
A dealership association commenter
expressed concern that this proposed
provision would penalize dealers if
consumers were to confuse a rebate or
discount offered for one vehicle with a
discounts were subject to material eligibility
limitations and trade-in requirement); Complaint
¶¶ 4–5, Timonium Chrysler, Inc., No. C–4429
(F.T.C. Jan. 28, 2014) (alleging dealership advertised
internet prices and dealer discounts but failed to
disclose consumer would have to qualify for
multiple rebates not generally available to them);
Complaint ¶¶ 4–5, Ganley Ford West, Inc., No. C–
4428 (F.T.C. Jan. 28, 2014) (alleging dealership
advertised discounts on vehicle prices, but failed to
disclose discounts were only available on the most
expensive models).
196 See, e.g., Decision and Order, Timonium
Chrysler, Inc., No. C–4429 (F.T.C. Jan. 28, 2014).
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vehicle that does not contain such an
offer. As under current law, dealers are
prohibited under § 463.3(d) from both
express and implied misrepresentations.
If, for example, a dealer states or implies
that a discount is available on several
types of vehicles when, in truth, the
discount is only available on one such
type of vehicle, such conduct would
violate this paragraph. If, alternatively,
the dealer does not state or imply that
a discount is available for several types
of vehicles, and offers a discount for one
type of vehicle, this conduct would not
violate this paragraph, as long as the
dealer makes no other express or
implied misrepresentations.
After careful review of the comments,
the Commission is adopting paragraph
(d) of § 463.3 as proposed. When dealers
advertise rebates or discounts in a
misleading manner, including when
such rebates or discounts are not
available to the typical consumer, or
apply only to the most expensive
versions of the make and model,197 such
conduct induces consumers to select
and transact with the dealer under false
pretenses.198
(e) The Availability of Vehicles at an
Advertised Price
Proposed § 463.3(e) prohibited
misrepresentations regarding the
availability of vehicles at an advertised
price. Upon reviewing the comments
pertaining to this provision, the
Commission is finalizing paragraph (e)
of § 463.3 largely as proposed, with the
minor modification of capitalizing the
defined term ‘‘Vehicles.’’
197 See Complaint ¶¶ 4–5, Ganley Ford West, Inc.,
No. C–4428 (F.T.C. Jan. 28, 2014) (alleging false ads
touting price discount but concealing offer was
limited to certain high-end models).
198 See Complaint ¶¶ 8–9, JS Autoworld, Inc., No.
C–4535 (F.T.C. Aug. 13, 2015) (alleging false ads
touting prices but concealing discounts with
material eligibility limitations); Complaint ¶¶ 7–9,
TC Dealership, L.P., No. C–4536 (F.T.C. Aug. 13,
2015) (alleging false ads touting attractive prices but
concealing discounts were subject to material
eligibility limitations and trade-in requirement);
Complaint ¶ 14, TXVT Ltd. P’ship, No. C–4508
(F.T.C. Feb. 12, 2015) (alleging false ads failed to
disclose that it would match consumers’ income tax
refunds only up to $1,000); Complaint ¶¶ 4–5,
Timonium Chrysler, Inc., No. C–4429 (F.T.C. Jan.
28, 2014) (alleging false ads touting pricing and
discounts but concealing material qualifications
and restrictions); Complaint ¶¶ 6, 9, TT of
Longwood, Inc., No. C–4531 (F.T.C. July 2, 2015)
(alleging promises of prices and discounts not
generally available to consumers); Complaint ¶¶ 6–
13, Jim Burke Auto., Inc., No. C–4523 (F.T.C. May
4, 2015) (alleging promises of prices and discounts
not generally available to consumers); see also Auto
Buyer Study, supra note 25, at 8 (‘‘A number of
[study] participants were attracted by promotional
offers in ads that they did not qualify for, but did
not realize that they did not qualify until they got
to the dealer. Some did not learn that they did not
qualify until they got to the financing stage of the
transaction.’’).
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One individual commenter
recommended that proposed § 463.3(e)
be expanded to prohibit certain specific
misrepresentations about advertised
vehicle availability, including whether
any specific vehicle is already reserved
for another consumer; whether the
availability is subject to a requirement
that the consumer pay a deposit; and
regarding the amount of time until the
vehicle becomes available. Another
individual commenter recommended
that the Rule require disclosure of how
long each vehicle has been in the
dealer’s inventory, to prevent dealers
from misrepresenting that a vehicle
recently became available. Here, the
Commission notes that, to the extent
any such misrepresentations regarding
the availability of vehicles were made
with express or implied reference to the
price of the vehicle, each would be
prohibited by § 463.3(e).199
Furthermore, to the extent such
misrepresentations included reference
to the subject of another paragraph of
§ 463.3, they would be prohibited by the
Final Rule. For example, if an
advertisement were to make a claim
about the monthly payment for a
specific vehicle, but the vehicle is not
actually available, it would be covered
under the bar against misrepresentations
regarding costs or terms in paragraph (a)
of § 463.3. In addition, under the Final
Rule, dealers are also subject to
disclosure requirements under § 463.4,
including the requirement at § 463.4(a)
to disclose the vehicle’s offering price in
any advertisement that references a
specific vehicle, or any monetary
amount or financing term for any
vehicle. And if a dealer discloses the
offering price for a vehicle, but the
vehicle is not available to consumers,
§ 463.3(e) applies. Beyond this, the
Commission will continue to monitor
whether other misrepresentations
regarding availability are being made
without reference to price, or to the
subject of another paragraph of § 463.3,
to determine whether additional action
is warranted.
The Commission received comments
from a number of dealership
associations and individuals requesting
that the Final Rule limit dealers’
responsibility for unanticipated delays,
or otherwise expressing concern about
199 The commenter also expressed concern about
misrepresentations regarding the refundability of
deposits and recommended that the Commission
include language in § 463.3(e) addressing this issue.
Because representations and practices regarding the
refundability of deposits are related to the costs or
terms of purchasing, financing, or leasing a vehicle,
this issue is covered by § 463.3(a). Thus, the
Commission declines to adopt the commenter’s
recommendation.
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how dealers would be able to comply
with this proposed provision. One
industry association commenter stated
that unanticipated delays could result
from factors beyond the reasonable
control of the dealer, such as shipping
or production issues. Other dealership
association commenters contended that,
because of supply chain disruptions,
adjustments to inventory and other
information may not always be
displayed on a retailer’s website
instantaneously.
As is the case under current law,
under this provision, dealers may not
make claims about the availability of
vehicles at an advertised price without
a reasonable basis at the time the claims
are made.200 Objective claims about
products or services represent,
explicitly or by implication, that an
advertiser has a reasonable basis to
support those claims.201 Consumers
would be less likely to be affected by
claims for products and services if they
knew the advertiser did not have a
reasonable basis for believing them to be
true.202 If a dealer has a reasonable basis
200 FTC Policy Statement on Deception, supra
note 42, at 1 n.5 (‘‘Advertising that lacks a
reasonable basis is also deceptive.’’) (citing
Firestone Tire & Rubber Co., 81 F.T.C. 398, 451–52
(1972) (additional citations omitted)); see Fed.
Trade Comm’n v. US Sales Corp., 785 F. Supp. 737,
748 (N.D. Ill. 1992) (‘‘Apart from challenging the
truthfulness of an advertiser’s representations, the
FTC may challenge the representation as
unsubstantiated if the advertiser lacked a
reasonable basis for its claims.’’); see also Fed.
Trade Comm’n v. Am. Screening, LLC, 4:20–CV–
01021–RLW (E.D. Mo. July 14, 2022) (granting
summary judgment for the FTC upon finding that
American Screening’s claim that its COVID–19
protective equipment was available and would ship
quickly was false and lacked a reasonable basis);
Fed. Trade Comm’n v. John Beck Amazing Profits,
LLC, 865 F. Supp. 2d 1052 (C.D. Cal. 2012) (finding
that the defendants’ representations were
unsubstantiated in violation of section 5, because
Defendants conceded that during the time period in
which their infomercial was aired they did not have
evidence supporting their representations that
consumers who purchased their product would be
able to earn money easily and because survey
results revealed that less than one percent of
consumers actually generated any revenue or
profits); Fed. Trade Comm’n v. Elegant Sols., Inc.,
8:19–cv–01333–JVS–KES (C.D. Cal., July 6, 2020)
(finding that defendants made false or
unsubstantiated representations, including
representing that consumers would be enrolled in
a repayment plan that may be forgiven after a
specific number of years even though there were no
Federal loan forgiveness programs with those
repayment terms).
201 Fed. Trade Comm’n, ‘‘FTC Policy Statement
Regarding Advertising Substantiation,’’ (appended
to In re Thompson Med. Co., Inc., 104 F.T.C. 648,
839 (1984)); Fed. Trade Comm’n v. John Beck
Amazing Profits, LLC, 865 F. Supp. 2d 1052, 1067
(C.D. Cal. 2012).
202 Fed. Trade Comm’n, ‘‘FTC Policy Statement
Regarding Advertising Substantiation,’’ (appended
to In re Thompson Med. Co., Inc., 104 F.T.C. 648,
839 (1984)); see Fed. Trade Comm’n v. Am.
Screening, LLC, 4:20–CV–01021–RLW (E.D. Mo.,
July 14, 2022) (granting FTC’s motion for summary
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to make a claim about the availability of
vehicles at the time the claim is made,
the dealer would not be in violation of
the provision if a vehicle later becomes
unavailable because of circumstances
that a dealer could not reasonably
anticipate or control.
A few dealership association
commenters claimed that promulgation
of § 463.3(e) would cause regulatory
confusion because State guidelines or
rules already address issues about the
availability of vehicles, including, for
example, by requiring dealers to note
the location of the vehicle.203 As
described in SBP III.C.1, States may
provide more or less specific
requirements relating to motor vehicle
dealers so long as those requirements
are not inconsistent with part 463, and
in the event of an inconsistency, the
Rule only affects such State law to the
extent of the inconsistency. To the
extent there are actual inconsistencies,
§ 463.9 is clear that this Rule’s
prohibition against misrepresentations
controls.
After careful consideration of the
comments, the Commission is adopting
paragraph (e) of § 463.3 largely as
proposed, with the minor modification
of capitalizing the defined term
‘‘Vehicles.’’ This paragraph prohibits
dealers from promoting low prices for
specific vehicles, but then later
misrepresenting, among other things,
that the advertised vehicle is no longer
available or no longer available at the
advertised price. Such
misrepresentations are likely to induce
consumers to waste their time traveling
to a particular dealership to pursue a
specific offer on a specific vehicle when
the offer or vehicle itself may not
actually be available.
(f) Whether Any Consumer Has Been or
Will Be Preapproved or Guaranteed for
Any Product, Service, or Term
Proposed § 463.3(f) prohibited
misrepresentations regarding whether a
consumer has been or will be
preapproved or guaranteed for any
product, service, or term. Upon
reviewing public comments, the
Commission is finalizing paragraph (f)
judgment and finding that Defendants’
representations that it had protective equipment in
stock and would ship it to consumers within seven
to ten business days were material to consumers
seeking such equipment during a global pandemic).
203 This provision would not prohibit dealers
from advertising a vehicle with limitations on
availability in a truthful manner, such that any
limitations are clear and conspicuous to the
consumer. For example, dealers should not
affirmatively represent that a vehicle is available on
its lot without a reasonable basis that the vehicle
is on the lot or without clearly and conspicuously
noting that the vehicle will be made available after
transfer from an affiliate’s lot.
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617
of § 463.3 without modification from the
Commission’s original proposal.
One dealership association
commenter recommended that
compliance with a State law that
prohibits certain misleading statements,
such as ‘‘we finance anyone’’ and ‘‘no
credit rejected’’ and similar statements,
should function as a safe harbor against
liability under this proposed
paragraph.204 Yet, while compliance
with the State law cited may require
dealers to refrain from using certain
frequently misleading statements, as
described by the commenter, that law
does not generally prohibit all
misrepresentations regarding material
information about consumer
preapprovals or guarantees; even if it
did, there is no evidence that
duplicative laws prohibiting
misrepresentations harm consumers or
competition, and no evidence of
benefits to consumers or competition in
allowing one such law to act as a safe
harbor against another such law.
Further, given that current law already
prohibits deceptive conduct generally,
dealers should be able to comply with
the Commission’s Rule, which provides
further protections for consumers and
law-abiding dealers. Thus, the
Commission declines to adopt the
recommended safe harbor.
Therefore, after careful consideration,
the Commission is finalizing paragraph
(f) of § 463.3. Misrepresentations
regarding preapproval or guarantees for
a product, service, or term—as with
misrepresentations about availability
and price, described previously—are
likely to impact consumers’ conduct
with regard to motor vehicle sales,
financing, or leasing transactions,
including by inducing consumers to
waste time pursuing illusory offers.
(g) Any Information on or About a
Consumer’s Application for Financing
Proposed § 463.3(g) prohibited dealers
from misrepresenting any material
information on or about a consumer’s
application for financing. After carefully
reviewing public comments, the
Commission is adopting paragraph (g) of
§ 463.3 without substantive
modification. As with § 463.3(b), the
only adopted modification is the
deletion of the term ‘‘Material,’’ which
nonetheless applies to the operation of
each of the misrepresentation
paragraphs in § 463.3, including
paragraph (g), through the addition of
the term in the introductory paragraph
of § 463.3.
204 Comment of Tex. Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8102 at 21; see 43 Tex.
Admin. Code 215.247(2) (2023).
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The Commission received a number
of comments regarding this provision,
including comments that expressed
support for prohibiting
misrepresentations about a consumer’s
application for financing.
A credit union commenter requested
that, in addition to this proposal, the
Commission consider implementing a
requirement to clearly and
conspicuously disclose any potential
financing limitations prior to vehicle
purchase negotiations, contending that
such a measure would better enable
consumers to choose a motor vehicle
dealer and financing option that best
serves their needs. To the extent a
dealer misrepresents a consumer’s
financing options or limitations,
including prior to or during the process
of selling, leasing, or arranging
financing for a vehicle, such conduct is
prohibited by this provision, and
depending on the circumstances, may
also violate other provisions of the Rule.
For example, as discussed in this
paragraph-by-paragraph analysis,
§ 463.3(a) of the Final Rule prohibits
misrepresentations regarding the cost or
terms of financing a vehicle; this
prohibition includes misrepresentations
about available vehicle financing.
Furthermore, this provision pertains to
misrepresentations; comments
pertaining to proposed disclosures
regarding price, add-ons, and total of
payments are examined in the
Commission’s discussion of § 463.4,
wherein the Commission explains its
determination not to finalize any
additional disclosure requirements not
included in its NPRM.
An individual commenter, while
expressing support for regulation of
such misrepresentations, also noted
concern for the ‘‘grave consequences of
falsifying information on a customer’s
application for financing,’’ and urged
the Commission to consult with other
law enforcement agencies to further
address such problems.205 The
Commission appreciates the concern
and the seriousness of falsifying
information on a consumer’s application
for financing, and coordinates regularly
with other law enforcement agencies
regarding areas of shared jurisdiction
and responsibility, including motor
vehicle sales and financing. The
Commission will continue to monitor
financing application falsification issues
to determine whether any additional
action, beyond § 463.3(g), is needed.
A number of dealership association
commenters contended that the
proposed language was vague and did
205 Individual commenter, Doc. No. FTC–2022–
0046–7445 at 12.
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not adequately explain the type of
behavior this paragraph would prohibit.
Relatedly, some dealership association
commenters contended that this
provision lacked specific guidance
about what a motor vehicle dealer must
or must not disclose. This provision,
however, utilizes terms which are
commonly used and understood, and
which may be interpreted according to
their plain meaning. Read together with
the introductory paragraph of § 463.3,
§ 463.3(g) prohibits misrepresentation
. . . regarding material information
about ‘‘[a]ny information on . . . a
consumer’s application for financing.’’
By its terms, this prohibition includes
any misrepresentations of material
information on a financing application.
For example, dealers would make
misrepresentations in violation of this
provision by including, on a consumer’s
application that is submitted to a thirdparty financing institution, consumer
income information that is different
from what the consumers have stated to
the dealer that the consumers actually
earn, or by representing a different
down payment amount than the amount
the consumer has actually provided, or
by misrepresenting that the vehicle is
being sold or leased with certain add-on
products.206 Moreover, as described in
detail with regard to other paragraphs of
§ 463.3, this provision does not require
any particular affirmative disclosures,
instead obligating dealers to refrain from
certain misrepresentations.
One dealership association
commenter questioned whether a dealer
would be held responsible for a
customer’s false statement about his or
her income. If a consumer falsely states
they have a higher income, that
consumer would not be misled into
thinking he has a higher income. If,
however, a consumer’s application
falsely states a higher income because a
dealer has altered the information, that
consumer would be misled into
thinking that the application they are
signing accurately reflects the
information the consumer provided, and
§ 463.3(g) would be violated.
Additionally, if a dealer advises a
consumer to include other sources of
payment as income or advises the
consumer to list a higher income in
206 See Complaint ¶¶ 18–36, Fed. Trade Comm’n
v. Tate’s Auto Ctr. of Winslow, Inc., No. 3:18–cv–
08176–DJH (D. Ariz. July 31, 2018); Consumer Fin.
Prot. Bureau, ‘‘Supervisory Highlights: Issue 30,
Summer 2023’’ 5 (July 2023), https://files.consumer
finance.gov/f/documents/cfpb_supervisoryhighlights_issue-30_2023-07.pdf (finding that
dealers ‘‘fraudulently included’’ in financing
documents add-ons, such as undercoating, that
were not actually present on the vehicle, creating
‘‘improperly inflated loan amounts’’ that caused
consumers to pay improper additional interest).
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other ways, such conduct may mislead
the consumer into thinking that it is
proper to calculate income for auto
retail installment contracts in a
particular way, and there may be a
violation of § 463.3(g).
After careful review and
consideration of the comments, the
Commission adopts paragraph (g) of
§ 463.3 without substantive
modification, prohibiting
misrepresentations regarding material
information about any information on or
about a consumer’s application for
financing. It is likely to affect a
consumer’s choices if the consumer
knows a dealer is misrepresenting the
consumer’s income, or other aspects of
financing applications. If, for example, a
consumer knew the truth—that the
dealer is inflating the consumer’s
income such that the consumer would
not otherwise obtain financing for a
particular vehicle—the consumer might
opt to finance a less expensive car,
rather than risking repossession.
Material misrepresentations on
consumers’ financing paperwork are
also likely to cause consumers
substantial injury, including by causing
them to take on debt beyond that which
the financing company would have
approved, and increasing the risk of
repossession and harmful consequences
to consumers’ credit. Consumers cannot
avoid the injury from dealers
misrepresenting the information
consumers provide them, and this
practice provides no countervailing
benefits to consumers or competition.
(h) When the Transaction Is Final or
Binding on All Parties
(i) Keeping Cash Down Payments or
Trade-In Vehicles, Charging Fees, or
Initiating Legal Process or Any Action If
a Transaction Is Not Finalized or If the
Consumer Does Not Wish To Engage in
a Transaction
Proposed § 463.3(h) prohibited
dealers from misrepresenting when the
transaction is final or binding on all
parties. Proposed § 463.3(i) prohibited
dealers from making misrepresentations
about keeping cash down payments or
trade-in vehicles, charging fees, or
initiating legal process or any action if
a transaction is not finalized or if the
consumer does not wish to engage in a
transaction. After careful review and
consideration of the comments, the
Commission is finalizing paragraphs (h)
and (i) of § 463.3 with the minor
modification of capitalizing the defined
term ‘‘Vehicles’’ in § 463.3(i) to conform
with the revised definition at § 463.2(e).
Some commenters, including a group
of State attorneys general and consumer
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advocacy organizations, generally
supported prohibiting
misrepresentations about when the
transaction is final or binding on all
parties but urged the Commission to
include additional requirements or
prohibitions. For instance, several
commenters, including consumer
advocacy organizations and individual
commenters, requested that the
Commission add to its Final Rule a
provision requiring dealers to include,
in every consumer credit contract, a
finality clause stating that the
transaction is final as soon as the
consumer credit contract is signed, or
alternatively, a provision requiring
dealers to include in retail installment
contracts a clause prohibiting financingcontingent sales. Commenters including
a group of State attorneys general
recommended that the Commission
require any dealer that does not
ultimately secure financing under
previously presented terms to unwind
the transaction, return any down
payment in full, and return any tradedin vehicle. Such commenters also
recommended that the Commission
implement restrictions, such as
requiring dealers to be reasonably
certain that a consumer will qualify for
quoted financing terms; requiring a
written disclosure that the consumer
must sign advising the consumer that
financing is not final; or setting a short
deadline by which the dealer must
either arrange financing or cancel the
transaction. Other commenters,
including a State consumer protection
agency, also supported requiring the
contractual contingency to be disclosed
conspicuously and limiting the
contingency to a short period of time. A
number of these commenters, including
consumer advocacy organizations,
provided examples of how spot delivery
transactions can harm consumers.
The provision’s prohibitions and
requirements address many of these
commenters’ concerns regarding spot
delivery and yo-yo financing. Spot
delivery and yo-yo financing refer to
situations where a dealer delivers a
vehicle to a consumer on the spot before
the financing or leasing has been
finalized, leads a consumer to believe
that the transaction is final, and then
later directs the consumer to return the
vehicle and engages in certain tactics,
such as failing to return the consumer’s
trade-in vehicle while refusing to honor
the finance or lease transaction, or
pressuring the consumer to enter into a
new transaction.207 Paragraphs (h) and
207 Complaint ¶¶ 67–72, Fed. Trade Comm’n v.
Universal City Nissan, Inc., No. 2:16–cv–07329
(C.D. Cal. Sept. 29, 2016); State ex rel. Dewine v.
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(i) of § 463.3 prohibit misrepresentations
regarding the finality of the transaction
and return of down payments and tradein vehicles. Under these provisions, if a
consumer is under the impression that
the transaction is final, and the dealer
subsequently causes the consumer to
return the vehicle to the lot because the
transaction was not final, or the dealer
takes or threatens to take possession of
the vehicle but refuses to return the
down payment or trade-in vehicle, the
dealer has violated either § 463.3(h), by
misrepresenting the finality of the
transaction, or § 463.3(i), by falsely
representing, expressly or by
implication, that the dealer has a legal
basis to keep the down payment or
trade-in vehicle in the event the
transaction is not finalized, or both.208
Regarding the recommendation to
include a requirement that dealers be
reasonably certain that consumers will
Dads Car Lot Inc., No. 13–cv–4036, 2014 BL
468717, at * 1 (Ohio Com. Pl. June 6, 2014) (finding
defendant violated State consumer sales practices
act by including ‘‘spot delivery’’ document that
allowed defendant to keep ‘‘all funds on deposit’’);
Att’ys Gen. of 31 States & DC, Comment Letter on
Public Roundtables: Protecting Consumers in the
Sale and Leasing of Motor Vehicles, Project No.
P104811, Submission No. 558507–00112 at 4 (Apr.
13, 2012), https://www.ftc.gov/sites/default/files/
documents/public_comments/public-roundtablesprotecting-consumers-sale-and-leasing-motorvehicles-project-no.p104811-00112/0011282927.pdf (recommending, among other rules
aimed at deterring yo-yo sales, FTC adopt rules that
would require dealers to disclose the consumer’s
‘‘right to walk away’’ if financing is rejected and,
in the context of spot delivery, to disclose financing
has not been finalized as well as the responsibilities
and potential consequences for consumers); Legal
Aid Just. Ctr., Comment Letter on Public
Roundtables: Protecting Consumers in the Sale and
Leasing of Motor Vehicles, Project No. P104811,
Submission No. 558507–00066 at 26, 29 (Jan. 30,
2012), https://downloads.regulations.gov/FTC-20220036-0062/attachment_2.pdf (explaining that in a
yo-yo sale the dealer misrepresents to the consumer
that credit has been finalized, when in fact the
dealer treats the sale as contingent, retaining the
ability to call off or seize the vehicle later; a ‘‘yo-yo
case can result in substantial distress to the person
who has been tricked’’; and ‘‘[t]he harm to the
marketplace occurs when the consumer believes a
credit sale has been completed and stops shopping
for a car on credit’’); Nat’l Consumer L. Ctr., ‘‘In
Harm’s Way—At Home: Consumer Scams and the
Direct Targeting of America’s Military and
Veterans’’ 41 (May 2003), https://filearchive.nclc.
org/special_projects/military/report-scams-facingmilitary.pdf (listing ‘‘Spot Delivery’’ or ‘‘yo-yo
sales’’ among scams commonly aimed at military
members).
208 See Orkin Exterminating Co., Inc., 108 F.T.C.
263 (1986), aff’d sub nom. Orkin Exterminating Co.
v. F.T.C., 849 F.2d 1354 (11th Cir. 1988) (finding
that defendant’s practice of unilaterally raising
consumers’ annual renewal fees where the
consumers’ contracts contained a ‘‘lifetime
guarantee’’ as to the amount of the fee was unfair
under section 5 of the FTC Act); see also First
Amended Complaint ¶¶ 59–61, Fed. Trade Comm’n
v. BF Labs, Inc., No. 4:14–cv–00815 (W.D. Mo. May
14, 2015) (alleging as unfair defendants’ practice of
unilaterally failing to provide paid-for services
while refusing to refund consumers’ upfront
payments).
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619
qualify for quoted financing terms, the
Rule the Commission is finalizing
already contains several provisions in
addition to § 463.3(h) and (i) that
address this conduct. For example, the
Rule prohibits misrepresentations
regarding material information about the
costs or terms of financing (§ 463.3(a)),
or about whether any consumer has
been or will be preapproved or
guaranteed for any product, service, or
term (§ 463.3(f)). As explained in the
paragraph-by-paragraph analysis of
§ 463.3(e) in SBP III.C.2(e), existing law
requires dealers to have a reasonable
basis for their claims. Objective claims
about products or services represent,
explicitly or by implication, that an
advertiser has a reasonable basis to
support those claims.209 Thus, to avoid
misrepresentation, dealers must
reasonably believe that consumers will
qualify for quoted financing terms, or
that the transaction will be finalized on
the terms presented, in order to
represent such terms to consumers.
Regarding additional provisions that
would require certain contractual
measures, such as finality clauses or
prohibitions against financingcontingent sales, the Commission is
concerned that requiring specific
contract provisions would obligate
dealers that are not engaged in spot
delivery to change their contracts even
though their customers do not
experience harm stemming from spot
delivery practices. Before requiring any
such changes, the Commission has
determined to continue to monitor the
market to evaluate whether additional
steps are warranted.210
Some commenters, including
dealership associations, requested that
the Commission clarify how dealers
could document compliance with these
proposed provisions, such as how
dealers could establish that appropriate
disclosures had been made. One such
commenter, for instance, asked whether
written agreements required by State
law were sufficient to satisfy the
requirements of these provisions. As
noted elsewhere in this paragraph-byparagraph analysis of § 463.3 in SBP
III.C.2, these provisions do not require
any particular affirmative disclosures,
instead obligating dealers to refrain from
209 Fed. Trade Comm’n, ‘‘FTC Policy Statement
Regarding Advertising Substantiation,’’ (appended
to In re Thompson Med. Co., Inc., 104 F.T.C. 648,
839 (1984)); Fed. Trade Comm’n v. John Beck
Amazing Profits, LLC, 865 F. Supp. 2d 1052, 1067
(C.D. Cal. 2012).
210 On May 31, 2023, the Commission received a
petition for rulemaking under 16 CFR 1.31
regarding yo-yo financing. Petition for Rulemaking
Concerning the Finality of a Car Purchase (Yo-Yo
Financing), Doc. No. FTC–2023–0035–0002. The
Commission will address this petition separately.
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certain misrepresentations. Section
463.6 discusses records dealers need to
keep to demonstrate compliance with
the requirements of the Final Rule, and
enumerates five such categories of
records, including copies of finance and
lease documents signed by the
consumer, whether or not final approval
is received for a financing or lease
transaction. The Commission declines
to include in this Final Rule additional
requirements regarding any specific
documents dealers must keep in order
to demonstrate compliance with
§ 463.3(h) or (i).
One individual commenter requested
that the Commission include in the CFR
the examples of harmful conduct related
to yo-yo financing that it published in
the NPRM.211 The Commission has
determined that each such example
describes conduct that violates this
rulemaking. Rather than adding them to
the text of the Final Rule, the
Commission repeats those examples in
this paragraph-by-paragraph analysis of
§ 463.3(h) and (i), in order to avoid
voluminous modifications to the Rule
text itself.
Commenters including a dealership
association asserted that the issue of
when a contract is final or binding is
one of State law, and thus it is within
the purview of each State to determine
when a contract is final or binding,
arguing that § 463.3(h) therefore should
be removed from the Final Rule.
Another such commenter contended
that even courts experienced in contract
interpretation have difficulty
determining when an agreement is final,
and that dealers therefore are likely to
transgress this prohibition in proposed
§ 463.5(h) accidentally. This provision,
however, requires that a dealer’s express
or implied representations regarding
material information be truthful, which
is consistent with current law and with
the Commission’s authority to prohibit
unfair or deceptive acts or practices.
Moreover, under § 463.9, this Rule does
not affect State law pertaining to
contracts so long as State law is not
inconsistent with part 463, and in the
event of an inconsistency, the Rule only
affects such State law to the extent of
the inconsistency.212 In the case of
211 See NPRM at 42020–21. Individual
commenter, Doc. No. FTC–2022–0046–9469 at 5–6.
212 One commenter questioned whether this
section would prohibit a dealer from retaining a
down payment on a special order vehicle where the
customer refuses to take delivery of the vehicle.
Comment of Minn. Auto. Dealers Ass’n, Doc. No.
FTC–2022–0046–8670 at 10. Sections 463.3(h) and
(i) prevent misrepresentations, including
misrepresenting that a dealer can keep a down
payment when a dealer does not have a legal basis
to do so. If the dealer does not make a
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§ 463.3(h), for example, an
inconsistency would include State law
allowing material misrepresentations
regarding whether transactions are final;
the Commission is unaware of any such
law. Further, to the extent dealers are
concerned they may transgress this
prohibition because courts have had
difficulty interpreting their contracts,
then, as they should be doing under
current law prohibiting
misrepresentations, dealers should
carefully consider the net impression
they are conveying with the language
they use, both in their contracts and in
the context in which these contracts are
presented, as such language may
confuse consumers as well.
Several dealership association
commenters claimed that State law
already prohibits misrepresentations
about spot delivery transactions or
otherwise protects consumers in such
transactions. One such commenter
asserted that Massachusetts law
prohibits spot deliveries, and cautioned
the FTC not to create uncertainty with
its Rule such that one might think spot
deliveries are allowed in Massachusetts.
Another such commenter asked whether
this provision applies in addition to
State law or instead of it. Other
commenters, including consumer
advocacy organizations, asserted that
less than half of the States have statutes,
regulations, or administrative
pronouncements about yo-yo
transactions; that there are significant
variations in such law from State to
State; and that State regulation often
does not provide sufficient protections
for consumers. As described throughout
the paragraph-by-paragraph analysis of
§ 463.3 in SBP III.C.2, State law may
provide more or less specific
requirements than those under the Final
Rule as long as those requirements are
not inconsistent with part 463, and in
the event of an inconsistency, the Rule
only affects such State law to the extent
of the inconsistency. As for any States
that prohibit spot delivery, such
prohibitions are consistent with the
provisions of this Rule. Finally, as to
whether additional provisions are
warranted to protect consumers, the
Commission will continue to monitor
the market to make this determination.
Commenters including an industry
association contended that the
Commission should not take action to
disrupt spot delivery transactions to
consumers, stating that there may be
reasons to keep down payments even
when consumers are not permitted to
keep the vehicle, or claiming that
misrepresentation, this provision would not be
violated.
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although abusive spot deliveries have
occurred, they are not a systemic
problem in the marketplace. The
Commission, however, need not show
that abusive spot deliveries are systemic
in order to finalize these provisions
barring misrepresentations.213 Further,
these misrepresentation prohibitions do
not alter requirements under current
law prohibiting dealers from making
express or implied misrepresentations.
After careful consideration of the
recommendations and record, the
Commission has determined to finalize
paragraphs (h) and (i) of § 463.3 largely
as proposed, with the minor
modification of capitalizing the defined
term ‘‘Vehicles’’ in § 463.3(i). The
Commission notes, however, that it has
significant concerns about consumer
harm due to yo-yo financing and will
continue to examine these issues even
as it finalizes these prohibitions against
certain misrepresentations.
Misrepresentations about when the
transaction is final or binding on all
parties, as well as about keeping down
payments or trade-in vehicles, charging
fees, or initiating legal process or any
action, are likely to affect consumer
conduct, including regarding whether to
enter into a new transaction with less
beneficial terms for the consumer, and
are likely to mislead consumers.
(i) Keeping Cash Down Payments or
Trade-In Vehicles, Charging Fees, or
Initiating Legal Process or Any Action If
a Transaction Is Not Finalized or If the
Consumer Does Not Wish To Engage in
a Transaction
Proposed § 463.3(i) is discussed with
§ 463.3(h).
(j) Whether or When a Dealer Will Pay
Off Some or All of the Financing or
Lease on a Consumer’s Trade-in Vehicle
Proposed § 463.3(j) prohibited
misrepresentations regarding whether or
when a motor vehicle dealer will pay off
some or all of the financing or lease on
a consumer’s trade-in vehicle. The
Commission is finalizing paragraph (j)
of § 463.3 largely as proposed, with
minor modifications—substituting
‘‘Dealer’’ for ‘‘Motor Vehicle Dealer’’
and capitalizing ‘‘Vehicle’’—to conform
with the revised definitions of
‘‘ ‘Covered Motor Vehicle’ or ‘Vehicle’ ’’
and ‘‘ ‘Covered Motor Vehicle Dealer’ or
‘Dealer’ ’’ at § 463.2(e) and (f).
The Commission received several
comments in response to this paragraph,
including from individual commenters
who expressed support for prohibiting
dealers from misrepresenting whether
they would pay off outstanding balances
213 See
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remaining on a trade-in vehicle.214
Other commenters, including an
industry association and dealership
associations, requested that the
Commission limit dealer responsibility
under this provision for unanticipated
delays stemming from circumstances
beyond a dealer’s reasonable control,
arguing that proposed § 463.3(j) made
no exception for unanticipated delays
such as a previous financing source
declining to accept a payoff or refusing
to release the vehicle title after receiving
a payoff.215 The Commission notes that,
as is the case under current law, under
this provision, dealers are not permitted
to make claims about whether or when
they will pay off some or all of the
financing or lease on a consumer’s
trade-in vehicle if the truth of those
claims depends on circumstances
outside their control and the dealer does
not possess a reasonable basis for such
claims.216
An individual commenter contended
that requiring additional disclosures
about this provision would confuse the
consumer.217 This provision, however,
does not necessitate any affirmative
disclosures from dealers. Instead, it
prohibits dealers from misleading
consumers about whether or when they
will pay off some or all of the financing
or lease on a consumer’s trade-in
vehicle.
One State consumer protection agency
commenter requested that the
Commission require, in situations where
a buyer’s credit information or trade-in
vehicle are evidently insufficient to
support a deal, that the dealer require
additional down payment or other
security, or affirmatively disclose that
the dealer is not responsible for paying
off liens.218 Without further information
214 See, e.g., Individual commenter, Doc. No.
FTC–2022–0046–3770 (‘‘I agree that these changes
need to take place. No one should have to pay what
was owed on a trade in after the dealership said
they would pay off the trade in . . . .’’).
215 For example, commenters stated that
occasionally the previous finance or lease source
will not provide a timely payoff for a traded vehicle
or will refuse to accept a payoff claiming more
money is due; or a previous finance or lease source
may accept a payoff, but will refuse to credit its
former customer’s account and release the title
promptly. In addition, an industry association
commenter requested that the Commission narrow
this prohibition to specifically address the fact
patterns giving rise to it that the Commission sets
forth in the NPRM, and, in so doing recognize that
it is in a dealer’s business interest to pay off the
existing loan quickly so that the vehicle can be
more easily and quickly retailed.
216 See paragraph-by-paragraph analysis of
§ 463.3(e) in SBP III.C.2(e) (discussing deception
and reasonable basis).
217 See Individual commenter, Doc. No. FTC–
2022–0046–7905 at 1.
218 See Comment of State of S.C. Dep’t of
Consumer Affs., Doc. No. FTC–2022–0046–7891 at
6.
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on the costs and benefits of such a
proposal, the Commission declines to
add such requirements to this Final
Rule. The Commission notes, however,
that the Rule prohibits dealers from
misleading consumers regarding when
trade-in vehicles have negative equity
and from otherwise failing to obtain the
consumer’s express, informed consent
prior to charging the consumer for any
item, including any amounts associated
with trading in a vehicle. The
Commission will continue to monitor
this area to determine whether any such
additional measures are warranted to
protect consumers or competition.
The Commission also received a
number of comments from dealership
associations arguing that existing State
and Federal laws address dealers’
obligations in connection with
informing consumers how much each
consumer is responsible for financing.
The Commission notes that commenters
presented no actual conflicts between
this provision and other laws, and to the
extent duplicative laws prohibit
misrepresentations in this area, the
Commission has not observed harmful
consequences to consumers or
competition. Further, as noted
elsewhere in the section-by-section
analysis, State laws may provide more
or less specific requirements as long as
those requirements are not inconsistent
with part 463, under § 463.9, and in the
event of an inconsistency, the Rule only
affects such State law to the extent of
the inconsistency.
After carefully considering the
comments, the Commission is finalizing
this provision with the two minor
modifications to conform with the
defined terms ‘‘ ‘Covered Motor Vehicle’
or ‘Vehicle’ ’’ and ‘‘ ‘Covered Motor
Vehicle Dealer’ or ‘Dealer.’ ’’ This
provision prohibits dealers from making
misrepresentations about paying off the
financing or lease on a trade-in vehicle.
Such conduct includes misrepresenting
to consumers who trade in a vehicle that
the dealer will pay off any outstanding
balance owed on the trade-in vehicle
when the consumer purchases a vehicle
from the dealer. For example, when
such a dealer takes a trade-in, if the
dealer remits payment to the entity to
whom the trade-in payment is owed, as
consumers would expect, but also adds
this payment to the amount the
consumer owes on the vehicle the
consumer is purchasing from the dealer,
the consumer is the party that has
ultimately paid off the trade-in amount,
contrary to the impression made by the
dealer. This provision also prohibits
dealers that are going out of business
from representing expressly or by
implication that they will pay off liens
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621
if they do not, in fact, pay off the liens,
or do not pay them off in a timely
manner. Such misrepresentations are
likely to affect a consumer’s choice to
visit a particular dealership or select a
particular vehicle.
(k) Whether Consumer Reviews or
Ratings Are Unbiased, Independent, or
Ordinary Consumer Reviews or Ratings
of the Dealer or the Dealer’s Products or
Services
Proposed § 463.3(k) prohibited
misrepresentations about whether
‘‘consumer reviews or ratings are
unbiased, independent, or ordinary
consumer reviews or ratings of the
Dealer or its products or services.’’
Upon careful review and consideration
of the comments, the Commission is
finalizing paragraph (k) of § 463.3 with
one technical clarification to replace
‘‘its’’ with ‘‘the Dealer’s.’’ The Rule’s
requirements apply to all individuals
and entities that meet the definition of
‘‘Dealer.’’
An individual commenter
recommended that the Commission
modify this provision to include
language explicitly prohibiting dealers
from creating, editorializing, modifying,
or removing consumer reviews.219 Here,
the Commission notes that if such acts
or practices would result in reviews that
are not independent or do not otherwise
reflect ordinary consumer experience,
they already would violate this
provision. For example, if a dealer
created a positive review, edited or
modified negative reviews to make them
sound positive, or removed negative
reviews while keeping positive reviews,
such practices would violate this
provision.
A few individual commenters
recommended that the Rule include
additional provisions related to
consumer reviews, including a
requirement for the creation of an online
database for consumer reviews and
complaints about dealerships, and a
requirement for dealers to post
consumer reviews online and in the
dealership location. The Commission
notes that while some reviews are
available online, additional information
could assist consumers, and the
Commission will consider whether such
219 Individual commenter, Doc. No. FTC–2022–
0046–2364 (‘‘Many favorable ([i.e.] 5 star) Dealer
reviews I have read appear suspect with generic,
similar wording (or no wording at all) seemingly
provided to offset lower Dealer ([i.e.] 1 star) ratings.
I recommend that for [§ 463.3(k)] the following (or
similar) be appended: Additionally, consumer
reviews may not be created, editorialized, modified
or removed by any Dealer or third party acting at
the direction of any Dealer. Consumer reviews
should be modifiable or removable by the
originating author.’’).
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measures are needed as it continues to
monitor the marketplace, including after
the Rule goes into effect.
Several dealership associations asked
what type or format of reviews or ratings
would be covered by this proposed
provision. As proposed, § 463.3(k)
applied to all reviews or ratings, in any
format or wherever displayed, that are
likely to mislead consumers as to
whether such reviews or ratings are
unbiased, independent, or ordinary
consumer reviews or ratings. Relatedly,
industry and dealership associations
contended that the language used in the
proposed provision was vague and
confusing, and requested that the
Commission further define the phrase,
‘‘unbiased, independent, or ordinary
consumer reviews or ratings.’’ To begin,
the operative terms in this phrase are
commonly used and understood and
may be interpreted according to their
plain meaning without further
definition. Moreover, the Commission
has, for decades, provided information
and guidance on avoiding deception
through the use of endorsements,
testimonials, and online reviews.220
Enforcement actions by the Commission
have documented examples of the types
of misrepresentations that would be
covered by this provision.221 For
example, dealerships and their
employees have posted positive, fivestar online reviews that falsely purport
to be objective or independent.222 As
these sources make clear, a person who
is unbiased, independent, and an
ordinary consumer would be someone
who was not paid or given something of
value to write a review and who has no
220 See, e.g., Fed. Trade Comm’n, Notice of
Proposed Rulemaking, Trade Regulation Rule on
the Use of Consumer Reviews and Testimonials, 88
FR 49364 (July 31, 2023) (to be codified at 16 CFR
465), https://www.govinfo.gov/content/pkg/FR2023-07-31/pdf/2023-15581.pdf; Fed. Trade
Comm’n, Guides Concerning Use of Endorsements
and Testimonials in Advertising, 16 CFR 255; Fed.
Trade Comm’n, ‘‘FTC’s Endorsement Guides: What
People are Asking,’’ https://www.ftc.gov/businessguidance/resources/ftcs-endorsement-guides-whatpeople-are-asking; Fed. Trade Comm’n, ‘‘Soliciting
and Paying for Online Reviews: A Guide for
Marketers,’’ https://www.ftc.gov/business-guidance/
resources/soliciting-paying-online-reviews-guidemarketers; Fed. Trade Comm’n, ‘‘Disclosures 101
for Social Media Influencers,’’ https://www.ftc.gov/
business-guidance/resources/disclosures-101social-media-influencers.
221 See Complaint ¶¶ 73–78, Fed. Trade Comm’n
v. Universal City Nissan, Inc., No. 2:16-cv-07329
(C.D. Cal. Sept. 29, 2016); see also Fed. Trade
Comm’n, Notice of Proposed Rulemaking, Trade
Regulation Rule on the Use of Consumer Reviews
and Testimonials, 88 FR 49364, 49371–75 (July 31,
2023) (to be codified at 16 CFR 465), https://
www.govinfo.gov/content/pkg/FR-2023-07-31/pdf/
2023-15581.pdf (discussing such enforcement
actions).
222 See Complaint ¶¶ 73–78, Fed. Trade Comm’n
v. Universal City Nissan, Inc., No. 2:16-cv-07329
(C.D. Cal. Sept. 29, 2016).
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employment or familial relationship or
other unexpected material connection to
the dealership.223
An industry association commenter
expressed concern that this proposed
provision did not appear to be limited
to misrepresentations that may occur
when a dealership, and not an unrelated
third party, affirmatively publishes
consumer reviews. To the extent an
independent third party that does not
have a material connection with the
dealership makes any such claims, those
claims would not be covered by this
provision. This provision concerns
situations where there is such a
relationship between the third party and
the dealer. For example, if a dealer were
to pay a third party or consumer to post
positive reviews that misrepresent their
status as unbiased, independent, or
ordinary consumer reviews, the dealer
would be violating this provision.224
One industry association commenter
contended that the Consumer Review
Fairness Act 225 already prohibits the
conduct covered by this provision. The
Consumer Review Fairness Act makes it
illegal for businesses to have form
contracts that disallow or restrict
consumers from posting negative
reviews. Section 463.3(k) prohibits
misrepresentations regarding the
authenticity of consumer reviews
generally. These provisions are not in
conflict, and as discussed in SBP III.C.1,
to the extent the provision creates any
duplication, the Commission has seen
no harm to consumers or competition
from duplicative prohibitions of
deceptive conduct.
Whether reviews or ratings about a
seller or the seller’s products or services
are from unbiased, independent, or
ordinary consumers is material to
consumers’ decision-making because a
consumer is more likely to interact with
a particular dealership if the dealership
223 One commenter conducted a study of Google
reviews of U.S. car dealerships from April 2008 to
September 2022. The commenter found by
examining a 2% sample of these reviews that
consumers gave on average 4.47 stars out of 5 stars
and made several other conclusions about
consumer satisfaction with the auto transaction
experience based on that methodology. Comment of
Inst. for Regul. Analysis & Engagement, Doc. No.
FTC–2022–0046–10164 at 2–5. The Commission
notes that, consistent with its enforcement
experience, there is no guarantee that those reviews
are a genuine reflection of consumer experience.
Moreover, the Commission notes that oftentimes
consumers do not realize that they have been
charged without their authorization. See SBP II.B.
Thus, such a study that relies on Google star ratings
is not conclusive of consumer experience.
224 See § 463.1 (‘‘It is an unfair or deceptive act
or practice within the meaning of section 5(a)(1) of
the Federal Trade Commission Act (15 U.S.C.
45(a)(1)) to violate any applicable provision of this
part, directly or indirectly . . . .’’).
225 See 15 U.S.C. 45b.
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has positive reviews or ratings from
unbiased, independent, or ordinary
consumers. Thus, after careful review of
all the comments, the Commission is
finalizing paragraph (k) of § 463.3
without substantive modification from
the Commission’s original proposal.
(l) Whether the Dealer or Any of the
Dealer’s Personnel or Products or
Services Is or Was Affiliated With,
Endorsed or Approved by, or Otherwise
Associated With the United States
Government or Any Federal, State, or
Local Government Agency, Unit, or
Department, Including the United States
Department of Defense or Its Military
Departments
Proposed § 463.3(l) prohibited
misrepresentations that ‘‘the Dealer or
any of its personnel or products or
services is or was affiliated with,
endorsed or approved by, or otherwise
associated with the United States
government or any Federal, State, or
local government agency, unit, or
department, including the United States
Department of Defense or its Military
Departments.’’ Upon careful review and
consideration of the comments, the
Commission is finalizing paragraph (l)
of § 463.3 with one technical
clarification to replace ‘‘its’’ with ‘‘the
Dealer’s.’’ The Rule’s requirements
apply to all individuals and entities that
meet the definition of ‘‘Dealer.’’
One individual commenter
recommended that the Commission
additionally prohibit dealers from
‘‘causing any person to impersonate a
police officer for any purpose.’’ 226 The
commenter contended that such a
prohibition would address a common
yo-yo financing tactic, wherein dealers
exert pressure on consumers to return
vehicles by calling the consumers on the
phone, falsely claiming to be police
officers, and falsely representing that
there is a warrant for the consumers’
arrest or that the dealer has reported the
consumers’ vehicles as stolen. The
Commission is likewise concerned
about such conduct, and notes that it
would be covered by the language in
this paragraph, which applies broadly to
misrepresentations of affiliation with,
endorsement or approval by, or
association with ‘‘any Federal, State, or
local government agency, unit, or
department,’’ including State or local
police officials.227 By misrepresenting
226 Individual commenter, Doc. No. FTC–2022–
0046–7445 at 17.
227 The Commission discussed government
impersonation scams in its Notice of Proposed
Rulemaking for a Trade Regulation Rule on
Impersonation of Government and Business. See 87
FR 62741 (Oct. 17, 2022). The Commission
observed, inter alia, ‘‘ongoing widespread fraud
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police involvement in potential vehicle
repossession, such conduct would also
violate paragraph (o) of § 463.3 of the
Final Rule.
A number of dealership association
commenters contended that some States
address this type of deception.228 As
noted in response to similar commenter
contentions regarding other proposed
provisions, the Commission has seen no
harm to consumers or competition from
duplicative misrepresentation
prohibitions, and overlap between the
Commission’s Rule provisions and
existing law is indicative of dealers’
ability to comply with these provisions.
Moreover, including such a provision in
the Final Rule additionally benefits
consumers who encounter such
conduct, and aids law-abiding dealers
that otherwise lose business to
competitors that act unlawfully.
Further, § 463.9 discusses part 463’s
relation to State laws.
A dealership association commenter
claimed that many dealerships in the
commenter’s State work with military
personnel to promote charitable causes,
and questioned whether a banner listing
a dealership at a charitable military
event would be considered a
misrepresentation that the dealership is
‘‘associated’’ with the military.229 Here,
the Commission notes that a banner that
conveys true participation in a
charitable military event, and does not
deceptively represent an affiliation
with, endorsement or approval by, or
association with the military, would not
violate this provision. The
Commission’s law enforcement practice
provides further guidance on this point:
the Commission’s many enforcement
actions alleging misrepresentation of
government affiliation provide examples
of the types of conduct that would
violate this provision.230
Representations about whether a
seller or any of its personnel, products,
or services is or was affiliated with,
endorsed or approved by, or otherwise
associated with the government are
likely to affect consumers’ conduct.
Consumers are more likely to visit a
dealership and select a vehicle or
product if they believe that a specific
dealer or a dealer’s personnel, products,
or services have been approved by a
government entity. The Commission
thus adopts paragraph (l) of § 463.3
without substantive modification from
the Commission’s original proposal.
schemes in which scammers impersonate law
enforcement or government officials in attempts to
extort money or steal personally identifiable
information.’’ See id. at 62742 (citing
announcements on March 7, 2022, and May 20,
2022, by the Federal Bureau of Investigation and the
Social Security Administration’s Office of the
Inspector General, in coordination with other
Federal law enforcement agencies, respectively).
228 One commenter further opined that ‘‘the
Department of Defense has itself dealt with this
situation in the case of military lending and sales.’’
Comment of Kan. Auto. Dealers Ass’n, Doc. No.
FTC–2022–0046–4510 at 7.
229 Comment of N.C. Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–11223 at 9.
230 See, e.g., Complaint ¶¶ 5–6, 9–11, 14, Traffic
Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020)
(alleging auto marketer misrepresented that it
provided COVID–19 stimulus relief to consumers);
Complaint ¶¶ 14–26, Fed. Trade Comm’n v. Ponte
Invs., LLC, No. 1:20–cv–00177 (D.R.I. Apr. 17, 2020)
(alleging misrepresentation of government
affiliation by company that impersonated the U.S.
Small Business Administration with business
(n) Whether, or Under What
Circumstances, a Vehicle May Be
Moved, Including Across State Lines or
Out of the Country
Proposed § 463.3(n) prohibited
misrepresentations regarding whether,
or under what circumstances, a vehicle
may be moved, including across State
lines or out of the country. Upon careful
review and consideration of the
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(m) Whether Consumers Have Won a
Prize or Sweepstakes
Proposed § 463.3(m) prohibited
misrepresentations about whether
consumers have won a prize or
sweepstakes. Upon careful review and
consideration of the comments, the
Commission is finalizing paragraph (m)
of § 463.3 without modification from its
original proposal.
Comments from dealership
associations contended that some States
or municipalities address this type of
deception. As discussed in SBP III.C.1,
the Commission has not seen harm to
consumers or competition from multiple
prohibitions against misrepresentations.
Furthermore, any significant overlap
between the Commission’s Rule
provisions and existing law is indicative
of dealers’ ability to comply with these
provisions. Finally, § 463.9 discusses
part 463’s relation to State laws.
Misrepresentations about whether
consumers have won a prize or
sweepstakes harm consumers by
inducing consumers to choose and
transact with a particular dealership
under false pretenses. Thus, the
Commission adopts paragraph (m) of
§ 463.3 without modification from the
Commission’s original proposal.
names ‘‘SBA Loan Program’’ and ‘‘SBA Loan
Program.com’’ and claimed to help businesses
obtain access to coronavirus relief programs
administered by the agency); Complaint ¶¶ 24–36,
Fed. Trade Comm’n v. DOTAuthority.com, Inc., No.
0:16–cv–62186 (S.D. Fla. Sept. 13, 2016) (alleging
defendants misrepresented affiliation with U.S.
Department of Transportation by claiming to be the
‘‘Compliance Unit’’ of ‘‘DOTAuthority’’ and
providing a telephone number with a Washington,
DC area code).
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623
comments, the Commission is finalizing
paragraph (n) of § 463.3 largely as
proposed, with the minor modification
of capitalizing the word ‘‘State,’’ as well
as the defined term ‘‘Vehicle’’ to
conform with the revised definition at
§ 463.2(e).
The Commission received comments
including from dealership associations
arguing that proposed § 463.3(n) would
pose issues for dealers who must
comply with limitations imposed by
manufacturers or distributors on the
export of new motor vehicles. These
commenters requested clarification
about liability under this provision in
the event dealers communicate any such
export limitations to consumers or take
other steps to prevent the export of new
vehicles. Section 463.3(n), however,
does not prohibit dealers from
accurately and non-deceptively
communicating whether, or under what
circumstances, a vehicle may be
moved—it instead prohibits
representations that mislead consumers
about this information.
Commenters including a dealership
association objected to this proposed
provision by asserting that a State or
insurance company may prescribe, and
the parties to a contract may agree upon,
whether a leased or purchased vehicle
may be driven to a particular area. This
provision, however, does not prevent
parties from discussing and agreeing to
whether a vehicle may be moved.
Instead, § 463.3(n) prohibits
misrepresentations about whether, or
under what circumstances, a vehicle
may be moved, including regarding any
liens or other restrictions that would
prevent or hinder consumers’ ability to
move the vehicle beyond certain
boundaries. Furthermore, interaction
with State laws is explained in the
section-by-section analysis of § 463.9.
Representations about whether, and
under what circumstances, a consumer
may move a vehicle are material as they
are likely to affect a reasonable
consumer’s decision to purchase a
vehicle, including decisions of military
consumers who may frequently need to
move.231
231 See, e.g., Fed. Trade Comm’n, ‘‘The Road
Ahead: Selling, Financing, & Leasing Motor
Vehicles,’’ Public Roundtable, Panel 1: Military
Consumers and the Auto Sales and Financing
Process, Remarks by Hollister K. ‘‘Holly’’ Petraeus,
Dir., Off. of Servicemember Affs., CFPB, Tr. at 11
(Aug. 2, 2011), https://www.ftc.gov/system/files/
documents/public_events/52654/080211_ftc_
sess1.pdf (‘‘[S]ervicemembers don’t always realize if
they buy and finance a car here in the U.S., they
can’t take it out of the country unless they have a
letter of permission from the lienholder to do so.
And some of the lienholders won’t give that
permission. . . . [W]e [heard from] a JAG in
Germany saying, ‘I see a number of people who end
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
Based on a review of the comments
and for the reasons previously
discussed, the Commission is finalizing
paragraph (n) of § 463.3 largely as
proposed, with the minor modification
of capitalizing ‘‘State’’ and the defined
term ‘‘Vehicle.’’
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(o) Whether, or Under What
Circumstances, a Vehicle May Be
Repossessed
Proposed § 463.3(o) prohibited
misrepresentations regarding whether,
or under what circumstances, a vehicle
may be repossessed. After careful
review and consideration of the
comments, the Commission is finalizing
paragraph (o) of § 463.3 with the minor
modification of capitalizing the defined
term ‘‘Vehicle’’ to conform with the
revised definition at § 463.2(e).
A number of commenters, including
consumer advocacy organizations and a
group of State attorneys general,
expressed concern about electronic
disablement of vehicles, including
through the use of starter interrupt
devices, which are sometimes utilized
for vehicle repossession. Many of these
commenters expressed concern about
the potential for harm to consumers if
such devices are activated without
regard to the location or operational
state of the vehicle, and recommended
that the Commission restrict their use.
Alternatively, one such commenter
recommended that the Commission add
a provision to part 463 that would
require dealers to disclose any such
technology, obtain the consumer’s
express, informed consent to its use,
and limit its use to one time, not to
exceed 30 days, once a consumer is in
default. Finally, the comment from a
group of State attorneys general
recommended that the Commission
require additional disclosures any time
a starter interrupt device is installed,
provide advance notice to consumers
prior to activating such devices, and
enable consumers to restart their
vehicles in emergency or unsafe
situations.232
The Commission recognizes the
potential for abuse with regard to
vehicle disablement technology.233 It is
up having to do what you would call ‘‘voluntary
repossession’’ on their car because they bought this
car, they’re excited about it, and . . . the person
who made them the loan didn’t say ‘‘Oh, by the
way, if you go overseas, we’re not gonna let you
take it with you.’’’ And . . . sometimes, they’ll find
that their warranty is no good overseas, either.’’).
232 Comment of 18 State Att’ys Gen., Doc. No.
FTC–2022–0046–8062 at 13.
233 See, e.g., Complaint ¶¶ 10–21, CFPB v. USASF
Servicing, LLC, No. 1:23-cv-03433–VCM (N.D. Ga.
Aug. 2, 2023); Consumer Fin. Prot. Bureau,
‘‘Supervisory Highlights: Issue 28, Fall 2022’’ 6–7
(Nov. 2022), https://files.consumerfinance.gov/f/
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already illegal under section 5 of the
FTC Act to engage in deception,
including regarding vehicle disablement
technology, and to unfairly cause
substantial injury to consumers, such as
by disabling a vehicle while it is being
operated on the highway.234 This
provision will further provide
protection for consumers from unfair or
deceptive conduct surrounding the
repossession of vehicles. Moving
forward, the Commission will continue
to monitor the motor vehicle
marketplace for developments in this
area to determine whether additional
restrictions are warranted.
A number of dealership association
commenters contended that this
provision would inhibit dealers from
making representations about their
lawful rights to repossess vehicles,
positing that, upon making any such
representations, this provision might
require dealers to carry out
repossessions without exception or risk
violating this provision. This provision,
however, does not prevent dealers from
providing accurate information to
consumers about when a vehicle can, or
will, be repossessed. Even where dealers
have a lawful right to repossess a
vehicle, current law, as well as this
provision, prohibit dealers from
misrepresenting whether or when they
may take such action. Current law,
including at the Federal level, imposes
some such restrictions in this regard: for
example, the Servicemembers Civil
Relief Act prohibits repossession of
vehicles during a servicemember’s
period of military service without a
court order, as long as the
servicemember either placed a deposit
for the vehicle or made at least one
installment payment on the contract
before entering military service.235 This
provision prevents dealers from
representing that they may repossess
military consumers’ vehicles under such
circumstances. However, dealers may
still accurately and non-deceptively
documents/cfpb_supervisory-highlights_issue-28_
2022-11.pdf (finding that, in certain instances, auto
servicers engaged in unfair acts or practices by
activating vehicle disabling devices in consumers’
vehicles when consumers were not past due on
payment, contrary to relevant contracts and
disclosures, including by causing the devices to
sound late payment warning beeps and by
preventing consumers from starting their vehicles).
234 See 15 U.S.C. 45; see also, e.g., Int’l Harvester
Co., 104 F.T.C. 949, 1064–67 (1984) (finding that
manufacturer’s failure to adequately disclose that
its tractors had a serious safety hazard constituted
unfair conduct, where the hazard caused serious
injury to a small number of consumers, consumers
could not have reasonably avoided the harm
because the respondent did not adequately disclose
the serious risk, and the cost of the respondent
disclosing the risk was very small in relation to the
substantial injury).
235 See 50 U.S.C. 3952(a).
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inform a consumer about the
circumstances under which a vehicle
can be repossessed or when the dealer
may take action. In providing
consumers with such information,
however, dealers must refrain from
representing, including by implication,
that repossession is likely when in truth
it is not.
After considering the comments, the
Commission is finalizing paragraph (o)
of § 463.3 largely as proposed, with the
minor modification of capitalizing the
defined term ‘‘Vehicle.’’ This provision
prohibits dealers from making
misrepresentations regarding material
information about repossession of a
vehicle. Information about whether, or
under what circumstances, a vehicle
may be repossessed is likely to affect
consumers’ conduct, including by
impacting military consumers’ conduct
regarding which payments to prioritize
while serving our country.
(p) Any of the Required Disclosures
Identified in This Part
Proposed § 463.3(p) prohibited
misrepresentations of any of the
required disclosures identified in this
part. As the Commission noted in its
NPRM, this was including but not
limited to representations that limit or
contradict the required disclosures.236
Upon careful review and consideration
of the comments, the Commission is
finalizing paragraph (p) of § 463.3 as
proposed.
The Commission received a
dealership association comment that
contended generally that the proposed
prohibited misrepresentations in this
provision were already addressed in
State statutes and regulations, and
asserted that such State measures
should suffice given that, according to
the commenter, State regulators are
more readily available to the public. As
discussed in SBP III.C.1, the
Commission has seen no harm to
consumers or competition from
duplicative prohibitions of deceptive
conduct, and commenters did not cite
State laws that permit
misrepresentations or otherwise present
a possible conflict with the Rule.
Moreover, the Final Rule provides
additional remedies that will benefit
consumers who encounter conduct that
is already illegal under State or Federal
law, including by adding a mechanism
for the Commission to redress
consumers injured by a dealer’s
violation of the rule, and will assist lawabiding dealers that presently lose
business to competitors that act
unlawfully. Furthermore, State laws
236 NPRM
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may provide more or less specific
requirements, as long as those
requirements are not inconsistent with
part 463, and in the event of an
inconsistency, the Rule only affects
such State law to the extent of the
inconsistency. Accordingly, the
Commission adopts this provision
without modification from its original
proposal.
The Commission hereby determines it
is an unfair or deceptive act in violation
of the FTC Act for any dealer to make
any misrepresentations, expressly or by
implication, regarding material
information about the subjects set forth
in the paragraphs of § 463.3. Such
misrepresentations are likely to cause
consumers to waste significant time or
money beyond what dealers led them to
believe would be necessary to purchase
or lease a vehicle. Thus, these
misrepresentations are material and are
likely to cause substantial injury to
consumers. This injury is not reasonably
avoidable by consumers themselves
because information about the truth or
falsity of the dealer’s misrepresentations
is within the control of the dealer, and
there are no countervailing benefits to
consumers or to competition from the
illegal practice of making
misrepresentations. Further, these
provisions also serve to help prevent
dealers from failing to make disclosures
required by § 463.4, and from charging
for add-ons that provide no benefit and
from failing to obtain express, informed
consent for charges, as required by
§ 463.5, including by prohibiting
misrepresentations regarding costs and
terms.237 To reflect this, and without
changing any substantive requirements
for covered entities, the Commission is
adding the following sentence to the
end of § 463.3, at newly designated
paragraph (q): ‘‘The requirements in this
section also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.4
and 463.5.’’ Thus, this Rule requires
dealers to refrain from making material
misrepresentations about the topics
enumerated in § 463.3. The prohibitions
contained in § 463.3 help protect
consumers from deceptive
representations and promote the ability
of honest dealers to compete on honest
terms.
237 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ such unfair or deceptive
acts or practices).
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D. § 463.4: Disclosure Requirements
1. Overview
The proposed rule included five
disclosure requirements for motor
vehicle dealers regarding certain pricing
and financing information (in proposed
§ 463.4(a) through (e)). These provisions
proposed to require dealers to disclose
a vehicle’s offering price; an add-on list
with each optional add-on for which the
dealer charges consumers and the price
of each such add-on; that such add-ons
are not required and that the consumer
can purchase or lease a vehicle without
the add-ons; and information about a
vehicle’s total of payments when
making certain representations about
monthly payments.
In its NPRM, the Commission
specifically requested comments
regarding key aspects of the proposed
disclosures. In response, various
stakeholder groups and individuals
provided comments regarding the
proposed provisions. In this section, the
Commission discusses the comments,
responses to the comments, and any
changes made to this section based on
the comments.
The Commission received many
comments in favor of its proposal,
including from consumer groups,
financial services groups, dealerships
and dealership employees, individual
consumers, and others. These comments
supported the proposed disclosures as
addressing bad actors and unlawful
practices in the automotive marketplace
while promoting transparency, reducing
consumer confusion, and refraining
from inhibiting consumer choice or
materially increasing the time or
paperwork required.
A number of such comments,
however, urged the Commission to
adopt additional disclosures, both in the
areas covered by its proposal and
elsewhere. Regarding disclosures
covered in the proposal, for example,
commenters suggested more detailed
requirements, including regarding
specific disclosure language and
specific placement of disclosures. The
Commission agrees with commenters
that key information affecting pricing,
add-ons, and costs must be disclosed
clearly and conspicuously to consumers
in order to address consumer deception
and unauthorized charges during the
motor vehicle buying and leasing
process. To provide flexibility for
dealers and room for disclosures to be
made in a manner that is clear and
conspicuous to consumers in particular
circumstances, however, the
Commission declines to include
additional prescriptive language about
the form of such disclosures. Further,
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625
the Commission emphasizes that, in
accordance with the provision being
finalized at § 463.3(p), any material
misrepresentations regarding the
disclosures in the Final Rule violate
section 5 of the FTC Act 238 and part
463.
The additional disclosures
recommended by commenters included,
inter alia: a disclosure regarding the
installation and use of any electronic
disabling devices; a disclosure
explaining the fees certain lenders may
charge to accept a consumer’s loan
application; a disclosure of the invoice
price, or the price a dealer paid the
manufacturer for the vehicle; a
disclosure of any potential value gap
between a vehicle’s price and its
appraised value; a disclosure, prior to
purchase negotiations, of any potential
financing limitations imposed by the
dealer; a disclosure of credit
characteristics relied upon by the dealer
and certain terms; a disclosure that, as
with a mortgage loan settlement
statement, itemizes all the elements of
the sale for car purchases; 239 and
disclosure signage in dealership
showrooms or on sales desks explaining
that add-ons are not required. As for
disclosures in additional areas, the
Commission recognizes that vehicle
purchase and lease transactions are
lengthy and document-heavy, and while
consumers may benefit from additional
information, each additional disclosure
requirement could increase the cost to
comply with part 463 and would risk
crowding out the information in the
Commission’s proposed disclosures.
Accordingly, the Commission has
determined not to expand § 463.4 of this
Final Rule to include additional
disclosures.240 The Commission will
238 15
U.S.C. 45.
of Or. Consumer Just., Doc. No.
FTC–2022–0046–8492 at 4; cf. Individual
commenter, Doc. No. FTC–2022–0046–0144
(recommending the disclosed offering price
separately list MSRP, markup, all fees, and add-on
costs); Comment of Legal Aid Just. Ctr., Doc. No.
FTC–2022–0046–7833 at 2 (‘‘[D]ealers should be
required to verbally disclose and explain in a
language the customer understands the material
terms of the contact [sic] (including APR, total
number of monthly payments required, etc.) before
customers sign[] the contract and receive the
customers’ consent that they understand these
terms. After this verbal disclosure, a consent form
should be required. This form should be provided
in the language preferred by the customer, and
should ensure that the customer was provided with
accurate and agreed-upon terms prior to signing.’’);
Individual commenter, Doc. No. FTC–2022–0046–
1641 (‘‘Mortgage lenders are required to give a
borrower a disclosure document prior to closing to
show all costs and expenses; car dealers should
have to do the same thing.’’).
240 In addition to the disclosures noted, a few
commenters requested additional provisions to
address concerns regarding transparency in pricing,
239 Comment
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continue to monitor the marketplace to
evaluate the efficacy and sufficiency of
the present disclosures.
In addition, the Commission received
a number of comments requesting that
it publish forms for the disclosures
proposed in this section. These
comments requested either that the use
of such forms be required or that the
Commission provide a ‘‘safe harbor’’
from liability under part 463 for
dealerships that utilize them.241 The
Commission did not receive, in the
course of public comment, evidence
sufficient to conclude that uniform
formatting for the delivery of such
disclosures would be necessary to make
them effective. Nor has the Commission
received evidence to establish that
mandating use of a particular form
disclosure would obviate deceptive and
unfair conduct in all circumstances. For
example, forms that were required or
that provided a ‘‘safe harbor’’ from
liability could be presented (1) with
other elements that are distracting or
confusing, (2) with information that
modifies or contradicts the form
disclosures, (3) with instructions,
discouragement, or time pressure that
causes consumers not to review the
forms or that makes such review
impracticable or impossible, or (4)
through the use of forms that are precompleted in whole or in part, to the
extent this makes the information
therein easy for consumers to miss. The
end result of such an approach would
be to enable deception while also
making such deception more difficult to
detect. Accordingly, the Commission
declines to mandate particular
disclosure forms as a requirement across
all transactions or to shield against
liability even where dealers otherwise
engage in deceptive or unfair conduct.
The Commission also notes that,
because it is not mandating particular
disclosure forms, dealers that are
already complying with the law will
avoid additional compliance costs
associated with using a new form, and
all dealers will have the flexibility to
convey the disclosures in a manner that
is clear and conspicuous under the
including related to interest rates, and that the Rule
require dealers to maintain a fiduciary relationship
to customers. The Commission recognizes the
concerns regarding pricing transparency and
deceptive conduct related to pricing, and will
continue to monitor such issues, including after this
provision (§ 463.4(a), offering price disclosure) and
the misrepresentation provisions (§ 463.3) are in
effect.
241 Comment of Nat’l Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8368 at 104, 122; Comment of
Ohio Auto. Dealers Ass’n, Doc. No. FTC–2022–
0046–6657 at 6, 9; see Comment of Compliance
Sys., Doc. No. FTC–2022–0046–7836 at 1.
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particular circumstances of their
transactions.
The Commission also received
comments that expressed opposition to
this section. Some individual
commenters argued that the required
disclosures were unduly extensive,
prescriptive or untested, or that the
substance of these disclosures is already
conveyed to consumers before the
consummation of the transaction. In
response, the Commission stresses that
this section is limited in both its scope
and its requirements. Each of the
disclosures in § 463.4 is focused on one
key category of information: vehicle
price, add-on optionality, or total of
payments. This section requires the
clear and conspicuous disclosure of this
information but does not include
prescriptive requirements. So, for
example, a written disclosure would
have to be in a size that stands out, but
a specific font or font size is not
mandated, nor are the specific terms or
format used, nor are any particular uses
of capitalization, punctuation, ink color,
or paper color or size. The proposal
refrained from additional formal
mandates in order to provide dealers
with flexibility, within the bounds of
the law, to provide this essential
information, including so that dealers
already conveying this information in a
non-deceptive manner may continue to
do so. Accordingly, the Commission
also finds that testing of these
requirements is unnecessary.
Furthermore, each of the disclosure
requirements being finalized addresses
the unfair or deceptive act or practice of
withholding essential information from
consumers or presenting such
information to them in a deceptive
manner. After reviewing comments,
including those that contended the
proposal was not prescriptive enough,
the Commission concludes that this is
the correct approach, and as such, has
determined not to adopt any additional
specifications dictating the form or
manner in which the disclosures must
be presented to consumers. Here, as
elsewhere, the Commission will
continue its long track record of
working to assist with legal
compliance.242 Further, for dealers
242 Each year since FY2002, the Small Business
Administration’s Office of the National
Ombudsman has rated the Federal Trade
Commission an ‘‘A’’ on its small business
compliance assistance work. See U.S. Small Bus.
Admin., ‘‘National Ombudsman’s Annual Reports
to Congress,’’ https://www.sba.gov/document/
report—national-ombudsmans-annual-reportscongress (providing reports from FY2013–FY2020);
Letter from Edith Ramirez, Chairwoman, Fed. Trade
Comm’n, to Senator David Vitter, Chairman, Comm.
on Small Bus. and Entrepreneurship at 1 (Nov. 16,
2015), https://www.ftc.gov/system/files/documents/
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already conveying this information
clearly and conspicuously, complying
with this provision should not be
burdensome.
Other commenters, including an
industry association, contended that
these disclosures would have the effect
of limiting the products and services
consumers are offered or otherwise
restrict lawful sales practices. In
response, the Commission reiterates that
this section focuses on one of the most
foundational pieces of information
regarding the sale of vehicles, add-ons,
and financing: their cost. Dealers
already providing this information in a
non-deceptive manner will need to
make minimal, if any, changes to their
disclosure practices. The Commission
has seen no evidence that disclosing
cost information has caused dealers to
cease offering products.
Some commenters, including
dealership associations, contended that
the presence of some State standards in
this area makes Federal regulation
unnecessary or contradictory. In
response, the Commission notes that it
drew from several State statutory and
regulatory provisions in formulating its
proposal, and it observes that the
existence and functioning of such
standards demonstrates the
practicability of such disclosure
measures. Dealers can comply with any
State laws requiring the same conduct
as well as this section. Similarly, to the
extent a State requires additional
disclosures regarding vehicle price, addons, or total of payments, nothing
prevents dealers from providing those
disclosures as well as those required
under § 463.4 so long as the State
disclosures are not inconsistent with
part 463. To the extent there is truly a
conflict between this section and State
law, § 463.9 provides that part 463 will
govern, but only to the extent of the
inconsistency, and only if the State
statute, regulation, order, or
interpretation affords consumers less
protection than does the corresponding
provision of part 463. Moreover, a
number of States do not have existing
standards in the areas covered by this
part; in such States, the Commission’s
disclosures will operate as a key
safeguard.
Other commenters, including an
industry association, argued that
requiring disclosures would increase the
time and paperwork for consumers to
reports/federal-trade-commission-rule-complianceguides-small-businesses-other-small-entitiescommission/eighth_section_212_report_to_
congress_july_2014-june_2015.pdf (citing
Commission’s ‘‘A’’ rating for ‘‘Compliance
Assistance’’ by the Nat’l Ombudsman from
FY2002–FY–2014).
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buy or lease a vehicle. In response, the
Commission notes that the section
includes requirements for the disclosure
of salient, material information early in
the process, thus eliminating the time
consumers would otherwise spend
pursuing misleading offers—time which
can then be spent pursuing truthful
offers in the absence of deception. These
measures will further allow consumers
to compare dealerships in advance
based on truthful terms; thus,
dealerships will earn business based on
the actual terms offered, and not lose
business to dealers who compete by
omitting or hiding actual terms.
Moreover, the disclosures required by
this section are limited to key
information affecting pricing, add-ons,
and total of payments, needed to
address consumer deception and
unauthorized charges during the
vehicle-buying and leasing process, and
are required to be in writing only where
the dealer is responding to written
consumer communications or already
providing consumers with
representations in writing.243 As
explained in detail in the paragraph-byparagraph analysis of § 463.4(e) in SBP
III.D.2(e), in order to avoid any
additional written disclosure
requirements, the Commission is
declining to mandate that its required
disclosures be made in writing in every
instance.
An industry association commenter
argued that the proposed disclosure
requirements in § 463.4 of the NPRM
violate the First Amendment. This
commenter contended that the proposed
disclosures constituted compelled
speech; that they would be subject to
intermediate judicial scrutiny were they
to be challenged in court; and that, in
the event of such a challenge, the
Commission’s actions would fail to
satisfy that standard of scrutiny, or a
less stringent one.
The Commission first addresses the
applicable First Amendment standard of
review for this rulemaking effort in the
event of a judicial challenge. If so
challenged, the disclosures in § 463.4
would not be subject to intermediate
judicial scrutiny, but instead to the less
rigorous review standard set forth in
Zauderer v. Office of Disciplinary
Counsel, 471 U.S. 626, 651 (1985).
When, as is the case here, a regulation
‘‘impose[s] a disclosure requirement
rather than an affirmative limitation on
speech,’’ and is ‘‘directed at misleading
243 See § 463.4(a) (stating that Offering Price must
be disclosed in writing if the communication with
the consumer, or the dealer’s response, is in
writing); § 463.4(c), (d), (e) (requiring that
disclosures be in writing if the dealer’s associated
representation is in writing).
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commercial speech,’’ Zauderer
governs.244
Under that standard, a commercial
speaker’s rights ‘‘are adequately
protected as long as disclosure
requirements are reasonably related to
the State’s interest in preventing
deception of consumers.’’ 245 In
Zauderer, the Court upheld a rule
requiring attorneys who advertised on a
contingency-fee basis to disclose that
clients who did not prevail in litigation
might nevertheless be liable for
significant costs.246 The Court found
that ‘‘the possibility of deception is []
self-evident’’ when an advertisement
discloses only one type of charge (fees)
without mentioning another (costs).247
In upholding the challenged rule as
reasonable, the Court emphasized that
the rule merely mandated disclosure of
‘‘purely factual and uncontroversial
information about the terms under
which . . . services will be available,’’
and that the ‘‘constitutionally protected
interest in not providing [such]
information . . . is minimal.’’ 248
As in Zauderer, § 463.4 requires only
‘‘purely factual and uncontroversial
information about the terms under
which [commercial goods or services]
will be available.’’ 249 These material
facts include the offering price of the
motor vehicle; that add-on products or
services are not required and the
consumer can purchase or lease the
vehicle without the add-on, if true; the
total amount the consumer will pay to
purchase or lease the vehicle and, if that
amount assumes the consumer will
provide consideration, the amount of
such consideration; and when a lower
monthly payment will increase the total
amount the consumer will pay to
purchase or lease the vehicle. As in
Zauderer, any ‘‘constitutionally
protected interest’’ a motor vehicle
dealer might have ‘‘in not providing
[this] factual information . . . is
minimal.’’ 250
Courts applying Zauderer have
repeatedly affirmed the constitutionality
of regulations requiring disclosures of
complete information about the cost of
a purchase, which are similar to the
required disclosures in § 463.4. For
example, courts upheld a regulation
requiring schools to ‘‘disclose the ‘total
cost’ of . . . tuition, fees, books, and
244 Milavetz, Gallop & Milavetz, P.A. v. United
States, 559 U.S. 229, 249 (2010) (emphasis original).
245 Zauderer v. Off. of Disciplinary Couns., 471
U.S. 626, 651 (1985).
246 Id. at 652.
247 Id. at 652–53.
248 Id. at 651.
249 See id. at 651.
250 Zauderer v. Off. of Disciplinary Couns., 471
U.S. 626, 651 (1985) (emphasis original).
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627
supplies for its programs,’’ finding that
this information was ‘‘purely factual
and uncontroversial.’’ 251 In another
instance, a court upheld under Zauderer
a rule requiring airlines to prominently
disclose the ‘‘total, final price’’ of
airfare, finding it was ‘‘reasonably
related to the government’s interest in
preventing deception of consumers.’’ 252
In yet another case, a court upheld a
rule requiring hospitals to disclose their
rates to consumers, finding they were
‘‘ ‘factual and uncontroversial’ and
directly relevant to ‘the terms under
which [hospitals’] services will be
available’ to consumers.’’ 253 The
disclosure provisions the Commission is
finalizing in § 463.4, like the provisions
upheld in these cases, merely require
factual and uncontroversial disclosures
to provide consumers with accurate and
timely pricing and financing
information as they consider motor
vehicle purchases and leases.254
As discussed, Zauderer applies here
because § 463.4 would ‘‘impose a
disclosure requirement rather than an
affirmative limitation on speech.’’ 255
The Commission notes, however, that
disclosure requirements in § 463.4
likewise would pass muster even if, as
the commenter suggested, they were
evaluated under the intermediate
scrutiny standard formulated in Central
Hudson Gas & Electric Corp. v. Public
Service Commission of New York, 447
U.S. 557 (1980), and subsequent cases
applying that standard.256 As an initial
matter, Central Hudson applies not to
disclosure requirements, such as those
the commenter challenges, but to
affirmative limitations on speech.257
The Central Hudson test requires
restrictions on lawful, non-misleading
speech to satisfy three remaining
criteria. First, there must be a
substantial governmental interest in the
restriction; second, the restriction must
directly advance that interest; and third,
the restriction may not be more
251 Ass’n of Priv. Sector Colls. & Univs. v.
Duncan, 110 F. Supp. 3d 176, 199 (D.D.C. 2015),
aff’d, 640 F. App’x 5 (D.C. Cir. 2016).
252 Spirit Airlines, Inc. v. U.S. Dep’t of Transp.,
687 F.3d 403, 412–15 (D.C. Cir. 2012) (internal
brackets omitted).
253 Am. Hosp. Ass’n v. Azar, 983 F.3d 528, 540
(D.C. Cir. 2020) (quoting Zauderer v. Off. of
Disciplinary Couns., 471 U.S. 626, 650–651 (1985)).
254 Further, as explained in the paragraph-byparagraph analysis of § 463.4 in SBP III.D.2, the
failure to disclose this information is itself a
deceptive or unfair practice.
255 Milavetz, Gallop & Milavetz, P.A. v. United
States, 559 U.S. 229, 249 (2010).
256 The commenter attributes the intermediate
scrutiny test to Pagan v. Fruchey, 492 F.3d 766, 771
(6th Cir. 2007), though it was in fact formulated by
the Supreme Court in Central Hudson.
257 Milavetz, Gallop & Milavetz, P.A. v. United
States, 559 U.S. 229, 249 (2010).
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extensive than necessary to advance the
interest.258 Under the Central Hudson
test, it is not necessary that ‘‘the manner
of restriction is absolutely the least
severe that will achieve the desired
end.’’ 259 Rather, there merely must be a
‘‘ ‘fit’ between the [restriction’s] ends
and the means chosen to accomplish
those ends—a fit that is not necessarily
perfect, but reasonable.’’ 260 In other
words, the restriction should be ‘‘one
whose scope is ‘in proportion to the
interest served.’ ’’ 261
The disclosure provisions the
Commission is finalizing in § 463.4
satisfy these criteria. First, the
disclosure provisions serve a substantial
governmental interest by requiring
motor vehicle dealers to provide
accurate terms, and in particular,
accurate pricing information, in
advertising and sales discussions.262 As
the Supreme Court has made clear, the
government’s ‘‘interest in ensuring the
accuracy of commercial information in
the marketplace is substantial.’’ 263 And
as explained in the paragraph-byparagraph analysis of § 463.4 in SBP
III.D.2, the disclosure requirements set
forth there are aimed at ensuring that
consumers receive accurate pricing
information and other material
transaction terms, and that dealers
refrain from the unfair or deceptive act
or practice of failing to provide this
information.264 The required
disclosures directly advance, ‘‘fit’’
reasonably with, and are proportionate
to, their intended ends of prohibiting
and preventing unfair or deceptive
conduct in motor vehicle transactions.
They prevent dealers from luring
consumers to dealerships with unfair or
deceptive advertising tactics, from
padding prices with unwanted add-on
258 See Cent. Hudson Gas & Elec. Corp. v. Pub.
Serv. Comm’n of N.Y., 447 U.S. 557, 566 (1980).
Although the Supreme Court in Central Hudson
treated the question whether regulated speech is
truthful and non-misleading as one of four criteria,
it has alternately treated this question as a threshold
inquiry, after which the three remaining criteria are
evaluated. See Fla. Bar v. Went For It, Inc., 515 U.S.
618, 623–24 (1995). Because the government is
‘‘free to prevent the dissemination of commercial
speech that is false, deceptive, or misleading,’’
Zauderer v. Off. of Disciplinary Couns., 471 U.S.
626, 638 (1985), if a challenged restriction fails this
threshold inquiry, Central Hudson does not apply.
259 Bd. of Trs. of State Univ. of N.Y. v. Fox, 492
U.S. 469, 480 (1989).
260 Id. (citation omitted).
261 Id. (quoting In re R.M.J., 455 U.S. 191, 203
(1982)).
262 NPRM at 42012.
263 Edenfield v. Fane, 507 U.S. 761, 769 (1993).
264 Nothing could be more directly relevant to
accurate pricing than disclosure of the actual price
itself. See Spirit Airlines, Inc. v. U.S. Dep’t of
Transp., 687 F.3d 403, 415 (D.C. Cir. 2012)
(substantial governmental interest ‘‘is clearly and
directly advanced by a regulation requiring that the
total, final price be’’ prominently disclosed).
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products or services, and from
misdirecting consumers about the true
cost of a vehicle through discussions of
monthly payment amounts. The
disclosure requirements effectively
‘‘impose[] no burden on speech other
than requiring [motor vehicle dealers] to
disclose the total price consumers will
have to pay. This the First Amendment
plainly permits.’’ 265
After careful consideration of the
comments, the Commission has
determined to finalize the introductory
paragraph of § 463.4 and certain of the
disclosure requirements included in its
NPRM, with some minor textual
changes. The introductory paragraph of
the NPRM proposed that it would be ‘‘a
violation of this part and an unfair or
deceptive act or practice in violation of
section 5 of FTC Act for any Motor
Vehicle Dealer to fail to make any
disclosure required by this section,
Clearly and Conspicuously.’’ The
Commission is finalizing this paragraph
with the minor textual change of
substituting ‘‘Federal Trade Commission
Act’’ for ‘‘FTC Act’’ for clarity and
conformity with other parts of the Rule.
The Commission is also adding the
word ‘‘Covered’’ to the defined term
‘‘Covered Motor Vehicle Dealer’’ to
conform with the revised definition at
§ 463.2(f), discussed in SBP III.B.2(f).
The Commission is finalizing the
specific disclosure requirements
proposed at § 463.4(a), (c), (d), and (e),
with modifications noted in the
paragraph-by-paragraph analysis in SBP
III.D.2(a), III.D.2(c), III.D.2(d), and
III.D.2(e).
265 Id. Further, the Commission has taken into
account prior enforcement work and other
initiatives. See NPRM at 42022–25 (explaining
rationale behind disclosure requirements and
extensively citing prior enforcement experience and
record evidence); see also Lorillard Tobacco Co. v.
Reilly, 533 U.S. 525, 555 (2001) (‘‘We do not . . .
require that empirical data come accompanied by
a surfeit of background information. We have
permitted litigants to justify speech restrictions by
reference to studies and anecdotes . . . or even . . .
based solely on history, consensus, and simple
common sense.’’ (internal quotation marks and
alterations omitted)); Fla. Bar v. Went For It, Inc.,
515 U.S. 618, 628, (1995) (same); Burson v.
Freeman, 504 U.S. 191, 211 (1992) (finding speech
restrictions justified even under strict scrutiny
based on a ‘‘long history, a substantial consensus,
and simple common sense’’); Milavetz, Gallop &
Milavetz, P.A. v. United States, 559 U.S. 229, 251
(2010) (‘‘When the possibility of deception is as
self-evident as it is in this case, we need not require
the State to conduct a survey of the public before
it may determine that the advertisement had a
tendency to mislead.’’ (internal quotation marks
and alterations omitted)); Am. Hosp. Ass’n v. Azar,
983 F.3d 528, 540 (D.C. Cir. 2020) (finding
reasonable relationship between rule and
governmental interests where ‘‘the Secretary,
relying on complaints from consumers, studies of
state initiatives, and analysis of industry practices,
reasonably concluded that the rule’s disclosure
scheme will help the vast majority of consumers’’).
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In the paragraphs that follow, the
Commission discusses the disclosure
requirements proposed in the NPRM,
the comments relating to the specific
disclosures, responses to the comments,
and the disclosure requirements
adopted in § 463.4.
2. Paragraph-by-Paragraph Analysis of
§ 463.4
(a) Offering Price
The offering price disclosure
provision in proposed § 463.4(a)
required dealers to disclose a vehicle’s
offering price in advertisements that
reference a specific vehicle or represent
a monetary amount or financing term for
any vehicle, as well as upon receipt of
a consumer communication about a
specific vehicle or any monetary
amount or financing term for any
vehicle. The Commission proposed
defining ‘‘Offering Price,’’ in § 463.2(k),
as ‘‘the full cash price for which a
Dealer will sell or finance the motor
vehicle to any consumer, excluding only
required Government Charges.’’ The
Commission also proposed defining the
term ‘‘Government Charges,’’ then in
§ 463.2(h), to mean ‘‘all fees or charges
imposed by a Federal, State or local
government agency, unit, or department,
including taxes, license and registration
costs, inspection or certification costs,
and any other such fees or charges.’’ For
the reasons discussed in the following
paragraphs, the Commission is
finalizing the offering price disclosure
provision at § 463.4(a), as well as the
corresponding ‘‘Offering Price’’ and
‘‘Government Charges’’ definitions in
§ 463.2 (finalized at § 463.2(k) and (i),
respectively), largely as proposed. The
Commission is including a modification
to the offering price definition to clarify
that dealers may, but need not, exclude
required government charges from a
motor vehicle’s offering price, and is
substituting ‘‘Vehicle’’ for ‘‘motor
vehicle’’ to conform with the revised
definition at § 463.2(e), discussed in
SBP III.B.2(e). Additionally, the
Commission is including a
typographical modification to the
‘‘Government Charges’’ definition to
include a serial comma for consistency.
The Commission also is capitalizing the
defined terms ‘‘Vehicle’’ throughout, in
its singular, plural, and possessive
forms, and is adding language to the end
of § 463.4(a)(3)(ii) clarifying that the
requirements in § 463.4(a) ‘‘also are
prescribed for the purpose of preventing
the unfair or deceptive acts or practices
defined in this part, including those in
§§ 463.3(a) and (b) and 463.5(c).’’
The Commission received a
significant number of comments on its
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proposed offering price disclosures.
Many commenters supported the
Commission’s proposal to require
dealers to provide uniform,
comprehensive, and accurate pricing
information. These commenters noted,
inter alia, that despite laws generally
prohibiting unfair or deceptive acts or
practices, present market conditions fail
to balance the ‘‘playing field’’ of
information between consumers and
motor vehicle dealers, allowing dealers
to take advantage of consumers by
hiding information about pricing,
imposing surprise price increases, or
using pricing advertising tactics that
systematically deceive consumers.266
Many consumers also underscored the
need for the proposed disclosure
requirements. Commenters in support
noted, for instance:
• Buying a car has always been a
horrible experience for me. The endless
driving to dealerships who advertise
vehicles for a sale price only to find that
the vehicle does not exist, or the price
advertised for the specific vehicle is not
what they had posted. The
salespersons[’] tactics, always
attempting to put you in a vehicle based
on a car payment, along with dancing
around the simple question of the actual
out the door price of the vehicle. . . .
It is such a shame that the dealerships
just do not give the customer the price
of the vehicle without them wanting to
start a ‘‘folder’’ and take all of your
information, a copy of your drivers
license, ect [sic] . . . . Please regulate
the automobile dealerships, especially
now when it seems they are at their
worst with these ridiculous add on fees
(paint and upholstery protector, ect [sic]
which was not added at the
manufacturer) along with adjustments
on top of the MSRP.267
• Buying a car in the US is now akin
to what I used to do in the Army: Before
going into the dealership, I have to
spend hours conducting ‘‘intelligence
prep of the battlefield’’ to understand
the tactics the dealership’s sales and
finance & incentives staff will throw at
me. . . . It has been made increasingly
worse by dealerships that advertise a
false price to entice a buyer but ‘‘baitand-switch’’ with Additional Dealer
Mark-Ups (ADM), and bogus fees and
charges for supposedly dealer-installed
items tha[t] the consumer doesn’t want
in the first place. . . . Unless the FTC
passes this proposed rule, things will
get worse before they get better.268
• Though I am not usually a fan of
adding layers of governmental
regulations to what should be a simple
transaction, there definitely needs to be
a change in what is allowed in the car
buying process. . . . As consumers we
should not have to spend hours reading
tiny print in obscure sections of a
website in order to validate a posted
price. The price should not be elevated
at the last minute in a hidden line item
such as a mandatory detailing package
or service plan you do not want or need
to the tune of thousands of dollars. . . .
We should not have to spend hours at
a dealer and go through mounds of
paperwork with a fine tooth comb in
order to simply see the ACTUAL price
of the vehicle. It is a ridiculous ploy to
confuse people into purchasing things
they do not want or need.269
• I have been trying to buy a new car
for the last two years but with
unexpected costs I am not able to have
a clear written contract on the car and
its pricing. I have contacted several
dealers in my area and many of them
have issues that prevent me from
commited [sic] to buying from them.
This ranges from them not being able to
give me a written sheet of the cost of the
car, fees, ect [sic] showing me how
much I will be paying in the end. . . .
Most of the dealerships I spoke to would
not give me a sales sheet of the vehicle
I want to purchase to show me how
much I will be paying in total. I would
have to put a down payment and just
trust them over the phone. If I can’t get
it in writing it is hard to commit to a
down payment I could lose.270
• Vehicles are typically the second
largest purchase made by people. Given
the choices available according to
respective needs/wants, purchasing a
vehicle should be the same as going to
any other mass-market retailer and
picking that appliance with a set price.
So why do we need to haggle or expend
additional intellectual and emotional
bandwidth towards ensuring that the
transaction is as initially stated? There
are instances where I’d rather be back
conducting combat operations in Iraq
than go through the dealer process, as it
incenses me that this corrupt way of
doing business is given a free pass. . . .
If you are a reputable and honest
dealership, then there should be no
worry; it will be business as usual.271
• Think of us, the car buying public.
We are mad as hell. Please start fixing
this crooked business model where
266 See, e.g., Comment of Nat’l Consumer L. Ctr.
et al., Doc. No. FTC–2022–0046–7607 at 17–20.
267 Individual commenter, Doc. No. FTC–2022–
0046–6649.
268 Individual commenter, Doc. No. FTC–2022–
0046–6225.
269 Individual commenter, Doc. No. FTC–2022–
0046–6089.
270 Individual commenter, Doc. No. FTC–2022–
0046–6656.
271 Individual commenter, Doc. No. FTC–2022–
0046–5238.
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nobody even knows what they are
supposed to be paying.272
• As a consumer, I fully support this
new proposed rules update. The
dealership experience has been an
anxiety provoking event everytime [sic]
I attempt to purchase a car. I have
multiple friends and family that all
report shady practices, bait and switch,
and up charging at point of sale during
their car buying process. Please pass
these regulations! 273
• I am writing in FULL support of the
FTC rules and regulations. . . . Buyers
deserve to know Out the door prices and
not be hassled by nonsensical add-ons
for the dealership’s benefit. People
should feel comfortable and excited to
buy their 1st car rather than the dread
I feel.274
• We find the vehicle we came to see
and see a sticker beside the
manufacture[r] one with added prices.
These typically include car alarms, VIN
etching, protection packages, floor mats,
market adjustment, etc. We go to
purchase the vehicle now and they say
that none of these can be removed from
the price of the car (even though they
advertised them without them at a much
lower price). We attempt to negotiate
them off and find out their [sic] is an
additional addon like reconditioning
fee. We fail at getting the price of the
vehicle down to the advertised price
and leave.275
• I have financed all of my cars, and
the total cost for the vehicle has always
been hidden, either physically or
through the dealer trying to move focus
onto other numbers such as the monthly
payment. Since monthly payments will
vary due to credit history, down
payments, interest rates, taxes, and
more, it is not an effective tool for
measuring a deal. $300 a month could
be a great deal on one car, and a horrible
deal on another. I would greatly benefit
from the proposal[’]s provision to
clearly list and advertise the price of the
car without additional add[-]ons. It
would greatly reduce the work of
finding the right car at the right
dealership. In each of the 3 cases, I have
gone to multiple dealers, wanting to
purchase a specific vehicle on their lot,
and walked away because of the hidden
272 Individual commenter, Doc. No. FTC–2022–
0046–5227.
273 Individual commenter, Doc. No. FTC–2022–
0046–5228.
274 Individual commenter, Doc. No. FTC–2022–
0046–5219.
275 Individual commenter, Doc. No. FTC–2022–
0046–0900.
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costs being added to the price of the
car.276
• I work as a salesperson at a local
Nissan dealership. . . . Currently,
dealerships across the US, including the
one I work for, have made the car
buying process needlessly confusing,
expensive, and frustrating by engaging
in false advertising and hidden add-on
products. While these practices are very
unscrupulous, they are incredibly
effective at what they are designed to
do: drive revenue for the store. If these
regulations are passed, they would
certainly take a significant toll on my
personal finances. But the longer I work
in my position, the more I realize that
no one should be allowed to engage in
such exploitative conduct in the course
of running a business. . . . Good,
ethical dealers will not have to make
any changes if these rules are put into
place. I also happen to know that
several of the comments in opposition
to the proposed regulations are solicited
by dealerships and their management.
The dealership group I work for, for
example, sent out a company-wide
email encouraging employees to post
comments on this site in opposition to
these rules. But there’s no question: The
American people want these
regulations. They need these
regulations. The only ones that don’t
want them are crooked auto dealerships
across the US. It’s been far too long that
such dealerships have run amuck with
underhanded sales practices and
deception. I would urge the FTC to
stand strong against . . . dealership
groups[]or any lobbyists and get these
rules passed! I know there will be stiff
resistance but it’s of the utmost
importance to good dealerships,
transparent salespeople, and, most
importantly, the average American
consumer! 277
A number of commenters supported
the offering price disclosure
requirement and associated definitions;
some expressed support while urging
additional protections. A number of
commenters, including consumer
advocacy organizations as well as
individual commenters, requested that
the Commission require a vehicle’s
offering price to include additional
items, such as charges for add-ons
attached to the vehicle when it is
offered, and charges for add-ons
required by the dealer to be sold with
the vehicle; to exclude rebate
information, including rebates
contingent upon the use of a certain
276 Individual commenter, Doc. No. FTC–2022–
0046–6490.
277 Individual commenter, Doc. No. FTC–2022–
0046–3693.
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financing company or upon qualifying
for any other rebate; and to prohibit the
exclusion of certain charges, including
the advertisement of an offering price
that factors out a down payment
amount.278
To begin, the Commission notes that
by the terms of the proposed ‘‘Offering
Price’’ definition, the only charges a
dealer was permitted to exclude from a
vehicle’s offering price were required
government charges. Thus, under the
proposal, if a dealer were to charge any
consumer for a preinstalled add-on, or
require any consumer to pay for an addon to purchase or finance the vehicle,
then the charges for such add-ons would
be required to be included in the
vehicle’s offering price.279 In addition,
while the proposed provision did not
prevent dealers from presenting
consumers with accurate and nonmisleading additional information,
including terms of limited availability,
the required offering price disclosure
needed to remain clearly and
conspicuously presented to consumers,
and could not be based on discounts or
rebates that are not available to ‘‘any
consumer,’’ including rebates
contingent upon the use of a certain
financing company or upon qualifying
for any other rebate. Similarly, under
the proposal, if the dealer required a
down payment amount to sell or finance
the vehicle, the offering price could not
factor out such an amount.
With respect to the proposed
definition of ‘‘Government Charges,’’
which is used in the definition of
‘‘Offering Price,’’ a number of consumer
advocacy organization commenters
contended the definition should be
narrow to accomplish the Commission’s
goal of ensuring that consumers have
access to accurate pricing information
before they enter a dealership,
emphasizing that only charges that are
imposed by, and payable to, a
government entity should be permitted
to be excluded from a vehicle’s offering
price, and that document fees that some
States allow dealers to charge should
278 A number of these commenters further
requested that the term ‘‘Offering Price’’ include
additional dealer fees that are known to the dealer
at the time they are advertised and imposed by the
dealer rather than a government entity. These
requests are addressed in the discussion of the
Commission’s definition of ‘‘Government Charges’’
in SBP III.B.2(i).
279 If a dealer does not require any consumer to
pay for an add-on, current law, as well as
provisions in this Rule, require dealers to refrain
from deception in this regard. See, e.g., § 463.3(a),
(b) (prohibiting material misrepresentations
regarding the costs or terms of purchasing,
financing, or leasing a vehicle, as well as any costs,
limitation, benefit, or any other material aspect of
add-ons); § 463.4(c) (requiring disclosures regarding
optional add-ons).
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not be excluded from the offering price.
The Commission notes that, as
proposed, the term ‘‘Government
Charges’’ is limited to those charges
‘‘imposed by a Federal, State or local
government agency, unit, or
department.’’ The Commission specified
in this proposed definition that such
charges need be ‘‘imposed by’’ a
government entity rather than, for
instance, having merely been
‘‘authorized by’’ or ‘‘allowed by’’ such
an entity. This language does not reach
charges that are authorized by a
government entity but not required,
since such charges have not been
‘‘imposed’’ 280 by the government. This
distinction therefore excludes from the
definition of ‘‘Government Charges’’
fees, such as dealership document
preparation fees that State or local law
does not require consumers to pay.
Furthermore, the definition of ‘‘Offering
Price’’ at § 463.2(k) permits only
‘‘required’’ government charges to be
excluded from a vehicle’s offering price.
Thus, charges the government does not
require consumers to pay, but allows the
dealer to charge or to pass along to the
consumer, such as document fees, must
be included in the disclosed offering
price if the dealer requires such charges
of any consumer.
Relatedly, an individual commenter
suggested that the Commission delete
the phrase ‘‘inspection or certification
costs’’ from the definition of
‘‘Government Charges’’ in order to avoid
confusion about the status of inspection
or certification charges that ‘‘are NOT
imposed by the Government,’’ as well as
explicitly state in the definition that the
term does ‘‘not include dealer document
or document processing fees (‘‘doc
fees’’), or electronic titling and
registration fees, which are not imposed
by the Government.’’ 281 Regarding the
phrase ‘‘inspection or certification
costs,’’ such costs that are not
‘‘imposed’’ by the government are
excluded from the definition of
‘‘Government Charges,’’ as the plain
language makes clear. Similarly, as
noted, dealer document or document
processing fees and any other fees that
are not imposed by the government are
excluded from the definition, as the
plain language states.
Some commenters, including a group
of State attorneys general, likewise
recommended that a vehicle’s offering
price include ‘‘anticipated’’ or
280 See, e.g., Impose, Cambridge Advanced
Learner’s Dictionary & Thesaurus, https://
dictionary.cambridge.org/us/dictionary/english/
impose (‘‘to officially force a rule, tax, punishment,
etc. to be obeyed or received’’).
281 Individual commenter, Doc. No. FTC–2022–
0046–7445 at 15–16.
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‘‘estimated’’ government charges.282 The
Commission agrees that consumers
would benefit from knowing this
information early on in their shopping
experience, and notes that dealers are
permitted under this Final Rule to
provide additional, truthful information
along with a vehicle’s offering price.
Rather than requiring that anticipated
government charges be included in the
offering price, the Commission is
modifying the definition from its
original proposal to make clear that
dealers need not exclude any such
charges from the offering price. The
Commission will evaluate whether the
definition, as finalized, as well as its
associated disclosure, effectively
address deceptive and unfair market
conduct, and will consider future
modifications as market practices
evolve.
Thus, the Commission is finalizing a
definition of ‘‘Offering Price’’ that
clarifies that dealers may, but need not,
exclude required government charges
from a vehicle’s offering price that
meets the requirements of § 463.2(k). In
particular, the Commission is finalizing
a definition of ‘‘Offering Price’’ that
removes the phrase ‘‘excluding only’’
and adds the phrase ‘‘provided that the
Dealer may exclude only’’ in its place.
The definition also substitutes
‘‘Vehicle’’ for ‘‘motor vehicle’’ to
conform with the revised definition of
‘‘‘Covered Motor Vehicle’ or ‘Vehicle’’’
at § 463.2(e), such that the definition
reads as follows: ‘‘Offering Price means
the full cash price for which a Dealer
will sell or finance the Vehicle to any
consumer, provided that the Dealer may
exclude only required Government
Charges.’’
Other commenters, including
consumer advocacy organizations,
proposed additional requirements to the
disclosure at § 463.4(a): prescribing
formatting, posting, and presentation
requirements for offering price
information, such as attaching a written
offering price to each vehicle, providing
written offering price information in
response to consumer communications
regardless of whether the
communications are written, and
requiring offering price to be the most
conspicuous piece of information
displayed to consumers. Regarding the
manner in which the offering price must
be presented, the Commission proposed
that all disclosures under § 463.4,
282 See, e.g., Comment of 18 State Att’ys Gen.,
Doc. No. FTC–2022–0046–8062 at 7; Comment of
Consumer Att’ys & Advocs., Doc. No. FTC–2022–
0046–7695 at 2–3 (requesting that the vehicle’s
offering price include ‘‘an estimate of government
fees and charges such as sales tax and registration
based on the dealer’s location’’).
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including the offering price disclosure,
be presented clearly and conspicuously.
As previously discussed, the proposed
disclosure provisions were directed at
addressing unlawful conduct while
providing dealers with flexibility to
present such disclosures in a manner
that is clear and conspicuous to their
consumers under the particular
circumstances. Thus, the Commission
has determined not to adopt further
formatting, posting, or presentation
requirements for its offering price
disclosure.
Some commenters, including
consumer advocacy organizations and a
consumer protection agency, proposed
that the Commission adopt an
additional requirement providing that
dealers must accept an offer from a
buyer of the offering price. In response,
the Commission notes that, under its
proposal, if a dealer were requiring any
consumer to pay a price that was higher
than the disclosed offering price, or
adding other conditions—such as
requiring the use of a particular finance
company or the purchase of an add-on—
to obtain the vehicle at the offering
price, such practices would violate part
463, including the offering price
provision, which requires disclosure of
the full cash price for which the dealer
will sell or finance the vehicle to any
consumer,283 and the related
requirement the Commission is
finalizing under § 463.3(p), which
prohibits misrepresentations regarding
the required disclosures in part 463.284
An individual commenter proposed
that the Commission adopt additional
requirements requiring dealers to
itemize and disclose each subcomponent of the offering price,
including any applicable document fee.
The Commission notes that it has not
been presented with any evidence that
the benefits of such additional
disclosure requirements outweigh the
283 See § 463.2(k) (defining ‘‘Offering Price’’ as
‘‘the full cash price for which a Dealer will sell or
finance the Vehicle to any consumer, provided that
the Dealer may exclude only required Government
Charges’’).
284 Some commenters described situations in
which a dealer may decline to sell or finance a
vehicle to a particular consumer, including due to
legal requirements, irrespective of whether the
dealer otherwise intends to honor its offering price
disclosures. These situations include, for example,
a consumer who presented identity theft indicia
under the Commission’s Red Flags Rule, 16 CFR
681; a consumer on the Specially Designated
Nationals List maintained by the Office of Foreign
Assets Control; a consumer who cannot produce the
required proof of insurance or license to complete
the transaction; or a consumer who is abusive or
violent at the dealership. The Commission’s
offering price provision is a pricing disclosure; it
will not otherwise alter the status quo on whether
a given sale or financing transaction must be
consummated.
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costs to consumers and competition.
The Commission may consider
additional such restrictions or
additional guidance in the future, based
on stakeholder experience with part 463
and whether it effectively remediates
unlawful conduct.
Other individual commenters
proposed that the Commission impose
limitations on the price of the vehicle—
for example, prohibiting dealers from
charging more than MSRP for the
vehicle—or prohibit or limit particular
charges, such as dealer fees, document
fees, and destination charges. The
Commission notes that several Rule
provisions will prohibit hidden charges
and deception related to pricing,
including § 463.4(a) (offering price
disclosure) and § 463.3(a) (prohibition
against misrepresenting the costs or
terms of purchasing, financing, or
leasing a vehicle). Before including
additional provisions, the Commission
will continue studying the market,
including after the Rule is in effect, to
determine whether additional steps are
needed.
Other commenters opposed the
offering price disclosure and related
definitions. Commenters including an
industry association contended that, by
defining ‘‘Offering Price’’ in § 463.2(k)
as the price ‘‘for which a Dealer will sell
or finance the motor vehicle to any
consumer,’’ the Commission would
prohibit dealers from changing vehicle
prices as market conditions change,
thereby making vehicle pricing less
dynamic than under current industry
practice.
Section 463.4 and the offering price
definition in § 463.2(k), however, do not
alter the current status quo on pricing
accuracy or pricing changes. Consistent
with the law, the offering price—as with
a presently advertised price—must be
truthful and non-misleading. If the
offering price is only available for a
certain period of time, the
advertisement must convey that fact
clearly and conspicuously, and if it is
no longer available, the dealer must
cease advertising the offering price.285
Some commenters expressed a related
concern that the Commission’s offering
price disclosure requirement could
require dealers to change their practices
when an advertised vehicle is no longer
available. For example, one industry
commenter asked whether, under such
circumstances, a dealer would somehow
be obligated to sell some other vehicle
285 As is the case under current law, under part
463, any qualifying information necessary to
prevent deception regarding a material fact must be
conveyed clearly and conspicuously. See FTC
Policy Statement on Deception, supra note 42, at 1
n.4, 4.
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to that consumer at the offering price.
Here, the offering price disclosure
requirement does not alter the status
quo: Under § 463.4(a), as under current
law, if an offer is limited to a particular
period of time, the offer must convey
that fact, and once a price is no longer
available, the dealer must cease
advertising that price. Regarding which
vehicles to sell at an advertised offering
price, under the Commission’s proposal,
the dealer must disclose the offering
price for the vehicles advertised. If the
dealer charges a different price, then the
dealer has not disclosed the offering
price for which the dealer will sell or
finance the vehicle, and the dealer has
misrepresented the price of the vehicle,
in violation of several provisions,
including §§ 463.3(b) and (p) and
463.4(a). For example, if a dealer
conveys that all vehicles of a certain
nature or in a certain category are
available at a particular offering price,
but charges a higher offering price for
any vehicle of that nature or in that
category, the dealer has violated the
Rule.
Other comments, including from a
member of Congress and from
dealership associations, raised concerns
that the Commission’s proposal would
limit dealers from advertising rebates,
discounts, or incentives of limited
availability, including when
qualifications for such rebates,
discounts, or incentives are identified in
the advertising, further contending that
such a result would contradict prior
FTC practice. Relatedly, commenters
including an industry association
questioned whether the Commission’s
proposal prohibited dealers from
advertising additional vehicle prices,
contending that such a result would
conflict with the longstanding
obligation under Federal law to disclose
a vehicle’s Manufacturer’s Suggested
Retail Price, or MSRP. The Commission
notes, however, that the offering price
disclosure requirement does not prevent
dealers from presenting accurate and
non-misleading additional information,
including terms of limited availability,
so long as the required offering price
disclosure remains clearly and
conspicuously presented to
consumers.286 If, however, a dealer’s
286 A number of dealership associations expressed
a related concern that the Commission, through its
offering price proposal, was somehow seeking to
restrict competition between dealers to being only
about the price of vehicles. The associations
described other areas, beyond vehicle price, by
which dealerships currently distinguish themselves
(e.g., their range of products and services; their
service availability; the convenience of their
locations; and the nature of their sales staffing and
process). In response, the Commission notes that it
has long recognized the importance of protecting
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disclosure were to give consumers a net
pricing impression that is contrary to
that which is actually available, then the
disclosure would violate § 463.4(a), and
the related requirement under
§ 463.3(p).287
Some commenters, including
dealership associations, generally
concluded the Commission’s proposed
offering price definition, or its
associated disclosure provision, were
unnecessary, confusing, burdensome, or
likely to hinder comparison shopping.
Some commenters, for instance,
contended that their respective States
already prohibit misrepresenting price
terms, rendering the Commission’s
proposal redundant. The Commission
notes, however, that a simple disclosure
of the offering price, using the same
definition across States, addresses
multiple issues, including: the
promotion of prices based on dealer
discounts, rebates, or other price
reductions when such benefits are in
fact subject to hidden or undisclosed
restrictions that render them
unavailable to typical customers; the
concealment or omission of additional
dealer charges, such as for document
preparation fees, amounting to several
hundred dollars; the advertisement of a
price without disclosing material
limitations or additional charges
required by the dealer that are fixed and
thus can be readily included in the price
at the outset; and the inducement to
pursue pricing offers that are not
actually available or to pay more for a
vehicle due to inadequate or
nonexistent disclosures. Moreover, this
disclosure and the associated
definitions should produce the corollary
benefit of increasing price competition
among dealers, who will be able to
compete on truthful, standard terms.288
The Commission also concludes that the
claim that its offering price disclosure
requirement would limit comparison
shopping appears to follow from the
mistaken notion that the offering price
competition across both price and quality metrics,
including providing consumers with truthful,
nondeceptive advertising. See, e.g., Cal. Dental
Ass’n v. Fed. Trade Comm’n, 526 U.S. 756, 766–68
(1999) (affirming Commission exercise of law
enforcement authority against industry guidelines
that unlawfully restricted both price advertising
and advertising relating to the quality of dental
services). As noted, the offering price disclosure
requirement does not prevent dealers from
presenting accurate and non-misleading additional
information, including information about any such
distinguishing characteristics, so long as the
offering price is presented clearly and
conspicuously.
287 For reference, § 463.3(p), which the
Commission is finalizing, see SBP III.C.2(p),
prohibits dealers from making material
misrepresentations regarding ‘‘[a]ny of the required
disclosures’’ under the Final Rule.
288 See NPRM at 42023.
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disclosure prohibits dealerships from
conveying accurate additional
information to consumers, including
information about rebates, discounts, or
other limited-availability incentives.
Relatedly, some dealership
association commenters contended
there are areas of overlap, or potential
conflict, with State law. Pursuant to
§ 463.9 of part 463, where it is possible
for dealers to comply with both State
law and the provisions of this
regulation, or where State law affords
greater consumer protection, part 463
will not displace existing State pricing
or disclosure regimes. This addresses
many of the commenters’ concerns
about State law. Some dealership
associations, for instance, contend that
their respective States require dealers to
separately disclose a dealer document
fee and not represent that the fee is
required by the State, or that they allow
dealers, with certain limitations, to
incorporate rebates into an advertised
price. Regarding document fees, dealers
can simultaneously comply with part
463, which requires document fees to be
included in the offering price unless
they are ‘‘required’’ government charges,
and with State law that permits but does
not require document fees to be
excluded from a vehicle’s advertised
price, or that requires disclosure of the
amount of the document fee and that
such a fee is not required by the State,
by disclosing the offering price and any
additional State-required information,
such as the amount of the dealer
document fee. Similarly, regarding
rebates, in addition to the offering price,
dealers may provide consumers with
additional pricing information,
including regarding rebates or other
incentive pricing, so long as the offering
price remains clear and conspicuous,
and any additional information is
truthful and non-misleading and
otherwise complies with part 463 and
existing law.
Another dealership association
commenter urged the Commission to
consider using an existing definition,
including a State-law definition of
‘‘sales price’’ or the definition of ‘‘cash
price’’ under the Truth in Lending Act’s
Regulation Z, in lieu of its proposed
offering price definition.289 The
Commission notes that its offering price
definition overlaps substantially with
the commenter’s suggested State-law
‘‘sales price’’ definition, which,
according to the commenter, requires
that a vehicle’s advertised price be one
at which ‘‘the dealer must be willing to
sell the motor vehicle . . . to any retail
289 Comment of Tex. Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8102 at 29–30.
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buyer’’; which ‘‘must’’ include certain
additional charges that are fixed and
thus can be readily included in the price
at the outset, including ‘‘[d]estination
and dealer preparation charges’’; and
which permits only certain categories of
costs and charges to be excluded.290
Based on the commenter’s description,
unlike the Commission’s definition, this
State-law definition permits the
exclusion of fees ‘‘allowed’’ by law or
those which the law has
‘‘prescribed.’’ 291 Again, the Rule
permits only charges that the
government requires the consumer to
pay to be excluded from a vehicle’s
offering price, by defining ‘‘Offering
Price’’ to allow only ‘‘required
Government Charges’’ to be excluded.
This difference from the State law
described by the commenter, however,
creates no conflict—a dealer governed
by that State law will be able to comply
with both requirements by disclosing an
offering price that excludes only
required government charges and
includes allowable government charges.
Similarly, commenters have not
demonstrated any actual conflicts
between the proposed offering price
definition and TILA’s definition of
‘‘cash price.’’ 292 Dealers can comply
with both requirements by disclosing an
offering price that excludes only
required government charges. And the
Rule’s definition addresses specific
unfair and deceptive conduct in the
auto marketplace. Were offering prices
to exclude additional categories, the
resulting disclosure provision at
§ 463.4(a) would permit dealers to lure
consumers to dealership lots based on a
price that is not actually the price the
dealer would require the consumer to
pay, a result that would require
consumers to spend time traveling to
the dealership and time on the lot to
attempt to discover the true price, and
that would place dealerships that
choose to advertise the price truthfully
at a competitive disadvantage.
Relatedly, commenters including an
industry association contended that no
additional regulation of pricing or credit
and lease advertising was necessary
beyond that provided by existing
practice or by the Truth in Lending Act,
the Consumer Leasing Act, and their
implementing Regulations Z and M, and
relatedly, that the Commission’s offering
price disclosure requirement
duplicated, modified, or ignored such
existing law. The disclosure
290 Id.; see also 43 Tex. Admin. Code 215.250(a),
(b) (2023).
291 Comment of Tex. Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8102 at 29–30; see also 43
Tex. Admin. Code 215.250(b)(3) (2023).
292 See 12 CFR 226.2(a)(9).
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requirement, however, is consistent
with these existing legal obligations and
does not disturb them; dealers can and
should make the disclosures required
under TILA and other laws as well as
the offering price disclosure required by
the Final Rule. The provision requires
dealers to disclose simple and highly
material pricing information under
certain circumstances.293 Providing
consumers with accurate and timely
pricing and financing information is
critical, especially in the context of
motor vehicle sales.294
Several commenters requested
modifications to limit or expand the
proposed definition of ‘‘Government
Charges,’’ or clarification regarding this
term’s application to certain fees. For
example, commenters, including a
dealership association, urged the
Commission to modify this proposed
definition to include charges that are
‘‘allowed to be charged but not required
or imposed by a Federal, State, or local
government agency, unit, or
department.’’ 295 One such commenter
provided the example of certain
registration and title charges, which it
described as ‘‘not necessarily imposed
or mandatory fees’’ and for which ‘‘the
amount may vary, depending on the
county’’ and the dealership, and within
a governmentally determined range.296
Regarding registration and title charges,
to the extent such charges are required
by a government agency, unit, or
department, then they fall within the
‘‘Government Charges’’ definition as
charges ‘‘imposed by’’ such agency,
unit, or department. If, however, there
are title, registration, or other fees,
beyond any title and registration fees
required by the government, that dealers
are allowed, but not required, to charge,
such fees do not fall within the
‘‘Government Charges’’ definition, and
293 The industry association commenter further
contended that this provision would apply to
dealers based on whether they have a service
department, but this is incorrect, as explained in
the analysis of the definition of ‘‘ ‘Covered Motor
Vehicle Dealer’ or ‘Dealer’ ’’ in SBP III.B.2(f).
294 See, e.g., Buckle Up, supra note 63, at 5
(noting consumer confusion about how the vehicle
price they were offered was determined and that
consumers did not understand they could negotiate
price); id. at 9 (observing add-on products or
services, which typically increase a vehicle’s
purchase price, were ‘‘the single greatest area of
confusion’’ in the study); Att’ys Gen. of 31 States
& DC, Comment Letter on Public Roundtables:
Protecting Consumers in the Sale and Leasing of
Motor Vehicles, Project No. P104811, Submission
No. 558507–00112–1 at 5–6 (Apr. 13, 2012), https://
www.ftc.gov/sites/default/files/documents/public_
comments/public-roundtables-protectingconsumers-sale-and-leasing-motor-vehicles-projectno.p104811-00112/00112-82927.pdf.
295 Comment of Tex. Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8102 at 14.
296 Id.
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633
to the extent a dealer imposes such
allowable charges on any consumer,
such fees must be included in the
offering price. Were the Commission to
categorize such allowed, but not
required, amounts as ‘‘Government
Charges,’’ dealers would be allowed to
exclude them from a vehicle’s offering
price but then require consumers to pay
them anyway, thereby allowing dealers
to lure consumers to their lots based on
a price that is not actually the price the
dealer would require the consumer to
pay—a fact that consumers would not
learn until they have spent time
traveling to the dealership and time on
the lot, if they learn this fact at all.297
Further, under such circumstances,
dealerships that choose to advertise the
price truthfully would be at a
competitive disadvantage. The
Commission therefore declines to
finalize the definition with such a
modification.
Commenters, including a number of
dealership associations, contended there
were burdens associated with the
Commission’s offering price disclosure
requirement, claiming it would cause
dealers to require documenting every
contact with a consumer in which a
specific vehicle was mentioned, thereby
lengthening the sales process and
increasing the recordkeeping burden.
Comments regarding recordkeeping
requirements, including records that
must be created and maintained under
this Rule, are addressed in the sectionby-section analysis of § 463.6. Here, the
Commission notes that accurate pricing
communication is already required by
law. Section 463.4(a) does not require a
complex or lengthy disclosure, is based
on similar provisions already in
operation in certain States,298 will
operate as a key safeguard in States
without such provisions, and, as
discussed in the following paragraphs,
addresses deceptive and unfair conduct.
Further, this offering price requirement
will save consumers time when
297 Indeed, as the Commission also noted in its
NPRM, an entity that induces the first contact
through false or misleading representation is liable
under the FTC Act, regardless if the buyer later
becomes fully informed. See, e.g., Resort Car Rental
Sys., Inc. v. Fed. Trade Comm’n, 518 F.2d 962, 964
(9th Cir. 1975); Fed. Trade Comm’n v. Gill, 71 F.
Supp. 2d 1030, 1046 (C.D. Cal. 1999), aff’d, 265
F.3d 944 (9th Cir. 2001).
298 For example, California and Wisconsin have
similarly enacted laws that make it unlawful for
dealerships to advertise a total price without
including additional costs to the purchaser outside
the mandatory fees such as tax, title, and
registration fees. Cal. Veh. Code 11713.1(b), (c)
(2023); Wis. Admin. Code. Trans. 139.03(3) (2023).
In Louisiana, the advertised price must be the full
cash price for which a vehicle will be sold to any
and all members of the buying public. La. Admin.
Code tit. 46, pt. V, 719 (2023).
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shopping for a vehicle by requiring the
provision of salient, material
information early in the process and
eliminating time otherwise spent
pursuing misleading offers. For dealers
already disclosing accurate pricing
information upfront, this provision
allows them to compete on an even
playing field.
Another industry association
commenter contended that, by requiring
offering price to be disclosed when an
advertisement references a specific
vehicle or represents a monetary
amount or financing term ‘‘by
implication,’’ the Commission’s
disclosure requirement could apply to
advertisements that merely list a
dealer’s website, on which specific
vehicles and their prices appear. Under
the Commission’s proposal, an
advertisement that does not expressly
reference a specific vehicle or expressly
refer to a monetary amount or financing
term would not do so ‘‘by implication’’
solely by referring to a website,
document, or other destination where
such information may otherwise be
available, absent evidence that the net
impression of a reasonable consumer is
that the advertisement implicitly
references such terms.299 The phrasing
in the Commission’s requirement—
‘‘expressly or by implication’’—refers to
the nature of the claims conveyed by a
dealer’s advertisement (i.e., whether
such claims are made expressly or by
implication). For more than three
decades, the Commission has explained
express and implied claims as follows:
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Express claims directly state the
representation at issue. Implied claims are
any claims that are not express. They range
on a continuum from claims that would be
‘‘virtually synonymous with an express claim
through language that literally says one thing
but strongly suggests another to language
which relatively few consumers would
interpret as making a particular
representation.’’ 300
This same industry association
commenter contended that its
aforementioned concerns—that the
disclosure requirement would prohibit
dynamic pricing, and that the
requirement would extend to
advertisements simply by virtue of their
referencing a dealer’s website—would
together cause dealers to curb their
pricing representations in advertising,
either by limiting such representations
299 See FTC Policy Statement on Deception, supra
note 42, at 2, 5 (describing the Commission’s ‘‘net
impression’’ standard for determining the meaning
of an advertisement).
300 Kraft, Inc., 114 F.T.C. 40, 120 (1991) (quoting
Thompson Med. Co., Inc., 104 F.T.C. 648, 788
(1984), aff’d, 791 F. 2d 189 (D.C. Cir. 1986), cert.
denied, 479 U.S. 1086 (1987)).
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to a vehicle’s MSRP or by factoring out
pricing altogether. As previously
discussed, these concerns appear to
misunderstand either existing legal
requirements or the fact that an offering
price disclosure would operate
consistent with those requirements. The
Commission’s requirement simply
requires dealers to disclose an offering
price and does not alter the current
status quo on pricing accuracy. To the
extent there is a concern that requiring
accurate pricing information limits
dealers to advertising MSRP or forgoing
advertising pricing information
altogether, such concerns apply equally
under current law—including in States
with pricing disclosure requirements
that resemble the Commission’s offering
price disclosure requirement. The
Commission, however, has not been
presented with evidence suggesting that
dealers will not want to distinguish
themselves from other dealers on price,
and will instead default to advertising a
price that is offered by all of their
competitors.
Another concern raised by this same
industry association commenter was
that, by requiring an offering price ‘‘in
the Dealer’s first response’’ to a
consumer communication that
references a specific vehicle or a
monetary amount or financing term for
any vehicle, the requirement would
prohibit dealers from explaining the
offering price and why it is being
provided, and that as a result,
consumers may understand the offering
price to be non-negotiable. Under
§ 463.4, however, dealers continue to be
permitted to communicate accurate
additional information, including the
availability of discounts or the dealer’s
willingness to negotiate, as long as the
offering price disclosure remains clear
and conspicuous.
The same industry association
commenter asserted that mandating the
disclosure of the offering price in
connection with ‘‘any communication
with a consumer’’ would result in
excessive and non-responsive
disclosures. The commenter provided
the example of a consumer who contacts
a dealership to ask whether the
dealership has ‘‘a silver [Ford] F–150 in
stock,’’ arguing that the Commission’s
proposal would require the dealer to
respond with offering price information
for each of the numerous (in the
commenter’s example, 40) silver F–150
vehicles the dealer has in stock. To
begin, if the entire communication
simply asks, ‘‘Do you have a silver Ford
F–150 in stock?,’’ it does not concern a
‘‘specific vehicle’’; it concerns a group
of vehicles—silver Ford F–150s—and,
under § 463.4, the dealer is not required
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to disclose an offering price, so long as
the dealer’s reply does not reference
either (1) a specific vehicle or (2) a
monetary amount or financing term for
any vehicle, whether a specific vehicle
or a group of vehicles.301 If, however,
the dealer chooses to respond by
discussing a specific vehicle—whether
by describing that vehicle, referring to a
stock or VIN number, or using other
means—the dealer is required to
disclose the offering price for that
specific vehicle. If the dealer chooses to
respond by discussing several specific
vehicles, the offering price disclosure
requirement applies for each such
vehicle. Finally, the offering price
disclosure requirement applies if the
dealer’s response references a monetary
amount or financing term, such as a
down payment or monthly payment
amount, for a specific vehicle or a group
of vehicles. This requirement applies
only to the dealer’s first response
regarding the specific vehicle. It does
not apply to subsequent
communications about that specific
vehicle.
The failure to disclose a vehicle’s
offering price in an advertisement or
other communication that references a
specific vehicle, or a monetary amount
or financing term for any vehicle, is
likely to cause substantial injury to
consumers who waste time and effort
pursuing offers that are not actually
available or end up paying more for a
vehicle than they expected or being
subject to hidden charges.
Buying or leasing a vehicle is timeconsuming and often the most
expensive purchase a consumer makes
without knowing the actual price of the
product at the outset. Consumers can
spend hours driving to a dealership.302
Once at the dealership, it can then take
several hours to days to finalize a
transaction 303 before the consumer
learns the price of the vehicle. And
many consumers never learn the true
price at all; part of the finalization
process includes signing dense
paperwork, where information regarding
the price of the vehicle and charges for
301 See Any (def. 1), Merriam-Webster.com
Dictionary, https://www.merriam-webster.com/
dictionary/any (defining ‘‘any’’ as ‘‘one or some
indiscriminately of whatever kind’’).
302 See, e.g., Complaint ¶¶ 23–26, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
01690 (N.D. Ill. Mar. 31, 2022) (alleging that many
consumers drive hours to dealerships).
303 See, e.g., Auto Buyer Study, supra note 25, at
15 (noting that the purchase transactions in the
FTC’s qualitative study often took 5 hours or more
to complete, with some extending over several
days); Cf. 2020 Cox Automotive Car Buyer Journey,
supra note 25, at 6 (reporting average consumer
time spent shopping for a vehicle at 14 hours, 53
minutes, including 1 hour, 49 minutes visiting
dealerships/sellers).
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other items is easily obscured,
especially if consumers are not provided
with baseline price information around
which to anchor the lengthy, dense
discussions and process. When
consumers are not provided with such
price information, they are susceptible
to hidden charges such as ‘‘junk fees’’ or
unnecessary add-ons that can cost
consumers thousands of dollars and
significantly increase their overall
expense.304 These hidden charges
substantially injure consumers by
increasing their total cost as well as
their debt burden in the many instances
where vehicle purchases are
financed.305
Moreover, the consumer injury caused
by the lack of price information is not
reasonably avoidable. The dealer has
sole control over pricing information
and the timing of when it is provided to
consumers. Even if the consumer learns
of the price of the vehicle before
finalizing the transaction, the consumer
has already spent time and effort
traveling to the dealer, on the dealership
lot, and in the financing office, and for
many, the immediate need for the
vehicle for work, school, childcare,
groceries, medical visits, and other vital
household reasons makes it infeasible to
start the process anew at a different
dealership. Further, during the lengthy
vehicle-buying process and in complex,
dense paperwork, it is especially easy to
hide or alter price information or
include hidden charges when
consumers are not provided with
baseline price information around
which to anchor the discussion of
vehicles, monetary amounts, or
financing terms.306
304 See Nat’l Consumer L. Ctr., ‘‘Auto Add-Ons
Add Up: How Dealer Discretion Drives Excessive,
Arbitrary and Discriminatory Pricing’’ (2017),
https://www.nclc.org/wp-content/uploads/2022/09/
auto_add_on_charts.pdf; Complaint ¶¶ 25, 27–28,
Fed. Trade Comm’n v. N. Am. Auto. Servs., Inc.,
No. 1:22–cv–01690 (N.D. Ill. Mar. 31, 2022)
(alleging defendants charged thousands of
consumers hundreds to thousands of dollars each
for unauthorized add-ons, totaling in aggregate over
$70 million since 2017); Complaint ¶¶ 59, 61, Fed.
Trade Comm’n v. Universal City Nissan, Inc., No.
2:16–cv–07329 (C.D. Cal. Sept. 29, 2016) (alleging
unauthorized add-on charges costing thousands of
dollars).
305 According to public reports, 81% of new
motor vehicle purchases, and nearly 35% of used
vehicle purchases, are financed. See Melinda
Zabritski, Experian Info. Sols., Inc., ‘‘Automotive
Industry Insights: Finance Market Report Q4 2020’’
at 4, https://www.autofinancenews.net/wp-content/
uploads/2021/03/2020-Q4-Auto-Finance-NewsIndustry-Pulse.pdf.
306 See, e.g., Complaint ¶¶ 17–19, 44, Fed. Trade
Comm’n v. Liberty Chevrolet, Inc., No. 1:20–cv–
03945 (S.D.N.Y. May 21, 2020) (dealers inflated the
car price on paperwork in the middle of the sale
without the consumer’s knowledge or
authorization, a practice they internally referred to
as adding ‘‘air money’’); Complaint ¶¶ 24–27, Fed.
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The injury to consumers from a lack
of price information is not outweighed
by benefits to consumers or competition
from withholding this basic
information. Instead, upfront
information about the offering price
protects consumers from lost time and
effort, supracompetitive prices, and
unexpected charges while increasing
price competition among dealers, who
should be able to compete on truthful,
standard terms. The costs of providing
price information—which the dealer
determines and can calculate upfront—
are minimal for dealers that are already
advertising a specific vehicle, monetary
amount, or financing term, especially
when compared to the injury to
consumers.
Thus, the failure to disclose a
vehicle’s offering price in an
advertisement or other communication
that references a specific vehicle, or a
monetary amount or financing term for
any vehicle is an unfair practice.
The Commission notes that
§ 463.4(a)(1) and (2) affects only dealers
that are already advertising about
specific vehicles or monetary amounts
or financing terms; it does not affect
businesses that do not expend funds on
advertising specific vehicles, monetary
amounts, or financing terms. The
Commission will continue to monitor
the market to assess whether this
approach is sufficient to address the
harms associated with a lack of price
and charge information. If not, the
Commission will revisit whether
additional measures are necessary, such
as requiring price information in all
advertising, requiring total charge
estimates, or prohibiting charges for
additional items along with a vehicle
sale.
Regarding deception, price is one of
the most material pieces of information
for a consumer in making an informed
purchasing decision.307 Yet, including
as illustrated by the Commission’s law
enforcement efforts, it can be difficult
for consumers to uncover the actual
price for which a dealer will sell an
advertised vehicle until visiting the
dealership and spending hours on the
Trade Comm’n v. N. Am. Auto. Servs., Inc., No.
1:22–cv–01690 (N.D. Ill. Mar. 31, 2022) (alleging
that defendants buried charges for add-ons in
voluminous paperwork, making it difficult to
detect).
307 See, e.g., Fed. Trade Comm’n. v. Windward
Mktg., Inc., 1997 WL 33642380, at *10 (N.D. Ga.
Sept. 30, 1997)) (‘‘[A]ny representations concerning
the price of a product or service are presumptively
material.’’); Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984); see also Fed. Trade Comm’n v.
Crescent Pub. Grp., Inc., 129 F. Supp. 2d 311, 321
(S.D.N.Y. 2001) (‘‘Information concerning prices or
charges for goods or services is material, as it is
‘likely to affect a consumer’s choice of or conduct
regarding a product.’ ’’).
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lot. When an advertisement or other
communication references a monetary
amount or financing term, it is
reasonable for a consumer to expect that
those amounts and terms are available at
other standard terms. If instead, for
example, a dealer advertises a low
monthly payment based on an
unexpectedly long financing term or an
unexpectedly high interest rate that
results in a higher price than standard
terms would have, then the consumer is
lured to the dealership based on a
misimpression of what they reasonably
expect the total price to be.
If a dealer advertises a specific
vehicle, it is reasonable for a consumer
to expect to learn the true offering price
of the vehicle upon visiting the
dealership. Consumers are misled when
dealers misrepresent or otherwise
obscure price information or charge for
items beyond the advertised vehicle
during the long and complex sales,
financing, and leasing process.308
If consumers knew that the true price
was beyond what was expected or that
the prices and charges were for
unwanted items, that would likely affect
their choice to visit one dealership over
another dealership. Thus, misleading
consumers about price information is
material. See, e.g., Fed. Trade Comm’n
v. Windward Mktg., Inc., No. Civ.A.
1:96–CV–615F, 1997 WL 33642380, at
*10 (N.D. Ga. Sept. 30, 1997) (‘‘[A]ny
representations concerning the price of
a product or service are presumptively
material.’’ (citing Removatron Int’l
Corp., 111 F.T.C. 206, 309 (1988));
308 Consumers who expect particular prices,
based on the MSRP or Kelley Blue Book, are also
misled when true pricing information is not
disclosed upfront. See, e.g., Individual commenter,
Doc. No. FTC–2022–0046–1878 (‘‘We ended up
having to drive 3 hours to get the [vehicle we]
wanted. Upon arriving to pickup the car we were
told there was a 4300 increase over MSRP.’’);
Individual commenter, Doc. No. FTC–2022–0046–
1690 (‘‘It was only after five hours at the dealership
that we discovered the dealer had added on a $3000
market adjustment and $3100 in other add-ons
(nitrogen-filled tires, LoJack, paint protection) to
MSRP.’’). The average transaction price of a new
vehicle exceeded the average manufacturer’s
suggested retail price (MSRP) for twenty
consecutive months between 2021 and 2023. See
Cox Auto., ‘‘After Nearly Two Years, New-Vehicle
Transaction Prices Fall Below Sticker Price in
March, According to New Data from Kelley Blue
Book’’ (Apr. 11, 2023), https://
www.coxautoinc.com/market-insights/kbb-atpmarch-2023/; see also Edmunds, ‘‘8 Out of 10 of Car
Shoppers Paid Above Sticker Price for New
Vehicles in January, According to Edmunds’’ (Feb.
15, 2022), https://www.edmunds.com/industry/
press/8-out-of-10-of-car-shoppers-paid-abovesticker-price-for-new-vehicles-in-january-accordingto-edmunds.html; iSeeCars, ‘‘10 New Cars Priced
the Highest Over MSRP, Even as Peak Pricing
Eases’’ (Mar. 19, 2023), https://www.yourerie.com/
news/10-new-cars-priced-the-highest-over-msrpeven-as-peak-pricing-eases/ (finding the average
new car price was 8.8% over MSRP).
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Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984)); see also Fed. Trade
Comm’n v. Crescent Pub. Grp., Inc., 129
F. Supp. 2d 311, 321 (S.D.N.Y. 2001)
(‘‘Information concerning prices or
charges for goods or services is material,
as it is ‘likely to affect a consumer’s
choice of or conduct regarding a
product.’ ’’).309
Thus, it is an unfair or deceptive act
or practice for dealers to fail to disclose
the offering price in an advertisement or
other communication that references,
expressly or by implication, a specific
vehicle or any monetary amount or
financing term for any vehicle.
Furthermore, this provision also
serves to prevent the misrepresentations
prohibited by § 463.3—including
misrepresentations regarding costs or
add-ons—by requiring consumers to be
told the true price of the vehicle in
advertisements and other
communications. It also helps prevent
dealers from failing to obtain the
express, informed consent of consumers
for charges, as addressed by
§ 463.5(c).310 Thus, the Commission is
requiring dealers to disclose a vehicle’s
offering price when advertising or
otherwise communicating about a
specific vehicle or monetary amount or
financing term for any vehicle. This
provision allows consumers to compare
offers based on the same price terms and
to select dealers that truly offer the
lowest price rather than dealers that
advertise deceptively low prices but
charge more. When price information in
the market is distorted or concealed—
especially in document- and timeintensive vehicle transactions—
consumers are unable to effectively
differentiate between sellers, and sellers
trying to deal honestly with consumers
are put at a competitive disadvantage.
For the foregoing reasons, and having
considered the comments that it
received on this proposed provision, the
Commission is finalizing the offering
price provision at § 463.4(a) with
modifications to capitalize the defined
term ‘‘Vehicle’’ in its singular, plural,
and possessive forms, to correspond to
the revised definition at § 463.2(e), and
309 Even if some consumers were not misled by
the failure to disclose the offering price, to show
deception under the FTC Act, ‘‘the FTC need not
prove that every consumer was injured. The
existence of some satisfied customers does not
constitute a defense. . . .’’ Fed. Trade Comm’n v.
Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir.
1989), vacated in part on other grounds, Fed. Trade
Comm’n v. Credit Bureau Ctr., LLC, 937 F.3d 764
(7th Cir. 2019); accord Fed. Trade Comm’n v.
Stefanchik, 559 F.3d 924, 929 n.12 (9th Cir. 2009).
310 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
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to add language clarifying that the
provision is also prescribed for the
purpose of preventing unfair or
deceptive acts or practices defined in
this Rule. The Commission is finalizing
the corresponding ‘‘Offering Price’’ and
‘‘Government Charges’’ definitions in
§ 463.2 largely as proposed, with
modifications to the ‘‘Offering Price’’
definition to conform with the defined
term ‘‘Vehicle’’ and to clarify that
dealers may, but need not, exclude
required government charges from a
vehicle’s offering price, and a
typographical modification to the
‘‘Government Charges’’ definition to
include a serial comma for consistency.
(b) Add-On List
The Commission’s proposed add-on
list disclosure provision (proposed
§ 463.4(b)) required the disclosure, both
online and at each dealership, of a list
of all optional add-ons for which the
dealer charges consumers and the price
of each such add-on.311 As proposed, if
the price of the add-on varies based on
the specifics of the transaction, the addon list would have to include the range
the typical consumer will pay.312 Due to
space constraints, dealer advertisements
presented not online but in another
format—such as in print, radio, or
television—would not be required to
include the add-on list, disclosing
instead the website, online service, or
mobile application where consumers
can access the add-on list.313
Many commenters, including
consumer advocacy organizations,
supported the proposal to require
dealers to provide consumers with clear,
accurate pricing information for add-on
products or services altogether in one
311 To the extent any add-on charges are required
by a dealership, and thus are not optional, such
charges would have to be included in the offering
price, pursuant to §§ 463.2(k) and 463.4(a).
312 See NPRM at 42044 (noting, in the definition
of ‘‘Add-on List’’ at proposed § 463.2(b) that ‘‘[i]f
the Add-on price varies, the disclosure must
include the price range the typical consumer will
pay instead of the price’’); see also Fed. Trade
Comm’n v. Five-Star Auto Club, Inc., 97 F. Supp.
2d 502, 528 (S.D.N.Y. 2000) (‘‘at the very least it
would have been reasonable for consumers to have
assumed that the promised rewards were achieved
by the typical Five Star participant’’); Complaint
¶¶ 28–50, Fed. Trade Comm’n v. Universal City
Nissan, Inc., No. 2:16–cv–07329 (C.D. Cal. Sept. 29,
2016) (alleging unlawful deception where a dealer’s
ads list prominent terms not generally available to
consumers, including where those terms are subject
to various qualifications or restrictions); Complaint
¶¶ 8–10, Progressive Chevrolet Co., No. C–4578
(F.T.C. June 13, 2016) (alleging advertised offer was
deceptive because the typical consumer would not
qualify for the offer).
313 Working in tandem, proposed § 463.4(b)(1)
and (2) would mean that dealers who engage in
advertising and charge for optional add-ons must
have a website, online service, or other mobile
application by which to disclose an add-on list.
PO 00000
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list. Some commenters raised concerns
that, without significant modification,
the Commission’s proposal to allow for
the disclosure of price range
information where the price of an addon varies based on the specifics of the
transaction would allow for significant
abuses, including by permitting dealers
to disclose ranges so broad they would
be meaningless. Such commenters urged
the Commission to modify its definition
of ‘‘Add-on List’’ to require, where a
price range is listed for a given add-on,
the add-on list further indicate the low,
median, and high prices charged to
consumers for each such add-on over
the preceding two years; or that the
Commission require dealers to create
individualized add-on lists for each
vehicle sold, containing one fixed, nonnegotiable price for each add-on.
Relatedly, other commenters, including
industry organizations, expressed
concerns regarding the add-on list
proposal, including that the proposal to
allow for price range information was
vague or confusing, and that certain
aspects of the proposed definition,
including the scope of add-ons covered,
as well as the requirement to keep such
add-on lists updated, would impose
extensive economic burdens.
After careful review of the comments,
the Commission has determined not to
finalize its proposed add-on list
provision (proposed § 463.4(b)). Here,
the Commission believes its proposal
would benefit from further review and
refinement. The Commission
nevertheless emphasizes that, under
existing law, dealers are prohibited from
misrepresentations regarding material
information about any costs, limitation,
benefit, or any other aspect of an addon, and from charging for add-ons
without obtaining the express, informed
consent of the consumer—conduct
which the Final Rule prohibits as well,
including in §§ 463.3(b) and § 463.5(c).
The Commission also emphasizes that,
in addition to the Rule’s prohibitions,
industry guidance and effective selfregulatory efforts can serve a role in
helping prevent problematic dealer
behavior in this area. The Commission
will continue to monitor the motor
vehicle marketplace for issues
pertaining to add-ons and will consider
implementing additional measures in
the future if it determines such
measures are warranted to address
deceptive or unfair acts or practices
related to add-on products or services.
(c) Add-Ons Not Required
For optional add-on products or
services, the Commission’s proposed
§ 463.4(c) required dealers to disclose,
when making any representation about
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an optional add-on, that the add-on is
not required and the consumer can
purchase or lease the vehicle without
the add-on. For the reasons discussed in
the paragraphs that follow, the
Commission is finalizing the required
disclosure at § 463.4(c) largely as
proposed. The Commission is
capitalizing the defined term ‘‘Vehicle’’
to conform with the definition at
§ 463.2(e). The Commission also is
adding language to the end of § 463.4(c)
clarifying that the requirements in
§ 463.4(c) ‘‘also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and (b) and 463.5(c).’’
A number of commenters, including a
group of State attorneys general,
supported this proposed requirement,
contending that unscrupulous dealers
have exploited the vehicle sales process
to saddle consumers with unwanted
add-on products or services, and that
such a disclosure would importantly
help consumers avoid discovering these
additional charges only after completing
the purchase, assenting to them because
they believed the add-ons to be required
in order to purchase the vehicle, or
paying for them unknowingly because
they never uncovered the charges. Many
individual commenters also stressed the
need for add-on disclosure
requirements. For example:
• Salespeople such as myself are
responsible for selling the car and all
aftermarket/add-on products. This has
put me in a unique position to see how
these proposed regulations would
impact automotive sales. I cannot stress
enough my support for these new rules.
. . . The payments calculated by
management include add-ons, but the
price of the add-ons and how they affect
the payments are not shown. The addons ‘‘packed’’ in the first payment often
include an extended warranty, GAP
insurance, tire and wheel protection, an
oil change package, a theft recovery
device, and sometimes more depending
on the situation.314
• Car buying is one of the most
miserable consumer experiences in
existence. Frankly, I’m disappointed
that this issue hasn’t been addressed
decades ago. It’s well past time that the
deceptive practices that car dealers use
to manipulate and take advantage of
customers is made illegal. What other
business can legally lie about the price
of the product that they sell, and slip
extra unwanted products into the deal
that they don’t reveal and won’t remove
upon request? These practices are
314 Individual commenter, Doc. No. FTC–2022–
0046–3693.
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arcane and unfair, especially
considering the absurd cost of
automobiles today. I wholeheartedly
approve of what the proposed rules are
attempting to accomplish. Please do not
allow a powerful lobbying group to limit
or change good legislation that benefits
tens of millions of Americans who
currently dread the car buying
experience for far more reasons than just
price.315
• . . . I am not against business
making a profit, in fact most Americans
understand businesses need to make
money too, however most dealers will
not disclose additional costs to the
purchaser until it is time to sign
paperwork for purchase. Rather than
simply being upfront with what their
desired price is and how much they
make from the sale rather they are fed
lines about ‘‘common practices’’, [sic]
‘‘these are normal fees’’ or simply not
being forthright about additional costs
on items only installed on location at
the dealerships to drive the price up.
Even more insulting is when buyer[s]
ask to have options removed from the
vehicle dealers stall or flat out refuse to
do so.316
• It is about time something like this
is brought up. This will have no effect
on the honest dealers out there. . . .
This will really help the consumer. . . .
We will be able to compare apples to
apples. You won’t show up at the
dealership with the lowest price only to
find out that they have all these other
fees that make them the least desirable
of the choices. Also, adding stuff like
pinstriping for large fees will come to an
end. . . . I have no problem with a
dealer making money. They are a
business and have overhead. I have a
problem when they try [to] gloss over
everything they are trying to charge you
for. This ruling needs to take effect.
Anyone posting against it is someone
working for a dealer. Like I mentioned
before, if you are doing everything on
the up and up, not only do you get good
reviews and repeat business, but this
ruling will not even effect [sic] you.317
• I also agree that Enhanced Informed
Consent in F & I office is necessary. One
315 Individual commenter, Doc. No. FTC–2022–
0046–5268.
316 Individual commenter, Doc. No. FTC–2022–
0046–1365.
317 Individual commenter, Doc. No. FTC–2022–
0046–9883; see also Individual commenter, Doc.
No. FTC–2002–0046–9632 (‘‘I was told that GAP
insurance was required to be included. . . . I [later]
contacted and asked for copies of my contracts. On
September 5 [the dealer] sent me an email with a
credit contract attached. I am including it here. It
says my monthly payment is over $370. It also
shows the cash price as close to $17,000.00. I can
also see it says the GAP is optional. I never saw this
contract. I never signed this contract.’’).
PO 00000
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637
of my cohort was almost coerced into
non-equivalent decision-making
scenarios in the finance office with their
car purchases. The finance officer flat
out ask[ed] them, ‘‘did you want the 2
year, 30[,000] mile extended warrant[y],
or the 4 year 50[,000] mile extended
warranty?’’ The wife sat there and
asked, ‘‘I’m confused. Do I HAVE to
pick one of those?’’ Her husband said,
‘‘No, he’s trying to trick you into buying
one. You don’t need any at all.’’ They
then promptly threatened to walk out
and the finance manager came out and
did their paperwork without further
conflict.318
Several commenters offered support
while also proposing that the
Commission adopt additional measures
to further ensure that consumers
understand that optional add-ons are
not required. One dealership group, for
example, commenting in support of
disclosures that optional add-ons are
not required, recommended that dealers
be required to include signage on their
websites and in their showrooms or on
their sales desks that set out both
components of the Commission’s
proposal: that add-ons are not required,
and that consumers may purchase or
lease the vehicle without add-ons. Other
commenters, including a consumer
protection agency and a consumer
advocacy organization, suggested that
the Commission modify the language in
proposed § 463.4(c) to strike the ‘‘if
true’’ language, asserting that all addons should be optional and not required
to consummate the sale or lease of a
vehicle. At least one individual
commenter recommended that the
Commission prohibit dealers from preinstalling add-ons.
In response to these comments, the
Commission notes that, were it to
require signage stating, generally, that
add-ons are optional, or to strike the ‘‘if
true’’ language from this disclosure, it
would cause consumers to be presented
with information that may not be
accurate in all circumstances. Some
add-ons might already be installed on
the vehicle or otherwise required by the
dealer. As explained in SBP III.D.2(a)
with regard to § 463.4(a), charges for
such add-ons must be included in the
vehicle’s offering price.319 In such cases,
representing that add-ons are
categorically optional would mislead
318 Individual commenter, Doc. No. FTC–2022–
0046–6816.
319 In such cases, however, § 463.4(a) of the Final
Rule requires these non-optional add-ons to be
included in a vehicle’s offering price; if the dealer
requires the consumer to pay for them, they are part
of the full cash price for which a dealer will sell
or finance the vehicle to any consumer. See SBP
III.D.2(a).
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
the consumer. Relatedly, by requiring
that charges for mandatory items be
included in the vehicle’s offering price,
the Final Rule allows dealers to
customize the vehicles they are selling
while protecting consumers by requiring
dealers to disclose the offering price for
such customized vehicles. Accordingly,
the Commission declines to prohibit the
practice of pre-installing add-ons in this
Final Rule, but will continue to monitor
the market to determine whether preinstalled add-ons require further
regulation. At the same time, the
Commission emphasizes that the
protections contemplated here and
elsewhere in this Final Rule prohibit
dealers from obscuring price
information and whether an add-on is
optional, and further require dealers to
obtain the express, informed consent of
the consumer to charge a consumer for
any add-on.
Additionally, several commenters
indicated their support for the
Commission’s proposal while also
recommending that the Commission
consider further steps to protect
consumers from deceptive or unfair
practices pertaining to the inclusion of
add-ons in consumer vehicle sales or
leases. Some commenters, including a
group of State attorneys general and a
dealership association, requested that
the Commission require dealers to
disclose any mandatory add-ons and
whether those add-ons are required in
order to obtain financing, including by
requiring such disclosure in an
addendum sticker affixed to the motor
vehicle. In response, the Commission
notes that other provisions of the Final
Rule prohibit misconduct in this area,
including by requiring, at § 463.4(a),
that charges for such add-ons must be
included in the vehicle’s offering price.
While consumers may benefit from
repeated or additional disclosures, each
additional disclosure requirement
would increase both the cost to comply
with the regulation and the risk of
crowding out other important
information. Given these risks, the
Commission declines to include
additional requirements regarding the
content or form of its add-on disclosure
at § 463.4(c). The Commission will
continue to monitor the market to gather
additional information on this issue and
will consider whether to modify or
expand this or other sections in the
future based on stakeholder experience
with this provision and whether it
effectively halts unlawful conduct.
Other commenters, including
consumer advocacy organizations and
consumer attorneys and advocates,
urged the Commission to adopt a thirtyday ‘‘cooling-off’’ period for the sale of
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vehicle-related add-ons, similar to that
required by the Commission for door-todoor and other off-premises sales,320
which would grant consumers time to
review the paperwork after the
transaction, and to cancel unexpected or
otherwise unwanted add-ons for a full
refund. As explained in greater detail in
the discussion of § 463.5(c), in SBP
III.E.2(c), the Commission also has
determined not to include in this Final
Rule a ‘‘cooling-off’’ period in which
add-on products or services may be
canceled. In this regard, the
Commission would benefit from
additional information, including the
length of time needed for such ‘‘cooling
off’’ rights to be effective. The
Commission may consider revisiting
this decision in the future based on
actual stakeholder experience with the
provisions of the Final Rule and
whether they effectively halt unlawful
conduct.
Other commenters presented
questions or critiques regarding this
proposed disclosure. As with the
Commission’s proposed disclosures
generally, some commenters, including
an industry association and a dealership
association, contended that existing
requirements in a number of States to
disclose that add-ons are optional make
Federal regulation in this area
unnecessary or contradictory. As
described in detail in SBP III.D.1, the
Commission first observes that the
functioning of such standards
demonstrates the practicability of its
proposed disclosure that add-ons are
not required. To the extent a State
requires additional disclosures
regarding add-ons, nothing prevents
dealers from providing those disclosures
as well as those required under part 463
so long as the State disclosures are not
inconsistent with those required under
part 463. To the extent there is truly an
inconsistency between this part and
State law, § 463.9 provides that part 463
will govern, but only to the extent of the
inconsistency, and only if the State
statute, regulation, order, or
interpretation affords consumers less
protection than does the corresponding
provision of this part. Finally, a number
of States do not have existing standards
in this area; in such States, the
Commission’s disclosures operate as a
key safeguard.
Commenters, including dealership
associations, argued that dealers would
develop and use an additional form to
demonstrate compliance with this
disclosure requirement, thereby
320 See Rule Concerning Cooling-Off Period for
Sales Made at Homes or at Certain Other Locations,
16 CFR 429.
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burdening the vehicle sales and delivery
process. The Commission begins by
noting that any such steps are not
required by part 463; on the contrary,
the Commission structured this
disclosure to provide dealers with
flexibility, within the bounds of the law,
to provide this essential information in
a manner that is clear and conspicuous
under the particular circumstances of
their transactions. This requirement
does not require a complex or lengthy
disclosure, is based on similar
provisions already in operation in
certain States,321 and for dealers already
disclosing accurate add-on information,
this provision requires no significant
additional burden.
When making a representation about
an add-on product or service, the failure
to disclose that the add-on is not
required and the consumer can
purchase or lease the vehicle without
the add-on, if true, is likely to cause
substantial injury to consumers who
end up paying more for a vehicle sales
or lease transaction than they expected
by being subject to charges of which
they are not aware or which they believe
are required because they were never
told they could decline the charges.
Absent this information, consumers
cannot reasonably avoid the injury of
being charged for these products
because they are not aware that they
have an option to begin with. When
consumers are presented with motor
vehicle transaction documents that
include a variety of charges, it is
difficult to detect any charges that are
added to the contract beyond those that
are required or have been agreed upon,
especially in a stack of lengthy,
complex, highly technical, and often
pre-populated documents, at the close
of a long sales, financing or leasing
process after an already-lengthy process
of selecting the vehicle and negotiating
over its price or payment terms.
Consumers cannot reasonably avoid
charges of which they are unaware, or
regarding which they do not know they
have a choice.
321 See, e.g., California Car Buyer’s Bill of Rights,
Cal. Civ. Code 2981 (requiring dealers to provide a
written list of specified items purchased and their
effect on monthly payments, including GAP, theft
deterrent devices, and surface protection products);
Minn. Stat. 59D.06(b) (requiring any person offering
a GAP waiver to disclose that the waiver is not
required for a consumer to buy or lease the vehicle);
Wash. Rev. Code. 48.160.050(9) (mandating that
GAP waivers disclose that ‘‘neither the extension of
credit, the terms of the credit, nor the terms of the
related motor vehicle sale or lease, may be
conditioned upon the purchase of the waiver.’’); La.
Stat. Ann. 32:1261(A)(2)(a) (declaring it unlawful
for a dealer to require, as a condition of sale and
delivery, for a consumer to purchase ‘‘special
features, appliances, accessories, or equipment not
desired or requested by the purchaser.’’).
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The injury to consumers from a lack
of information about add-on optionality
is not outweighed by benefits to
consumers or competition from
withholding this basic information.
Instead, information about the optional
nature of these products or services
protects consumers from lost time and
effort, supracompetitive transaction
costs, and unexpected charges while
increasing competition among dealers,
who are able to compete on truthful,
standard terms. Moreover, the cost of
providing this threshold information is
minimal, especially when compared to
the injury to consumers, and providing
such information is consistent with
existing industry guidance.322
This provision addresses deceptive
conduct as well. Throughout the lengthy
vehicle sales, financing, or leasing
process, dealers often discuss various
different charges at various different
times. Such charges include charges the
government requires the consumers to
pay and financing costs. Dealers then
often present consumers a total amount
to pay that differs from the advertised or
sticker price. Given that some additional
charges are required, if a dealer also
discusses charges for items that are not
required, such as optional add-ons, it is
reasonable for consumers to believe that
charges for such items are required. In
the course of a lengthy transaction
involving extensive negotiations,
dealers can obscure such products and
their associated charges in dense
paperwork. Moreover, the omitted
information is highly material: if
consumers knew that a particular
optional add-on was not required to
purchase the vehicle, it would likely
affect their choice about whether to
purchase the add-on.323
Thus, it is an unfair or deceptive act
or practice for dealers to fail to disclose,
when making a representation about an
add-on product or service, that the add322 See Nat’l Auto. Dealers Ass’n et al.,
‘‘Voluntary Protection Products: A Model
Dealership Policy’’ 4 (2019), https://www.nada.org/
regulatory-compliance/voluntary-protectionproducts-model-dealership-policy (stating
dealerships should ‘‘prominently display to
customers a poster stating that [add-on products or
services] offered by the dealership are optional and
are not required to purchase or lease a vehicle or
obtain warranty coverage, financing, financing on
particular terms, or any other product or service
offered by the dealership. . . .’’).
323 See, e.g., Fed. Trade Comm’n. v. Windward
Mktg., Inc., 1997 WL 33642380, at *10 (N.D. Ga.
Sept. 30, 1997)) (‘‘[A]ny representations concerning
the price of a product or service are presumptively
material.’’); Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984); see also Fed. Trade Comm’n v.
Crescent Pub. Grp., Inc., 129 F. Supp. 2d 311, 321
(S.D.N.Y. 2001) (‘‘Information concerning prices or
charges for goods or services is material, as it is
‘likely to affect a consumer’s choice of or conduct
regarding a product.’ ’’).
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639
Section 463.4(d) of the Commission’s
proposed rule required dealers, when
making any representation about a
monthly payment for any vehicle, to
disclose the total amount the consumer
will pay to purchase or lease the vehicle
at that monthly payment after making
all payments as scheduled. If the total
amount disclosed assumes the
consumer will provide consideration,
the proposed rule required dealers to
disclose the amount of consideration to
be provided by the consumer. For the
reasons discussed in the following
paragraphs, the Commission is
finalizing the required disclosure at
§ 463.4(d) largely as proposed. The
Commission is capitalizing the defined
term ‘‘Vehicle’’ to conform with the
definition at § 463.2(e), and making the
minor grammatical correction of
replacing the semicolon and the word
‘‘and’’ at the end of § 463.4(d)(1) with a
period. The Commission also is adding
language to the end of § 463.4(d), at
newly designated (d)(3), clarifying that
the requirements in § 463.4(d) ‘‘also are
prescribed for the purpose of preventing
the unfair or deceptive acts or practices
defined in this part, including those in
§§ 463.3(a) and 463.5(c).’’
A number of commenters, including
consumer advocacy organizations,
supported this proposed requirement,
contending it would provide essential
information to the consumer while not
contributing to information overload,
and noting the information to be
disclosed would have been calculated
by the dealer in the process of
determining the proposed monthly
payment. Many individual commenters
also stressed the need for the
Commission’s proposal:
• Small businesses are a cornerstone
of our economy. Automotive dealers,
like other retailers, deserve to make a
reasonable profit in order to maintain
their physical plants, to purchase
inventory, and to pay their staff. That
being said, some auto dealers have for
years used misleading and often outand-out deceptive sales tactics (i.e., lies)
to generate sales. . . . Sometimes the
unwary consumer may not even realize
that the actual price differs from the
quoted price, because the automobile
finance agent speaks only in terms of
monthly payments rather than the total
cost. The consumer may not even
realize that he or she has been ‘‘taken’’
until a friend with an amortization table
runs the numbers.325
• At most dealerships, including the
one I work at, when a customer asks to
see figures on a car after a test drive,
management goes out of their way to
make sure the customer only sees the
monthly payment. The typical numbers
presented to the customer initially show
the price of the car, the trade-in value,
the down payment, and the monthly
payment options in bold numbers at the
bottom. The payments calculated by
management include add-ons, but the
price of the add-ons and how they affect
the payments are not shown. . . .
Compounding this issue of hidden addons is that salespeople are instructed to
figure out the customer’s budget
beforehand (e.g., $450 per month). If the
monthly payment with the car and addons comes out to be less than $450 per
month, management will often raise the
price of the add-ons to get the payment
to $450 or even slightly above.326
• I wholeheartedly support the
proposed regulation changes for car
dealerships and the car buying process.
324 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
325 Individual commenter, Doc. No. FTC–2022–
0046–1216.
326 Individual commenter, Doc. No. FTC–2022–
0046–3693.
on is not required and the consumer can
purchase or lease the vehicle without
the add-on, if true. Further, this
provision also serves to prevent the
misrepresentations prohibited by
§ 463.3—including misrepresentations
regarding material information about the
costs or terms of purchasing, financing,
or leasing a vehicle, or about any costs,
limitations, benefits, or any other aspect
of an add-on—by requiring consumers
to be told whether represented add-ons
are optional. It also helps prevent
dealers from failing to obtain the
express, informed consent of the
consumer for charges, as addressed by
§ 463.5(c).324 Thus, the Commission is
requiring dealers to disclose, when
making representations about add-ons,
that the add-ons are not required and
the consumer can purchase or lease the
vehicle without the add-ons, if true.
For the foregoing reasons, and having
considered all of the comments that it
received on this proposal, the
Commission is finalizing the required
disclosure at § 463.4(c) largely as
proposed, with the minor modifications
of capitalizing the defined term
‘‘Vehicle’’ and clarifying that the
requirements of § 463.4(c) also are
‘‘prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.3(a) and (b)
and 463.5(c).’’
(d) Total of Payments and Consideration
for a Financed or Lease Transaction
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As an average consumer who has bought
3 vehicles with financing and 2 without,
I can see the obvious benefit these
proposed regulations would have on the
car buying process. The vast quantities
of paperwork and add [-]ons make it
easy for car dealers to switch things
around to their benefit. I had one
dealership . . . change the term of my
auto loan from 72 to 84 months in the
middle of reprinting the final sales sheet
because of another obvious error in the
first copy. In the midst of all the
distractions and misdirection going on,
[I] didn’t notice [‘]til[l] after the fact. I
felt powerless and cheated. . . .327
• There is no reason that buying a car
has to be a chore and so ambiguous on
price. The dealer was also so twisted up
on getting me to focus on the monthly
payment and not the total price of the
car and that is where they were able to
sneak the price up. Practices like this
are also why people have such a disdain
for purchasing a new/used car.328
• I have experienced many of the
‘‘typical’’ tactics that one hears about
when negotiati[ng] with an automobile
dealership, like the salesperson always
wanting to talk about the monthly
payment and never the actual trade-in
price and sales price. . . . I agree that
the whole car buying process could be
made easier and I see no reasons that
any fair and honest car dealership
would object to these proposed changes/
rules as they, in my estimation are all
things that a fair and honest car dealer
should be doing anyway. The only car
dealers that should be objecting to these
new rules should be the unscrupulous
dealers.329
• When buying a car dealers try to
negotiate the monthly payment, so the
actual total cost is hidden from the
buyer until they get into the ‘‘financing
office’’ where all kinds of unexpected
add-ons are sprung on the consumer.330
• I am trying to buy a new car, from
the factory, with no modifications or
alterations, is it so much to ask for? The
process of figuring out the price of the
car is impossible. The sales people are
all about the monthly payment, when I
asked them what the car price is the
answer is always what payment are you
looking for.331
• They only want to gain the amount
you can be ‘‘comfortable’’ on your
327 Individual
commenter, Doc. No. FTC–2022–
0046–5567.
328 Individual commenter, Doc. No. FTC–2022–
0046–2176.
329 Individual commenter, Doc. No. FTC–2022–
0046–4034.
330 Individual commenter, Doc. No. FTC–2022–
0046–4911.
331 Individual commenter, Doc. No. FTC–2022–
0046–5958.
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monthly payment so that they can
stretch out the term and hammer you
with hidden fees and other expenses
you won[’]t be able to see right away.332
• Dealerships always want you to
come in so they can manipulate you
into a car you can[’]t afford and pay for
things you don’t need by hiding them in
a monthly payment.333
• If we had to do our grocery
shopping the same way dealers want us
to buy a car, most Americans would
starve before sunset. ‘‘What kind of
monthly payment are you looking for in
a banana?’’ is a conversation I should
never be forced to have. . . .334
One individual commenter requested
that the Commission make clear that
handwritten negotiation notes made by
a dealer would trigger the requirement
that this proposed disclosure be made in
writing.335 In response, the Commission
affirms such representations have been
made ‘‘in writing,’’ 336 and thus, where
dealers represent a monthly payment in
such notes, this provision requires them
to provide the disclosures in § 463.4(d)
in writing.
Other commenters, including industry
associations and individual
commenters, questioned whether the
proposal would require a disclosure in
every place a monthly payment appears
on a dealer’s website, or otherwise
would be difficult or infeasible given
the frequency with which dealers
provide consumers with monthly
payment information, suggesting that
such a requirement could either
overwhelm consumers or dissuade
dealers from providing monthly
payment information, or arguing 337 that
the proposal overlapped with other laws
such as the Truth in Lending Act or the
Consumer Leasing Act. Regarding
monthly payment amounts appearing
more than once or in multiple places,
the Commission notes that, as proposed,
this section would require disclosure of
the total purchase or lease amount for a
332 Individual commenter, Doc. No. FTC–2022–
0046–8847.
333 Individual commenter, Doc. No. FTC–2022–
0046–6405.
334 Individual commenter, Doc. No. FTC–2022–
0046–3860.
335 Individual commenter, Doc. No. FTC–2022–
046–9469 at 6–7.
336 See, e.g., Writing, Black’s Law Dictionary (11th
ed. 2019) (defining ‘‘writing’’ as ‘‘[a]ny intentional
recording of words in a visual form, whether in
handwriting, printing, typewriting, or any other
tangible form that may be viewed or heard with or
without mechanical aids.’’); cf. Fed. R. Evid. 1001(a)
(defining ‘‘writing’’ as letters, words, numbers, or
their equivalent set down in any form’’).
337 These association commenters made these
contentions regarding the monthly payment
disclosures at both § 463.4(d) and (e). The
Commission responds to these contentions in this
section.
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vehicle including any assumed
consumer-provided consideration, and
only when making a representation
about the vehicle’s monthly payment
amount; it would not require a complex
or lengthy disclosure. Consumers shop
for vehicles and interact with online
interfaces, and other advertising in
many different ways; thus, it is
important for this simple disclosure to
accompany a monthly payment
representation however a consumer
might encounter it. Moreover, the
Commission has taken into account
existing disclosure obligations.338
Monthly payment amounts for motor
vehicle sales or leases constitute socalled ‘‘triggering terms’’ under the
Truth in Lending Act, the Consumer
Leasing Act, and their implementing
Regulations Z and M. As such, dealers
currently providing such information,
including on their websites or other
online interfaces, are bound by existing
laws that require providing consumers
with additional terms in a clear and
conspicuous way: in the case of vehicle
credit transaction offers, this includes
the terms of repayment, which reflect
the repayment obligations over the full
term of the loan; 339 in the case of
vehicle lease offers, this includes the
number, amounts, and due dates or
periods of scheduled payments under
the lease.340 The Commission’s
disclosure requirement takes into
account these existing obligations,
requiring, specifically: the total amount
the consumer will pay to purchase or
lease the vehicle at a represented
monthly payment amount including any
assumed consumer-provided
consideration. Similarly, regarding the
feasibility of providing this disclosure
as often as dealers provide consumers
with monthly payment information:
once dealers choose to make a
representation about a monthly
payment, they are capable of disclosing
a total of payments for the consumer
based on the same inputs needed to
arrive at that voluntary monthly
payment representation.
The Commission further notes that, in
the event a monthly payment is already
being disclosed, the associated total of
payment would be calculated with the
same financing or leasing estimates used
338 One industry commenter, in expressing
concern that § 463.4(d) and (e) may conflict with
Regulations Z and M, questioned whether the FTC
coordinated with the Federal Reserve Board.
Several Senators similarly questioned whether the
FTC consulted with the Federal Reserve Board,
CFPB, or other agencies. Although the Commission
cannot comment on specific interactions, it
coordinates regularly with other Federal agencies,
including the Federal Reserve Board and the CFPB.
339 See 12 CFR 1026.24(b), (d)(2)(ii).
340 See 12 CFR 1013.7(b), (d)(2)(iii).
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to calculate the monthly payment.
Dealers already must be prepared to
calculate such a total to satisfy their
obligations under TILA, the CLA, or
their implementing regulations.341
Regarding § 463.4(d)’s similarity to
existing laws, as discussed previously,
this provision is indeed consistent with
other laws, and commenters have not
indicated how providing truthful
information about total payment
amounts along with information they
already provide about monthly payment
amounts would unduly burden them or
harm consumers, or how providing such
information in writing before providing
consumers with the contract, if they are
already providing monthly payment
information in writing prior to the
contract, would do so.
Some dealership associations
described certain elements of the
proposal as vague or unclear, requesting
that the Commission clarify its use of
the term ‘‘by implication’’ with regard to
a monthly payment, or alternatively,
that the Commission omit the terms
‘‘any’’ (as it pertains to ‘‘any
representation’’), ‘‘by implication,’’ and
‘‘indirectly’’ from the proposed
disclosure provision.342 Regarding the
use of the term ‘‘by implication’’ with
regard to a monthly payment, as
discussed in the section-by-section
analysis of § 463.3 in SBP III.C with
respect to the prohibition on express or
implied misrepresentations, the
Commission notes that such language is
consistent with longstanding law, and
given that representations can mislead
reasonable consumers even without
making express claims, the provision
could be rendered meaningless without
it.343 Variations of the phrase ‘‘expressly
341 As is currently the case under Federal law and
the Final Rule, the terms must be the terms
available to the typical consumer. See, e.g., Fed.
Trade Comm’n v. Five Star Auto Club, 97 F. Supp.
2d 502, 528 (S.D.N.Y. 2000) (‘‘[A]t the very least it
would have been reasonable for consumers to have
assumed that the promised rewards were achieved
by the typical Five Star participant.’’). This is
consistent with prior FTC enforcement actions. See,
e.g., Complaint ¶¶ 48–53, 82–84, Fed. Trade
Comm’n v. Universal City Nissan, Inc., No. 2:16–
cv–07329 (C.D. Cal. Sept. 29, 2016) (alleging
unlawful deception where a dealer’s advertisements
list prominent terms not generally available to
consumers, including where those terms are subject
to various qualifications or restrictions); Complaint
¶¶ 8–10, Progressive Chevrolet Co., No. C–4578
(F.T.C. June 13, 2016) (alleging advertised offer was
deceptive because the typical consumer would not
qualify for the offer).
342 One commenter requested clarification or
deletion of ‘‘any,’’ ‘‘by implication’’ and
‘‘indirectly’’ from § 463.4(c) and (e) for the same
reasons it articulated with regard to § 463.4(d): that
the terms are too vague. The explanation provided
in the text pertains to these sections as well.
343 The FTC Policy Statement on Deception and
FTC cases make clear that both express and implied
claims can be deceptive. See, e.g., ECM Biofilms,
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or by implication’’ appear frequently in
existing Commission guides and
regulations,344 and implied claims are
treated extensively in the longstanding
FTC Policy Statement on Deception,
which the Commission issued in 1983
to provide guidance to the public on the
Inc. v. Fed. Trade Comm’n, 851 F.3d 599 (6th Cir.
2017) (affirming Commission’s finding that an
additive manufacturer’s unqualified
biodegradability claim conveyed an implied claim
that its plastic would completely biodegrade within
five years); POM Wonderful LLC, Doc. No. C–9344
(F.T.C. Jan. 10, 2013) (Opinion of the Commission),
generally aff’d by POM Wonderful, LLC v. Fed.
Trade Comm’n, 777 F.3d 478 (D.C. Cir. 2015)
(finding that company’s advertisements would
reasonably be interpreted by consumers to contain
an implied claim that POM products treat, prevent,
or reduce the risk of certain health conditions and
for some ads that these effects were clinically
proven); Kraft, Inc. v. Fed. Trade Comm’n, 970 F.2d
311 (7th Cir. 1992) (affirming finding of deception
where Kraft advertisements juxtaposed references to
the milk contained in Kraft singles and the calcium
content of the milk, the combination of which
implied that each Kraft single contained the same
amount of calcium as five ounces of milk). Further,
to be considered reasonable, the interpretation or
reaction does not have to be the only one; when a
seller’s representation conveys more than one
meaning to reasonable consumers, one of which is
false, the seller is liable for the misleading
interpretation. See FTC Policy Statement on
Deception, supra note 42, at 3. Further, an
interpretation will be presumed reasonable if it is
the one the respondent intended to convey. Id.
344 See, e.g., Telemarketing Sales Rule, 16 CFR
310.3(a)(2) (prohibiting ‘‘[m]isrepresenting, directly
or by implication, in the sale of goods or services’’
a list of ten categories of material information); 16
CFR 310.2(o) (defining ‘‘debt relief service’’ as any
program or service ‘‘represented, directly or by
implication, to renegotiate, settle, or in any way
alter’’ certain terms); 16 CFR 310.5(a)(2) (requiring
telemarketers to keep records of certain prize and
prize-recipient information ‘‘for prizes that are
represented, directly or by implication, to have a
value of $25.00 or more’’); Business Opportunity
Rule, 16 CFR 437.1(c) (defining a ‘‘(b)usiness
opportunity’’ as a commercial arrangement in
which, among other criteria, ‘‘[t]he seller, expressly
or by implication, orally or in writing, represents
that’’ it will provide, inter alia, business locations,
outlets, accounts, or customers); Disclosure
Requirements and Prohibitions Concerning
Franchising, 16 CFR 436.1(e) (defining ‘‘(f)inancial
performance representation’’ as any representation
to a prospective franchisee that states, ‘‘expressly or
by implication, a specific level or range’’ of sales,
income, or profits); Military Credit Monitoring Rule,
16 CFR 609.3(e) (describing as prohibited materials
those that ‘‘expressly or by implication’’ represent
certain ‘‘interfering, detracting, inconsistent, and/or
undermining’’ information); Rules and Regulations
Under Fur Products Labeling Act, 16 CFR 301.14
(requiring an ‘‘unknown’’ origin disclosure when
‘‘no representations are made directly or by
implication’’ regarding the origin of used furs); 16
CFR 301.18 (regulating the ‘‘passing off’’ of
domestic furs as imported by prohibiting labeling,
invoicing, or advertising that ‘‘represent[s] directly
or by implication’’ that such furs have been
imported); 16 CFR 301.43 (regulating the use of
deceptive trade or corporate names by prohibiting
any ‘‘representation which misrepresents directly or
by implication’’ certain information); Power Output
Claims for Amplifiers Utilized in Home
Entertainment Products, 16 CFR 432.1(a) (defining
the regulation’s scope when certain amplifier
features or characteristics are ‘‘represented, either
expressly or by implication, in connection with the
advertising, sale, or offering for sale’’).
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641
meaning of deception.345 Furthermore,
this language serves to help ensure that
dealers may not avoid this disclosure
requirement by making only implied
reference to monthly payments,
including by referring to a monthly
payment amount that is not explicitly
identified as such, or by referring to a
regular periodic payment made on a
different installment basis (e.g., a
biweekly payment) to indirectly
illustrate a consumer’s monthly
payment obligations.
These same reasons also counsel
against deleting the terms ‘‘any’’ and
‘‘indirectly’’ from this proposed
disclosure provision. To begin, one
dealership association commenter
suggested deleting these terms from the
regulatory text, but did not explain the
nature of its specific concern regarding
its use of the term ‘‘any,’’ instead
claiming generally that the terms with
which the commenter took issue were
‘‘broad,’’ ‘‘vague,’’ and ‘‘imprecise.’’ As
proposed, the Commission’s total
payments disclosure would be required
when a dealer makes ‘‘any
representation . . . about a monthly
payment for any vehicle.’’ These
disclosure circumstances are markedly
similar to those under Regulation Z and
Regulation M: Regulation Z requires the
disclosure of additional payment terms
when ‘‘any’’ of a number of terms is set
forth, including ‘‘[t]he amount of any
payment’’; 346 Regulation M similarly
requires the disclosure of additional
terms when ‘‘any’’ of a number of items
is stated, including ‘‘[t]he amount of any
payment.’’ 347 The use of the term ‘‘any’’
is consistent with existing law, and thus
is not confusing or impracticable.
Furthermore, as with representations
made ‘‘by implication,’’ the Commission
has a longstanding practice of regulating
representations made ‘‘indirectly’’ in the
same manner as those made directly,348
345 See FTC Policy Statement on Deception, supra
note 42, at 2.
346 12 CFR 1026.24(d) (emphasis added).
347 12 CFR 1013.7(d) (emphasis added).
348 See, e.g., Business Opportunity Rule, 16 CFR
437.6 (prohibiting ‘‘any seller, directly or indirectly
through a third party’’ from engaging in certain
prohibited practices); Credit Practices Rule, 16 CFR
444.2 (prohibiting as unfair ‘‘a lender or retail
installment seller directly or indirectly’’ taking or
receiving certain obligations from a consumer); 16
CFR 444.3 (prohibiting as deceptive ‘‘a lender or
retail installment seller, directly or indirectly’’
misrepresenting cosigner liability, and prohibiting
as unfair ‘‘a lender or retail installment seller,
directly or indirectly’’ obligating a cosigner under
certain circumstances); 16 CFR 444.4 (prohibiting as
unfair the act or practice of ‘‘a creditor, directly or
indirectly’’ levying or collecting certain late
charges); Telemarketing Sales Rule, 16 CFR
310.3(a)(3) (prohibiting as deceptive the act or
practice of ‘‘[c]ausing billing information to be
submitted for payment, or collecting or attempting
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and it does so to help ensure that its
requirements are effective and not easily
avoided. The Commission thus declines
to modify their usage in § 463.4(d).
Some commenters, including a
dealership association, questioned
whether the disclosure requirement
would require dealers to obtain
individuals’ consumer reports before
providing monthly payment
information. In response, the
Commission notes that § 463.4(d) does
not alter the status quo regarding the
information a dealer must have in order
to represent a monthly payment
amount. As previously discussed, this
provision does not require disclosure of
a monthly payment; instead, if a dealer
chooses to represent a monthly payment
amount, § 463.4(d) requires a
corresponding disclosure of ‘‘the total
amount the consumer will pay to
purchase or lease the vehicle at that
monthly payment.’’ As previously
explained in detail, dealers are capable
of disclosing a total of payments for the
consumer based on such voluntary
monthly payment representations.
Furthermore, to the extent a dealer may
be providing consumers with estimated
monthly payment information, the
dealer may use the same assumptions
used for estimating the monthly
payment in order to determine the total
of payments. Further, as is required
under other law and this Rule, the
dealer must refrain from deception,
including by avoiding assumptions that
the consumer would not reasonably
expect or for which the consumer would
not reasonably qualify.349
to collect payment for goods or services or a
charitable contribution, directly or indirectly’’
without express verifiable authorization); 16 CFR
310.4(a)(7) (prohibiting as abusive the act or
practice of ‘‘[c]ausing billing information to be
submitted for payment, directly or indirectly,
without the express informed consent of the
customer or donor’’); Mail, internet, or Telephone
Order Merchandise Rule, 16 CFR 435.1(f) (defining
‘‘Telephone’’ as ‘‘any direct or indirect use of the
telephone to order merchandise. . . .’’);
Preservation of Consumers’ Claims and Defenses, 16
CFR 433.2 (prohibiting as an unfair or deceptive act
or practice ‘‘for a seller, directly or indirectly’’ to
take or receive a consumer credit contract which
does not contain the Commission’s ‘‘Holder Rule’’
provision); Prohibition of Energy Market
Manipulation Rule, 16 CFR 317.3 (declaring ‘‘[i]t
shall be unlawful for any person, directly or
indirectly’’ to engage in certain energy market
manipulation practices); Trade Regulation Rule
Pursuant to the Telephone Disclosure and Dispute
Resolution Act of 1992, 16 CFR 308.7(i) (declaring
that regulated persons may not ‘‘report or threaten
directly or indirectly to report adverse information’’
on a consumer report under certain circumstances).
349 Importantly, as is the case under current law,
a dealer may not mislead the consumer about the
likelihood of qualifying for any particular credit or
leasing terms in the course of providing this
disclosure. Generally speaking, such deception is
less likely where the dealer communicates to the
consumer any assumptions it may have made, along
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When making a representation,
expressly or by implication, directly or
indirectly, about a monthly payment for
any vehicle, the failure to disclose the
total amount the consumer will pay,
inclusive of any consideration, to
purchase or lease the vehicle at that
monthly payment after making all
payments as scheduled is likely to cause
substantial injury to consumers who
waste time and effort pursuing offers
that are not actually available at
reasonably expected terms; or who pay
more for a vehicle sales or lease
transaction than they expected by being
subject to hidden charges or an
unexpected down payment or trade-in
requirement; or who are subject to the
higher financing or leasing costs and
greater risk of default associated with an
unexpectedly lengthy loan or lease term.
Moreover, when a consumer pays for his
or her vehicle over a longer period of
time, there is an increased likelihood
that negative equity will result when the
consumer needs or wants to purchase or
lease another vehicle, because a
vehicle’s value tends to decline faster
than the amount owed.350 Longer motor
vehicle financing term lengths also have
higher rates of default, potentially
posing greater risks to both borrowers
and financing companies.351 Even if a
consumer eventually learns the true
total payment, or later learns that the
terms being discussed are based on a
previously undisclosed requirement that
the consumer provide consideration,
such as a down payment, the consumer
cannot recover the time spent pursuing
the offer that the consumer had
expected.
The injury caused by the failure to
disclose the total amount and
consideration is not reasonably
avoidable. As the Commission has
observed previously, withholding total
payment information enables dealers to
focus consumers on the monthly
payment amount in isolation. Under
such circumstances, dealers may add
with the basis for any such assumptions, in a
manner in which the consumer understands this
information.
350 Buckle Up, supra note 63, at 7.
351 Consumer Fin. Prot. Bureau, ‘‘Quarterly
Consumer Credit Trends: Growth in Longer-Term
Auto Loans’’ 7–8 (Nov. 2017), https://files.consumer
finance.gov/f/documents/cfpb_consumer-credittrends_longer-term-auto-loans_2017Q2.pdf; see also
Zhengfeng Guo et al., Off. of the Comptroller of the
Currency, ‘‘A Puzzle in the Relation Between Risk
and Pricing of Long-Term Auto Loans’’ 2, 4–5, 20
(June 2020), https://www.occ.gov/publications-andresources/publications/economics/working-papersbanking-perf-reg/pub-econ-working-paper-puzzlelong-term-auto-loans.pdf (finding motor vehicle
financing with six-plus-year terms have higher
default rates than shorter-term financing during
each year of their lifetimes, after controlling for
borrower and loan-level risk factors).
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unwanted, undisclosed, or even
fictitious add-on charges more easily,
since consumers may not notice the
relatively small changes an add-on
charge makes when secreted within a
monthly vehicle payment, despite the
fact that such hidden charges can cost
a consumer more than a thousand
dollars over the course of an auto
financing or lease term.352 The absence
of information concerning the total of
payments—which is within the sole
control of the dealership—also enables
dealers to use claims regarding monthly
payment amounts to falsely imply
savings or parity between different
offers where reduced monthly payments
increase the total vehicle cost due to an
increased payment term or annual
percentage rate.
The injury to consumers from a lack
of total payment information is not
outweighed by benefits to consumers or
competition from withholding this basic
information. Instead, the burden of
disclosing this information—which the
dealer determines and can calculate
upfront—is minimal for dealers who are
already making representations about a
monthly payment for a vehicle,
especially when compared to the injury
to consumers.
Regarding deception, as detailed in
the NPRM and in this SBP, cost is one
of the most material pieces of
information for a consumer in making
an informed purchasing decision.353 Yet
it can be difficult for consumers to
uncover the actual costs, and their
352 See Auto Buyer Study, supra note 25, at 14
(‘‘[T]he dealer can extend the maturity of the
financing to reduce the effect of the add-on on the
monthly payment, obscuring the total cost of the
add-on’’); Auto Buyer Study: Appendix, supra note
66, at 229, 233 (Study participant 457481)
(dealership pitching add-ons at the end of the
negotiation, and in terms of consumer’s monthly
price); Auto Buyer Study: Appendix, supra note 66,
at 701 (Study participant 437175) (dealership
pitching add-ons in terms of monthly price); see
also Complaint ¶¶ 12–19, Fed. Trade Comm’n v.
Liberty Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y.
May 21, 2020) (alleging dealership included
deceptive and unauthorized add-on charges in
consumers’ transactions); Complaint ¶¶ 21–28, Fed.
Trade Comm’n v. Ramey Motors, No. 1:14–cv–
29603 (S.D. W. Va. Dec. 11, 2014) (alleging dealer
emphasized attractive terms such as low monthly
payments but concealed substantial cash down
payments or trade-in requirements); Complaint
¶¶ 38–46, Fed. Trade Comm’n v. Billion Auto, Inc.,
No. 5:14–cv–04118–MWB (N.D. Iowa Dec. 11, 2014)
(alleging dealer touted attractive terms such as low
monthly payments but concealed significant extra
costs).
353 See, e.g., Fed. Trade Comm’n v. Windward
Mktg., Inc., No. Civ.A. 1:96–CV–615F, 1997 WL
33642380, at *10 (N.D. Ga. Sept. 30, 1997) (‘‘[A]ny
representations concerning the price of a product or
service are presumptively material.’’); Removatron
Int’l Corp., 111 F.T.C. 206, 309 (1988) (‘‘The
Commission presumes as material express claims
and implied claims pertaining to a product’s . . .
cost.’’ (citing Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984)).
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actual associated terms, for which a
dealer will sell or lease an advertised
vehicle until visiting the dealership and
spending hours on the lot. When an
advertisement or other communication
references a monetary amount or
financing term, it is reasonable for a
consumer to expect that those amounts
and terms are available for a vehicle at
other standard terms, and, in the
absence of information to the contrary,
that no down payment or other
consideration is required. If instead, for
example, a dealer advertises a low
monthly payment based on an
unexpectedly long financing term or
unexpectedly high interest rate that
results in a higher total payment than
standard terms would have yielded, or
based on an expected but undisclosed
down payment or other consideration to
be provided by the consumer, the
consumer will be induced to visit the
dealership based on a misimpression of
what they reasonably expect the total
payment to be.
If consumers knew that the true terms
were beyond what was expected, or
their transaction included charges for
unwanted items, that would likely affect
their choice to visit a particular
dealership over another dealership.
Thus, misleading consumers about cost
information is material. A lack of total
payment information therefore is likely
to affect a consumer’s decision to
purchase or lease a particular vehicle
and is material, and paying an increased
total cost causes substantial consumer
injury.
Thus, it is an unfair or deceptive act
or practice for dealers to fail to disclose
when making any representation about
a monthly payment for any vehicle, the
total amount the consumer will pay to
purchase or lease the vehicle at that
monthly payment after making all
payments as scheduled, inclusive of
assumed consideration. Further, this
provision also addresses the
misrepresentations prohibited by
§ 463.3—including misrepresentations
regarding material information about the
costs or terms of purchasing, financing,
or leasing a vehicle—by requiring
consumers to be provided with the total
payment amount associated with any
represented monthly payment amount.
It also helps prevent dealers from failing
to obtain the express, informed consent
of the consumer for charges, as required
by § 463.5(c).354 To address these unfair
or deceptive acts or practices, the
Commission is requiring dealers to
354 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
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disclose, when making any
representation about a monthly payment
for any vehicle, the total amount the
consumer will pay to purchase or lease
the vehicle at that monthly payment
after making all payments as scheduled,
inclusive of assumed consideration. As
with a vehicle’s price, when cost
information in the market is distorted or
concealed—especially in document- and
time-intensive vehicle transactions—
consumers are unable to effectively
differentiate between sellers, and sellers
trying to deal honestly with consumers
are put at a competitive disadvantage.
For the foregoing reasons, and having
considered all of the comments that it
received, the Commission is finalizing
the required disclosure at § 463.4(d)
largely as proposed, with the minor
modifications of capitalizing the defined
term ‘‘Vehicle,’’ substituting a period for
a semi-colon and the word ‘‘and’’ at the
end of § 463.4(d)(1), and clarifying that
the requirements of § 463.4(d) also are
‘‘prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.3(a) and
463.5(c).’’
(e) Monthly Payments Comparison
Proposed § 463.4(e) required dealers,
when making any comparison between
payment options that includes
discussion of a lower monthly payment,
to disclose that the lower monthly
payment will increase the total amount
the consumer will pay to purchase or
lease the vehicle, if true. For the reasons
discussed in the following paragraphs,
the Commission is finalizing the
required disclosure at § 463.4(e) largely
as proposed. The Commission is
capitalizing the defined term ‘‘Vehicle’’
to conform with the definition at
§ 463.2(e). The Commission also is
adding language to the end of § 463.4(e)
clarifying that the requirements in
§ 463.4(e) ‘‘also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and 463.5(c).’’
A number of institutional commenters
supported such a provision,
emphasizing that it would provide an
appropriate amount of helpful
information and help make the true
terms of a car deal much clearer to
consumers. Many individual
commenters also stressed the need for
the Commission’s proposal:
• My car buying experience involving
dealers has include [sic] many of the
issues identified, such as: . . .
Negotiating a 4 year loan with a known
loan payment (did math prior to final
steps). Presented paperwork with a
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643
similar but lesser monthly payment.
Dealer had changed terms to 5 year loan
without open disclosure. Happy to hear,
‘‘the bank gave you a better rate, you got
a smaller payment,’’ almost didn’t catch
what they’d done.355
• I have purchased about 10 new
vehicles in my lifetime. . . . They prey
on monthly payments as a tool, saying
they can lower the monthly payment
but not telling customers they added
months or years to the term. Anything
that forces them to be honest is a great
justice for consumers! 356
• Sometimes, when you are in
negotiations with a car dealer, they
engage in deceptive practices by
lowering your monthly payment amount
without telling you how they lowered it.
They may have increased your down
payment or increased your interest rate
or increased your term of the loan. This
can lead [t]o much higher costs for the
consumer. I had reached an agreement
with a dealer to lower my monthly
payments, but what they didn’t tell me
until I got into the F & I manager’s office
is that my deal [was] for 6 years, not 4,
and they increased my interest rate.357
• . . . I was quoted a payment at 72
months with adding aftermarket
warranty but come to find out they
extended my term to 76 months in order
to meet what I wanted to pay monthly.
I did not find this out until after I
bought the car. Very dishonest
dealership. This last minute bait and
switch has to stop.358
• I purchased a truck from a
Tennessee truck dealer. After agreeing
on a monthly payment of $920 for 72
months, I travelled to the dealership to
complete the purchase, but the finance
office changed the terms to 84 months
with the same monthly payment,
effectively adding $11,000 to their
profit! 359
• I just want to walk in to a
dealership, find a car that fits my needs
and buy it. And what is up with these
RIDUCULOUSLY [sic] long loan terms?
72 MONTHS? If someone cannot afford
a car dealers shouldn’t extend the loan,
they should steer them to a more
affordable car! 360
The Commission received numerous
comments relating to the scope and
355 Individual commenter, Doc. No. FTC–2022–
0046–0141.
356 Individual commenter, Doc. No. FTC–2022–
0046–0985.
357 Individual commenter, Doc. No. FTC–2022–
0046–1652.
358 Individual commenter, Doc. No. FTC–2022–
0046–7569.
359 Individual commenter, Doc. No. FTC–2022–
0046–0115.
360 Individual commenter, Doc. No. FTC–2022–
0046–0050.
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terms of its proposed monthly payments
comparison disclosure. A number of
institutional and individual commenters
urged the Commission to require that
such disclosures uniformly be provided
to consumers in writing. The
Commission agrees with commenters
that many monthly payment
comparisons happen verbally, in the
course of discussions with consumers.
As proposed, the Commission’s monthly
payment comparison disclosure made
clear that such discussions are covered,
and that dealers would be required to
inform consumers in the course of such
discussions—‘‘[w]hen making any
comparison between payment
options’’—if a represented lower
monthly payment will increase the total
amount the consumer will pay to
purchase or lease the vehicle. The
Commission believes there are
significant consumer benefits when
such disclosures are made verbally,
close in time to when monthly payment
options are discussed. Given that carbuying and leasing transactions are
already lengthy and paperwork-heavy,
the Commission believes it must be
judicious with any additional written
disclosure requirements to avoid
crowding out other disclosures or other
important information. Accordingly, the
Commission has determined not to
modify § 463.4(e) from its original
proposal in order to mandate that the
required disclosure always be made in
writing. The Commission will continue
to monitor the market for any further
developments in this area and will
consider whether to modify this or other
Final Rule provisions in the future.
Some commenters, including
consumer advocacy organizations, urged
the Commission to adopt specific
proposed language rather than a general
disclosure requirement, or a
requirement that this disclosure include
the total amount the consumer will pay
at the lower monthly payment under
discussion. Regarding the proposal to
require particular, uniform disclosure
language, the Commission did not
receive, in the course of public
comment, evidence sufficient to
conclude that uniform formatting for the
delivery of such disclosures would be
necessary to make them effective. The
Commission currently lacks information
to evaluate whether any particular form
disclosure would effectively
communicate the required information
to consumers in a manner that in all
circumstances obviates deceptive or
unfair conduct. Moreover, regarding the
proposal to require that the monthly
payment comparison disclosure
additionally require dealers to disclose
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the new total amount that the consumer
will pay, the Commission emphasizes
that part 463 will require such a
disclosure without the need to modify
this provision from the Commission’s
original proposal. As noted in the
paragraph-by-paragraph analysis of
§ 463.4(d) in SBP III.D.2(d), the
Commission is finalizing § 463.4(d),
which requires dealers making any
representation about a monthly payment
for a vehicle to disclose the total amount
the consumer will pay to purchase or
lease the vehicle at a given monthly
payment amount after making all
payments as scheduled, inclusive of
assumed consideration, largely as
proposed. The monthly payment
comparison discussions covered by
§ 463.4(e) are those that ‘‘include[]
discussion of a lower monthly
payment.’’ To the extent a dealer, in the
course of such discussions, makes a
representation ‘‘about a monthly
payment for any Vehicle,’’ § 463.4(d)
will require the dealer to disclose the
total amount the consumer will pay at
that monthly payment amount.
Comments, including those from a
number of dealership associations 361
and an individual commenter,
characterized the Commission’s
proposal as burdensome and likely to
lead to excessive disclosures while
providing little additional assistance to
consumers. In response, the
Commission emphasizes the
streamlined nature of proposed
§ 463.4(e). In its proposal, the
Commission refrained from additional
formal mandates in order to provide
dealers with flexibility, within the
bounds of the law, to provide this
essential information—that a given
lower monthly payment will increase
the total amount the consumer will
pay—including so that dealers already
conveying this information in a nondeceptive manner may continue to do
so.
Thus, after careful review of the
comments, the Commission has
determined to finalize § 463.4(e) largely
as proposed. When making any
comparison between payment options,
expressly or by implication, directly or
indirectly, that includes discussion of a
lower monthly payment, the failure to
disclose that the lower monthly
payment will increase the total amount
the consumer will pay to purchase or
lease the vehicle, if true, is likely to
361 As previously indicated, some such
association commenters contended generally that
the proposed total of payments disclosures at
§ 463.4(d) and (e) overlapped with the Truth in
Lending Act or other laws. The Commission
responds to this point in the context of the
discussion of § 463.4(d), in SBP III.D.2(d).
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mislead consumers regarding the total
terms associated with the lower
monthly payment amount. When a
dealer elects to compare between
different monthly payment options, if
the lower monthly payment would
result in a higher total transaction cost,
discussion of this fact is necessary to
prevent the comparison from being
misleading. Absent this information, it
is reasonable for a consumer who is
presented with a monthly payment
comparison to expect that the lower
monthly payment amount would
correspond to lower total transaction
cost. This is because the opposite can
only be true if the dealer has created a
so-called ‘‘apples to oranges’’
comparison, in which an undisclosed
element of the transaction—such as the
length of the payment term, or the
existence of a balloon payment—has not
been kept constant across the two
monthly payment scenarios being
compared. Under such circumstances,
without providing the consumer with
further information, the dealer’s claims
regarding monthly payment amounts
falsely imply saving or parity between
different offers where reduced monthly
payments increase the total vehicle cost.
Thus, where a lower monthly payment
amount represents a more expensive
transaction, the dealer must, at a
minimum, disclose this simple but
counterintuitive fact to not deceive
consumers.362
Furthermore, as explained in the
NPRM and in the paragraph-byparagraph discussion of § 463.4(d) in
SBP III.D.2(d), cost is one of the most
material pieces of information for a
consumer in making an informed
purchasing decision.363
Regarding unfairness, when making
any comparison between payment
options, expressly or by implication,
directly or indirectly, that includes
discussion of a lower monthly payment,
the failure to disclose that the lower
monthly payment will increase the total
362 Depending on the circumstances, a dealer may
need to take additional measures, such as disclosing
the specific basis for any increase in total costs, or
amount of any such increase, in order to avoid
deceiving consumers.
363 See, e.g., Fed. Trade Comm’n v. Windward
Mktg., Inc., No. Civ.A. 1:96–CV–615F, 1997 WL
33642380, at *10 (N.D. Ga. Sept. 30, 1997) (‘‘[A]ny
representations concerning the price of a product or
service are presumptively material.’’); Removatron
Int’l Corp., 111 F.T.C. 206, 309 (1988) (‘‘The
Commission presumes as material express claims
and implied claims pertaining to a product’s . . .
cost.’’ (citing Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984)); see also Fed. Trade Comm’n v.
Crescent Pub. Grp., Inc., 129 F. Supp. 2d 311, 321
(S.D.N.Y. 2001) (‘‘Information concerning prices or
charges for goods or services is material, as it is
‘likely to affect a consumer’s choice of or conduct
regarding a product.’ ’’).
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amount the consumer will pay to
purchase or lease the vehicle, if true, is
likely to cause substantial injury to
consumers who waste time and effort
pursuing offers that are not actually
available at the total payment amount
they expect; or who pay more for a
vehicle sales or lease transaction than
they expected by being subject to
hidden charges or an unexpected down
payment or trade-in requirement; or
who are subject to the higher financing
costs and greater risk of default
associated with an unexpectedly
lengthy loan term.
Furthermore, the injury caused by
withholding this information is not
reasonably avoidable by consumers.
During negotiations, if dealers agree to
a lower monthly payment, consumers
have no reason to expect that this
apparent ‘‘concession’’ in fact means an
increased total vehicle cost due to an
increased payment term or annual
percentage rate. Under such
circumstances, dealers can also add
unwanted, undisclosed, or even
fictitious add-on charges more easily, by
increasing the payment term enough
that including add-on charges would
still result in a lower monthly payment
as a ‘‘concession’’ to the consumer. The
injury to consumers from a lack of price
information is not outweighed by any
benefits to consumers or competition
from withholding this basic
information. Instead, information about
increased cost protects consumers from
lost time and effort, and unexpected
charges while increasing competition
among dealers, who would be able to
compete on truthful, standard terms.
The costs of stating that the total
payment has increased—which the
dealer determines and can calculate
upfront—are minimal for dealers that
are already making representations
about a monthly payment for a vehicle,
especially when compared to the injury
to consumers.
Thus, it is an unfair or deceptive act
or practice for dealers to fail to disclose,
when making any comparison between
payment options, expressly or by
implication, directly or indirectly, that
includes discussion of a lower monthly
payment, that the lower monthly
payment will increase the total amount
the consumer will pay to purchase or
lease the vehicle, if true. Further, this
provision also serves to prevent the
misrepresentations prohibited by
§ 463.3—including misrepresentations
regarding material information about the
costs or terms of purchasing, financing,
or leasing a vehicle—by requiring
consumers to be given accurate
information that the total payment will
increase when presented with a lower
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monthly payment. It also helps prevent
dealers from failing to obtain the
express, informed consent of the
consumer for charges, as addressed by
§ 463.5(c), including charges relating to
the financing or lease of a vehicle.364
Thus, the Commission is requiring
dealers to disclose, when making any
comparison between payment options,
expressly or by implication, directly or
indirectly, that includes discussion of a
lower monthly payment, that the lower
monthly payment will increase the total
amount the consumer will pay to
purchase or lease the vehicle, if true. As
with a vehicle’s price, when cost
information in the market is distorted or
concealed—especially in document- and
time-intensive vehicle transactions—
consumers are unable to effectively
differentiate between sellers, and sellers
trying to deal honestly with consumers
are put at a competitive disadvantage.
For the foregoing reasons, and having
considered all of the comments that it
received on this proposed provision, the
Commission is finalizing the required
disclosure at § 463.4(e) largely as
proposed, with the minor modifications
of capitalizing the defined term
‘‘Vehicle’’ additional language clarifying
that the requirements in § 463.4(e) ‘‘also
are prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.3(a) and
463.5(c).’’
E. § 463.5: Dealer Charges for Add-Ons
and Other Items
1. Overview
Proposed § 463.5 prohibited motor
vehicle dealers from charging for add-on
products or services from which the
consumer would not benefit; from
charging consumers for undisclosed or
unselected add-ons unless certain
requirements were met; and from
charging for any item unless the dealer
obtains the express, informed consent of
the consumer for the item.
In response to the NPRM, various
stakeholder groups and individuals
submitted comments regarding these
proposed provisions. Among these were
comments in favor of the provisions;
comments that urged the Commission to
include additional restrictions on addon charges; and comments questioning
or recommending against the proposed
provisions.
After careful consideration of the
comments, the Commission has
determined to finalize § 463.5(a) and (c)
364 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
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645
without substantive modification and
has determined not to finalize § 463.5(b)
regarding undisclosed or unselected
add-ons. The Commission also is
making minor textual edits to the
introductory language in § 463.5 for
clarity and consistency: substituting
‘‘Federal Trade Commission Act’’ for
‘‘FTC Act’’; adding ‘‘Covered’’ to ‘‘Motor
Vehicle Dealer’’ to conform with the
defined term at § 463.2(f) (‘‘ ‘Covered
Motor Vehicle Dealer’ or ‘Dealer’ ’’), and
capitalizing ‘‘Vehicles’’ to conform with
the defined term at § 463.2(e)
(‘‘ ‘Covered Motor Vehicle’ or
‘Vehicle’ ’’).
In the following analysis, the
Commission examines each proposed
provision in § 463.5; the substantive
comments relating to each provision;
responses to these comments; and the
Commission’s final determination with
regard to each proposed provision.
2. Paragraph-by-Paragraph Analysis of
§ 463.5
(a) Add-Ons That Provide No Benefit
Section 463.5(a) of the proposed rule
prohibited motor vehicle dealers from
charging for add-ons if the consumer
would not benefit from such an add-on,
including a pair of enumerated
examples. For the following reasons, the
Commission is finalizing this provision
largely as proposed, with modifications
to correct a misplaced hyphen; add the
word ‘‘that’’ before ‘‘are duplicative of
warranty coverage’’; and capitalize the
defined term ‘‘Vehicle’’ to conform with
the revised definition at § 463.2(e). The
Commission also is adding language to
the end of § 463.5(a), at newly
designated (a)(3), clarifying that the
requirements in § 463.5(a) ‘‘also are
prescribed for the purpose of preventing
the unfair or deceptive acts or practices
defined in this part, including those in
§ 463.3(a) and (b) and paragraph (c) of
this section.’’ Relatedly, the
Commission is finalizing the definition
of the term ‘‘GAP Agreement,’’ which is
referenced in this provision and defined
in § 463.2(h) of the Final Rule,
substantively as proposed, with minor
modifications to correct a misplaced
period, substitute ‘‘Vehicle’’ for both
‘‘vehicle’’ and ‘‘motor vehicle’’ to
conform with the revised definition at
§ 463.2(e), and remove an extraneous
term—‘‘insured’s’’—without changing
the definition’s operation.
Many commenters, including a
number of industry participants and
associations, stated that products that
provide no benefit to the consumer
should not be sold in connection with
the sale or financing of vehicles. Many
commenters that supported the
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provision stated, inter alia, that the
examples the Commission enumerated
in this paragraph were obvious 365 and
particularly helpful for less-experienced
buyers who may be led to believe that
a particular product or service would be
beneficial.366 Some individual
commenters, for instance, noted that
they had no way to confirm whether the
‘‘nitrogen-filled’’ tires they purchased
with their vehicle actually had more
nitrogen than naturally exists in the air,
even though they were told the
purchase of this service was
mandatory.367 At least one individual
commenter described requesting to see
the nitrogen tank after such a purchase
and being denied by the dealer.
Examples of public comments about
add-ons include the following:
• I would argue that this does not go
far enough but it [is] a good start. As
someone who is trying to purchase a
new vehicle, there is a[n] endless
supply of ‘‘perk packages’’ or ‘‘Family
deals’’ that I ‘‘must purchase’’ if I would
like to acquire a car from a dealer. These
include a variety of dubious products
such as insurance policies that pay out
$3,500 if your car is stolen (and can’t be
found) in the first 90 days of ownership,
if your car is totaled by your insurance
company in the first 90 days they’ll pay
$3,500. Nitrogen in the tires (A $196
value). Vin Etching on the windows,
plastic stickers on the door handles to
prevent scratches. These items are a
requirement to bundle with the vehicle
and a deal that provides ‘‘over $7,000 in
value’’ for $2,995. These tricks ignore
the obvious, such as your car can not be
both stolen (unrecovered) AND totaled
so it’s impossible to collect on both
policies so the cumulative ‘‘value’’ of
this package is overstated.368
• One of the latest scams is to force
you to buy a $1,000 gps unit so they can
recover the car if you miss payments.
This shouldn’t be allowed.369
• Second vehicle I purchased had a
$1,650 ‘‘protection pkg’’ plus the usual
nitrogen in the tires BS. This time I
asked to be shown the nitrogen tank
they fill the tires with, they refused
saying due to insurance rules customers
aren’t allowed in the shop. I asked them
to take off the paint and fabric
protection charge also, they declined at
first until I reminded them they just got
the vehicle the night before and there
was still plastic factory coverings on the
seats and strips of plastic on the
vehicles body protecting certain areas.
This time they mumbled some excuse
about the addendum added to the price
is put on the vehicle as soon as it arrives
and they hadn’t had ‘‘time’’ to apply all
the overpriced add[-]ons.370
• I’m a former carsalesperson
[sic]. . . . Dealers should be banned
from selling . . . special paints to
protect from rust . . . . No coatings are
added.371
• I worked at a Dodge/Ram dealership
for three years at the make ready
(carwash) department. When new
vehicles arrived their tires were rarely
deflated and then filled with nitrogen. It
is my understanding that the
manufacture initially paid for the
nitrogen fill and the customer was later
charged.372
• [O]ne of my previous purchases
almost ended . . . with GAP that was so
unnecessary, the lender called us a few
days later after we already had the car
and told us we’d be experiencing a
lower monthly payment unless we
wanted the price of the product back in
a check because of the price we
negotiated and the sizable down
payment, it was impossible for GAP to
ever be required.373
A number of individual commenters
indicated they did not consider nitrogen
tires a valuable purchase and expressed
no desire to purchase them. Many
commented that, when they informed
their respective dealers that they did not
want these add-ons, the dealers would
represent, inter alia, that nitrogen tires
were required by law, that their
insurance premium would increase
without the add-on, that new foreign
vehicles coming into the country must
have nitrogen-filled tires under the law,
or that the consumer needed to
purchase nitrogen tires to meet fuel
economy standards.
Other commenters supported this
proposed provision while also
recommending that the Commission
broaden its scope to prohibit the sale of
add-on products or services that provide
only ‘‘minimal’’ benefit to
consumers.374 One such commenter, for
instance, suggested the provision be
expanded to prohibit dealers from
365 See, e.g., Individual commenter, Doc. No.
FTC–2022–0046–1608 at 6.
366 See, e.g., Comment of 18 State Att’ys Gen., Doc
No. FTC–2022–0046–8062 at 9.
367 See, e.g., Individual commenter, Doc. No.
FTC–2022–0046–0565.
368 Individual commenter, No. FTC–2002–0046–
0565.
369 Individual commenter, No. FTC–2002–0046–
4552.
370 Individual commenter, Doc. No. FTC–2022–
0046–0854.
371 Individual commenter, Doc. No. FTC–2022–
0046–1393.
372 Individual commenter, Doc. No. FTC–2022–
0046–5493.
373 Individual commenter, Doc. No. FTC–2022–
0046–6816.
374 See, e.g., Legal Aid Just. Ctr., Doc. No. FTC–
2022–0046–7833 at 3.
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charging for an add-on unless it
provides a ‘‘substantial, material
benefit’’ to consumers.375 Another
commenter contended that there are a
number of add-ons not meeting such
standards being sold in connection with
the sale or financing of vehicles,
including future servicing packages for
vehicle tune-ups and oil changes that
are sold to remote or out-of-State
consumers who are exceedingly
unlikely to return to the dealership for
such services; tracking devices that are
used almost exclusively for electronic
repossession; and ‘‘vendor’s single
interest’’ or ‘‘VSI’’ insurance, which
protects the financing entity, but not the
consumer, in the event that the vehicle
is damaged or destroyed.376
The Commission acknowledges the
considerable consumer harm that results
from the sale of such add-ons and notes
that several provisions in the Rule it is
finalizing will address misconduct
related to these and other add-ons,
including many of the practices
described by those commenters
recommending further action. For
example, to the extent that dealers make
misrepresentations about any benefit of
an add-on, such conduct would violate
§ 463.3(b) of the Final Rule. Thus, were
a dealer, for instance, to promote the
sale of an add-on—such as a tracking
device that is used almost exclusively
for electronic repossession—based on its
supposed benefit to the consumer, when
the product primarily benefits another
party, such conduct would violate the
Rule even if the product otherwise
provides an ancillary or marginal
benefit to consumers. And if the add-on
provided no benefit to the consumer
and only a benefit to another party,
§ 463.5(a) would prohibit the dealer
from charging the consumer for it.
Further, to the extent that dealers charge
for add-ons without express, informed
consumer consent for the charge, such
conduct would violate § 463.5(c).
The Commission recognizes that there
may be significant consumer benefits
from implementing additional
restrictions on the sale of add-on
products or services. However, without
additional information on costs and
benefits to consumers or competition
associated with such restrictions, the
Commission has determined not to
implement such restrictions in this
Final Rule. The Commission will
continue to monitor the motor vehicle
375 Comment of Legal Action Chi., Doc. No. FTC–
2022–0046–8097 at 10.
376 See also Consumer Fin. Prot. Bureau, ‘‘What
Is Vendor’s Single Interest (VSI) insurance? ’’ (Aug.
16, 2016), https://www.consumerfinance.gov/askcfpb/what-is-vendors-single-interest-vsi-insuranceen-731/.
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marketplace to gather additional
information on this issue and will
consider whether to modify or expand
§ 463.5(a) in the future, including on the
basis of stakeholder experience with
this provision and whether it effectively
addresses unlawful conduct.
Commenters also urged the
Commission to adopt a number of
additional measures regarding the sale
of such add-ons. A consumer advocacy
organization, for instance, proposed that
the Commission require dealers to list
coverage limitations for add-ons that
may overlap with a vehicle’s warranty
coverage, observing that consumers
commonly are not aware of important
limitations until the add-on, such as a
warranty or service contract, is needed,
and only then does the consumer learn
the add-on does not provide the
anticipated benefits. A State consumer
protection agency recommended that
the Commission require affirmative
disclosures for the sale of add-ons that
may provide only ‘‘nominal’’ benefit,
offering a list of what they characterized
as such products for the Commission to
consider in conjunction with this
recommendation.
In response, the Commission notes
that other provisions in part 463 address
misconduct relating to these issues,
including by prohibiting
misrepresentations regarding material
information about add-ons, by requiring
disclosures about optional add-ons, and
by requiring dealers to obtain the
express, informed consent of the
consumer for add-on charges. Thus,
misrepresenting the coverage limitations
of an add-on; making representations
regarding an optional add-on without
disclosing that it is not required and
that the consumer can purchase or lease
the vehicle without the add-on; and
charging for an add-on under false
pretenses or without the consumer’s
express, informed consent would violate
other provisions the Commission is
finalizing. The Commission is
concerned that requiring additional
disclosures may have the effect of
reducing the saliency of key information
in what is already a lengthy, paperworkheavy transaction. Accordingly, the
Commission has determined not to
adopt additional such disclosure
measures in this Final Rule.
In addition, at least one consumer
protection agency commenter asked the
Commission to consider deeming it an
unfair or deceptive act or practice to sell
any add-on product for a price greater
than the value of the product itself. The
Commission declines to restrict the sale
of add-on products at a price higher
than the value of the product itself,
absent additional information, including
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information regarding the costs and
benefits to consumers and competition
of such a restriction.377
A number of industry association
commenters claimed the provision was
vague and requested the Commission set
forth how to calculate the loan-to-value
(‘‘LTV’’) ratio at which a GAP agreement
would be non-beneficial, given that
there could be fluctuation of the vehicle
value in the future. Some suggested that
the Commission adopt a presumption or
safe harbor that dealers complying with
an LTV calculation set by the
Commission be deemed in compliance
with the portion of the proposal related
to GAP agreements.
Other industry association
commenters argued against adopting a
set LTV ratio as the basis for
determining whether a consumer would
benefit from a GAP agreement, claiming
that the vehicle financing entity is best
positioned to determine whether such
an add-on would be beneficial.
Relatedly, some industry association
commenters contended that certain GAP
agreements sold on a low-LTV loan, or
that limit benefits based on a
consumer’s LTV ratio, could still
provide additional benefits.
A financing association commenter
contended that any final rule should not
create rules around the calculation of
the LTV ratio. Another financing group
proposed that the Commission require
dealers to provide disclosures that
would inform consumers of any
potential value gap between a vehicle’s
purchase price and its appraised value.
With regard to establishing LTV ratio
parameters for the sale of GAP
agreements, without further information
from commenters regarding the costs
and benefits of establishing a particular
LTV ratio as the basis for determining
whether a consumer would benefit from
a GAP agreement, or a particular
method for calculating the LTV ratio,
and given the Commission’s previously
stated information saliency concerns
about finalizing additional disclosures
in an already lengthy transaction, the
Commission has determined not to
establish in this Final Rule a particular
numeric threshold or calculation
regarding the sale of GAP agreements to
consumers, or to require additional
associated disclosures. Regarding the
benefits of certain GAP agreements, this
377 One consumer attorney commenter requested
that the Commission clarify that warranty
disclaimers are not a valid defense to common law
fraud and statutory consumer fraud, and that, if
fraud is proven, warranty disclaimers are not an
allowable defense to UCC actions. In response, the
Commission notes that none of the provisions the
Commission is finalizing state that warranty
disclaimers are a defense to common law fraud or
in UCC actions.
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647
provision restricts sales of GAP
agreements where the consumer would
not benefit. If there are benefits to the
consumer, dealers must abide by other
provisions in the Final Rule, including
the requirements that the dealer
represents the extent of those benefits
accurately (§ 463.3(b)) and obtains
express, informed consent from the
consumer for the charges for this item
(§ 463.5(c)).
The Commission also received some
industry association comments claiming
that each State imposes differing
requirements as to coverage,
disclosures, exceptions, and product
terms of GAP agreements. One such
commenter asked for guidance on how
a bright-line, State-law rule on LTV
ratios would interact with the FTC’s
proposal. Another such commenter
requested the FTC reconcile different
State-law approaches to the sale of GAP
agreements, particularly regarding how
this proposed provision would interact
with a State law that, according to the
commenter, only requires a dealer to
have a reasonable belief that the
customer may be eligible for a benefit.
In response, the Final Rule does not
disturb State law unless it is
inconsistent with part 463, and then
only to the extent of the inconsistency.
Where, for example, State laws restrict
the sale of GAP agreements if the LTV
ratio for the transaction is below a
certain threshold, or require that dealers
have a ‘‘reasonable belief’’ that the GAP
agreement would benefit the consumer,
dealers in that State can, and must,
comply with the State law and with the
Rule. Pursuant to such State law,
dealers would be prohibited from
selling the product if the LTV ratio is
below the established threshold or if
they do not reasonably believe the GAP
agreement would benefit the consumer
and, pursuant to the Final Rule, if the
LTV ratio would result in the consumer
not benefitting financially. To the extent
there is an actual conflict between the
Commission’s Final Rule and a State
law—and the Commission is skeptical
that there is such a State law that
explicitly allows for the sale of a
product that does not benefit the
consumer—the Commission refers
commenters to § 463.9, which sets forth
the Rule’s relation to State laws.
With respect to the proposed
definition of ‘‘GAP Agreement,’’ an
industry association commenter
contended that the phrase ‘‘the actual
cash value of the insured’s vehicle in
the event of an unrecovered theft or
total loss’’ meant the value of the
vehicle at some point in the future, and
asserted that future vehicle values
cannot be accurately determined at the
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time of sale. The proposed definition,
however, did not prescribe how dealers
must calculate a vehicle’s cash value;
rather, it explains that the term ‘‘GAP
Agreement’’ means an agreement to
indemnify a vehicle purchaser for any
difference between such value, however
determined, in the event of an
unrecovered theft or total loss, and the
amount owed, regardless of what that
difference may be. Upon examination of
this phrase, however, the Commission
has determined to remove the term
‘‘insured’s’’ because it is extraneous and
does not affect the operation of this
definition: with or without the term, the
phrase describes the manner in which a
qualifying GAP agreement determines
the amount to indemnify a vehicle
purchaser or lessee. In context in this
definition, it is clear without the term
‘‘insured’s’’ that the applicable
‘‘Vehicle’’ is the one covered by the
GAP agreement. Omitting this
unnecessary term thus avoids confusion
without substantively changing this
definition.
One industry association commenter
argued that reference to ‘‘GAP
insurance’’ should be removed from the
definition of ‘‘GAP Agreement’’ because
of the McCarran-Ferguson Act’s reversepreemption of certain Federal laws that
‘‘invalidate, impair, or supersede’’ State
laws enacted ‘‘for the purpose of
regulating the business of
insurance.’’ 378 As previously discussed
with regard to the definition of ‘‘Addon,’’ however, commenters have
provided no evidence that the proposed
or Final Rule would invalidate, impair,
or supersede State laws enacted for the
purpose of regulating insurance. Rather
than affecting any State’s regulation of
insurance, the Final Rule prohibits
dealers from making misrepresentations
regarding add-ons, from failing to
disclose when add-ons are not required,
and from charging for add-ons that
provide no benefit or for which the
consumer has not provided express,
informed consent. The Commission
therefore finalizes the definition of
‘‘GAP Agreement’’ largely as proposed
in its NPRM with minor modifications
to correct a misplaced period, substitute
‘‘Vehicle’’ for both ‘‘vehicle’’ and
‘‘motor vehicle’’ to conform with the
revised definition at § 463.2(e), and
remove an extraneous term—
‘‘insured’s’’—without changing the
definition’s operation.
While acknowledging that products or
services that provide no benefit to
consumers should not be sold,
commenters including an industry
association also argued that the
378 15
U.S.C. 1012(b).
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Commission’s proposed provision was
vague and required more research. Some
industry association commenters
expressed concern regarding how the
Commission would determine whether
an item would not benefit the consumer.
In response, the Commission provides
the following information. Proposed
§ 463.5(a) included enumerated
examples of add-ons from which
consumers would not benefit: (1)
nitrogen-filled tires that contain no
more nitrogen than normally found in
the air, and (2) products or services that
do not provide coverage for the vehicle,
the consumer, or the transaction, or are
duplicative of warranty coverage for the
vehicle, including a GAP agreement if
the consumer’s vehicle or neighborhood
is excluded from coverage or the LTV
ratio would result in the consumer not
benefitting financially.379 As these
examples illustrate, determining that a
consumer would not benefit from an
add-on involves analyzing objective
standards under the circumstances,
such as whether the add-on provides
benefits; whether the consumer is
eligible to use the add-on; whether the
add-on’s coverage excludes the vehicle
at issue; and whether the add-on is
incompatible with the vehicle at issue.
Thus, additional examples of add-ons
that would be prohibited by this
provision include the following:
purported rust-proofing add-ons that do
not actually prevent rust; purported
theft-prevention or theft-deterrent addons that do not prevent or deter theft;
and add-ons that the vehicle itself
cannot support, including engine oilchange services for a vehicle, such as an
electric vehicle, that does not use engine
oil, or software or audio subscription
services for a vehicle that cannot
support the software or utilize the
subscription.380
379 See Consumer Fin. Prot. Bureau, ‘‘Supervisory
Highlights: Issue 19, Summer 2019’’ 3–4 (Sept.
2019), https://files.consumerfinance.gov/f/
documents/cfpb_supervisory-highlights_issue-19_
092019.pdf (finding instances in which auto lenders
sold ‘‘a GAP product to consumers whose low LTV
meant that they would not benefit from the
product’’).
380 See, e.g., Shannon Osaka, ‘‘Electric vehicles
are hitting a road block: Car dealers,’’ Wash. Post
(Nov. 9, 2023), https://www.washingtonpost.com/
climate-solutions/2023/11/09/car-dealerships-evsales (describing a dealership salesperson offering
an electric vehicle-buyer a plan for oil changes and
an extended warranty for a gas-powered car); see
also Consumer Fin. Prot. Bureau, ‘‘Supervisory
Highlights: Issue 24, Summer 2021’’ 3–4 (June
2021), https://files.consumerfinance.gov/f/
documents/cfpb_supervisory-highlights_issue-24_
2021-06.pdf (finding servicers added and
maintained unnecessary collateral protection
insurance (CPI) when consumers had adequate
insurance and thus the CPI provided no benefit to
the consumers, and also when consumers’ vehicles
had been repossessed even though no actual
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One association commenter argued
that the phrase ‘‘nitrogen-filled tire
related-products or services that contain
no more nitrogen than naturally exists
in the air’’ in proposed § 463.5(a)(1)
would create a standard with which it
may be impossible to comply because
‘‘no individual set of tires could have a
higher total quantity of nitrogen than
that in ‘the air’ that stretches around the
planet.’’ 381 This commenter requested
that the Commission clarify to avoid
this possible reading. Here, the
Commission notes that the phrase does
not prohibit such tires if they do not
contain a ‘‘higher total quantity of
nitrogen than that in the air’’; instead,
charging for a nitrogen-filled tire would
fail by this standard if it contains ‘‘no
more nitrogen than’’ the proportion that
‘‘naturally exists in the air.’’
One industry association commenter
requested more explanation from the
Commission regarding what would be
considered ‘‘duplicative of warranty
coverage’’ under proposed § 463.5(a)(2),
while another contended that vehicle
service contracts that overlap with a
manufacturer’s warranty may still
provide additional, beneficial coverage,
such as after the manufacturer’s
warranty expires. In response, the
Commission notes that this provision
prohibits the sale of warranties that are
duplicative. A dealer may offer a
warranty add-on that has some overlap
in coverage with existing warranty
coverage for the vehicle, but the add-on
must provide additional protection.
Moreover, other provisions of the Final
Rule address misconduct relating to
warranties, including by prohibiting
misrepresentations regarding material
information about any costs, limitation,
benefit, or any other aspect of the
warranty product or service. For
example, under the Final Rule, a dealer
may not mislead a consumer as to the
benefits or conditions of the warranty,
including amount or length of coverage
(§ 463.3(b)). In addition, under
§ 463.5(c), the dealer must obtain the
express, informed consent of the
consumer for the charge for the
warranty (§ 463.5(c)).
Other commenters, including an
industry association, asserted that this
proposed provision would cause dealers
to stop offering beneficial products or
services. The Commission notes that its
proposal did not require such a result
and emphasizes that this provision
would prevent charges to consumers for
products or services that provide them
insurance protection was provided after
repossession).
381 Comment of Competitive Enter. Inst., Doc. No.
FTC–2022–0046–7670 at 6.
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no benefit. To the extent that a
prohibition against charging consumers
for items that provide no benefit to the
consumer may cause some dealers to
discontinue offering beneficial products,
consumers would be free to instead visit
other dealerships or to seek the same or
similar offerings from other providers.
Dealers, of course, continue to be free
under the Final Rule to offer beneficial
add-ons to consumers—consistent with
existing law and with other provisions
of this Rule.
Some commenters, including industry
associations and a dealership
association, raised concerns about
compliance administrability for this
proposed provision in the case of
products attached to a vehicle by
manufacturers that may provide no
benefit, questioning whether, if this
proposal went into effect, dealers would
be prohibited from charging for such
products. In response, the Commission
refers commenters to the definition of
‘‘Add-on’’ or ‘‘Add-on Product(s) or
Service(s)’’ in § 463.2(a). Notably, ‘‘Addon’’ is defined, in relevant part, as any
‘‘product(s) or service(s) not provided to
the consumer or installed on the Vehicle
by the Vehicle manufacturer . . .’’
Thus, if an add-on product or service is
installed on the vehicle by the motor
vehicle manufacturer, it falls outside the
scope of this definition, and
concomitantly, outside the scope of the
provision at § 463.5(a). Nonetheless,
other provisions in the Final Rule
address misconduct relating to this
issue. For instance, as examined in
additional detail in the discussion of
§ 463.4, in SBP III.D, the offering price
for the vehicle would be required to
incorporate the charges for any such
items if the dealer requires the
consumer to pay for them. In addition,
as described in additional detail in the
discussion of § 463.5(c), in SBP
III.E.2(c), a dealer may not charge for
any such item unless the dealer obtains
the express, informed consent of the
consumer for the charge.
Another industry association
commenter incorrectly stated that this
provision was beyond the FTC’s
authority and correctly noted that the
Commission has the authority to see
that products are marketed and
advertised fairly and honestly. As the
commenter acknowledged, the
Commission has the authority to
address unfair and deceptive conduct;
that is precisely what this provision
does. Dealerships charging consumers
for add-ons from which the consumers
would not benefit is both a deceptive
and unfair act or practice in violation of
the FTC Act, as discussed in the
following paragraphs. To address this
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deception or unfairness, the
Commission is finalizing this provision
with minor modifications, including
one to correct a typographical error in
the placement of a hyphen in a phrase
in proposed § 463.5(a)(1). In the NPRM,
the relevant phrase appeared as, ‘‘(1)
Nitrogen-filled tire related-products or
services’’; in the Final Rule, the
corrected phrase will now read as
follows: ‘‘(1) Nitrogen-filled tire-related
products or services.’’ For clarity, the
Commission is also adding the word
‘‘that’’ before ‘‘are duplicative of
warranty coverage;’’ capitalizing the
defined term ‘‘Vehicle’’ to conform with
the revised definition at § 463.2(e); and
adding language clarifying that the
requirements of § 463.5(a) also are
‘‘prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in § 463.3(a) and (b) and
paragraph (c) of this section.’’
Dealerships charging consumers for
add-ons from which the consumers
would not benefit involves deceptive
conduct. When a dealer charges
consumers for add-ons that would not
benefit the consumers, the dealer either
(1) discusses the add-on charges or (2)
is silent about these items. In the first
scenario, if a dealer discusses add-on
charges, consumers typically would not
agree to pay such charges for additional
products from which they could not
benefit unless they are led to believe,
directly or by omission, that these
products would in fact be beneficial to
them. Thus, the dealer would be
misleading consumers, even in the
event the dealer subsequently provides
a disclaimer indicating the add-on
would not benefit the consumer.382 In
the second scenario, it is reasonable for
consumers to believe that the terms they
have agreed to are what was negotiated,
and do not include additional charges
for optional, undisclosed items—
particularly items that would not benefit
the consumer. If a dealer charges
consumers for such items under such
circumstances, the dealer is misleading
the consumer. Misleading consumers
about cost information is material.383 If
382 Removatron Int’l Corp. v. Fed. Trade Comm’n,
884 F. 2d 1489, 1497 (1st Cir. 1989) (‘‘Disclaimers
or qualifications . . . are not adequate to avoid
liability unless they are sufficiently prominent and
unambiguous to change the apparent meaning of
the claims and to leave an accurate impression.
Anything less is only likely to cause confusion by
creating contradictory double meanings.’’).
383 See, e.g., Fed. Trade Comm’n v. Windward
Mktg., Ltd., No. Civ.A. 1:96–CV–615F, 1997 WL
33642380, at *10 (N.D. Ga. Sept. 30, 1997) (‘‘[A]ny
representations concerning the price of a product or
service are presumptively material.’’); Removatron
Int’l Corp., 111 F.T.C. 206, 309 (1988) (‘‘The
Commission presumes as material express claims
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649
consumers knew that a dealership was
charging them for items from which
they would not benefit, such knowledge
likely would affect their commercial
choices, including whether to continue
with, or ultimately consummate, the
vehicle sale or financing transaction.384
Such charges are also unfair. When
charges for any add-on accompany the
already lengthy and complex car-buying
process, it is difficult to obtain consent
that is truly express and informed.385
Rather than prohibiting all such charges
or taking other measures, as specifically
contemplated in the NPRM,386 however,
this provision focuses on charges for
add-ons that would not benefit the
consumer. Charges for add-ons that
would not benefit the consumer can cost
consumers thousands of dollars and
significantly increase the overall cost to
the consumer in the transaction,
including by increasing the amount
financed and total of payments, thereby
increasing the risk the consumer will
ultimately default on repayment
and implied claims pertaining to a product’s . . .
cost.’’ (citing Thompson Med. Co., Inc., 104 F.T.C.
648, 817 (1984)); see also Fed. Trade Comm’n v.
Crescent Pub. Grp., Inc., 129 F. Supp. 2d 311, 321
(S.D.N.Y. 2001) (‘‘Information concerning prices or
charges for goods or services is material, as it is
‘likely to affect a consumer’s choice of or conduct
regarding a product.’ ’’).
384 Even under a hypothetical scenario wherein a
consumer understood an add-on would not benefit
them but wanted to pay extra for the add-on
anyway, in the case of an act or practice challenged
by the agency as deceptive or unfair, ‘‘the FTC need
not prove that every consumer was injured. The
existence of some satisfied customers does not
constitute a defense . . . .’’ Fed. Trade Comm’n v.
Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir.
1989), vacated in part on other grounds, Fed. Trade
Comm’n v. Credit Bureau Ctr., LLC, 937 F.3d 764
(7th Cir. 2019); accord Fed. Trade Comm’n v.
Stefanchik, 559 F.3d 924, 929 n.12 (9th Cir. 2009).
385 See, e.g., Consumer Fin. Prot. Bureau,
‘‘Supervisory Highlights: Issue 19, Summer 2019’’
3–4 (Sept. 2019), https://files.consumerfinance.gov/
f/documents/cfpb_supervisory-highlights_issue-19_
092019.pdf (describing findings, from supervisory
examinations, of lenders selling GAP agreements to
consumers whose low LTV meant that they would
not benefit from the product: ‘‘By purchasing a
product they would not benefit from, consumers
demonstrated that they lacked an understanding of
a material aspect of the product. The lenders had
sufficient information to know that these consumers
would not benefit from the product. These sales
show that the lenders took unreasonable advantage
of the consumers’ lack of understanding of the
material risks, costs, or conditions of the product.’’).
386 See, e.g., NPRM at 42030 (Question 33) (‘‘In
particular, the Commission is contemplating
whether any final Rule should restrict dealers from
selling add-ons (other than those already installed
on the vehicle) in the same transaction, or on the
same day, the vehicle is sold or leased.’’); id.
(Question 38) (discussing proposed § 463.5(c) and
asking ‘‘Does the proposal provide a meaningful
way to obtain consent in an already disclosureheavy transaction? If it would result in too many
disclosures, what other measures could be taken to
protect consumers from unauthorized charges? ’’).
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obligations.387 This injury is not
reasonably avoidable by consumers
when dealers are silent about such
charges and simply include them in
dense, lengthy contracts, as explained in
detail in SBP II.B.2.388 If a dealer
instead describes what the charges are
for, such a description either
deceptively states or implies that the
add-on would benefit the consumer, or
acknowledges the add-on would not
benefit the consumer, the latter of which
would create ‘‘contradictory double
meanings’’ 389 and, if discovered, would
still result in the dealer wasting the
consumers’ time.390 Further, there are
no benefits to consumers or to
competition from charging consumers
for add-ons that would not benefit them.
Moreover, charging for non-beneficial
products is inconsistent with industry
guidance,391 and dealerships that profit
from such sales place dealerships that
do not at a competitive disadvantage.
Thus, it is an unfair or deceptive act or
practice for dealers, in connection with
the sale or financing of vehicles, to
charge for an add-on product or service
if the consumer would not benefit from
such an add-on product or service. This
provision also serves to prevent
387 See, e.g., Complaint ¶¶ 25–28, Fed. Trade
Comm’n v. N. Am. Auto. Servs., Inc., No. 1:22–cv–
01690 (N.D. Ill. Mar. 31, 2022).
388 See, e.g., Auto Buyer Study, supra note 25, at
13–15, 17–18.
389 See Removatron Int’l Corp. v. Fed. Trade
Comm’n, 884 F. 2d 1489, 1497 (1st Cir. 1989)
(‘‘Disclaimers or qualifications . . . are not
adequate to avoid liability unless they are
sufficiently prominent and unambiguous to change
the apparent meaning of the claims and to leave an
accurate impression. Anything less is only likely to
cause confusion by creating contradictory double
meanings.’’).
390 Even in the hypothetical scenario where some
consumers could have avoided the injury because
they understood that an add-on would not benefit
them but wanted to pay extra for the add-on
anyway, the dealer’s conduct in selling nonbeneficial add-ons would still be unfair because it
substantially injures other consumers who do not
wish to pay for items that would not benefit them
and, as discussed in the SBP text, cannot reasonably
avoid the harm, and no countervailing benefits
outweigh the costs. See FTC v. Amazon.com, Inc.,
2016 U.S. Dist. LEXIS 55569, *15, *18–21 (W.D.
Wash. Apr. 26, 2016) (finding unfairness even
though some consumers could have avoided the
charge). Additionally, consumers who truly wish to
purchase add-ons that do not benefit them may still
be able to do so directly from the add-on provider.
391 See Nat’l Auto. Dealers Ass’n et al.,
‘‘Voluntary Protection Products: A Model
Dealership Policy’’ 5 (2019), https://www.nada.org/
regulatory-compliance/voluntary-protectionproducts-model-dealership-policy (explaining that
when determining which voluntary protection
products to offer to customers, ‘‘the dealership
should have confidence in the value that the
product offers to customers,’’ including that the
dealership should understand ‘‘whether its
coverage is already provided by another product
being purchased by the customer,’’ and stating ‘‘[i]t
is essential that customers have a clearly defined
path to receiving such benefits.’’).
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misrepresentations prohibited by
§ 463.3 of the Final Rule, including
misrepresentations regarding material
information about the costs or terms of
purchasing, financing, or leasing a
vehicle, and about any costs, limitation,
benefit, or other aspect of an add-on.
This provision further helps prevent
dealers from failing to obtain express,
informed consent for charges, as
prohibited by § 463.5(c).392
(b) Undisclosed or Unselected Add-Ons
The Commission’s proposed
provisions relating to undisclosed or
unselected add-on products or services,
at § 463.5(b), prohibited dealers from
charging for optional add-ons before
undertaking certain measures.
Specifically, proposed § 463.5(b)(1)
prohibited dealers from charging for
optional add-ons unless the dealers
disclosed, and offered to consummate
the transaction for, the cash price at
which a consumer may purchase the
vehicle without such add-ons. This
proposed provision also required the
consumer to decline to purchase the
vehicle for the cash price without the
add-on by means of a written
declination, with date and time
recorded, and signed by the consumer
and a manager of the motor vehicle
dealer. The proposed requirements of
§ 463.5(b)(1) applied before the dealer
referenced any aspect of financing for a
specific vehicle, aside from the offering
price, or before consummating a nonfinanced sale. Proposed § 463.5(b)(2)
required similar steps before charging
for any optional add-on in a financed
transaction, including that the dealer
disclose, and offer to consummate the
transaction for, a vehicle’s cash price
without optional add-ons plus the
finance charge for such transaction,
separately itemizing the components of
the offer. This proposed provision also
required a written, dated, time-stamped,
and signed declination. Finally,
proposed § 463.5(b)(3) required dealers
to disclose the cost of the transaction,
whether financed or not, without any
optional add-ons, as well as the charges
for the optional add-ons selected by the
consumer, separately itemized. Each
proposed provision required clear and
conspicuous disclosure of specific
information relating to optional add-ons
and their associated costs.
As discussed in the following
paragraphs, the Commission has
determined not to finalize the proposed
provisions at § 463.5(b) regarding
392 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
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undisclosed or unselected add-ons.
Many commenters described the likely
benefits of such proposed provisions,
and a number of commenters indicated
how such provisions would be feasible,
including by reference to similar
disclosure regimes already in effect at
the State or local level. Commenters also
credited the Commission’s goals for
such provisions.
However, other commenters opposed
these proposed provisions, contending
they would be burdensome and timeconsuming. Others similarly expressed
concern that, given the duration,
complexity, and paperwork-heavy
nature of motor vehicle sales and
financing transactions, these provisions
would not effectively resolve the
problem of add-ons being sold without
express, informed consumer consent.393
Having considered the comments, the
Commission declines to include in this
Final Rule the proposed provisions
relating to undisclosed or unselected
add-on products or services at
§ 463.5(b). The Commission notes that
various commenters were concerned
about the extent to which this proposal
would add documents and time to the
transaction. If finalized, this would have
been the sole provision in the Final Rule
that affirmatively requires the dealer
and consumer, in all circumstances, to
view and sign additional documentation
during the purchase, finance, or lease
process, in what is already a documentheavy, time-consuming, and
complicated transaction. The
Commission further notes that, as a
matter of existing law, dealers are
already prohibited from engaging in
misrepresentations regarding add-ons
and from charging for add-ons without
express, informed consent—conduct
which the Final Rule prohibits as well.
Accordingly, the Commission has
determined not to include this provision
in its Final Rule.
The Commission will continue to
monitor the motor vehicle marketplace
for issues pertaining to unselected or
undisclosed add-ons, and will consider
implementing additional measures in
the future if it determines such
measures are necessary to address
deceptive or unfair practices relating to
add-ons.
393 See, e.g., Comment of Nat’l Consumer L. Ctr.
et al., Doc. No. FTC–2022–0046–7607 at 30–31.
Instead, advocates recommended that the
Commission require a cooling-off period for addons, similar to that required by the Commission for
door-to-door and other off-premises sales, which
would grant consumers time to review the
paperwork after the transaction, and to cancel
unexpected or otherwise unwanted add-ons for a
full refund. Id. This comment is addressed when
discussing § 463.5(c) in SBP III.E.2(c).
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(c) Any Item Without Express, Informed
Consent
Section 463.5(c) of the proposed rule
prohibited motor vehicle dealers, in
connection with the sale or financing of
vehicles, from charging consumers for
any item unless the dealer obtains the
express, informed consent of the
consumer for the charge. Upon careful
review and consideration of the
comments, the Commission is finalizing
this provision with one modification
from its original proposal: the addition
of language to the end of § 463.5(c)
clarifying that the requirements in
§ 463.5(c) ‘‘also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and (b), 463.4, and paragraph (a) of this
section.’’ In addition, the Commission is
finalizing the corresponding definition
of ‘‘Express, Informed Consent,’’ now at
§ 463.2(g).
Many commenters favored the
proposed provision and expressed the
need for such a provision. For example:
• In one instance a salesman who
appeared busy and trying to help me
efficiently navigate the process rushed
me to sign a small paper, ‘‘just sign this
quickly and we’ll be on our way,’’ I was
told, without disclosure that they were
selling me something that I did not
want. I found it later and felt cheated.394
• They made me sign the sales bill on
an electronic device, but the finance guy
never pointed to me any number I was
getting charge[d] for, and never pointed
to me the total amount I was getting
billed for. He seem[ed] to be in a hurry
and he even told me he had people
waiting for him to see. I think it was all
planned to push the buyer to blindly
sign the bill of sale without explaining
anything because he was scrolling the
electronic pages in a hurry and going
straight to the sign box line. I thought
I signed the agreed amount, I trust them,
but, instead, they charge me for things
I never agreed on. I went back to the
dealer in less than 48 hours when I
discovered the fraud and asked them to
remove the extra fees they charged me
for, they refused and they forced me to
pay for it, I asked them and requested
them to take the car back, they refused
it again, at the end, they gave me a little
bit of a discount, but, not compared to
what I got charged for. . . .395
• I am an attorney in private practice
in NY representing consumers for 33
years. It never ceases to amaze me how
car dealers defraud honest trusting
consumers substantial sums of money
through various common deceptive and
fraudulent practices ranging from
altering documents, concealing
documents, having consumers sign
blank documents, lying about the
material terms of the deal, altering the
prices, adding on other contracts or
items never discussed and selling
vehicles with undisclosed damages and
defects.396
• I have worked in the automotive
business for many year[s]. I realize there
are plenty of dealers around the US that
have deceptive business practices,
however this isn’t the case for all
dealers. I believe there can be laws that
can be put in place to help prevent
dealers from adding additional backend
products without consent or
knowledge.397
Others supported the proposed
provision and urged the Commission to
include additional measures, such as a
thirty-day ‘‘cooling-off’’ period within
which consumers would be able to
receive a full refund for any add-ons. A
number of commenters, including
consumer advocacy organizations,
contended that such an additional time
frame to review, and potentially cancel,
any add-ons would counter the highpressure, confusing environment of the
dealership F&I office and undermine
any efforts to misrepresent add-on
charges and coverage. Such commenters
also indicated that such a provision
would allow consumers the opportunity
to compare prices and providers, and
ultimately help increase competition in
the marketplace. A few individual
commenters requested that the
Commission provide a cooling-off
period not only for add-ons, but for the
full vehicle purchase, and a prohibition
on charging non-refundable deposits.
The Commission agrees that a
‘‘cooling off’’ provision could offer
consumers additional protection from
unwanted add-ons; however, additional
information would assist the
Commission in evaluating the potential
benefits of such a provision. Such
information might include, for example,
what length a cooling-off period would
need to be in order to offer adequate
protection to consumers and to
competition, or how consumers would
most effectively be made aware of such
a cooling-off period in the course of the
complicated, lengthy, and documentheavy vehicle sale or financing
transaction. Such information would be
particularly relevant given that, in the
394 Individual commenter, Doc. No. FTC–2022–
0046–0794.
395 Individual commenter, Doc. No. FTC–2022–
0046–0671.
396 Individual commenter, Doc. No. FTC–2022–
0046–0073.
397 Individual commenter, Doc. No. FTC–2022–
0046–9917.
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651
Commission’s law enforcement
experience, consumers have paid
unauthorized charges on years-long
contracts without learning of the
charges.398 Accordingly, the
Commission will continue to monitor
the market to determine whether, after
adoption of this Rule, it appears that a
cooling-off period or other measures
would be warranted.
Other commenters, including
consumer advocacy organizations,
emphasized the importance of having
disclosures and other documents
available in the language used to
negotiate the sale or lease. Here, the
Commission notes that a dealer does not
obtain the express, informed consent of
the consumer if the consumer’s assent to
a charge is ambiguous or based on a
disclosure the consumer does not easily
understand.399 Thus, if a dealer uses
one language during negotiations and a
different language in its contracts, and
the consumer does not understand and
assent to the charges, the dealer is
violating § 463.5(c). Furthermore, the
Commission notes that the definition of
‘‘Express, Informed Consent’’ it is
finalizing at § 463.2(g) requires, inter
alia, a clear and conspicuous disclosure
of what the charge is for and the amount
of the charge, and the Commission’s
definition of ‘‘Clear(ly) and
Conspicuous(ly),’’ at § 463.2(d)(5),
requires disclosures to appear ‘‘in each
language in which the representation
that requires the disclosure appears.’’
Other commenters, including a
consumer advocacy organization and a
consumer protection agency,
recommended the Commission
prescribe additional requirements for
obtaining express, informed consent for
charges, such as boxes for signatures
and date-and-time recordings, and a
requirement that dealers comply with
the E-Sign Act. Other commenters also
discussed obtaining consent through
electronic signatures. Commenters
including consumer advocacy
organizations, for instance, reported
cases wherein documents that were
signed and supposedly provided
electronically to consumers, were never
actually delivered to the consumer, or
delivered days later. According to these
commenters, some consumers would
sign on a small signature pad where
they could not see the terms of the
document being signed. Other
practitioner commenters reported that
398 See
discussion in SBP II.B.2.
§ 463.2(g) (defining ‘‘Express, Informed
Consent’’ to include an affirmative act
communicating ‘‘unambiguous assent to be
charged’’); § 463.2(d) (defining ‘‘Clear(ly) and
Conspicuous(ly)’’ to include a manner that is
‘‘easily understandable’’).
399 See
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consumers’ electronic signatures were
applied to contracts with very different
terms from what the consumers believed
they were accepting. An individual
commenter recommended that dealers
be required to provide paper documents
where requested and consumers be
allowed to consent on paper documents
only, noting that elderly consumers or
those for whom English is a second
language may have difficulty with
electronic signatures. Another
individual commenter expressed the
view that anyone needing assistance
understanding the sales price or
disclosures should be provided
independent legal counsel at the
dealership’s expense.
While the Commission agrees that
additional measures to promote express,
informed consent could reduce the
incidence of unauthorized charges and
aid with enforcement efforts, the
Commission has determined not to
include in this Final Rule provisions
that would require new forms during
the vehicle sale or financing transaction.
This way, law-abiding dealers would
not have to change their practices for
obtaining express, informed consent.
Thus, the Commission declines to add
further requirements, including those
involving signature boxes or date-andtime recordings. Regarding the E-Sign
Act, nothing in the Rule modifies
compliance obligations under this Act.
Instead, the Final Rule requires that,
regardless of whether any given
signature may have been obtained
through electronic or other means, the
dealer must obtain the express,
informed consent of the consumer to
any item for which the dealer charges
the consumer. Furthermore, the
Commission notes that a dealer has not
obtained express, informed consent if a
dealer has consumers sign an electronic
keypad without seeing and
understanding the terms, or applies
their electronic signatures on contracts
with terms different from those to which
the consumer agreed.400 In such
circumstances, the consumer has not
demonstrated informed consent, or
unambiguous assent to be charged,
including because the signatures are not
in close proximity to clear and
conspicuous disclosures regarding the
charges.
Other commenters, including industry
and dealership associations, claimed
that the Commission did not provide
enough information regarding what
would constitute express, informed
400 See § 463.2(g) (defining ‘‘Express, Informed
Consent’’ to include requiring clear and
conspicuous disclosures of what the charge is for
and the amount of the charge).
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consent to charges, contending that
additional detail was needed, or that the
provision and associated definition of
‘‘Express, Informed Consent’’ were too
vague. The Commission notes, however,
that the phrase ‘‘Express, Informed
Consent’’ is consistent with existing
legal standards.401 Commission
enforcement actions over the years have
challenged as deceptive or unfair the
failure to get express, informed consent
to charges, including in actions
involving motor vehicle dealers and
others:
• Rushing consumers through stacks
of auto paperwork more than 60 pages
deep and requiring over a dozen
signatures, where the paperwork
included charges for unwanted addons.402
• Double charging certain fees
without consumers’ knowledge or
consent in highly technical documents
presented at the close of a long
financing process after an already
lengthy process of selecting a vehicle
and negotiating over its price.403
• Presenting consumers with
preprinted sales and financing forms
that included add-ons consumers had
not requested, and rushing consumers
through the closing process while
directing them where to sign forms,
including forms that were blank.404
• Charging consumers more for a
product or service than they agreed to
pay.405
• Charging consumers for more
products than they requested.406
• Cramming charges onto consumers’
bills for services that the consumers did
not request without the consumers’
knowledge or consent.407
Courts have found the failure to
obtain express, informed consent to be
a violation of the FTC Act.408 Other
401 See, e.g., Fed. Trade Comm’n v. Amazon.com,
Inc., 71 F. Supp. 3d 1158, 1163 (W.D. Wash. 2014).
402 Complaint ¶¶ 24–25, 29–49, 76, Fed. Trade
Comm’n v. North Am. Auto. Servs., Inc., No. 1:22–
cv–01690 (N.D. Ill. Mar. 31, 2022).
403 Complaint ¶¶ 17–19, 44, Fed. Trade Comm’n
v. Liberty Chevrolet, No. 1:20–cv–03945 (S.D.N.Y.
May 21, 2020).
404 Complaint ¶¶ 59–64, 91, Fed. Trade Comm’n
v. Universal City Nissan, No. 2:16–cv–07329 (C.D.
Cal. Sept. 29, 2016).
405 See, e.g., Complaint ¶¶ 29, 47, Fed. Trade
Comm’n v. Yellowstone Cap. LLC, No. 1:20–cv–
06023–LAK (S.D.N.Y. Aug. 3, 2020).
406 See, e.g., Complaint ¶¶ 11–14, 21, Bionatrol
Health, LLC, No. C–4733 (F.T.C. Mar. 5, 2021).
407 See, e.g., Complaint ¶¶ 8–9, 42, Fed. Trade
Comm’n v. T-Mobile USA, Inc., No. 2:14–cv–00967–
JLR (W.D. Wash. July 1, 2014); Complaint ¶¶ 9, 49,
Fed. Trade Comm’n v. AT&T Mobility, LLC, No.
1:14–cv–03227–HLM (N.D. Ga. Oct. 8, 2014).
408 See, e.g., Fed. Trade Comm’n v. FleetCor
Techs., Inc., 620 F. Supp. 3d 1268, 1333–38 (N.D.
Ga. 2022); Fed. Trade Comm’n v. Amazon.com,
Inc., No. C14–1038–JCC, 2016 WL 10654030, at *8
(W.D. Wash. July 22, 2016); Fed. Trade Comm’n v.
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statutes and rules enforced by the
Commission include express, informed
consent requirements for consumer
purchases,409 and similar provisions
have appeared in Commission orders
resolving charges that motor vehicle
dealers or other sellers have levied
unauthorized charges on consumers.410
In short, the prohibition in § 463.5(c)
against charging consumers for products
or services without their express,
informed consent, and the
corresponding definition of ‘‘Express,
Informed Consent’’ in § 463.2(g) are
consistent with existing law in
articulating what motor vehicle dealers
must do—and already should be doing.
The Commission further notes that
the proposed definition of ‘‘Express,
Informed Consent’’ provided
information regarding what was
required by § 463.5(c): an affirmative act
by the consumer communicating
unambiguous assent to be charged,
made after receiving and in close
proximity to a clear and conspicuous
disclosure, in writing, and also orally
for in-person transactions, of the
following: (1) what the charge is for; and
(2) the amount of the charge, including,
if the charge is for a product or service,
all fees and costs to be charged to the
consumer over the period of repayment
with and without the product or service.
As is evident from this language, there
Inc21.com Corp., 745 F. Supp. 2d 975, 1005 (N.D.
Cal. 2010), aff’d, 475 F. App’x 106 (9th Cir. 2012).
409 15 U.S.C. 8402(a)(2), 8403(2) (Restore Online
Shoppers’ Confidence Act); 16 CFR 310.4(a)(7)
(Telemarketing Sales Rule).
410 The Commission has required express,
informed consent provisions in orders against
motor vehicle dealers and others. See Stipulated
Order at Art. IV, Fed. Trade Comm’n v. Passport
Auto. Grp., Inc., No. 8:22–cv–02670–TDC (D. Md.
Oct. 18, 2022); Stipulated Order at Art. II, Fed.
Trade Comm’n v. North Am. Auto. Servs., Inc., No.
1:22–cv–01690 (N.D. Ill. Mar. 31, 2022) Stipulated
Order at Art. II, Fed. Trade Comm’n v. Liberty
Chevrolet, No. 1:20–cv–03945 (S.D.N.Y. May 22,
2020); Stipulated Order at Art. III, Fed. Trade
Comm’n v. Consumer Portfolio Servs., No. 14–cv–
00819 (C.D. Cal. June 11, 2014). Similarly, the
Commission has required such provisions in orders
in other contexts. See, e.g., Stipulated Order at Art.
III, Fed. Trade Comm’n v. Yellowstone Cap. LLC,
No. 1:20–cv–06023–LAK (S.D.N.Y. May 4, 2021);
Stipulated Order at Art. IV, Fed. Trade Comm’n v.
Prog. Leasing, No. 1:20–cv–1668–JPB (N.D. Ga. Apr.
22, 2020); Decision and Order at Art. VI, Bionatrol
Health, LLC, No. C–4733 (F.T.C. Mar. 5, 2021);
Stipulated Order at Art. I.E, Fed. Trade Comm’n v.
BunZai Media Grp., Inc., No. CV 15–4527–GW
(PLAx) (C.D. Cal. June 27, 2018); Stipulated Order
at Art. I, Fed. Trade Comm’n v. T-Mobile USA, Inc.,
No. 2:14–cv–00967–JLR (W.D. Wash. Dec. 19, 2014);
Stipulated Order at Art. I, Fed. Trade Comm’n v.
AT&T Mobility, LLC, No. 1:14–cv–03227–HLM
(N.D. Ga. Oct. 8, 2014); Decision and Order at Art.
I, Google, Inc., No. C–4499 (F.T.C. Dec. 2, 2014);
Consent Order, Apple Inc., No. C–4444 (F.T.C. Mar.
27, 2014); cf. Fed. Trade Comm’n v. Kennedy, 574
F. Supp. 2d 714, 720–21 (S.D. Tex. 2008)
(consumers charged without express, informed
consent for web services could not reasonably avoid
harm when told that websites were ‘‘free’’).
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must be an affirmative act that itself
conveys the consumer’s unambiguous
assent to the specific charge: it must
clearly and expressly communicate both
that the consumer has been informed
about the charge and consents to the
charge. This act cannot be susceptible to
alternative interpretations, i.e., that the
consumer meant to communicate
something other than the consumer’s
authorization to be charged for the
specific add-on or other item in
question. For example, a consumer
might ask, ‘‘how much would it cost to
get the car with [a specific add-on]? ’’
Such a statement does not convey
unambiguous assent to be charged for
the mentioned add-on; rather, it could
merely convey curiosity, interest, or a
desire to evaluate options. Similarly, if
a consumer responds to a salesperson’s
description of an add-on by saying
‘‘OK,’’ this response may merely
confirm that the consumer had heard or
understood information and does not
indicate the consumer’s unambiguous
assent to purchase, let alone be charged
for, such an item.
Relatedly, some commenters,
including dealership associations,
suggested that the addition, by the
consumer, of a signature or set of
initials, accompanied by a
corresponding date can be partial
evidence of an affirmative, or ‘‘Express,’’
act. The Commission notes that the
extent to which these, or other, acts
indicate ‘‘Express, Informed Consent’’
depends on circumstances and context.
A consumer signing a lengthy document
with pre-checked boxes does not, by
itself, demonstrate express, informed
consent. This is particularly so at the
end of an hours-long transaction, at
which point actions that, under other
circumstances, may indicate assent are
increasingly less likely to do so
unambiguously, given that at the close
of a transaction, consumers expect to be
finalizing previously agreed-upon terms
instead of discussing new products or
services hours into the deal. For
express, informed consent to be
effective, the consumer must
understand what a charge is for and the
amount of the charge, including all costs
and fees over the length of the payment
period. A signed and dated document
would not satisfy the requirement for
express, informed consent, for example,
if the consumer was directed to sign the
final page of a contract or an electronic
signature pad and the signed and dated
document did not reflect the terms to
which the consumer had agreed. In such
cases, the signed and dated document
does not represent the consumer’s
unambiguous assent to be charged,
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made after receiving, and in close
proximity to, a clear and conspicuous
disclosure of what the charges are for
and the amount of the charges.
Some industry association
commenters argued that the proposed
definition was too prescriptive, and
would require, for instance, video
records to demonstrate compliance, or
that the proposed language was
overreaching, and requiring express,
informed consent for every item on a
contract would be complicated and
time-consuming. The Commission notes
again that, under current law,
dealerships are already required to
obtain consumers’ express, informed
consent to charges. If dealers are already
obtaining such consent, as is required
by law, they need not take additional
steps, such as by using a separate
disclosure form or videos, or by
spending additional time during the
transaction to comply with this
provision.
A dealership association commenter
requested examples of recordkeeping
and best practices evidencing oral
disclosures that would satisfy the
requirement to obtain express, informed
consent. The express, informed consent
requirement and definition require the
disclosure to be made in writing in
addition to orally for in-person
transactions. Furthermore, under other
provisions of the Rule, such as the
definition of ‘‘Clear(ly) and
Conspicuous(ly)’’ at § 463.2(d)(7),
dealers are prohibited from
contradicting information that is
required to be disclosed; thus, for
example, dealers’ oral representations
must be consistent with the written
disclosure required for obtaining
express, informed consent. Best
practices for satisfying the requirement
to obtain express, informed consent
include presenting key information and
finalizing actual terms early in the
transaction—for example, by including
full cost information, such as estimated
taxes, costs of any selections made by
the consumer, and any other
components of cost, on dealer
websites—and maintaining records that
this was done. The Commission notes
that, as a transaction progresses,
consumers expect to be finalizing
previously agreed-upon terms instead of
discussing new charges and new
products or services. In lieu of finalizing
additional formal mandates in the Rule
regarding recordkeeping and best
practices evidencing express, informed
consent, the Commission recognizes
that industry members and other
stakeholders will have significant room
to develop self-regulatory programs and
guidance tailoring these and other
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653
topics to the specifics of their business
operations.
Some dealership association
commenters expressed concern that
such a provision would be inconsistent
with State laws and would complicate
the car buying experience. While the
Commission is not aware of any laws
that allow dealers to charge consumers
without their express, informed consent,
and thus is not aware of any
inconsistences with this provision,
§ 463.9 of the Final Rule specifies what
dealers must do in the case of actual
conflicts with State law. State laws may
provide more or less specific
requirements—including requirements
that provide greater protection—as long
as they do not conflict with the Final
Rule, as set forth in § 463.9. The
Commission also notes that to the extent
there is overlap with existing law, there
is no evidence that duplicative
prohibitions against deceptive and
unfair conduct, including prohibitions
against charging consumers without
express, informed consent, have harmed
consumers or competition.
Commenters, including an industry
association, inquired whether the term
‘‘item,’’ as used in this proposed
provision, differed from the term ‘‘Addon Product or Service’’ defined in
§ 463.2 of the Commission’s proposal.
The industry association also argued
that requiring express, informed consent
is beyond what is required under the
Truth in Lending Act. The Commission
responds as follows: Consistent with its
plain meaning, the term ‘‘item’’ is
broader than, and thereby encompasses,
the term ‘‘Add-on Product(s) or
Service(s),’’ which is limited by its
definition in § 463.2 of the Final
Rule.411 As proposed, § 463.5 addressed
‘‘Dealer Charges for Add-ons and Other
Items.’’ 412 It did so in recognition of the
fact that add-ons are one type of ‘‘item,’’
but that ‘‘Other Items’’ for which a
dealer might charge exist as well. Thus,
as proposed, § 463.5 applied to charges
generally, whether such charges were
for an add-on or for another item. As
previously discussed, charging
consumers without their express,
informed consent to the charge has long
been an unfair or deceptive practice
under the FTC Act. This has been the
case regardless of what the charge is for.
Accordingly, dealers already should be
obtaining consumers’ express, informed
411 See NPRM at 42046. The term ‘‘item’’ includes
‘‘a distinct part in an enumeration, account, or
series’’ as well as ‘‘a separate piece of news or
information.’’ See Item (defs. 1, 3), MerriamWebster.com Dictionary, https://www.merriamwebster.com/dictionary/item (last visited Sept. 14,
2023).
412 See NPRM at 42046 (emphasis added).
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consent for charges, whether it is for an
Add-on or any other item, regardless of
what may be required under other laws.
Commenters, including this same
industry association commenter, also
questioned how a dealership would
calculate ‘‘the amount of the charge . . .
with and without the product or
service’’ as would be required under
proposed § 463.2(g)(2), as well as how
this proposed provision would work in
a non-financed transaction.413
Conversely, an individual commenter
stated that current F&I practices already
routinely disclose the proposed charges
with and without the product or service.
The Commission notes that its proposed
definition of ‘‘Express, Informed
Consent’’ plainly required disclosure of
the ‘‘amount of the charge, including, if
the product is for a product or service,
all fees and costs to be charged to the
consumer over the period of repayment
with and without the product or
service.’’ 414 The amount the dealer will
charge the consumer over the period of
repayment with the product or service
is the total charge for that product or
service. In the event the charge is for an
optional product or service, the amount
the dealer will charge the consumer
without the product or service is zero;
in the event the charge is for a nonoptional item, the dealer’s disclosure
must clearly indicate as such. Regarding
non-financed transactions, as with a
financed transaction, the amount the
dealer will charge the consumer over
the period of repayment with the
product or service is the total charge for
that product or service. If the period of
repayment is such that full payment is
due upon receipt of the vehicle, the
amount required to be disclosed is the
total charge for that product or service
to be paid upon receipt of the vehicle.
The amount the dealer will charge the
consumer without the product or
service, if it is optional, is zero; in the
event the charge is for a non-optional
item, the dealer’s disclosure must
clearly indicate such. Sharing this basic
information with consumers—how
much they will pay for the item and
how much they will pay without it—
addresses practices, such as hiding addon charges, misrepresenting whether
such charges are required in connection
with the vehicle sale or financing
transaction, or misrepresenting how
such charges influence the total of
payments for the transaction.
An industry association comment
stated that, were the Commission’s
proposal to become final, the
Commission would be able to obtain
monetary relief from dealers for harmed
consumers, and argued that Holder Rule
protections for such consumers thus
would be unnecessary.415 Accordingly,
it urged the Commission to modify its
proposal to include a safe harbor for
contract assignees, which it argued
would be incapable of detecting
deficiencies in sale or lease transactions,
such as dealer misrepresentations or a
lack of consumer consent, unless those
deficiencies were apparent from the face
of the contract. Here, the Commission
emphasizes that no provision of the
Final Rule changes the status quo
regarding the responsibilities of
assignees or other subsequent holders of
motor vehicle financing under the
Holder Rule. The Commission did not
include, when enacting the Holder Rule,
a safe harbor from liability for claims or
defenses based on their capability of
detection by such assignees or other
subsequent holders, and the
Commission does not believe on the
basis of comments received in the
course of this rulemaking that such a
change would be warranted as a
consequence of finalizing this Rule. The
Holder Rule provides important
protections for harmed consumers, even
when there is law that allows the
Commission or other law enforcers to
obtain remedies for harmed consumers,
including where the consumers are
seeking recourse from, or defending
themselves against, parties that have not
been the subject of law enforcement
actions.416 Furthermore, while the
Commission understands that dealers
are often in the best position to ensure
they have, in the first instance, obtained
a consumer’s express, informed consent
for charges, there are steps an assignee
or other subsequent holder of the
consumer credit contract, such as a
third-party financing entity, can take to
address concerns about contracts
obtained without express, informed
consent. For example, if a financing
entity receives complaints from
consumers or others that specific
charges were obtained without
415 See
Holder Rule, 16 CFR 433.2.
Holder Rule, 16 CFR 433.2; see also Fed.
Trade Comm’n, Advisory Opinion Regarding F.T.C.
Trade Regulation Rule Concerning Preservation of
Consumers’ Claims and Defenses (May 3, 2012),
https://www.ftc.gov/system/files/documents/
advisory_opinions/16-c.f.r.part-433-federal-tradecommission-trade-regulation-rule-concerningpreservation-consumers-claims/
120510advisoryopinionholderrule.pdf (last visited
Dec. 5, 2023).
416 See
413 This commenter also contended that this
provision would result in many disclosures when
combined with proposed § 463.5(b). Comment of
Nat’l Auto. Dealers Ass’n, Doc. No. FTC–2022–
0046–8368 at 98–99. As discussed previously, the
Commission declines to finalize proposed
§ 463.5(b).
414 See NPRM at 42045.
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authorization or sees that charges for a
particular item are occurring
substantially more frequently at a given
dealership than at others, the financing
company can take steps to make sure
the dealer is obtaining express,
informed consent. Further, if a financing
entity is concerned that a dealership
may be acting in violation of the Final
Rule, it may arrange its business
relationships accordingly, including by
altering or withdrawing its business
from the dealership.417
Another industry association
commenter asked for clarification
regarding the extent to which particular
rules are necessary to obtain customer
authorization for charges, thus reflecting
what is already necessary under State or
Federal law, as opposed to preventative
measures that the Commission
otherwise deems necessary. The
Commission notes that this provision is
consistent with the requirements of the
FTC Act, which already prohibits
charging consumers without express,
informed consent, and is needed to
address unfair and deceptive conduct.
As the Commission set forth in its
NPRM, the length and complexity of
motor vehicle transactions has created
an environment rife with deceptive and
unfair conduct. Consumer complaints
and the Commission’s extensive law
enforcement experience, among other
sources, indicate that some dealers have
added thousands of dollars in
unauthorized charges to motor vehicle
transactions, including for add-ons
consumers had already rejected.418 Such
issues are exacerbated when, for
example, preprinted dealer contracts
automatically include charges for
optional add-ons that the consumer has
not selected; when dealers rush
consumers through stacks of paperwork
with buried charges after a lengthy
process; when dealers misinform
consumers that the documents they are
signing represent agreed-upon terms; or
when dealers ask consumers to sign
blank documents.
Charging consumers without their
express, informed consent causes
substantial injury to consumers in the
amount of the unauthorized charge.
This injury is not reasonably avoidable
when dealers do not clearly and
conspicuously disclose to the consumer
what the charge is for and the amount
of the charge, since this information is
within the unilateral control of the
417 See Complaint ¶¶ 29–32, Fed. Trade Comm’n
v. Tate’s Auto Ctr. of Winslow, Inc., No. 3:18-cv08176–DJH (D. Ariz. July 31, 2018) (alleging a
financing entity ceased business with Tate’s Auto
Center after concerns about loan falsification and
substantial losses).
418 See SBP II.B.2.
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dealer. There are no countervailing
benefits to consumers or to competition
that outweigh this injury. To the
contrary, if all dealers obtained express,
informed consent to charges, they
would not lose business to dealers who
do not do so.
Charging for an item without
obtaining the consumer’s express,
informed consent is also a deceptive
practice under section 5 of the FTC
Act.419 When a dealer presents a
consumer with whom the dealer has
negotiated a finalized sale or financing
contract, the dealer is representing that
the contract includes only charges that
were negotiated and to which the
consumer agreed. If the dealer failed to
obtain the consumer’s express, informed
consent, however, such a representation
is false or misleading. It is also material:
if consumers knew that they had not, in
fact, authorized a charge that the dealer
nonetheless included in their sales or
financing contract, this information
likely would have affected the
consumers’ willingness to continue to
engage with the dealership, as well as
consumers’ willingness to select and
pay for any such item. The express,
informed consent requirement also
serves to prevent the misrepresentations
prohibited by § 463.3 of the Final Rule—
including misrepresentations regarding
material information about the costs or
terms of purchasing, financing, or
leasing a vehicle, and about any costs,
limitation, benefit, or other aspect of an
add-on.420 The requirement also serves
to prevent violations of the disclosure
requirements in § 463.4 and the
prohibition against charging for nonbeneficial add-ons in § 463.5(a). By
operation of the definition of ‘‘Express,
Informed Consent’’ at § 463.2(g), this
requirement reduces the likelihood that
dealers will fail to disclose what a given
charge is for and the amount of the
charge including all fees and costs to be
charged to the consumer over the period
of repayment with and without the
charged item, thereby making the
disclosures of information required by
§ 463.4 more likely. The same is true
regarding the requirements of § 463.5(a):
the requirement that dealers obtain
informed and unambiguous assent to be
charged for each product or service
makes it less likely that dealers will
charge consumers for items from which
419 See, e.g., Fed. Trade Comm’n v. FleetCor
Techs., Inc., 620 F. Supp. 3d 1268, 1334–39 (N.D.
Ga. Aug. 9, 2022); Fed. Trade Comm’n v. Inc21.com
Corp., 745 F. Supp. 2d 975, 1001–03 (N.D. Cal.
Sept. 21, 2010).
420 See 15 U.S.C. 57a(a)(1)(B) (the Commission
‘‘may include requirements prescribed for the
purpose of preventing’’ unfair or deceptive acts or
practices).
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they would not benefit; consumers
typically do not provide informed,
unambiguous assent to be charged for
additional products from which they
could not benefit unless they are led to
believe, directly or by omission, that
these products would be beneficial.
Thus, the Commission has
determined to finalize proposed
§ 463.5(c), prohibiting dealers from
charging a consumer for any item unless
the dealer obtains the express, informed
consent of the consumer for the charge,
with the addition of language clarifying
that the requirements in § 463.5(c) ‘‘also
are prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.3(a) and (b),
463.4, and paragraph (a) of this section.’’
In addition, the Commission has
determined to finalize its definition of
‘‘Express, Informed Consent,’’ now at
§ 463.2(g), substantively as proposed.
F. § 463.6: Recordkeeping
Proposed § 463.6 required motor
vehicle dealers to create and retain, for
a period of twenty-four months from the
date the record is created, all records
necessary to demonstrate compliance
with the Final Rule, including those in
five enumerated paragraphs. This
proposed section further provided that
dealers may retain such records in any
legible form, and in the same manner,
format, or place as they may already
keep such records in the ordinary
course of business, and that failure to
keep all required records required will
be a violation of the Rule. As examined
in additional detail in the following
analysis, several commenters supported
the proposal; several urged the
Commission to adopt broader
recordkeeping requirements; and several
other commenters argued that the
proposed requirements were too broad.
After careful consideration, the
Commission has determined to adopt
these recordkeeping requirements
largely as proposed, with two
conforming modifications to remove
references to proposed provisions not
adopted in the Final Rule; one
typographical modification to include a
serial comma for consistency; and minor
textual changes to ensure consistency
with the defined terms at § 463.2(e) and
(f) by replacing ‘‘Motor Vehicle Dealer’’
with ‘‘Covered Motor Vehicle Dealer’’ or
‘‘Dealer,’’ replacing ‘‘Motor Vehicle’’
with ‘‘Vehicle,’’ and capitalizing
‘‘vehicle.’’ In the following paragraphs,
the Commission discusses each
proposed recordkeeping requirement,
the comments the Commission received
on each such requirement as well as the
Commission’s responses to such
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655
comments, and the provisions the
Commission is finalizing.
Section 463.6(a) of the proposed rule
required motor vehicle dealers to create
and retain, for a period of twenty-four
months from the date the record is
created, all records necessary to
demonstrate compliance with the Final
Rule, including (1) copies of materially
different advertisements, sales scripts,
training materials, and marketing
materials regarding the price, financing,
or lease of a motor vehicle that the
dealer disseminated during the relevant
time period; (2) copies of all materially
different add-on lists and all documents
describing such products or services
that are offered to consumers; (3) copies
of all purchase orders; financing and
lease documents with the dealer signed
by the consumer, whether or not final
approval is received for a financing or
lease transaction; and all written
communications relating to sales,
financing, or leasing between the dealer
and any consumer who signs a purchase
order or financing or lease contract with
the dealer; (4) records demonstrating
that add-ons in consumers’ contracts
meet the requirements of § 463.5,
including copies of all service contracts,
GAP agreements, and calculations of
loan-to-value ratios in contracts
including GAP agreements; and (5)
copies of all written consumer
complaints relating to sales, financing,
or leasing, inquiries related to add-ons,
and inquiries and responses about
vehicles referenced in § 463.4.
Proposed § 463.6(b) provided that a
motor vehicle dealer may keep the
required records ‘‘in any legible form,
and in the same manner, format, or
place as they may already keep such
records in the ordinary course of
business.’’ This proposed paragraph also
specified that failure to keep all records
required under paragraph (a) of this
section would be a violation of the Final
Rule.
Many commenters, including State
regulators, legal aid groups, consumer
advocacy organizations, and individual
commenters, endorsed the
Commission’s proposed rule generally,
without criticism of its proposed
recordkeeping requirements. In
addition, one such association
commenter expressly stated that it
supported each of the proposed
recordkeeping provisions, explaining
that these proposed provisions were
needed to address ‘‘bait and switch’’
tactics, provide evidence of whether
required disclosures are made, and
identify consumers harmed by illegal
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practices.421 Here, the Commission
notes that record retention requirements
are necessary to preserve written
materials that reflect the transactions
between the dealer and purchasing
consumers, and to assist the
Commission to enforce its Rule by
enabling it to ascertain whether dealers
are complying with its requirements; to
identify persons who are involved in
any challenged practices; and to identify
consumers who may have been injured.
Such requirements are particularly
important in the case of complicated,
lengthy, and document-heavy vehicle
sale or financing transactions, in which
law violations may be more difficult for
consumers and others to detect. Indeed,
the Commission routinely includes
recordkeeping requirements in its
rules.422
Several commenters, including
consumer advocacy organizations,
consumer protection agencies, a group
of State attorneys general, and
individual commenters, urged the
Commission to consider expanding the
proposed twenty-four-month record
retention period, noting that the
contract period for most retail
installment contracts is much longer
than twenty-four months, and that State
limitations periods for claims relating to
the subject matter of the Commission’s
proposed rule often extend well beyond
this proposed timeframe. Numerous
such commenters, for instance,
recommended a record retention period
of the longer of seven years or the length
of the consumer’s financing contract.
The Commission understands that
there would be benefits to a longer
period, especially given that vehicle
financing repayment terms are often far
longer than twenty-four months, and
that many dealers likely already
maintain, in the ordinary course of
business, the types of records set forth
in proposed § 463.6. The Commission,
however, is also mindful that other
commenters raised concerns about the
costs associated with record retention,
including costs that would increase
with any extension of the retention
period. Rather than limiting the types of
records to be maintained, and thus
hampering the Commission’s ability to
ensure compliance with the Final Rule,
the Commission has determined to
adopt a retention period that is shorter
than the time period of many motor
421 Comment of Nat’l Consumer L. Ctr. et al., Doc.
No. FTC–2022–0046–7607 at 48–49; see also
Comment of N.Y.C. Dep’t of Consumer and Worker
Prot., Doc. No. FTC–2022–0046–7564 at 6 (noting
retention requirements are vital to investigations,
particularly with respect to mandatory disclosures).
422 See, e.g., Telemarketing Sales Rule, 16 CFR
310.5; Business Opportunity Rule, 16 CFR 437.7.
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vehicle financing contracts, in order to
minimize burdens. In the event the
Commission subsequently determines
that a twenty-four-month retention
period is insufficient to ensure
compliance with this Rule, the
Commission may consider other
measures in the future.
In addition, a number of commenters,
including consumer advocacy
organizations, recommended additional
provisions, including an explicit
requirement to retain languagetranslated versions of required records,
and a requirement to make retained
records available to consumers upon
request. Regarding language-translated
versions of required records,
§ 463.6(a)(3), (a)(4), and (a)(5) require
dealers to retain copies of ‘‘all’’ listed
records, while § 463.6(a)(1) mandates
that dealers retain ‘‘Materially different’’
copies of records. Thus, for the records
listed in § 463.6(a)(3), (a)(4), and (a)(5),
any translations are required to be
retained; in the case of § 463.4(a)(1), the
Rule requires materially different
translations to be maintained.423 The
Commission therefore has determined
not to add to the recordkeeping section
of the Rule a standalone requirement to
retain translated versions. The
Commission will continue to monitor
the marketplace to determine whether
additional action or protections are
warranted.
The Commission also declines to
include in this Final Rule an additional
requirement that dealers provide
retained records to consumers upon
request. Such a requirement may be
beneficial; however, it is not clear to
what extent dealers currently refuse to
provide consumers with such records,
and there is insufficient information in
the rulemaking record to assess the
impact of—or need for—such a
modification of the existing requirement
to retain and preserve materials in the
Rule. The Commission will continue to
monitor the motor vehicle marketplace,
including issues relating to information
access, to determine whether additional
action or protections are warranted.
Other commenters—particularly auto
industry participants—objected to the
proposed recordkeeping
requirements.424 Several such
423 See
§ 463.2(j).
industry commentor questioned the
utility of records in FTC actions. This commenter
also stated that the FTC is not a supervisory agency
and thus should not be seeking to create a records
inspection scheme. As noted previously,
recordkeeping requirements are necessary here to
prevent unfair and deceptive practices by
mandating preservation of written materials that
reflect dealer transactions and to enable effective
enforcement of the Rule. The Commission has the
authority to prescribe rules for the purpose of
424 One
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commenters contended that the
proposed requirements were new
obligations that went beyond specific
State recordkeeping requirements. Some
dealership associations argued that
existing State recordkeeping
requirements are sufficient and that a
Commission rule was unnecessary. One
such commenter argued that the
existence of overlapping, but different,
State and Federal standards may make
compliance difficult for motor vehicle
dealers.
In response, the Commission notes
that the recordkeeping requirement is
necessary to ensure motor vehicle dealer
compliance with the Final Rule, and
therefore may have different
requirements than State standards. To
provide dealers with flexibility and to
minimize burden, however, the
proposed rule permitted dealers to
retain records ‘‘in any legible form,’’
including ‘‘the same manner, format, or
place’’ in which records are kept in the
ordinary course of business. To the
extent dealers have fashioned their
ordinary record retention practices
around State recordkeeping standards,
the proposed rule thus allowed for
record retention in the form required by
State recordkeeping standards.
Additionally, as discussed in the
following paragraphs, the Commission
is not finalizing recordkeeping
requirements that dealers maintain Addon Lists and Cash Price without
Optional Add-ons disclosures and
declinations, further reducing burdens.
One industry association commenter
suggested that this requirement would
increase risks of identity theft and raise
privacy concerns. The Commission
notes that many dealers already have
obligations to retain customer records
under State law.425 Dealers are required
to have systems in place to protect this
information, given that the failure to
adequately protect such information
violates existing law, including section
5 of the FTC Act and the Commission’s
Standards for Safeguarding Customer
Information, also known as the
preventing unfair or deceptive acts or practices. See
15 U.S.C. 57a(a)(1)(B). The Commission routinely
includes recordkeeping requirements in rules, see,
e.g., Telemarketing Sales Rule, 16 CFR 310.5;
Business Opportunity Rule, 16 CFR 437.7, and
courts have ordered companies to maintain records
in FTC orders, see, e.g., Final Judgment at 20–21,
Fed. Trade Comm’n v. Elegant Sols., Inc., No. 8:19–
cv–01333–JVS–KES (C.D. Cal., July 17, 2020); Order
for Permanent Injunction and Monetary Judgment at
27–28, Fed. Trade Comm’n. v. Consumer Defense,
LLC, No. 2:18–cv–00030–JCM–BNW (D. Nev. Dec. 5,
2019).
425 See, e.g., Va. Code sec. 46.2–1529 (requiring
retention for five years of ‘‘all dealer records’’
regarding, among other things, vehicle purchases,
sales, trades, and transfers of ownership).
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Safeguards Rule.426 Thus, to the extent
the Final Rule requires dealers to collect
personal information beyond that which
they are already collecting, they should
already have systems in place to protect
such information.
Some commenters raised concerns
about the requirement in proposed
§ 463.6(a)(1) to preserve, inter alia,
materially different advertisements,
sales scripts, and marketing materials.
One such dealership association
commenter argued that dealers should
not be required to retain sales scripts,
training materials, and marketing
materials, while another dealership
association commenter argued that
dealers should not be required to
maintain advertisements, positing that
these materials are publicly available
and could be requested from advertisers
as concerns arise with respect to
particular ads. Commenters including
two dealership organizations argued
that digital advertisements would be
difficult to retain, with one such
commenter urging the Commission to
adopt an approach that would permit
dealers to retain a representative
example of a vehicle advertisement and
the underlying data used to populate
vehicle ads. The other such commenter
suggested that the proposed
recordkeeping requirement could be
unduly burdensome because ‘‘all
materials’’ related to its online
inventory ‘‘could be deemed some
version of materially different
advertisements and marketing materials
regarding price or financing of a motor
vehicle.’’ Another dealership
organization commenter raised a similar
concern about website listings and
questioned whether the term
‘‘advertisement’’ includes television ads
and email campaigns.
After considering these comments, the
Commission has determined that the
proposed recordkeeping requirements in
§ 463.6(a)(1) strike an appropriate
balance by requiring the retention of
materials needed to enable effective
enforcement while only requiring such
records to be retained for twenty-four
months and in any legible form.
Advertisements and marketing materials
regarding the price, financing, or lease
of a motor vehicle are critical to
determining compliance with virtually
every provision in the Final Rule, as
they are often consumers’ first contact
426 15 U.S.C. 45; 16 CFR 314; see also Decision
and Order, LightYear Dealer Techs., LLC, No. C–
4687 (F.T.C. Sept. 3, 2019) (consent order); FTC
Business Guidance, ‘‘FTC Safeguards Rule: What
Your Business Needs to Know,’’ https://
www.ftc.gov/business-guidance/resources/ftcsafeguards-rule-what-your-business-needs-know
(last visited Dec. 5, 2023).
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in the vehicle-buying or -leasing
process, and often contain key
representations about pricing,
payments, and other terms. Scripts and
training materials are important
evidence of a dealer’s compliance
program regarding the Final Rule’s
requirements, including of the
information and instructions that
dealership staff are given with respect to
the areas that are addressed by the Final
Rule. Furthermore, regarding the
contention that advertisements are
available publicly or could be requested
separately, a core purpose of the
recordkeeping requirement is to ensure
that disseminated representations are
preserved for a sufficient period of time
to allow for compliance concerns to be
addressed. A compliance regime that,
contrary to the Commission’s proposal,
allowed the destruction of
advertisements after they have been
publicly presented, or that requires the
Commission to try to obtain materials
from advertisers or third parties, would
not serve this purpose.
With respect to the scope of
advertisements that must be retained,
the recordkeeping requirement does not
differ with respect to the form of the
advertisement, since the same
enforcement concerns are raised
regardless of whether an ad is presented
in digital, hardcopy, email, audio,
televised, or other format. The
recordkeeping requirement does not
require all advertisements to be
retained, however, as § 463.6(a)(1)
specifically includes the proviso that ‘‘a
typical example of a credit or lease
advertisement may be retained for
advertisements that include different
Vehicles, or different amounts for the
same credit or lease terms, where the
advertisements are otherwise not
Materially different.’’ Regarding the
commenter’s proposal to allow dealers
to retain a ‘‘representative’’ example of
an advertisement with digital data that
can recreate different versions of the
advertisement, this provision, as
proposed, permitted dealers to preserve
typical examples of advertisements in
this manner so long as such records are
already kept in in the ordinary course of
business, capture all differences that
would be material to consumers, and
accurately show how the offers have
been presented to consumers. Materially
different website listings, television
advertisements, and email campaigns
must be preserved, consistent with the
plain meaning of the terms used in the
section.
With respect to proposed
§ 463.6(a)(2)’s requirement to maintain
copies of all materially different add-on
lists, an industry association commenter
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657
contended that retaining materially
different add-on lists would be difficult,
given the scope of the term ‘‘Add-on’’
and the consequent size of the list as
well as its dynamic nature. One
dealership association commenter
argued that the proposed requirement to
retain add-on lists was unnecessary,
contending that concerns could be
addressed as they arise, and requesting
to replace this proposed requirement
with a requirement to retain a master
copy of each insurance product, service
contract, or other add-on in the dealer’s
general business file. After carefully
considering the comments, the
Commission has determined not to
finalize the proposed requirement at
§ 463.4(b) to disclose an add-on list, and
consequently will not be finalizing the
proposed requirement at § 463.6(a)(2)
that dealers retain materially different
add-on lists.
Several commenters, including
industry associations, argued that
certain of the proposed requirements to
preserve written material, including
written communications under
proposed § 463.6(a)(3) and written
consumer complaints, and inquiries and
responses about vehicles referenced in
§ 463.4, under proposed § 463.6(a)(5),
would be unduly burdensome.
Generally, these commenters contended
that the various ways consumers may
communicate with dealers—including
chat features on a dealer’s website,
emails and text messages with
salespersons, and social media posts—
would require the development of new
and onerous preservation systems. A
dealership organization commenter
raised concerns about retaining text
messages and emails, contending that
salespeople may use their personal
phones and email addresses, even if the
dealership has policies against such use.
One industry association commenter
argued that third parties might have
records related to add-ons and that this
provision should only apply to
‘‘complaints’’ relating to add-ons
instead of ‘‘inquiries’’ relating to addons. One dealership association
commenter argued that dealers should
not be required to retain consumer
complaints, contending it should be the
businesses’ decision whether to
maintain such materials, and also
arguing that the Rule should not require,
under proposed § 463.6(a)(4), the
preservation of materials such as pricing
options presented to consumers,
contending that such materials should
be limited to the two parties to the
agreement.
After considering these comments, the
Commission has determined to finalize
requirements to retain written materials
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under § 463.6(a)(3), (4), and (5), with a
limiting modification to § 463.6(a)(4).
These requirements are necessary to
address unfair and deceptive practices
by mandating that dealers preserve
written materials that reflect the
transactions between the dealer and
purchasing consumers, and to assist the
Commission in its enforcement of the
Rule.427 Such materials are particularly
important given that the vast majority of
consumers do not file a complaint, and
with hidden charges, many consumers
never know about the illegal conduct in
the first place.428 For instance, as
explained in SBP II.B, a survey of one
dealership group’s customers showed
that 83% of the respondents were
subject to the dealer’s unlawful
practices related to add-ons. This equals
16,848 consumers—far more than the
391 complaints received against the
dealer over the time period covered by
the survey.
To minimize burden, as previously
noted, the retention requirements are for
a period of twenty-four months. Further,
as stated previously, § 463.6(b) permits
dealers to retain records ‘‘in any legible
form,’’ which could, for example,
include using the backup and export
features that already exist in many
social media services, email platforms,
chat platforms, and text systems, instead
of creating entirely new systems.
Regarding dealers that use third parties
to administer add-ons, commenters did
not explain why they cannot access
records related to add-ons from these
parties.429 Further, altering the language
in the provision to apply to
‘‘complaints’’ rather than ‘‘inquiries’’
related to add-ons could invite
arguments that consumer statements,
such as, ‘‘Why was I charged for this
add-on that I did not know about?’’ are
not ‘‘complaints,’’ but simply
‘‘inquiries.’’ With respect to the use of
salespeople’s personal devices to
conduct motor vehicle dealer activities,
including the sale, financing, or leasing
427 As noted previously, a dealership association
commenter argued that dealers should not be
required to preserve complaints and certain add-on
materials, contending that it should be a business
decision whether to retain such records. The
Commission declines to substantively modify these
requirements from the Commission’s original
proposal, given the importance of these materials in
ensuring compliance with the other requirements of
the Rule.
428 See SBP II.B (discussing how complaints
represent the tip of the iceberg in terms of actual
consumer harm).
429 This is consistent with the Commission’s prior
enforcement order practice. See, e.g., Stipulated
Order at 25, Fed. Trade Comm’n v. N. Am. Auto.
Servs., Inc., No. 1:22–cv–0169 (N.D. Ill. Mar. 31,
2022) (requiring retention of ‘‘records of all
consumer complaints and refund requests, whether
received directly or indirectly, such as through a
third party, and any response’’).
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of vehicles, as with any business,
dealers should ensure that their
employees are communicating with
consumers through appropriate
channels that can be monitored and
controlled by the dealership.
Some commenters, including an
industry association and a dealership
organization, also raised concerns about
how to determine what would
constitute ‘‘written consumer
complaints’’ under proposed
§ 463.6(a)(5). For purposes of the Rule,
the Commission refers commenters to
the plain meaning of the terms used in
the phrase, which terms are commonly
used and understood.430
Two industry association commenters
argued that the proposed requirement to
retain written communications would
be particularly burdensome for
recreational vehicle dealers, contending
that that this was particularly so given
that many RV dealers are small
businesses. In response, the
Commission notes that, as explained in
the paragraph-by-paragraph analysis of
§ 463.2(e) and (f) in SBP III.B.2(e) and
(f), it has determined not to finalize the
Rule with respect to dealers
predominantly engaged in the sale,
leasing, or servicing of RVs, but it will
continue to monitor the marketplace to
determine whether modifications or
revisions may be warranted in the
future.
Finally, one industry association
commenter argued that the proposed
recordkeeping requirements and costs
were unwarranted given that the
Commission has brought an average of
fewer than four enforcement actions a
year against motor vehicle dealers in the
past decade. In response, the
Commission notes that its experience
indicates that the number of
enforcement actions is not remotely
reflective of the total violations of law
in the auto marketplace. To uncover
misconduct and bring actions, law
enforcement agencies and officials often
rely on complaints from affected parties.
As previously discussed, however,
consumer complaints typically
represent just the ‘‘tip of the iceberg’’ in
430 The term ‘‘written’’ means ‘‘made or done in
writing.’’ See Written, Merriam-Webster.com
Dictionary, https://www.merriam-webster.com/
dictionary/written (last visited Dec. 5, 2023). The
term ‘‘consumer’’ includes ‘‘one that utilizes
economic goods.’’ See Consumer (def. a), MerriamWebster.com Dictionary, https://www.merriamwebster.com/dictionary/consumer (last visited Dec.
5, 2023). The term ‘‘complaint’’ includes an
‘‘expression of grief, pain, or dissatisfaction,’’
‘‘something that is the cause or subject of protest
or outcry,’’ and ‘‘a formal allegation against a
party.’’ See Complaint (defs. 1, 2a, 3), MerriamWebster.com Dictionary, https://www.merriamwebster.com/dictionary/complaint (last visited Dec.
5, 2023).
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terms of actual violations, and the vast
majority of consumers who are
subjected to unlawful practices in this
area may not realize they are being
victimized.431 Further, the Commission
has limited law enforcement resources
and jurisdiction over a broad range of
commerce.432 The number of actions it
brings relating to motor vehicle
dealers—as with actions in any area—is
necessarily limited by these resource
constraints, even when there are
ongoing, chronic problems that cause
substantial consumer harm. Despite
these constraints, the Commission and
its law enforcement partners have taken
significant action aimed at addressing
unfair and deceptive practices in the
motor vehicle marketplace, as explained
in SBP II.C. Given that problems with
bait-and-switch advertising, add-ons,
and other aspects of vehicle-buying and
-leasing have continued to be a source
of consumer harm despite this action,
additional measures are warranted. And
the Commission has taken steps to
minimize burden, including by
declining to finalize the add-on list
disclosure requirements in proposed
§ 463.4(b), as well as the itemized
disclosures required in proposed
§ 463.5(b) and their corresponding
proposed recordkeeping requirements.
Moreover, the recordkeeping provisions
permit dealers to retain records in any
legible form, providing a flexible
standard that permits the use of
ordinary and standard forms of data and
document retention.
The Commission adopts in the Final
Rule recordkeeping requirements largely
as they were set forth in the proposed
rule, with two substantive
modifications. After careful
consideration, the Commission is
removing the requirements to retain
copies of add-on lists required by
proposed § 463.6(a)(2) and records
showing compliance with the cash price
without optional add-ons disclosures
and declinations required by proposed
§ 463.6(a)(4). These changes will reduce
record creation and retention burdens
for dealers. As previously described, the
Final Rule also contains one
typographical modification of adding a
serial comma and conforming edits for
consistency with the defined terms in
§ 463.2(e) and (f).
The Commission adopts these
recordkeeping requirements to promote
effective and efficient enforcement of
the Rule, thereby deterring and
preventing deception and unfairness. As
discussed throughout this SBP, the
rulemaking record, including the
431 See
432 See
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Commission’s law enforcement
experience, indicates that there are
chronic problems confronting
consumers in the motor vehicle sales,
financing, and leasing process, which
include advertising misrepresentations
and unlawful practices related to addons and hidden charges.433 The
recordkeeping requirements in the Final
Rule will assist the Commission in
investigating and prosecuting law
violations and help the Commission
identify injured consumers for paying
consumer redress. The recordkeeping
requirements are flexible, allowing
dealers to retain materials in any legible
form, and are limited to a period of
twenty-four months from the date the
record is created. The recordkeeping
requirements are consistent with, and
similar to, the recordkeeping
requirements in other Commission
rules, as tailored to individual
industries and markets.434
G. § 463.7: Waiver Not Permitted
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Proposed § 463.7 prohibited waiver of
the requirements of the Final Rule by
providing that it constituted a violation
of the Rule ‘‘for any person to obtain, or
attempt to obtain, a waiver from any
consumer of any protection provided by
or any right of the consumer under’’ the
Rule. Comments that addressed this
proposed provision generally either
supported it or expressed no opinion on
it. Comments in support noted that the
provision would help provide
consistency in the protection it would
provide to consumers and emphasized
that it would prohibit unscrupulous
dealers from causing consumers to sign
away their rights. This proposed
provision was modeled on a similar
provision in the Mortgage Assistance
Relief Services (‘‘MARS’’) Rule, which
was originally promulgated by the
Commission and subsequently
republished by the CFPB.435 Moreover,
at least one State has a similar waiver
provision in its rule covering motor
433 Some enforcement actions have specifically
alleged that a defendant failed to maintain
documents required under a prior order with the
FTC. Complaint ¶¶ 42–45, Fed. Trade Comm’n v.
Norm Reeves, Inc., No. 8:17–cv–01942 (C.D. Cal.
Nov. 3, 2017) (alleging dealer failed to keep records
of previous advertisements needed to demonstrate
compliance with prior order); Complaint ¶¶ 32–35,
Fed. Trade Comm’n v. New World Auto Imports,
Inc., No. 3:16–cv–22401 at (N.D. Tex. Aug. 18,
2016) (same).
434 See, e.g., 16 CFR 310.5 (Telemarketing Sales
Rule); 16 CFR 437.7 (Business Opportunity Rule);
16 CFR 453.6 (Funeral Industry Practices Rule); 16
CFR 301.41 (Fur Products Labeling Rule).
435 See MARS Rule (Regulation O), 12 CFR
1015.8, previously published by the Commission at
16 CFR 322.1.
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vehicle dealer practices.436 The
Commission concludes that this
provision is necessary to prevent
circumvention of the Rule, and, after
review of the comments, adopts this
prohibition as it was originally
proposed.
H. § 463.8: Severability
Proposed § 463.8 provided that the
provisions of the Final Rule ‘‘are
separate and severable from one
another. If any provision is stayed or
determined to be invalid, it is the
Commission’s intention that the
remaining provisions will continue in
effect.’’ This proposed provision was
modeled on similar provisions in other
rules, including the Commission’s
Telemarketing Sales Rule and the MARS
Rule.437 A number of commenters,
including dealership associations,
raised general concerns that the
proposed provisions may be too
integrated with each other for
severability to be possible. Such
commenters, however, did not provide
examples of any such instances wherein
they believed certain provisions could
not remain in effect if other provisions
were stayed or determined to be invalid.
Upon consideration of the comments,
the Commission concludes that
severability is possible in the event any
provision is stayed or determined to be
invalid. The Rule the Commission is
finalizing includes prohibitions against
misrepresentations regarding material
information (§ 463.3), required
disclosures (§ 463.4), and prohibitions
against charging for add-ons that
provide no benefit or any item without
express, informed consent (§ 463.5)—
each of which dealers are capable of
abiding by independently, as well as by
the provisions that independently
support their operation, including
Authority (§ 463.1), Definitions
(§ 463.2), Recordkeeping (§ 463.6),
Waiver not permitted (§ 463.7), and
Relation to State laws (§ 463.9). Thus,
the Commission has determined to
adopt this provision in the Final Rule as
it was originally proposed.
I. § 463.9: Relation to State Laws
Proposed § 463.9 provided that the
Rule does not supersede, alter, or affect
‘‘any other State statute, regulation,
order, or interpretation relating to Motor
Vehicle Dealer requirements, except to
the extent that such statute, regulation,
order, or interpretation is inconsistent
436 See, e.g., Wis. Admin. Code Trans. 139.09
(similar waiver prohibition clause in Wisconsin’s
Motor Vehicle Trade Practices rule).
437 See MARS Rule, 16 CFR 322.8 (Commission
Rule), 12 CFR 1015.11 (CFPB Rule); Telemarketing
Sales Rule, 16 CFR 310.9.
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659
with’’ the Rule, ‘‘and then only to the
extent of the inconsistency.’’ Proposed
§ 463.9 further provided that, for
purposes of this provision, a State
statute, regulation, order, or
interpretation is not ‘‘inconsistent’’ if
the protection such statute, regulation,
order, or interpretation affords any
consumer ‘‘is greater than the protection
provided under’’ the Rule. After
carefully considering the comments, the
Commission adopts § 463.9 largely as
proposed in the Final Rule.
Numerous State regulator commenters
contended that the proposed rule would
create a uniform baseline of protection
that would complement State standards.
A comment from a group of eighteen
State attorneys general contended that
many of the Proposed rule’s
requirements were similar to, or the
same as, requirements that currently
exist under State laws or regulations,
and highlighted the benefit to law
enforcement from establishing a
consistent Federal baseline while
providing States with flexibility to
impose heightened consumer
protections.438
One municipal licensing entity
commenter that expressed general
support of the Commission’s proposed
rule also posited that the Commission
should broaden proposed § 463.9 to
expressly include municipalities. With
respect to the applicability of the
provision to municipalities, the
Commission notes that State political
subdivisions exercise delegated power
of their State, and as such, § 463.9
applies to municipal standards as
well.439
Other commenters, including
dealership associations, referred
generally to potential conflicts between
the Commission’s proposed rule and
State laws, but such commenters
typically did not point to any specific
purported conflicts with State law. To
the extent some such commenters
argued that certain proposed provisions
would conflict with State laws, such
arguments are addressed in the SBP’s
corresponding paragraph-by-paragraph
analysis of the relevant Rule provision.
Generally, the Commission is not aware
of State laws that allow dealers to make
misrepresentations regarding material
information; prohibit the disclosure of
438 Comment of 18 State Att’ys Gen., Doc. No.
FTC–2022–0046–8062 at 11.
439 See City of Columbus v. Ours Garage &
Wrecker Serv., Inc., 536 U.S. 424, 433 (2002) (‘‘The
principle is well settled that local governmental
units are created as convenient agencies for
exercising such of the governmental powers of the
State as may be entrusted to them in its absolute
discretion.’’) (quoting Wis. Pub. Intervenor v.
Mortier, 501 U.S. 597, 607–08 (1991)).
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accurate information regarding a
vehicle’s offering price, optional vehicle
add-ons, or total payment information;
or permit dealers to charge consumers
for add-ons that provide no benefit to
the consumer or to charge for items
without consumers’ express, informed
consent. To the extent there truly are
conflicts, as discussed in the following
paragraphs, § 463.9 establishes the
framework for addressing any such
inconsistencies.
Commenters including dealership
associations also argued that existing
State standards are sufficient and
identified State requirements that the
commenters argued would be redundant
with, or superior to, one or more
provisions in the Commission’s
proposed rule. To the extent the Rule
prohibits conduct that is already
prohibited by State laws, the
Commission has not seen evidence that
State and Federal standards prohibiting
the same misconduct has harmed
consumers or competition. Moreover,
such overlap is indicative of dealers’
ability to comply with the relevant
provisions in the Rule. To the extent
State laws have additional requirements
that provide greater protections or are
not otherwise inconsistent with part
463, dealers must continue to follow
those laws.
Several dealership association
commenters expressed concern
regarding how to determine whether a
State statute, regulation, order, or
interpretation affords ‘‘greater
protection’’ than a provision in the
Commission’s proposed rule. One such
commenter, for example, raised
concerns that proposed § 463.5(a) may
conflict with a pending California bill
that would prohibit the sale of GAP
when a vehicle has less than a 70%
loan-to-value ratio. An industry
association commenter claimed that the
Commission’s proposed definitions of
‘‘Dealer or Motor Vehicle Dealer’’ would
conflict with analogous State
definitions. In response, the
Commission emphasizes that § 463.9
would be triggered only if there were an
actual inconsistency between State law
and the Final Rule, and in the event of
an inconsistency, the Rule only affects
such State law to the extent of the
inconsistency. The commenter
examples did not present any such
inconsistencies because it is possible to
comply with both the cited State law
examples and with the Final Rule. For
instance, a dealer operating in a State
that prohibits the sale of a GAP
agreement when a vehicle transaction
involves a loan-to-value ratio below
70% would need to abide by the ratio
set forth by State law and also by the
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Rule’s prohibition against charging for
the product if the consumer would not
benefit from it. Similarly,
notwithstanding a commenter’s claims
that the proposed rule’s definition of
‘‘Dealer or Motor Vehicle Dealer’’ would
conflict with analogous State standards,
the commenter did not identify any
actual conflicts; nevertheless, to the
extent State and Federal standards cover
independent areas or actors, each actor
must comply with the standards—
whether State, Federal, or both—under
which the actor is covered.440 Further
discussion of how State laws interact
with specific sections of the Rule are
explained in the corresponding sectionby-section analysis for the relevant
sections.
Some such commenters also
questioned whether more coordination
with States and Federal agencies was
needed, without explaining what
coordination was needed. In any event,
the Commission coordinates regularly
with States and Federal counterparts.
Many commenters’ concerns focused
on the written disclosures proposed in
§ 463.5(b), which the Commission has
determined not to include in this Final
Rule. For instance, a substantial number
of commenters, including industry
associations, argued that proposed
§ 463.5(b) would have created different
Federal and State requirements for
written disclosures that would result in
duplicative paperwork. A dealership
association specifically argued that
proposed § 463.5(b) may have conflicted
with a State pre-contract disclosure
requirement pertaining to six categories
of add-ons because it would have
required an additional disclosure about
a broader category of add-ons. An
industry association similarly pointed to
this State’s pre-contract disclosure
requirement as a reason that additional
disclosures under this Rule, including
those required by proposed § 463.5(b),
could result in consumer confusion. At
least four commenters, including
industry associations and a dealership
organization, argued that the proposed
rule’s requirement under § 463.5(b) to
create new documentation may conflict
with the ‘‘single document’’
requirements, in effect in many States,
which mandate that the entire motor
vehicle sale, financing, or lease
agreement—including any add-on
products or services—be within one
document. As discussed in the
440 See, e.g., Pirouzian v. SLM Corp., 396 F. Supp.
2d 1124, 1131 (S.D. Cal. 2005) (reasoning that the
more inclusive definition of ‘‘debt collector’’ under
California law is not ‘‘inconsistent’’ with the Fair
Debt Collection Practices Act because by ‘‘enlarging
the pool of entities who can be sued’’ the State law
offered greater protection).
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paragraph-by-paragraph analysis of
§ 463.5 in SBP III.E.2, the Commission
has determined not to finalize the
written disclosures requirement under
this provision.
After carefully considering the
comments regarding proposed § 463.9,
the Commission is finalizing this
section largely as proposed, with one
minor modification: the Commission is
adding ‘‘Covered’’ to the term ‘‘Motor
Vehicle Dealer’’ in § 463.9(a) to conform
with the revised definition in § 463.2(f).
Section 463.9 provides a uniform floor
of protection with the Commission’s
Final Rule, while also permitting States
to enact stronger protections, using a
standard that has been applied in other
laws and regulations for several
decades.441 This provision is necessary
to address unfair and deceptive
practices and to enable the Commission
to enforce the Rule.
IV. Effective Date
The Final Rule becomes effective on
July 30, 2024. One industry association
commenter objected that the NPRM did
not include an effective date or inquire
into the timing for feasibly
implementing the Rule. Another such
commenter requested at least 18 months
for stakeholders to prepare for Rule
compliance, but did not explain why it
would take 18 months to refrain from
conduct that is already illegal, such as
making misrepresentations. Rules are
generally required to be published 30 to
60 days before their effective date,
though in some circumstances, agencies
may cite good cause for the rule to
become effective sooner than 30 days
from publication.442 Given the
significant harm to consumers and lawabiding dealers from deceptive or unfair
acts or practices; and the fact that, for
dealers already complying with the law,
compliance with the Rule the
Commission is finalizing should not be
onerous; the NPRM did not propose or
contemplate any additional delay.
Nevertheless, after a review of
comments, the Commission is providing
dealers until July 30, 2024 to make
441 See, e.g., 10 U.S.C. 987(d)(1) (Military Lending
Act); 15 U.S.C. 1692n (Fair Debt Collection
Practices Act); 12 CFR 1006.104 (Regulation F); 15
U.S.C. 1693q (Electronic Funds Transfer Act); see
also 21 U.S.C. 387p(a)(1) (Family Smoking
Prevention and Tobacco Control Act).
442 See 5 U.S.C. 553(d) (requiring publication of
a substantive APA rule ‘‘not less than 30 days
before its effective date’’ except ‘‘as otherwise
provided by the agency for good cause found and
published with the rule’’). Significant rules defined
by Executive Order 12866 and major rules defined
by the Small Business Regulatory Enforcement
Fairness Act are required to have a 60-day delayed
effective date. See E.O. 12866, 58 FR 51735 (Oct.
4, 1993); 5 U.S.C. 801(a)(3)).
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changes to their operations, if needed,
in light of the Rule’s requirements.
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V. Paperwork Reduction Act
On July 13, 2022, the Commission
submitted the NPRM and an
accompanying Supporting Statement to
the Office of Management and Budget
(‘‘OMB’’) for review under the
Paperwork Reduction Act (‘‘PRA’’), 44
U.S.C. 3501–3521. On July 29, 2022,
OMB directed the Commission to
resubmit its request when the proposed
rule was finalized.443
The Commission is now submitting
the Final Rule and a Supplemental
Supporting Statement to OMB. The
disclosure and recordkeeping
requirements of the Rule constitute
‘‘collection[s] of information’’ for
purposes of the PRA.444 The associated
burden analysis follows.445
In the NPRM, the Commission
provided estimates and solicited
comments regarding the proposed rule,
including regarding (1) the proposed
add-on list disclosure requirement; (2)
443 OMB assigned the rulemaking control number
3084–0172 for PRA review purposes.
444 44 U.S.C. 3502(3); 5 CFR 1320.3(c).
445 One commenter suggested the FTC did not
comply with several provisions of the PRA,
specifically those contained in 5 CFR
1320.5(a)(1)(iv), 1320.8(d)(1), 1320.11(a),
1320.11(b), and 1320.11(d). The commenter does
not explain the basis for the purported deficiencies.
These provisions generally relate to the submission
of a collection of information to OMB, and
solicitation and consideration of public comments.
The FTC has complied with these provisions. The
FTC submitted an Information Collection Request to
Office of Management and Budget on July 13, 2022,
concurrently with publication of the NPRM, in
accordance with 5 CFR 1320.11(b). See Motor
Vehicle Dealers Trade Regulation Rule, ICR
202202–3084–001, OMB 3084–0172, https://
omb.report/icr/202202-3084-001. Because the FTC
complied with this requirement, the collection of
information proposed in the NPRM is not, as the
commenter contends, subject to disapproval under
5 CFR 1320.11(d).
The Commission also did not violate 5 CFR
1320.5(a)(1)(iv) and 1320.11(a), providing for
comments to be submitted to OMB, as the
commenter contends. Those provisions are limited
by 5 CFR 1320.8(d)(3), which provides that the
agency need not direct comments to OMB ‘‘if the
agency provides notice and comment through the
notice of proposed rulemaking . . . for the same
purposes as are listed under’’ 5 CFR 1320.8(d)(1).
The Commission solicited comments in the NPRM
on the subjects enumerated in 5 CFR 1320.8(d)(1),
see NPRM at 42028–31, 42035–43, and it was not
necessary for the Commission to also direct those
same comments to OMB. The Commission thus did
not violate 5 CFR 1320.5(a)(iv) or 1320.11(a).
Further, contrary to the commenter’s assertion,
the Commission demonstrated throughout the
NPRM that the information collection-related
requirements it embodies are necessary, offer utility
and public benefit, and minimize burdens. See, e.g.,
NPRM at 42027, 42043. Moreover, the Commission
requested comments on the necessity, utility,
benefits, and burdens of the proposed rule, see
NPRM at 42028–31, 42035–43, and has further
taken into consideration and addressed comments
in this SBP.
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the proposed cash price without
optional add-ons disclosure
requirement; (3) other proposed
provisions prohibiting certain
misrepresentations and requiring certain
disclosures; (4) the proposed
recordkeeping provisions; and (5)
estimated capital and other non-labor
costs. As previously discussed, after
carefully reviewing the comments, the
Commission has made certain changes
to the relevant provisions in the Final
Rule. Specifically, the Commission has
determined not to finalize requirements,
pursuant to proposed § 463.4(b), that
dealers disclose an add-on list or,
pursuant to proposed § 463.5(b), that
dealers refrain from charging for
optional add-ons unless enumerated
requirements relating to the vehicle’s
cash price without optional add-ons are
met.
In the NPRM, the Commission
estimated that the disclosure and
recordkeeping requirements would
impact approximately 46,525 franchise,
new motor vehicle and independent/
used motor vehicle dealers in the
U.S.446 In the NPRM, the Commission
explained that this figure was exclusive
to automobile dealers, and invited
comments regarding market information
for dealers of other types of motor
vehicles, such as boats, RVs, and
motorcycles.447 In response, one
industry association commenter noted
the absence of such other motor vehicle
dealers from the Commission’s estimate.
Another commenter also noted the
absence of such dealers in the estimate
and argued that the Commission’s
estimate also erroneously included
independent used motor dealers which
the commenter contended do not
perform any servicing work, but stated
that the Commission’s estimate was
fairly accurate numerically. As
discussed in the paragraph-byparagraph analysis of § 463.2(e) in SBP
III.B.2(e), the Commission has
determined to expressly exclude
‘‘Recreational boats and marine
equipment,’’ ‘‘Motorcycles, scooters,
and electric bicycles,’’ ‘‘Motor homes,
recreational vehicle trailers, and slide-in
campers,’’ and ‘‘Golf carts’’ from the
Final Rule’s definition of ‘‘Covered
Motor Vehicle.’’ Further, as examined in
the paragraph-by-paragraph analysis of
§ 463.2(f) in SBP III.B.2(f), the plain
meaning of the term ‘‘servicing’’ covers
activities that are undertaken by
independent used car dealers.448 Thus,
446 NPRM
at 42031.
at 42031 n.154, 42036.
448 See also Used Car Rule, 81 FR at 81668 (noting
that the term ‘‘servicing’’ used in this same context
‘‘captures activities undertaken by essentially all
447 NPRM
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661
the Commission bases its estimate of the
entities covered by the Final Rule on the
same North American Industry
Classification System (‘‘NAICS’’) 449
categories—‘‘new car dealers’’ and
‘‘used car dealers’’—as it did in the
NPRM.450 As with other figures in this
section, the NAICS data assembled by
the U.S. Census Bureau have been
revised since the publication of the
Commission’s NPRM with more recent
data. Based on these revisions, the
Commission now estimates that the
Final Rule’s disclosure and
recordkeeping requirements will impact
approximately 47,271 franchise, new
motor vehicle and independent/used
motor vehicle dealers in the United
States.451
The estimated overall annual hours
burden for the Final Rule’s collections
of information is 1,595,085 hours. The
estimated overall annual labor cost for
the Final Rule’s collections of
information is $51,904,537. The
estimated overall annual capital and
other non-labor cost for the Final Rule’s
collections of information is
$14,181,300.
A. Add-On List Disclosures
Section 463.4(b) of the proposed rule
required motor vehicle dealers that
charge for optional add-on products or
services to disclose clearly and
conspicuously in advertisements and on
any website, online service, or mobile
application through which they market
motor vehicles, and at any dealership,
an itemized add-on list of such products
used car dealers,’’ including by preparing vehicles
for sale by addressing any obvious mechanical
problems and by undertaking the general industry
practice of appearance reconditioning).
449 NAICS is the standard used by Federal
statistical agencies in classifying business
establishments for the purpose of collecting,
analyzing, and publishing statistical data related to
the U.S. business economy. North American
Industry Classification System, U.S. Census Bureau,
https://www.census.gov/naics/.
450 U.S. Census Bureau, ‘‘All Sectors: County
Business Patterns, including ZIP Code Business
Patterns, by Legal Form of Organization and
Employment Size Class for the U.S., States, and
Selected Geographies: 2019,’’ https://
data.census.gov/cedsci/table?q=CBP2019.
CB1900CBP&n=44111%3A44112&tid=
CBP2019.CB1900CBP&hidePreview=true&nkd=
EMPSZES∼001,LFO∼001 (listing 21,427
establishments for ‘‘new car dealers,’’ NAICS code
44111, and 25,098 establishments for ‘‘used car
dealers,’’ NAICS code 44112). See NPRM at 42031.
451 U.S. Census Bureau, ‘‘All Sectors: County
Business Patterns, including ZIP Code Business
Patterns, by Legal Form of Organization and
Employment Size Class for the U.S., States, and
Selected Geographies: 2021,’’ https://
data.census.gov/table?q=CB2100CBP&n=
44111:44112&tid=CBP2021.CB2100CBP&nkd=
EMPSZES∼001,LFO∼001 (listing 21,622
establishments for ‘‘new car dealers,’’ NAICS code
44111, and 25,649 establishments for ‘‘used car
dealers,’’ NAICS code 44112).
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or services and their prices. In the
NPRM, the Commission estimated costs
for the add-on list disclosure and
solicited comments on its burden
analysis.452 One industry association
made several arguments, including that
the Commission underestimated the
time and resources required because an
add-on list can be lengthy, vary by
vehicle and over time, and require
working with several third parties. This
commenter also argued that periodic
revision of such lists would take more
than the estimated one hour of clerical
time per dealer, per year. The
commenter, however, did not offer any
specific estimates for such periodic
revision activities.
As explained in the section-by-section
analysis of § 463.4 in SBP III.D.2, after
careful consideration, the Commission
has determined not to finalize its
proposed add-on list provision at
§ 463.4(b).
B. Disclosures Relating to Cash Price
Without Optional Add-Ons
Section 463.5(b) of the proposed rule
required motor vehicle dealers that
charge for optional add-on products or
services to provide certain itemized
disclosures regarding pricing and cost
information without such add-ons. In
response to the Commission’s estimates
with respect to this proposed provision,
one industry association argued that the
Commission did not provide adequate
explanation of the assumptions it used
to arrive at its cost estimates for this
proposed provision, and contended that
the Commission underestimated the
costs associated with developing,
printing, and presenting the proposed
disclosures. This commenter also
contended that the proposed
requirement would have required
significant training costs; that multiple
forms would have been required for
each motor vehicle transaction; and that
aspects of the required disclosures
would be duplicative of information
already provided by dealerships in the
ordinary course of business. The
commenter estimated that developing a
disclosure form for this proposed
provision would cost dealers at least
$750 and suggested that other attendant
costs would be in the hundreds of
millions or billions of dollars, without
explaining how it arrived at such
estimated figures.
As explained in the section-by-section
analysis of § 463.5 in SBP III.E, after
careful consideration, the Commission
has determined not to include in this
Final Rule the itemized disclosure
provisions at proposed § 463.5(b). The
452 NPRM
at 42032–33, 40235, 42040.
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Commission notes that imposing
unauthorized charges—including
charges buried in lengthy contracts or
included in contracts that consumers
are rushed through—is a violation of
both the Final Rule’s § 463.5(c) and of
the FTC Act. The Commission will
continue to monitor the market to
determine whether additional steps are
warranted to combat unauthorized
charges for add-ons or other items in the
motor vehicle marketplace.
C. Prohibited Misrepresentations and
Required Disclosures
Section 463.3 of the Final Rule
prohibits dealers from making any
misrepresentation regarding material
information about the categories
enumerated in the section.
The provisions in this section have
been adopted largely without
modification from the NPRM, wherein
the Commission estimated that any
additional costs associated with the
proposed misrepresentation
prohibitions would be de minimis.453
One industry association commenter
argued that a bar on misrepresentations
in the Final Rule would require
increased training and compliance costs
and result in longer transaction times
and costs related to working with
vehicle manufacturers about online
advertisements. This section, however,
does not require any additional
disclosures or information collection.
Thus, while dealers might elect to
enhance their training and
compliance,454 refraining from making
misrepresentations does not require
additional training or compliance costs
or transaction time. The Commission
therefore affirms its prior estimate that
any additional costs associated with the
prohibitions in § 463.3 against making
misrepresentations would be de
minimis.
Section 463.4(a) of the Final Rule
requires dealers to clearly and
conspicuously disclose a vehicle’s
offering price in advertisements and
other communications that reference a
453 NPRM
at 42033, 42039.
Commission produced and considered
alternative cost estimate scenarios for the Rule
provisions in its preliminary regulatory analysis,
see NPRM at 42036–44, and its final regulatory
analysis in section VII. The Commission also
invited comments on the accuracy of its PRA
burden estimates, including the validity of the
methodology and assumptions used, see NPRM at
42035. The Commission provides a single estimate
per Rule provision for this separate Paperwork
Reduction Act burden analysis in conformity with
the PRA. See 44 U.S.C. 3506(c)(1)(A)(iv) (providing,
for each collection of information, including those
arising from rules published as final rules in the
Federal Register, that agencies shall conduct a
review that includes ‘‘a specific, objectively
supported estimate of burden’’).
454 The
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specific vehicle, or any monetary
amount or financing term for any
vehicle. ‘‘Offering Price’’ is defined in
§ 463.2(k) of the Rule as ‘‘the full cash
price for which a Dealer will sell or
finance the Vehicle to any consumer,
provided that the Dealer may exclude
only required Government Charges.’’
The information required by § 463.4(a)
is necessary to address unfair or
deceptive conduct associated with the
failure to provide such price
information and unfairly charging
unexpected prices or for hidden items
that can add hundreds or thousands of
dollars to a vehicle sale.455
This provision is being adopted
largely as proposed.456 In response to
the NPRM, one industry association
commenter claimed there would be an
average of three offering price
disclosures per transaction, since,
according to the commenter, consumers,
on average discuss three specific motor
vehicles per transaction. This
commenter also contended that the
number of required offering price
disclosures would obligate dealers to
incur additional training costs. As the
Commission explained in its NPRM,
vehicle pricing activities and
representations are usually and
customarily performed by dealers in the
course of their regular business
activities. While this provision may
increase the importance of those
activities, or alter when in the course of
business they are undertaken, the
Commission estimates that any
additional attendant costs are de
minimis.457
Section 463.4(d) of the Final Rule
require dealers, when making any
representation about a monthly payment
for any vehicle, to disclose the total
amount the consumer will pay to
purchase or lease the vehicle at that
monthly payment after making all
455 Some commenters suggested that providing an
Offering Price may be difficult due to pricing
changes over time. As explained in SBP III.D.2(a),
limited-time offers should be clearly disclosed as
such. Advertising prices without disclosing
material limitations that would mislead consumers
is a deceptive or unfair practice.
456 As stated in SBP III.B.2(k) and SBP III.D.2(a),
the Commission is finalizing this Offering Price
definition at § 463.2(k) largely as proposed, with a
modification to clarify that dealers may, but need
not, exclude required government charges from a
vehicle’s offering price. In addition, this definition
in the Final Rule substitutes ‘‘Vehicle’’ for ‘‘motor
vehicle’’ to clarify that the term is consistent with
the revised definition of ‘‘‘Covered Motor Vehicle’
or ‘Vehicle’ ’’ at § 463.2(e). The Commission also
added language to the end of § 463.4(a) clarifying
that the requirements in § 463.4(a) ‘‘also are
prescribed for the purpose of preventing the unfair
or deceptive acts or practices defined in this part,
including those in §§ 463.3(a) and (b) and
§ 463.5(c).’’
457 See NPRM at 42033, 42039–40.
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payments as scheduled, as well as the
amount of consideration to be provided
by the consumer if the total amount
disclosed assumes the consumer will
provide consideration. Section 463.4(e)
of the Final Rule requires dealers, when
making any comparison between
payment options that includes
discussion of a lower monthly payment
to disclose, if true, that a lower monthly
payment will increase the total amount
the consumer will pay to purchase or
lease the vehicle.
These provisions have been adopted
largely as proposed.458 In response to
the Commission’s estimates with respect
to these proposed provisions, one
commenter raised concerns that these
disclosures would intrude on existing
disclosures, and that any associated
paperwork burden would be confusing,
duplicative, and unnecessary. The
commenter also argued that these
disclosures would add time to the
transaction process and require
additional staff training. No commenters
provided alternative estimates of the
costs associated with this provision.
Failing to disclose information about
the total of payments for a vehicle when
representing monthly payment
information is deceptive or unfair, as set
forth in SBP III.D.2(d). Dealers already
generate the required information
during the normal course of business,
and disclosing this total of payments
information provides consumers with
fundamental information that is readily
available to the dealer when making
representations regarding monthly
payments, at which time such
disclosures are required. Nevertheless,
there may be upfront labor costs
associated with developing procedures
to provide these disclosures consistently
at the appropriate point in the
transaction and with training
employees. The Commission estimates
such upfront costs as follows: 8
compliance manager hours per dealer
on implementing a template disclosure
script that contains the required
information and on ensuring sales staff
consistently deliver the disclosure at an
appropriate time during the transaction,
for an upfront hours burden of 378,168
(8 hours × 47,271). Applying labor costrates of $31.21 per hour yields
$11,802,623.28 ($31.21 × 378,168
458 These provisions in the Final Rule capitalize
the defined term ‘‘Vehicle’’ to conform with the
revised definition of ‘‘ ‘Covered Motor Vehicle’ or
‘Vehicle’ ’’ at § 463.2(e). The Commission also
substituted a period for a semi-colon and the word
‘‘and’’ at the end of § 463.4(d)(1), and added
language to the end of § 463.4(d) and (e) clarifying
that the requirements in these paragraphs ‘‘also are
prescribed for the purpose of preventing the unfair
or deceptive acts or practices defined in this part,
including those in §§ 463.3(a) and § 463.5(c).’’
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hours).459 After a review of comments,
the Commission is adding ongoing
training costs. Specifically, the
Commission estimates annual ongoing
costs of 1 hour of training time for sales
and related employees per year, for an
annual hours burden of 417,110 (1 hour
× 417,110 sales and related employees).
Applying labor cost-rates of $29.43 per
hour, the total estimated ongoing labor
cost burden is $12,275,547.30 across the
industry (417,110 sales and related
employees × 1 hour × $29.43).
Further, § 463.4(c) of the Final Rule
requires dealers that sell optional addon products or services to disclose to
consumers that these add-ons are not
required, and that the consumer can
purchase or lease the vehicle without
these add-ons. This requirement has
been adopted largely as proposed, and
is necessary to address deceptive and
unfair practices regarding these
products or services, including
misrepresentations that these products
are required when they are not, and
charging consumers for such products
without the consumers’ express,
informed consent.460 It requires a
simple disclosure of information that is
known to the dealer, and the
Commission anticipates that the
information collection burdens
associated with this requirement is de
minimis.461
Similarly, § 463.5(c) of the Final Rule
requires dealers to refrain from charging
consumers for any item unless the
dealer obtains the express, informed
459 The estimates throughout this section have
been updated with more recent data since the
publication of the NPRM. Labor rates are based on
new data from the Bureau of Labor Statistics. See
U.S. Bureau of Labor Statistics, ‘‘May 2022 National
Industry-Specific Occupational Employment and
Wage Estimates NAICS 441100—Automobile
Dealers’’ (Apr. 25, 2023), https://www.bls.gov/oes/
current/naics4_441100.htm. The number of
dealerships has been updated to reflect new data
from Census County Business Patterns. See U.S.
Census Bureau, ‘‘All Sectors: County Business
Patterns, including ZIP Code Business Patterns, by
Legal Form of Organization and Employment Size
Class for the U.S., States, and Selected Geographies:
2021,’’ https://data.census.gov/table?q=
CB2100CBP&n=44111:44112&tid=CBP2021.
CB2100CBP&nkd=EMPSZES∼001,LFO∼001.
460 This provision in the Final Rule capitalizes
the defined term ‘‘Vehicle’’ to conform with the
revised definition of ‘‘ ‘Covered Motor Vehicle’ or
‘Vehicle’ ’’ at § 463.2(e). The Commission also
added language to the end of § 463.4(c) clarifying
that the requirements in this paragraph ‘‘also are
prescribed for the purpose of preventing the unfair
or deceptive acts or practices defined in this part,
including those in §§ 463.3(a) and (b) and
§ 463.5(c).’’
461 As with § 463.3, § 463.5(a) does not require
any additional disclosures or information
collection. Thus, while dealers might elect to
enhance their training and compliance policies, or
to take steps to document compliance with
§ 463.5(a), any such additional measures are not
required by this provision.
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663
consent of the consumer for the
charge.462 In response to the
Commission’s estimates with respect to
these proposed provisions, some
commenters generally discussed
burdens, as addressed in the section-bysection analysis in SBP III, that they
contended would accompany this
proposed provision, but none provided
sufficient detail for cost estimates. The
Commission notes that this provision
addresses the unfair or deceptive
practice of charging consumers for items
they do not know about or to which
they have not agreed, or in amounts
beyond those to which the consumer
has agreed. As dealers must currently
have policies in place to prevent charges
without consent in order to comply with
current law, the Commission anticipates
that any burdens associated with this
provision will be de minimis.463
D. Recordkeeping
Section 463.6 of the Final Rule
requires dealers to create and retain, for
a period of twenty-four months from the
date the record is created, all records
necessary to demonstrate compliance
with the Rule, including with its
disclosure requirements. This provision
has been adopted with revisions to
account for other changes in the Final
Rule, as explained in SBP III.F.464 These
recordkeeping provisions are necessary
to promote effective and efficient
enforcement of the Rule, thereby
deterring dealers from engaging in
deceptive or unfair acts or practices.
In the NPRM, the Commission
provided cost estimates and solicited
comment on its recordkeeping burden
analysis.465 The Commission
anticipated that dealers would incur
certain incremental costs related to: (i)
recordkeeping systems; and (ii)
calculations of loan-to-value ratios for
contracts with GAP agreements.
Several commenters, including
industry associations, dealership
organizations, and a dealership
462 See
SBP III.E.2(c).
its NPRM, the Commission noted that it
anticipated this section would require dealers to
provide readily available information to consumers
in direct communications with customers, and that
dealers complying with existing law have policies
in place to prevent charges without consent,
thereby estimating minimal additional resulting
costs. See NRPM at 42033, 42036–44. The
Commission did not receive comments discussing
attendant burdens in sufficient detail for revised
cost estimates, and thus affirms its prior estimate
regarding additional costs associated with
§ 463.5(c).
464 The Final Rule also contains one
typographical modification to § 463.6—adding a
serial comma—and minor textual changes to ensure
consistency with the defined terms at § 463.2(e) and
(f).
465 NPRM at 42033–34, 42043.
463 In
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association, generally contended that
the Commission underestimated the
burdens of compliance relating to the
changes dealers would need to make to
their existing recordkeeping systems.
These commenters, however, did not
provide the Commission with
alternative estimates regarding such
burdens. As explained in the section-bysection analysis of the Recordkeeping
section, § 463.6, in SBP III.F, this
provision gives dealers the flexibility to
retain materials in any legible form,
including in the same manner, format,
and place as they may already keep
such records in the ordinary course of
business. The Commission nonetheless
has determined, in response to
comments, to revise its estimates
regarding incremental storage expenses
that may be associated with the
recordkeeping requirements in the Final
Rule, and, as provided in the capital and
other non-labor costs discussion in the
following paragraphs, the Commission
is adding an estimate of incremental
additional storage costs to its estimate.
Further, the Commission notes that its
initial recordkeeping cost estimates
were based on a proposal that required
records regarding add-on list disclosures
and cash price without optional add-on
disclosures—records that the Rule the
Commission is finalizing does not
require dealers to retain. Given that the
Commission is not finalizing these
additional record-related requirements,
the estimates provided in its NPRM may
overestimate attendant costs resulting
from the Rule’s recordkeeping
requirements. Notwithstanding this
possibility, the Commission maintains
its prior calculations of the time
required to modify existing
recordkeeping systems.466 The
Commission anticipates that it will take
covered motor vehicle dealers
approximately 15 hours to modify their
existing recordkeeping systems to retain
the required records for the 24-month
period specified in the Rule. This yields
a general recordkeeping burden of
709,065 hours annually (47,271 motor
vehicle dealers × 15 hours per year).
The Commission anticipates that
programming, administrative,
compliance, and clerical staff are likely
to perform the tasks necessary to
comply with the recordkeeping
requirements in § 463.6 of its Rule. In
particular, the Commission estimates
this 15-hour per-dealer labor hours
burden to design, implement, or update
466 In its NPRM, the Commission estimated costs
to create and implement a loan-to-value calculation
process. NPRM at 42034. Such costs are already
accounted for in the Commission’s estimates for the
time required to modify existing recordkeeping
systems, and thus are not separately itemized here.
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systems for record storage and create the
templates necessary to accommodate
retention of all relevant materials, as
follows: 8 hours of time for a
programmer, at a cost-rate of $40.24 per
hour; 5 hours of additional clerical staff
work, at a cost-rate of $20.16 per hour;
1 hour of sales manager review, at a
cost-rate of $80.19 per hour; and 1 hour
of review by a compliance officer, at a
cost-rate of $31.21 per hour.467
Applying these cost-rates to the
estimated per-dealer hours burden
described previously, the total estimated
initial labor cost burden is $534.12 per
average dealership (($40.24 per hour ×
8 hours) + ($20.16 per hour × 5 hours)
+ ($80.19 per hour × 1 hour) + ($31.21
per hour × 1 hour)), totaling
$25,248,386.52 across the industry
($534.12 per average dealership ×
47,271 dealerships).
The Commission also received
comments regarding its cost estimates
relating to the records of loan-to-value
ratios for transactions that include GAP
agreement sales. One industry
association commenter argued that this
recordkeeping requirement would also
require additional training, that creating
a loan-to-value calculator template for
GAP agreements would be difficult
given the variation of loan-to-value
ratios, and that this recordkeeping
requirement would lengthen the time to
conduct vehicle sale or financing
transactions.468 No commenter provided
alternative estimates of the costs
associated with the Commission’s
proposed recordkeeping requirements.
As explained in the paragraph-byparagraph analysis of § 463.5 in SBP
III.E.2, the Commission is not
mandating a particular LTV threshold or
method of calculation, but rather
requiring that dealers not charge a
consumer for GAP agreements or other
products or services if the consumer
would not benefit from the product or
service. The Commission anticipates
that, to the extent dealers do not
currently retain any materials used to
make such an assessment, dealers may
incur certain additional costs.
Specifically, the Commission
anticipates that dealers will expend one
minute per sales or financing
transaction for a salesperson to perform
the calculation contemplated by this
requirement, at a cost rate of $28.41 per
467 Applicable wage rates are based on data from
the Bureau of Labor Statistics. See U.S. Bureau of
Labor Statistics, ‘‘May 2022 National IndustrySpecific Occupational Employment and Wage
Estimates NAICS 441100—Automobile Dealers’’
(Apr. 25, 2023), https://www.bls.gov/oes/current/
naics4_441100.htm.
468 These arguments are addressed in the sectionby-section analysis of § 463.5. See SBP III.E.
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hour. The Commission estimates that
covered motor vehicle dealers sell
approximately 31,562,959 vehicles each
year, and that approximately 17% of
such sales include GAP agreements, for
an estimated total of 5,444,502 covered
vehicle sales.469 While the number of
motor vehicles sold will vary by
dealership, this yields an average sales
volume of 115 sales transactions per
average dealership per year that include
a GAP agreement (5,444,502 covered
vehicle sales/47,271 dealerships). This
yields an estimated annual hours
burden for all dealers of 90,742 hours
(5,444,502 covered transactions × 1/60
hours). Applying the associated labor
rates yields an estimated annual labor
cost for all dealers of $2,577,980.22
(90,742 hours × $28.41 per hour).
E. Capital and Other Non-Labor Costs
The Commission anticipates that the
Final Rule will impose limited capital
and non-labor costs. The Commission
presented estimates in the NPRM with
respect to such costs and solicited
comments on its burden analysis. Here,
the Commission discusses its estimates
for the capital and non-labor costs
associated with the Rule’s disclosure
and recordkeeping requirements. While
some commenters generally discussed
burdens that they contended would
accompany these proposed provisions,
none provided any alternative cost
estimates regarding capital and other
non-labor costs.470
1. Disclosures
The Commission anticipates that the
Rule’s disclosure requirements will
impose de minimis capital and other
non-labor costs. As the Commission
noted in the NPRM, dealers already
have in place existing systems for
providing sales- and contract-related
disclosures to buyers and lessees, as
well as to consumers seeking
information during the vehicleshopping process.471 While the Final
Rule’s disclosure requirements may
result in limited additions to the
469 In response to comments, the Commission has
revised the number of transactions across the
industry from the NPRM to exclude private party
and fleet transactions. The estimated percentage of
sales including GAP agreements is derived from
data provided by an industry commenter. Comment
of Nat’l Auto. Dealers Ass’n, Doc. No. FTC–2022–
0046–8368 at 12.
470 One commenter claimed generally that the
Commission underestimated these costs, referring
to arguments the commenter made with respect to
the Commission’s burden analysis of specific
disclosure and recordkeeping provisions. The
Commission has responded to those arguments in
the foregoing analysis, with the exception of
recordkeeping storage costs, which are addressed in
the following discussion.
471 NPRM at 42034.
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information that must be provided
during the transaction process,
depending on a dealer’s current
business operations, the Commission
anticipates that these changes will not
require substantial investments in new
systems.472 Further, many dealers may
elect to furnish some disclosures
electronically, further reducing total
costs.473
The Commission previously estimated
non-labor costs for providing
disclosures in written or electronic
form. This estimate was based on
proposed § 463.5(b), which required
written disclosures in all transactions in
which dealers charge for optional addons. As discussed in the paragraph-byparagraph analysis of § 463.5 in SBP
III.E.2, the Commission has determined
not to finalize the proposed provision at
§ 463.5(b). While some commenters
generally discussed burden with respect
to disclosure requirements being
finalized by the Commission, no
commenter estimated non-labor costs
associated with such requirements. The
Commission estimates that the nonlabor costs related to disclosures, which
relate to fundamental information (the
vehicle offering price, that optional addons are not required, and regarding the
total amount to purchase or lease the
vehicle), will be de minimis.
2. Recordkeeping
In the NPRM, the Commission
observed that dealers already have in
place existing recordkeeping systems for
the storage of documentation they
would retain in the ordinary course of
business irrespective of the Rule’s
requirements.474 Commenters including
industry associations, a dealership
organization, and a dealership
association argued that the Commission
underestimated the burdens associated
with the Commission’s proposed
requirements to retain written
communications, as well as the need to
develop new systems to capture these
materials. The Commission disagrees
that the recordkeeping requirements in
§ 463.6 mandate the creation of new
recordkeeping systems. As explained in
the section-by-section analysis of
§ 463.6, this provision gives dealers the
flexibility to retain materials in any
legible form, including in the same
manner, format, or place as they may
already keep such records in the
ordinary course of business.
The Commission is, however, revising
its estimates regarding incremental
storage expenses that may be associated
472 Id.
473 Id.
474 Id.
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with the recordkeeping requirements in
the Final Rule to add such
recordkeeping storage costs to its
estimate. The Commission previously
noted, and continues to believe, that
dealers that store records in hard copy
are unlikely to require extensive
additional storage for physical
document retention, and, due to the low
cost of electronic storage options, that
expanding electronic storage capacity
would impose minimal costs.475 The
Commission also invited comments on
estimated storage costs; while some
commenters generally discussed
burdens, as addressed in the section-bysection analysis of the recordkeeping
requirements in § 463.6, that they
contended would accompany the
proposed provisions, the Commission
did not receive any comments that
provided estimates. The Commission
nevertheless has conducted additional
research, and now estimates that each
dealer will need to spend approximately
$300 per year in investment in
additional IT systems and hardware for
additional storage (either on premises or
electronically) to retain records, the
annual cost for which would be
$14,181,300 for all covered dealers
($300 × 47,271 covered dealers).476
VI. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’), as amended by the Small
Business Regulatory Enforcement
Fairness Act of 1996,477 requires an
agency to provide an Initial Regulatory
Flexibility Analysis (‘‘IRFA’’) and Final
Regulatory Flexibility Analysis
(‘‘FRFA’’) of any rule subject to noticeand-comment requirements,478 unless
the agency head certifies that the
regulatory action will not have a
significant economic impact on a
substantial number of small entities.479
In the NPRM, the Commission provided
475 NPRM
at 42034–35.
review of dealer transaction records
suggests that a typical transaction generates 3.4 MB
of data under the status quo. Given the average
number of transactions per dealer, this suggests that
storing all these records would require dedicated
space of roughly 4.2 GB per year. With a two-year
retention window, this corresponds to 8.4 GB of
storage at any given time. We estimate that the
(annual) amount budgeted here should be sufficient
to maintain at least 1 TB of storage—either on
premises or through a cloud storage vendor—which
is sufficient for more than 100 times the data
storage capacity necessary to retain all transaction
files generated by a typical dealership in a year
under the status quo. The Commission anticipates
that this amount of data storage capacity will be
more than sufficient to also allow for dealers to
keep any necessary records of correspondence with
consumers who ultimately do not complete
transactions at the dealership.
477 See Public Law 104–121 (1996).
478 5 U.S.C. 603(a), 604(a).
479 5 U.S.C. 605(b).
476 Our
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665
an IRFA, stated its belief that the
proposal will not have a significant
economic impact on small entities, and
solicited comments on the burden on
any small entities that would be
covered.480 In addition to publishing the
NPRM in the Federal Register, the
Commission announced the proposed
rule through press releases, social media
posts, and blog articles directed toward
businesses and consumers, as well as
through other outreach,481 in keeping
with the Commission’s history of small
business guidance and outreach.482
The Commission thereafter received
over 27,000 public comments, many of
which identified themselves as being
from small dealers, industry
associations that represent small
dealers, and employees of small
dealers.483 The Commission greatly
480 NPRM
at 42035.
e.g., Press Release, Fed. Trade Comm’n,
‘‘FTC Proposes Rule to Ban Junk Fees, Bait-andSwitch Tactics Plaguing Car Buyers’’ (June 23,
2022), https://www.ftc.gov/news-events/news/pressreleases/2022/06/ftc-proposes-rule-ban-junk-feesbait-switch-tactics-plaguing-car-buyers; Lesley Fair,
‘‘Proposed FTC Rule Looks Under the Hood at the
Car Buying Process,’’ Fed. Trade Comm’n Business
Blog (June 23, 2022), https://www.ftc.gov/businessguidance/blog/2022/06/proposed-ftc-rule-looksunder-hood-car-buying-process; Alan S. Kaplinsky,
A Close Look at The Federal Trade Commission’s
Proposed Rule for Motor Vehicle Dealers, with
Special Guests Sanya Shahrasbi and Daniel Dwyer,
Staff Attorneys, FTC Bureau of Consumer
Protection, Division of Financial Practices,
Consumer Finance Monitor (Aug. 11, 2022), https://
www.ballardspahr.com/Insights/Blogs/2022/08/
Podcast-The-FTCs-Proposed-Rule-Motor-VehicleDealer-Guests-Sanya-Shahrasbi-and-Daniel-Dwyer.
482 Each year since FY2002, the Small Business
Administration’s Office of the National
Ombudsman has rated the Federal Trade
Commission an ‘‘A’’ on its small business
compliance assistance work. See U.S. Small
Business Administration, ‘‘2013–2020 SBA Nat’l
Ombudsman’s Ann. Reps. to Cong.,’’ https://
www.sba.gov/document/report—nationalombudsmans-annual-reports-congress (providing
reports from FY2013–FY2020); Letter from Joseph
J. Simons, Chairman of the Federal Trade
Commission, to Senator James Risch, Chairman of
the Committee on Small Business and
Entrepreneurship, U.S. Senate, and to Congressman
Steve Chabot, Chairman of the Committee on Small
Business, U.S. House of Representatives, https://
www.ftc.gov/system/files/documents/reports/
federal-trade-commission-rule-compliance-guidessmall-businesses-other-small-entities-commission/
tenth_section_212_report_to_congress_july_2016june_2017_1_0.pdf (citing Commission’s ‘‘A’’ rating
for ‘‘Compliance Assistance’’ by the National
Ombudsman from FY2002–FY2016).
483 The Commission received 27,349 comment
submissions filed in response to its NPRM. See Gen.
Servs. Admin., Doc. No. FTC–2022–0046–0001,
Proposed Rule, Motor Vehicle Dealers Trade
Regulation Rule (July 13, 2022), https://
www.regulations.gov/document/FTC-2022-00460001 (noting comments received). To facilitate
public access, 11,232 such comments have been
posted publicly at www.regulations.gov. Id. (noting
posted comments). Posted comment counts reflect
the number of comments that the agency has posted
to Regulations.gov to be publicly viewable.
Agencies may choose to redact or withhold certain
481 See,
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appreciates, and thoroughly considered,
the feedback it received from such
stakeholders in developing the Final
Rule; made changes from the proposed
rule in response to such feedback; and
will continue to engage with
stakeholders moving forward to
facilitate implementation of the Rule.
As previously discussed, after
reviewing comments, the Commission
has determined, as an alternative to
finalizing the proposed rule in its
entirety, to finalize a Rule that does not
contain the proposed add-on list
disclosure requirements at § 463.4(b), or
the proposed disclosures and
declinations pertaining to a vehicle’s
cash price without optional add-ons at
§ 463.5(b). Furthermore, as discussed in
the paragraph-by-paragraph analysis of
§ 463.2(e) in SBP III.B.2(e), in response
to public comments and after careful
consideration, the Commission has
determined to exclude recreational
boats and marine equipment;
motorcycles; and motor homes,
recreational vehicle trailers, and slide-in
campers from the Rule’s definition of
‘‘Covered Motor Vehicle.’’ After careful
consideration of the comments and
following its determination not to
finalize the proposed rule in its entirety,
the Commission is certifying that the
Final Rule will not have a significant
economic impact on a substantial
number of small entities. In the
following paragraphs, the Commission
discusses comments from the public, as
well as from the U.S. Small Business
Administration Office of Advocacy
(‘‘SBA Advocacy’’), and the reasons for
the Commission’s conclusion that the
Rule will not have a significant
economic impact on a substantial
number of small entities.484 Given,
submissions (or portions thereof) such as those
containing private or proprietary information,
inappropriate language, or duplicate/near duplicate
examples of a mass-mail campaign. Gen. Servs.
Admin., Regulations.gov Frequently Asked
Questions, https://regulations.gov/faq.
484 The Office of Advocacy has emphasized that,
while it is housed within SBA, it is an independent,
stand-alone office that has its own statutory charter,
leadership structure, and appropriations account.
SBA Advocacy, ‘‘Background Paper: Office of
Advocacy 2017–2020’’ 111–19 (Jan. 2021), https://
advocacy.sba.gov/wp-content/uploads/2021/02/
Background-Paper-Office-of-Advocacy-2017-2020web.pdf; see also 15 U.S.C. 634a through 634g. SBA
Advocacy’s Chief Counsel is appointed from
civilian life by the President, with the advice and
consent of the Senate, and most of SBA Advocacy’s
professionals serve at the pleasure of the Chief
Counsel. 15 U.S.C. 634a, 634d(1) (empowering
Chief Counsel for Advocacy to employ and fix the
compensation of additional staff personnel); SBA
Advocacy, ‘‘Background Paper: Office of Advocacy
2017–2020’’ 95 (Jan. 2021), https://advocacy.sba.
gov/wp-content/uploads/2021/02/BackgroundPaper-Office-of-Advocacy-2017-2020-web.pdf. SBA
Advocacy does not circulate its work for clearance
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however, that the Commission believes
that the vast majority of covered entities
are small entities and provided an IRFA
in the NPRM, in the interest of
thoroughness, the Commission has also
performed an FRFA, as described in
SBP VI.B.2.
A. Significant Impact Analysis
1. Comments on Significant Impact
In the NPRM, the Commission stated
its belief that the proposed rule would
not have a significant economic impact
on a substantial number of small
entities, and invited comments.485
with the SBA Administrator, OMB, or any other
Federal agency prior to publication. 15 U.S.C. 634f.
485 An industry association commenter argued
that the Commission did not make a formal section
605(b) certification, publish the certification in the
Federal Register, or provide the certification to the
Chief Counsel for Advocacy of the Small Business
Administration. This comment misunderstands the
RFA. The RFA does not require certification when
a rule is proposed. See 5 U.S.C. 605(b) (providing
that the head of the agency may make the
certification ‘‘at the time of publication of the final
rule’’). The Commission’s NPRM stated its belief
that the proposal would not have a significant
economic impact on a substantial number of small
entities, invited comment on this issue, and also
provided an IRFA. The Commission has carefully
reviewed the SBA’s and others’ comments, is
making changes to the proposal, and is now
publishing the Final Rule and making a formal
certification, as is required by the RFA.
Although the Commission included the NPRM in
its Fall 2022 Regulatory Agenda, and explained in
its NPRM that the proposed rulemaking was not
included in the Commission’s Spring 2022
Regulatory Agenda because the Commission first
considered the NPRM after the publication deadline
for the Regulatory Agenda, see NPRM at 42031
n.153, the same commenter argued that the RFA
and Executive Order 12866 required the
Commission to include it in earlier Regulatory
Agendas. As an initial matter, Executive Order
12866 does not apply to independent agencies such
as the FTC. Regardless, as discussed in SBP II.C,
Commission has engaged in a sustained effort over
many years to engage with consumer and dealer
groups, and other stakeholders, regarding the issues
addressed in the Rule. See supra note 90. Neither
the RFA nor Executive Order 12866 precludes the
Commission from promulgating the Rule regardless
of whether it was included in an earlier Regulatory
Agenda (or even arguably could have been). Section
602(d) of the RFA explicitly provides that
‘‘[n]othing in this section precludes an agency from
considering or acting on any matter not included in
a regulatory flexibility agenda.’’ See Coastal
Conservation Ass’n v. Locke, No. 2:09–CV–641–
FTM–29, 2011 WL 4530631, at *38 (M.D. Fla. Aug.
16, 2011), report & recommendation adopted sub
nom. Coastal Conservation Ass’n v. Blank, No.
2:09–CV–641–FTM–29, 2011 WL 4530544 (M.D.
Fla. Sept. 29, 2011) (denying request for injunction
based on allegation of noncompliance with 5 U.S.C.
602(d)). Similarly, Executive Order 12866 explicitly
provides that it ‘‘does not create any right or
benefit, substantive or procedural, enforceable at
law or equity by a party against the United States,’’
let alone one that would preclude adoption of the
Rule. See E.O. 12866, 58 FR 51735, 51744 (Sept. 30,
1993); see also Trawler Diane Marie, Inc. v. Brown,
918 F. Supp. 921, 932 (E.D.N.C. 1995), aff’d sub
nom. Trawler Diane Marie, Inc. v. Kantor, 91 F.3d
134 (4th Cir. 1996) (denying request to invalidate
regulation based on allegation of noncompliance
with Executive Order 12866).
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Several commenters, including industry
associations and a dealership
association, generally argued that the
Rule would impose substantial
economic burdens on small entities, and
some suggested that small entities may
be disproportionately burdened by the
Rule given limited legal and compliance
staff. No commenters provided
comprehensive alternative empirical
cost or revenue data that could be used
to put costs in context. Commenters,
including an industry association and
SBA Advocacy, argued that the
Commission did not provide a sufficient
factual basis for, or analysis of, the
effects on small entities, and that the
proposed rule would be unduly
burdensome for smaller motor vehicle
dealers.486 The comment from SBA
Advocacy further argued that the
Commission provided no information
about the economic impact of the
proposed rule on small entities, but
noted that if the total estimated cost of
$1,360,694,552 were divided by the
number of dealers estimated in the
NPRM (46,525), the cost would be
roughly $29,000 per such dealer.487 The
comment from SBA Advocacy also
argued that the Commission failed to
include familiarization and training
costs or costs that the Commission
could not quantify, such as investments
in additional IT systems and
hardware.488
The Commission has considered these
comments carefully and has taken them
into account in setting forth the factual
basis for the certification in SBP VI.A.2,
including by modifying its analysis to
add an estimate of familiarization and
training costs in response to such
concerns.489 The Commission notes, as
486 See Comment of SBA Advocacy, Doc. No.
FTC–2022–0046–6664 at 3.
487 Comment of SBA Advocacy, Doc. No. FTC–
2022–0046–6664 at 3.
488 Comment of SBA Advocacy, Doc. No. FTC–
2022–0046–6664 at 3.
489 After additional research, the Commission
estimates that each dealer will need to spend
approximately $300 per year on storage (either on
premises or in the cloud) to store the records the
Rule requires them to maintain. Based on a review
of the transaction records the Commission has
received from dealers through investigations, this
amount is likely to be more than sufficient.
Commission review suggests that a typical vehicle
transaction generates 3.4 MB of data under the
status quo. Given the average number of
transactions per dealer, this suggests that storing all
these records would require dedicated space of
roughly 4.2 GB per year. With a two-year retention
window, this corresponds to 8.4 GB of storage at
any given time. The Commission estimates that the
$300 annual amount budgeted here should be
sufficient to maintain at least 1 TB of storage—
either on premises or through a cloud storage
vendor—which is sufficient for more than 100 times
the data storage capacity necessary to retain all
transaction files generated by a typical dealership
in a year under the status quo. The Commission
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SBA Advocacy did in its comment, that
the NPRM estimated a total cost for the
proposed rule of $1,360,694,552. This
estimate was for costs over a ten-year
time period. Thus, dividing this
estimate by the number of affected
dealers estimated in the NPRM yields a
cost of roughly $29,000 per dealer over
a ten-year period—or approximately
$2,900 per year per dealer.490 This
figure—$2,900—is slightly more than
the average gross profit described in the
NPRM for a single vehicle sale by a new
vehicle dealer, and less than half of the
average gross profit described in the
NPRM for a single vehicle sale by an
independent used vehicle dealer.491
After carefully reviewing the
comments, the Commission does not
conclude that the Final Rule will
impose a significant economic burden
on a substantial number of smaller
entities.492 As described in SBP
VI.A.2(b), the estimated economic
impact of the Final Rule, controlling for
firm size based on available census data,
is less than or equal to 0.27% of annual
sales, 1.49% of the gross margin, and
4.12% of the gross margin minus
operating expense for dealerships of all
sizes.493 The Commission further notes
that, in response to comments from SBA
anticipates that this amount of data storage capacity
will be more than sufficient to also allow for dealers
to keep any necessary records of correspondence
with consumers who ultimately do not complete
transactions at the dealership.
490 NPRM at 42013.
491 As noted in the NPRM, new vehicle dealers
averaged a gross profit of about $2,444 per new
vehicle, and about $2,675 per used vehicle, and
independent used vehicle dealerships had an
average gross profit of more than $6,000 per vehicle.
See NPRM at 42014 (citing Nat’l Auto Dealers
Ass’n, ‘‘Average Dealership Profile’’ 1 (2020),
https://www.nada.org/media/4136/
download?attachment [https://web.archive.org/web/
20220623204158/https://www.nada.org/media/
4136/download?attachment] (June 23, 2022) and
Nat’l Indep. Auto Dealers Ass’n, ‘‘NIADA Used Car
Industry Report 2020’’ at 21).
492 Notably, while many industry commenters
claimed that the burden of the Rule would be
substantial, none provided data on revenue or
profit.
493 U.S. Census Bureau, ‘‘Annual Retail Trade
Survey: 2021’’ (Dec. 15, 2022), https://
www.census.gov/data/tables/2021/econ/arts/
annual-report.html. Gross margin minus operating
expenses was determined by deducting total 2021
operating expenses ($144,268 million) from 2021
gross margin ($226,118 million). Gross margin
represents total sales less the cost of goods sold.
Operating expenses include but are not limited to
annual payroll, commissions, data processing,
equipment, advertising, lease and rental payments,
utilities, and repair and maintenance. See Glossary,
U.S. Census Bureau, https://www.census.gov/
glossary (last visited Dec. 5, 2023). Note that the
operating expenses amount may include some
costs—such as payments for deceptive advertising
or commissions earned on unauthorized charges—
that are not legitimate expenses. If these were
excluded, the gross margin minus operating cost
figures would be even lower than those described
in the text.
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Advocacy and others, the Paperwork
Reduction Act analysis incorporates
additional estimates for training and
storage costs beyond those estimated in
the NPRM.
2. Certification of the Final Rule
The Commission hereby certifies that
the Final Rule will not have a
significant economic impact on a
substantial number of small entities.
As an initial matter, the Commission
believes that a substantial number of
small entities are covered by the Rule.
New vehicle dealers (NAICS code
44111) are classified as small entities if
they have an average of 200 or fewer
employees, and used car dealers (NAICS
code 44112) are classified as small
entities if they have average annual
revenues of $30.5 million or less.494
Census data indicate that the vast
majority of dealers classified into these
NAICS codes are small entities.495 There
are approximately 47,271 covered
dealers in the United States, of which
over 93% have fewer than 100
employees. Thus, while the Commission
cannot determine the precise number of
small entities affected by the Rule,
census data suggest that the vast
majority of covered dealers are small
entities.
The Commission certifies that the
Rule will not have a significant
economic impact on a substantial
number of small entities. The
Commission has analyzed the costs of
the Rule (1) based on industry averages
and (2) accounting for dealer size based
on the number of employees. Under
either measure, the Rule will not have
a significant economic impact on a
substantial number of small entities.
(a) Industry Averages
The Commission estimates a total cost
for the Final Rule, at the scenario
reflecting the Commission’s highest cost
estimates, of $1.075 billion to $1.270
billion over a ten-year period.496 Using
494 See North American Industry Classification
System, U.S. Census Bureau, https://
www.census.gov/naics/. These standards are
determined by the Small Business Size Standards
component of the NAICS, which is available at
https://www.sba.gov/document/support-table-sizestandards.
495 The census report does not provide sufficient
detail to provide a precise numerical estimate of the
number of small entities covered by the Rule. The
census data provide the number of dealers with
fewer than 250 employees, and also provide
revenue and gross margin figures for the motor
vehicle dealers industry, without further
breakdown. For that reason, the census data do not
provide sufficient information to calculate the
specific number of dealers that are small entities.
Nor did commenters provide comprehensive
alternative firm size data.
496 The $1.075 billion figure was determined by
summing the unrounded total highest estimated
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667
the highest end of this highest-cost
scenario, the Rule will have an
estimated cost of $1.270 billion over ten
years using a 3% discount rate. This
translates to an average estimated peryear cost of $127 million ($1.270 billion
× 0.1). Census data show that, in 2021,
automobile dealers had annual sales of
$1.265 trillion, gross margin of $226.118
billion,497 and gross margin minus
operating expenses of $81.850 billion.
Discounting these numbers over a 10year period using a 3% discount rate
equates to average annual sales of
$1.079 trillion, gross margin of $192.883
billion, and gross margin minus
operating expenses of $69.820 billion.
The estimated yearly cost of the Rule
therefore is approximately 0.01% of
annual sales ($127 million/$1.079
trillion), 0.07% of gross margin ($127
million/$192.883 billion), and 0.18% of
gross margin minus operating expenses
($127 million/$69.820 billion) across
the industry.498
(b) Dealer Size Based on the Number of
Employees
In addition to considering industry
averages, the Commission has analyzed
the cost of the Rule accounting for
dealer size based on the number of
employees. Certain costs are fixed (i.e.,
remain the same regardless of the
number of employees) while other costs
scale with dealer size. We consider both
costs associated with the Final Rule’s total of
payments disclosure requirements ($246 million),
offering price disclosure requirements ($46
million), requirements regarding certain add-ons
and express, informed consent ($406 million),
prohibitions on misrepresentations ($130 million),
and recordkeeping requirements ($248 million),
using a 7% discount rate. The $1.270 billion figure
was determined by summing the unrounded total
highest estimated costs associated with the Final
Rule’s total of payments disclosure requirements
($296 million), offering price disclosure
requirements ($46 million), requirements regarding
certain add-ons and express, informed consent
($475 million), prohibitions on misrepresentations
($157 million), and recordkeeping requirements
($296 million), using a 3% discount rate.
497 U.S. Census Bureau, ‘‘Annual Retail Trade
Survey: 2021, Sales’’ (Dec. 15, 2022), https://
www2.census.gov/programs-surveys/arts/tables/
2021/sales.xlsx (showing $1,264,635 million in
estimated annual sales in 2021 for automobile
dealers, NAICS code 4411); U.S. Census Bureau,
‘‘Annual Retail Trade Survey: 2021, Gross Margin’’
(Dec. 15, 2022), https://www2.census.gov/programssurveys/arts/tables/2021/gm.xlsx (showing
$226,118 million in estimated annual gross margin
in 2021 for automobile dealers, NAICS code 4411);
U.S. Census Bureau, ‘‘Annual Retail Trade Survey:
2021, Total Operating Expenses’’ (Dec. 15, 2022),
https://www2.census.gov/programs-surveys/arts/
tables/2021/exp.xlsx (showing $144,268 million in
estimated annual operating expenses in 2021 for
automobile dealers, NAICS code 4411).
498 The calculations in this analysis were
performed using unrounded inputs in order to
maintain accuracy. Nevertheless, for ease of
reference, such inputs have been rounded where
they are described in the text.
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(1) first-year compliance costs and (2)
costs in subsequent years.
(1) First-year compliance costs. Firstyear compliance costs are the sum of: (1)
upfront fixed costs; (2) one year of
annual ongoing costs that are fixed; and
(3) one year of annual ongoing costs that
scale.
The Commission estimates the
upfront fixed costs per dealer under the
highest-cost scenario as follows: $963.44
to update policies and procedures to
provide the offering price disclosure
required by § 463.4(a) ((8 estimated
pricing hours 499 × $80.19 per hour) + (8
estimated programming hours × $40.24
per hour)); $249.68 to design disclosures
required by § 463.4(d) and (e) and
inform associates of their obligations to
provide these disclosures (8 estimated
compliance manager hours × $31.21 per
hour); $1,783.56 to cull add-ons with no
consumer benefit from offerings,
develop policies regarding when certain
add-ons may or may not be sold, and
create nonmandatory disclosures, in
response to the requirements of § 463.5
((16 estimated compliance manager
hours × $31.21 per hour) + (12 estimated
sales manager hours × $80.19 per hour)
+ (8 estimated programmer hours ×
$40.24 per hour)); and $534.12 to
upgrade recordkeeping systems and
create the templates necessary to
accommodate retention of all relevant
material under § 463.6 ((8 estimated
programmer hours × $40.24 per hour) +
(5 estimated clerical hours × $20.16 per
hour) + (1 estimated sales manager hour
× $80.19 per hour) + (1 estimated
compliance manager hour × $31.21 per
hour)). These figures total $3,530.80 per
dealer.500
The Commission estimates the annual
fixed ongoing costs per dealer for the
first year under the highest-cost scenario
as follows: $390.13 to conduct a
heightened compliance review of
public-facing representations to ensure
compliance with § 463.3 (150 estimated
documents per year × 5 estimated
minutes of review per document ×
$31.21 per hour of compliance officer
review); and $300 estimated for
expanded storage to retain records
required under § 463.6. These figures
total $690.13 per dealer per year.
The Commission estimates annual
ongoing costs that scale with dealer size
499 As used here, ‘‘pricing hours’’ means time
spent by a sales and marketing manager reviewing
dealership policies and procedures for determining
the public-facing prices of vehicles in inventory.
500 Applicable wage rates throughout this section
are based on data from the Bureau of Labor
Statistics. See U.S. Bureau of Labor Statistics, ‘‘May
2022 National Industry-Specific Occupational
Employment and Wage Estimates NAICS 441100—
Automobile Dealers’’ (Apr. 25, 2023), https://
www.bls.gov/oes/current/naics4_441100.htm.
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based on number of employees as
follows. The Commission estimates that
annual costs that scale with dealer size
are $76.86 per employee per year.
Annual ongoing costs that scale with
dealer size include: $26.53 per
employee to provide the total of
payments disclosures required by
§ 463.4(d) and (e) (((417,110 sales &
related employees × 1 estimated hour
for training × $29.43 per hour) +
(19,228,256 total covered transactions
involving monthly payments or
financing × (2/60 estimated disclosure
hours per transaction × $28.41 per hour
+ $0.15 printing costs per disclosure)))/
1,257,877 total employees); $36.40 per
employee for training and the delivery
of a disclosure under a regime in which
dealers choose to deliver an itemized
disclosure to comply with § 463.5
(((417,110 sales & related employees × 1
estimated hour for training × $29.43 per
hour) + ((10,343,319 new vehicle sales
+ 21,219,640 used vehicle sales) × (2/60
estimated disclosure hours per sale
transaction × $28.41 per hour + $0.11
physical costs per disclosure)))/
1,257,877 total employees); and $13.93
per employee to generate and store
calculations required to be retained
under § 463.6 ((31,562,959 vehicle sales
× 1/60 estimated hours per transaction
× $28.41 per hour/1,257,877 total
employees) + (5,444,502 vehicle sales
with GAP agreement × 1/60 estimated
hours per transaction × $28.41 per hour/
1,257,877 total employees)).
Next, the Commission uses census
data on the average number of
employees at dealerships within
different dealer size cohorts to
determine the per-dealer cost for each
dealer cohort.501 Multiplying the
501 Based on 2021 census data, dealers with fewer
than five employees have an average of 1.62
employees (34,616 employees at all dealerships
with fewer than five employees/21,356 dealers with
fewer than five employees); dealers with 5–9
employees have an average of 6.50 employees
(35,794 employees/5,507 dealers); dealers with 10–
19 employees have an average of 13.77 employees
(52,852 employees/3,837 dealers); dealers with 20–
49 employees have an average of 33.62 employees
(253,365 employees/7,536 dealers); dealers with
50–99 employees have an average of 69.52
employees (423,351 employees/6,090 dealers);
dealers with 100–249 employees have an average of
140.31 employees (386,001 employees/2,751
dealers); dealers with 250–499 employees have an
average of 317.25 employees (57,105 employees/180
dealers); dealers with 500–999 employees have an
average of 580.56 employees (5,225 employees/9
dealers); and dealers with 1,000 or more employees
have an average of 1,913.60 employees (9,568
employees/5 dealers). See U.S. Census Bureau, ‘‘All
Sectors: County Business Patterns, Including ZIP
Code Business Patterns, by Legal Form of
Organization and Employment Size Class for the
U.S., States, and Selected Geographies: 2021,’’
https://data.census.gov/table?q=CB2100CBP&n=
44111:44112&tid=CBP2021.CB2100CBP&nkd=
LFO∼001.
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estimated cost per employee ($76.86) by
the average number of employees within
different dealer size cohorts yields
annual ongoing scaled costs per dealer
of: $124.59 per dealer with fewer than
5 employees ($76.86 × 1.62 employees);
$499.59 per dealer with between 5 and
9 employees ($76.86 × 6.50 employees);
$1,058.73 per dealer with between 10
and 19 employees ($76.86 × 13.77
employees); $2,584.18 per dealer with
between 20 and 49 employees ($76.86 ×
33.62 employees); $5,343.19 per dealer
with between 50 and 99 employees
($76.86 × 69.52 employees); $10,784.88
per dealer with between 100 and 249
employees ($76.86 × 140.31 employees);
$24,384.79 per dealer with between 250
and 499 employees ($76.86 × 317.25
employees); $44,623.26 per dealer with
between 500 and 999 employees ($76.86
× 580.56 employees); and $147,085.08
per dealer with 1,000 or more
employees ($76.86 × 1,913.60
employees).
Thus, the total first-year compliance
costs based on dealer size are $4,345.51
($3,530.80 + $690.13 + $124.59) per
dealer with fewer than 5 employees;
$4,720.51 ($3,530.80 + $690.13 +
$499.59) per dealer with between 5 and
9 employees; $5,279.66 ($3,530.80 +
$690.13 + $1,058.73) per dealer with
between 10 and 19 employees;
$6,805.11 ($3,530.80 + $690.13 +
$2,584.18) per dealer with between 20
and 49 employees; $9,564.12 ($3,530.80
+ $690.13 + $5,343.19) per dealer with
between 50 and 99 employees;
$15,005.80 ($3,530.80 + $690.13 +
$10,784.88) per dealer with between 100
and 249 employees; $28,605.72
($3,530.80 + $690.13 + $24,384.79) per
dealer with between 250 and 499
employees; $48,844.18 ($3,530.80 +
$690.13 + $44,623.26) per dealer with
between 500 and 999 employees; and
$151,306.01 ($3,530.80 + $690.13 +
$147,085.08) per dealer with 1,000 or
more employees.
To analyze the economic effect of the
costs of the Rule by dealer size, the
Commission compares per-dealer costs
to per-dealer sales, gross margin, and
gross margin minus operating expenses.
The Commission does not have data on
how sales, gross margin, and operating
expenses are apportioned to dealerships
based on the number of employees.
Accordingly, the Commission assumes
that sales, gross margin, and operating
expenses are apportioned to dealerships
pro rata with the number of employees.
Dividing the 2021 industry-wide figures
for annual sales ($1.265 trillion), gross
margin ($226.118 billion), and gross
margin minus operating expenses
($81.850 billion) by the total number of
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employees (1,257,877),502 each
employee represents an additional
$1,005,372.54 in sales ($1.265 trillion/
1,257,877 employees), $179,761.61 in
gross margin ($226.118 billion/
1,257,877 employees), and $65,069.96
in gross margin minus operating
expenses ($81.850 billion/1,257,877
employees). Multiplying these peremployee figures by the average number
of employees of dealers within different
size cohorts provides per-dealer sales,
gross margin, and gross margin minus
operating expenses for each cohort. For
instance, dealers with fewer than 5
employees have estimated annual sales
of $1,629,611.16 (1.62 employees ×
$1,005,372.54 sales per employee),
annual gross margin of $291,376.10
(1.62 employees × $179,761.61 gross
margin per employee), and annual perdealer gross margin minus operating
expenses of $105,472.17 (1.62
employees × $65,069.96 gross margin
minus operating expenses per
employee).
The Commission then divides firstyear compliance costs by these figures
to yield cost as a percentage of sales,
gross margin, and gross margin minus
operating costs. Applying this method
to each of the dealer size cohorts, firstyear compliance costs are equivalent to:
0.27% of annual sales ($4,345.51/
$1,629,611.16), 1.49% of gross margin
($4,345.51/$291,376.10), and 4.12% of
gross margin minus operating expenses
($4,345.51/$105,472.07) for dealers with
fewer than 5 employees; 0.07% of
annual sales ($4,720.51/$6,534,647.69),
0.40% of gross margin ($4,720.51/
$1,168,401.53), and 1.12% of gross
margin minus operating expenses
($4,720.51/$422,936.98) for dealers with
5–9 employees; 0.04% of annual sales
($5,279.66/$13,848,305.89), 0.21% of
gross margin ($5,279.66/$2,476,090.91),
and 0.59% of gross margin minus
operating expenses ($5,279.66/
$896,293.27) for dealers with 10–19
employees; and less than one-half of one
percent of the annual sales, gross
margin, and gross margin minus
operating expenses for the remaining
categories of dealers.
(2) Costs in subsequent years. The
estimated cost of compliance with the
Rule drops after the first year, given the
absence of upfront costs, which are not
incurred after the first year. Compliance
502 Data on the number of employees comes from
the 2021 census. See U.S. Census Bureau, ‘‘All
Sectors: County Business Patterns, Including ZIP
Code Business Patterns, by Legal Form of
Organization and Employment Size Class for the
U.S., States, and Selected Geographies: 2021,’’
https://data.census.gov/table?q=CB2100CBP&n=
44111:44112&tid=CBP2021.CB2100CBP&nkd=
EMPSZES∼001,LFO∼001.
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costs in subsequent years—which are
limited to annual ongoing costs (both
fixed and those that scale with dealer
size)—are therefore a smaller percentage
of annual sales, gross margin, and gross
margin minus operating expenses, equal
to less than two percent of these metrics
for dealers of all sizes.503
The Commission does not find that
these compliance costs represent a
significant economic burden. The
Commission therefore certifies that the
Final Rule will not have a significant
economic impact on a substantial
number of small entities.
B. Initial and Final Regulatory
Flexibility Analysis
The NPRM noted the Commission’s
belief that the proposed rule would not
have a significant economic impact on
small entities, but nevertheless
examined the six IRFA factors, and
invited comment on the proposed rule’s
burdens on small businesses. In the
following paragraphs, the Commission
discusses comments and then sets forth
a FRFA.
1. Comments on the Initial Regulatory
Flexibility Analysis
(a) Description of the Reasons Why
Action by the Agency Is Being
Considered
The IRFA explained that the
Commission proposed the Rule to
address misleading practices and
unauthorized charges to consumers
during the vehicle buying or leasing
process, and to deter dealer misconduct
and remedy consumer harm. The
Commission further noted that its law
enforcement, outreach and other
engagement in this area, and the
hundreds of thousands of consumer
complaints received by the FTC,
indicated that dealership misconduct
and deceptive tactics persisted despite
Federal and State law enforcement
efforts. In response, the comments from
SBA Advocacy and one industry group
argued that the number of complaints
received by the Commission is
insufficient to support a rulemaking
given the total number of vehicle
transactions in the United States.504
503 Average ongoing compliance costs after the
first year equal: 0.05% of annual sales, 0.28% of
gross margin, and 0.77% of gross margin minus
operating expenses for dealers with fewer than 5
employees, and less than one-half of one percent of
annual sales, gross margin, and gross margin minus
operating expenses for the remaining categories of
dealers.
504 Comment of SBA Advocacy, Doc. No. FTC–
2022–0046–6664 at 6. SBA Advocacy also raised
concerns that the proposal could make the buying
process more cumbersome and confusing, noting
that the proposal requires additional disclosures,
and the proposal prohibited dealers from relying on
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669
Similarly, the industry group argued
that the Commission has not filed
enough law enforcement actions against
motor vehicle dealers to justify the
proposal, and that, where it has brought
enforcement actions, the Commission
has managed to obtain redress for
harmed consumers without the need for
an additional monetary remedy. As
explained in SBP II.B and in the sectionby-section analysis of the recordkeeping
requirements in § 463.6 in SBP III.F,
a signed or initialed document, by itself, or
prechecked boxes to establish express, informed
consent. These arguments are addressed in the
discussion of disclosures in §§ 463.4, 463.5 and the
definition of ‘‘Express, Informed Consent’’ in
§ 463.2.
The industry group also argued that the number
of complaints is overstated because it includes: (1)
complaints that are not applicable to motor vehicle
dealers or conduct addressed by the Rule, and (2)
consumers who did not report a loss. This industry
group also argued that the Commission failed to
take notice of survey data indicating that the
majority of consumers are satisfied with their
vehicle purchases. See, e.g., Cox Auto., ‘‘2021 Cox
Automotive Car Buyer Journey Study’’ (2022)
[hereinafter 2021 Cox Automotive Car Buyer
Journey Study], https://www.coxautoinc.com/wpcontent/uploads/2022/01/2021-Car-Buyer-JourneyStudy-Overview.pdf. First, in the Commission’s
experience, complaints understate harm caused by
unlawful conduct in a given category,
notwithstanding any inclusion of complaints that
may pertain to ancillary or related issues. See SBP
II.B (discussing how complaints represent the tip of
the iceberg in terms of actual consumer harm and
citing case where prior to FTC action, there were
391 complaints about add-ons and other issues but
survey results during the same period indicted that
at least 16,848 customers were subject to unlawful
practices related to add-ons alone). Moreover, the
Commission’s reported complaint numbers may be
underinclusive of relevant complaints filed by
consumers (e.g., complaints about vehicle financing
issues may be filed under the ‘‘Banks and Lenders’’
category; vehicle repossession issues may be filed
under the ‘‘Debt Collection’’ category; and
complaints about deceptive online vehicle
shopping may be filed under the ‘‘Online Shopping
and Negative Reviews’’ category). With regard to
consumers who did not report a loss, the
Commission disagrees that such consumers were
not harmed or that their experience is not relevant
to the Rule. For example, many consumers
experience a law violation or other harmful
conduct, but choose not to consummate the
transaction, including consumers who waste time
pursuing misleading offers. Further, survey data
indicating that a majority of customers are
‘‘satisfied’’ do not indicate whether those customers
had hidden charges in their contracts and whether
they ever became aware of such charges. Surveys
cited by the Commission have identified situations
where customers are unaware of add-on charges in
their contracts; indeed, in one case, 79% of
consumers were unaware of such charges. See SBP
II.B (discussing hidden charges in auto contracts).
Consumers might be satisfied with a purchase until
they later learn they are paying for items they did
not authorize, if they learn this at all. Further, ‘‘the
FTC need not prove that every consumer was
injured. The existence of some satisfied customers
does not constitute a defense . . . .’’ Fed. Trade
Comm’n v. Amy Travel Serv., Inc., 875 F.2d 564,
572 (7th Cir. 1989), vacated in part on other
grounds, Fed. Trade Comm’n v. Credit Bureau Ctr.,
LLC, 937 F.3d 764 (7th Cir. 2019); accord Fed.
Trade Comm’n v. Stefanchik, 559 F.3d 924, 929
n.12 (9th Cir. 2009).
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consumer complaints represent the ‘‘tip
of the iceberg’’ of actual misconduct, as
many unlawful practices go undetected
or unreported by consumers. Further,
the Commission has taken significant
action aimed at addressing law
violations in the motor vehicle dealer
marketplace, despite limited resources
and a broad mandate to address
unlawful practices across much of the
nation’s commercial activity,505 and,
particularly given the Supreme Court’s
2021 ruling limiting the FTC’s ability to
obtain redress for consumers, it is
difficult to get full redress for
consumers.506 Despite these
Commission actions, as well as the
hundreds of additional actions brought
by other Federal and State regulators,
the deceptive or unfair acts or practices
addressed by the proposed rule persist.
(b) Succinct Statement of the Objectives
of, and Legal Basis for, the Proposed
Rule
The objectives of the Rule and its
legal basis, including the specific grant
of rulemaking authority under section
1029 of the Dodd-Frank Act, 12 U.S.C.
5519, were set forth in the IRFA.507 The
objectives and legal basis, and
comments on these topics, additionally
have been discussed throughout this
SBP.
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(c) Description of and, Where Feasible,
Estimate of the Number of Small
Entities to Which the Proposed Rule
Will Apply
In its IRFA, the Commission
estimated that there were approximately
46,525 franchise, new motor vehicle,
and independent/used motor vehicle
dealers.508 As discussed in the
505 One industry group argued that the majority
of the FTC’s enforcement actions have pertained to
deceptive advertising, and few have alleged
unlawful conduct involving add-ons. The
Commission agrees that many of its actions have
alleged deceptive pricing. In focusing on certain
actions that involved allegations that dealers placed
unauthorized charges for add-ons, however, the
commenter leaves out other unlawful conduct
related to add-ons. Such conduct includes, for
example, misrepresentations regarding the pricing
of add-ons (Complaint ¶¶ 6–12, TT of Longwood,
Inc., No. C–4531 (F.T.C. July 2, 2015)), or failing to
disclose that mandatory add-ons were included in
the cost of credit (Consent Order ¶¶ 73–75, Y King
S Corp., CFPB No. 2016–CFPB–0001 (Jan. 21,
2016)). In addition, unauthorized charges are likely
to go unnoticed by consumers, which can hamper
enforcement efforts. See, e.g., Auto Buyer Study,
supra note 25, at 14 (describing several study
participants who thought they had not purchased
add-ons, or that add-ons were free, and only learned
during the study that they were charged for addons).
506 See AMG Cap. Mgmt., LLC v. Fed. Trade
Comm’n, 141 S. Ct. 1341 (2021).
507 NPRM at 42035.
508 Id. at 42035. The Commission explained that,
because of the relative size of the automobile
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Paperwork Reduction Act analysis in
SBP III.V, the Commission received
comments from SBA Advocacy and
others on this estimate, and the
Commission has responded to those
comments by making certain changes to
the proposal in light of the comments
received. The Commission has revised
its estimate of covered dealers to 47,271
franchise, new motor vehicle, and
independent/used motor vehicle dealers
based on newly available NAICS data
assembled by the U.S. Census
Bureau.509
Regarding the estimate of the number
of small entities affected by the Final
Rule, as noted in the Certification of the
Final Rule,510 while the Commission
cannot determine the precise number of
small entities, the data the Commission
does have reinforce the Commission’s
initial view that most covered entities
are small entities.
(d) Description of the Projected
Reporting, Recordkeeping, and Other
Compliance Requirements of the
Proposed Rule
An industry association commenter
argued that the Commission did not
‘‘accurately’’ lay out the proposed rule’s
projected requirements. The commenter
did not provide an explanation of what
it alleged to be inaccurate in the
Commission’s description. This
comment notwithstanding, the NPRM
described the proposed rule’s projected
requirements, including by elaborating
on the proposed recordkeeping
requirements and providing estimates
regarding the anticipated recordkeeping
time and resource obligations for
programmers, clerical staff, sales
managers, and compliance officers.511
The NPRM also provided a detailed
market compared to other types of motor vehicle
dealers, and the greater availability of relevant
information for this market, its NPRM analysis
exclusively considered automobile dealers. The
Commission invited submissions of market
information for other types of motor vehicles such
as boats, RVs, and motorcycles that would allow
expansion of the scope of its analysis. See NPRM
at 42035–36.
509 U.S. Census Bureau, ‘‘All Sectors: County
Business Patterns, Including ZIP Code Business
Patterns, by Legal Form of Organization and
Employment Size Class for the U.S., States, and
Selected Geographies: 2021,’’ https://
data.census.gov/table?q=CB2100CBP&
n=44111:44112&tid=CBP2021.
CB2100CBP&nkd=EMPSZES∼001,LFO∼001 (listing
21,622 establishments for ‘‘[n]ew car dealers,’’
NAICS code 44111, and 25,649 establishments for
‘‘[u]sed car dealers,’’ NAICS code 44112).
510 See SBP VI.A.2.
511 NPRM at 42035; see also id. at 42033–34
(describing recordkeeping requirements and
analyzing cost burden). To avoid duplicative or
unnecessary analysis, the information required by
the IRFA can be provided with or as part of any
other analysis required by any other law. 5 U.S.C.
605(a).
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description of the recordkeeping
requirements for entities to be covered
by the Rule.512
(e) Duplicative, Overlapping, or
Conflicting Federal Rules
An industry association commenter
argued that the Commission failed to
identify relevant Federal rules that may
duplicate, overlap, or conflict with the
proposal. This commenter’s arguments
that the proposed rule conflicts with
Federal statutes are addressed in the
section-by-section analysis in SBP III.
Commenters provided no examples of
actual conflicts between the proposals
and Federal law. Further, there is no
evidence that duplicative laws
prohibiting misrepresentations or unfair
acts or practices have harmed
consumers or competition. Moreover,
the additional remedies provided by the
Final Rule will benefit consumers who
encounter conduct that is already illegal
and will assist law-abiding dealers that
presently lose business to competitors
that act unlawfully.
(f) Description of Any Significant
Alternatives to the Proposed Rule
Which Accomplish the Stated
Objectives of Applicable Statutes and
Which Minimize Any Significant
Economic Impact of the Proposed Rule
on Small Entities
Statutory examples of ‘‘significant
alternatives’’ include different
requirements or timetables that take into
account the resources available to small
entities; the clarification, consolidation,
or simplification of compliance and
reporting requirements under the Rule
for small entities; the use of
performance rather than design
standards; and an exemption from
coverage of the Rule, or any part thereof,
for small entities.513 Comments from
SBA Advocacy and from a national
industry association argued that the
Commission did not set forth
alternatives to the proposed rule.514
In its Regulatory Flexibility Act
compliance guidance to Federal
agencies, the SBA Office of Advocacy
provides that, ‘‘[i]f an agency is unable
to analyze small business alternatives
separately, then alternatives that reduce
the impact for businesses of all sizes
must be considered.’’ 515 As the
512 See NPRM at 42027, 42035 (enumerating
records to be retained and time period for
retention).
513 See 5 U.S.C. 603(c)(1)–(4).
514 Comment of SBA Advocacy, Doc. No. FTC–
2022–0046–6664.
515 Off. of Advoc., U.S. Small Bus. Admin., ‘‘A
Guide for Government Agencies: How to Comply
with the Regulatory Flexibility Act’’ 39 (2017),
https://advocacy.sba.gov/wp-content/uploads/
2019/06/How-to-Comply-with-the-RFA.pdf.
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Commission explained in its NPRM, it
‘‘envisioned and drafted this Rule
mindful that most motor vehicle dealers
are small entities,’’ and drafted its
proposal in the first instance to
minimize economic impact on all motor
vehicle dealers.516 For example, the
Rule prohibits conduct that already
violates the FTC Act, but still takes
steps to minimize burdens for dealers of
all sizes, by, for example, allowing
records to be kept in any legible form
already kept in the ordinary course of
business, and by limiting recordkeeping
requirements to twenty-four months
from the date the record is created
despite the fact that motor vehicle
financing terms are generally years
longer than this period. Commenters
generally appear to understand the
relevant market in a similar manner. For
instance, the possible alternatives raised
by the comment from SBA Advocacy
would apply uniformly to both large
and small businesses. These alternatives
included excluding vehicle dealers that
do not sell automobiles, regardless of
the size of the dealer, and creating a
carve-out for banks and other financing
companies that would cover multibillion dollar institutions.517 Comments
from SBA Advocacy and a national
516 NPRM at 42036–37; see also id. at 42029–30
(indicating, in Questions for Comment 26.b, 28.a, &
30 that the Commission was considering alternative
approaches).
517 See Comment of SBA Advocacy, Doc. No.
FTC–2022–0046–6664 at 4–6. As addressed in SBP
III.C.2(a) and SBP III.E.2(c), in responding to a
similar comment by financial institutions, the Final
Rule does not change the status quo regarding the
responsibilities of contract assignees or other
subsequent holders of motor vehicle financing
under the Holder Rule, and the Commission
declines to create a safe harbor for contract
assignees where it did not previously exist.
Similarly, one comment recommended that the
Commission add a rule provision authorizing an
alternative compliance mechanism, stating that
such a provision would aid not just smaller entities
but larger entities as well. Under this alternative
mechanism, independent accountability
organizations could apply to the Commission for
authorization to review and assess auto dealers’
adherence to a set of rule compliance guidelines
that would be created. See Comment of BBB Nat’l
Programs, Doc. No. FTC–2022–0046–8452 at 1–3.
This comment suggested that such an alternative
compliance mechanism would have several
benefits, including educating industry participants
and allowing for industry oversight beyond the
capacity of the FTC. The Commission agrees with
the goals of educating stakeholders and maximizing
resources used to ensure compliance with the Rule
but notes that these goals can be furthered without
adding alternate mechanisms with as-yet unknown
guidelines, that may or may not be sufficient to
protect consumers, to the Rule that the Commission
is finalizing. The Commission notes that the Rule
finalizes certain baseline protections that should
already be in place under the law. The Commission
encourages stakeholders, such as auto dealer trade
associations, BBB, and others, to educate their
members and the public about the Rule and
encourage compliance, as such groups have done
when issuing guidance on other aspects of the law.
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industry association also discussed the
proposed rule’s disclosure requirements
in an industry-wide manner, not
limiting their comments to businesses
under any particular size threshold.518
Nevertheless, the Commission has
reviewed these comments carefully, has
responded to comments on alternatives
in the corresponding sections of its
section-by-section analysis, and has
determined to modify the definition of
‘‘Covered Motor Vehicle’’ at § 463.2(e)
and not to finalize the requirements
proposed in §§ 463.4(b) and 463.5(b).519
2. Final Regulatory Flexibility Analysis
Although the Commission is
certifying that the Rule will not have a
significant economic impact on a
substantial number of small entities, the
Commission has prepared the following
FRFA with this Final Rule. In the
following paragraphs, the Commission
provides the information required for a
FRFA: (1) a statement of the need for,
and objectives of, the Rule; (2) a
statement of the significant issues raised
by public comments in response to the
IRFA, including any comments filed by
the Chief Counsel for Advocacy of the
Small Business Administration in
response to the proposed rule, the
Commission’s assessment and response,
and any resulting changes; (3) a
description of and an estimate of the
number of small entities to which the
Rule will apply or an explanation of
why no such estimate is available; (4) a
description of the projected reporting,
recordkeeping, and other compliance
requirements; and (5) a description of
the steps the agency has taken to
minimize the significant economic
impact on small entities consistent with
the stated objectives of applicable
statutes, including a discussion of any
significant alternatives for small
entities.520
518 Comment of SBA Advocacy, Doc. No. FTC–
2022–0046–6664 at 5–6; see generally Comment of
Nat’l Auto. Dealers Ass’n, Doc. No. FTC–2022–
0046–8368. The National Automobile Dealers
Association also argues that the Commission should
have considered whether to do a rule in the first
instance. The NPRM provides a detailed
explanation of why, more than a decade after
Congress granted the FTC APA rulemaking
authority with respect to motor vehicle dealers, and
continued enforcement, outreach, and other
initiatives, a rule is needed to address ongoing
problems related to bait-and-switch tactics and
hidden charges.
519 Separately, the Commission notes that the
NPRM identified and solicited comments on
alternatives to every substantive requirement,
including the areas specifically addressed by the
commenters. See, e.g., NPRM at 42028–30 (Q4–7,
Q10, Q16, Q28, Q33, Q36–38); id. at 42040–41.
520 5 U.S.C. 604(a)(1)-(6).
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671
(a) Statement of the Need for, and
Objectives of, the Rule
The FTC issues this Final Rule to
address deceptive and unfair acts or
practices during the vehicle buying or
leasing process, and to provide an
additional enforcement tool to remedy
consumer harm and assist law-abiding
dealers. As detailed in SBP II.B.1, these
deceptive and unfair practices include
bait-and-switch tactics, such as dealers
advertising deceptively low prices or
other deceptive terms to induce
consumers to visit the dealership, and
charging such consumers additional,
unexpected amounts, including after the
consumers have invested significant
time and effort traveling to, and
negotiating at, the dealership premises.
At present, consumers may never learn
that they are paying substantial
unexpected charges, given the
complexity and length of the motor
vehicle sale, financing, or lease
transaction and its attendant contracts
and other documents. Law enforcement,
outreach and other engagement in this
area, as well as the number of consumer
complaints each year regarding motor
vehicle dealer practices, indicate that
unlawful conduct persists despite
Federal and State law enforcement
efforts.
(b) Issues Raised by Comments,
Including Comments by the Chief
Counsel for Advocacy of the SBA, the
Commission’s Assessment and
Response, and Any Changes Made as a
Result
The comments regarding the IRFA are
addressed in SBP VI.B, and the
comments regarding the other
provisions of the NPRM are discussed in
the SBP’s section-by-section analysis in
SBP III. As noted, the Commission has
made certain changes to the Rule after
carefully reviewing the comments.
These changes include modification of
the definition of ‘‘Covered Motor
Vehicle’’ at § 463.2(e), removal of the
add-on list disclosure requirement in
proposed § 463.4(b) and the
requirements in proposed § 463.5(b),
and removal of the corresponding
recordkeeping requirements in proposed
§ 463.6(a)(2) and (a)(4).
(c) Description and Estimate of the
Number of Small Entities to Which the
Final Rule Will Apply or an Explanation
of Why No Such Estimate Is Available
The Final Rule applies to covered
motor vehicle dealers, as defined in
§ 463.2(f), of covered motor vehicles at
§ 463.2(e): ‘‘any self-propelled vehicle
designed for transporting persons or
property on a public street, highway, or
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road,’’ and, in light of comments
received, excludes specific categories as
detailed in § 463.2(e).521 As explained
in the Certification,522 the Commission
cannot determine the precise number of
small entities to which the Final Rule
applies, but census data indicate that
the vast majority of the estimated 47,271
dealers covered by the Rule are small
entities according to the applicable U.S.
Small Business Administrator’s relevant
size standards.
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(d) Description of the Projected
Reporting, Recordkeeping, and Other
Compliance Requirements
The Final Rule prohibits certain
unfair or deceptive acts or practices and
contains recordkeeping requirements.
The Final Rule contains no reporting
requirements.
The Final Rule requires covered
motor vehicle dealers to clearly and
conspicuously disclose the offering
price of a vehicle in certain
advertisements and in response to
consumer communications. It also
requires dealers to make certain other
disclosures during the sale, financing, or
leasing process. To enforce the Rule and
prevent the unfair or deceptive practices
prohibited by the Rule, the Rule further
requires dealers to retain records
necessary to demonstrate compliance
with the Rule. Such records include
advertising materials and copies of
purchase orders and financing and lease
documents. The Rule requires such
records to be retained for a period of
twenty-four months from the date they
are created and provides that they may
be kept in any legible form, and in the
same manner, format, or place as they
may already be kept in the ordinary
course of business. Further details on
these provisions are discussed
throughout this SBP, including in the
section-by-section analysis of the
recordkeeping requirements in § 463.6,
as well as in the preceding Paperwork
Reduction Act analysis.
(e) Description of the Steps the
Commission Has Taken To Minimize
the Significant Economic Impact on
Small Entities Consistent With the
Stated Objectives of Applicable Statutes
The Final Rule addresses certain
unfair or deceptive acts or practices in
motor vehicle sales, financing, and
leasing. In drafting its NPRM, reviewing
public comments, and modifying the
Rule from its original proposal, the
521 The Commission is authorized to prescribe
rules with respect to a motor vehicle dealer that is
predominantly engaged in the sale and servicing of
motor vehicles, the leasing and servicing of motor
vehicles, or both, as defined in 12 U.S.C. 5519(a).
522 See SBP VI.A.2.
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Commission has taken specific steps to
avoid unduly burdensome requirements
for small entities. The Commission
believes that the Final Rule—including
the prohibitions against making specific
misrepresentations and against charging
consumers for any item unless the
dealer obtains the express, informed
consent of the consumer for the
charge—is necessary to protect
consumers, including small-business
consumers that purchase, finance, or
lease motor vehicles. By addressing
these practices, the Rule also will
benefit competition by preventing lawabiding dealers, many of which are
small businesses, from losing business
due to unlawful practices by other
dealers.
For each provision in the Rule, the
Commission has attempted to reduce
the burden on businesses, including
small entities. For example, the
Commission limited the number of
disclosures that dealers are required to
make under the Final Rule, and in
response to comments, further limited
such disclosures by determining not to
finalize the disclosures in proposed
§§ 463.4(b) and 463.5(b). Similarly, the
Commission has limited the duration of
the Rule’s recordkeeping requirements
to twenty-four months from the date the
relevant record is created, even though
this period is far shorter than the length
of many financing contracts.
As previously noted, the Commission
does not believe the Final Rule imposes
a significant economic impact on a
substantial number of small entities.
Nonetheless, the Commission has taken
care to avoid extensive requirements
related to form. For example, the
Commission does not specify the form
in which records required by the Final
Rule must be kept. Moreover, the Rule’s
disclosure requirements do not mandate
specific font sizes. In sum, the
Commission has worked to minimize
any significant economic impact on
small businesses.
VII. Final Regulatory Analysis Under
Section 22 of the FTC Act
A. Introduction
The Federal Trade Commission (FTC)
is finalizing a Rule to address unfair or
deceptive acts or practices by covered
motor vehicle dealers when engaging
with consumers who are shopping for
covered motor vehicles. The Rule
contains several provisions targeted at
addressing price-related deception and
unfairness for consumers with respect to
purchasing, leasing, and financing new
and used motor vehicles. The Final Rule
prohibits misrepresentations regarding
material information about certain
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aspects of motor vehicles and motor
vehicle financing. The Final Rule also
mandates certain disclosures about
vehicle price, payments, and add-ons,
while prohibiting charges for add-on
products and services that would not
benefit the consumer or for any item
unless the dealer obtains the express,
informed consent of the consumer for
the charge.
Section 22 of the FTC Act, 15 U.S.C.
57b–3, requires the Commission to issue
a final regulatory analysis when
publishing a final rule. The final
regulatory analysis must contain (1) a
concise statement of the need for, and
objectives of, the final rule; (2) a
description of any alternatives to the
final rule which were considered by the
Commission; (3) an analysis of the
projected benefits, any adverse
economic effects, and any other effects
of the final rule; (4) an explanation of
the reasons for the determination of the
Commission that the final rule will
attain its objectives in a manner
consistent with applicable law and the
reasons the particular alternative was
chosen; and (5) a summary of any
significant issues raised by the
comments submitted during the public
comment period in response to the
preliminary regulatory analysis, and a
summary of the assessment by the
Commission of such issues.
As discussed previously, the FTC
issues this Final Rule to address
deceptive and unfair acts or practices
during the vehicle buying or leasing
process, and to provide an additional
enforcement tool to remedy consumer
harm and assist law-abiding dealers.
These deceptive and unfair practices
include bait-and-switch tactics, such as
dealers advertising deceptively low
prices or other deceptive terms to
induce consumers to visit the
dealership; and charging such
consumers additional, unexpected
amounts, including after the consumers
have invested significant time and effort
traveling to, and negotiating at, the
dealership premises. At present,
consumers may never learn that they are
paying substantial unexpected charges,
given the complexity and length of the
motor vehicle sale, financing, or lease
transaction and its attendant contracts
and other documents. Law enforcement,
outreach, and other engagement in this
area, as well as the number of consumer
complaints each year regarding motor
vehicle dealer practices, indicate that
unlawful conduct persists despite
Federal and State law enforcement
efforts.
In response to public comments, the
Commission considered and made a
number of revisions from the proposed
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rule, which in turn have necessitated
revisions to the regulatory analysis,
resulting in this final regulatory
analysis.523 The most significant
revisions to the proposed rule impacting
the regulatory analysis are the removal
of proposed §§ 463.4(b) (requiring the
disclosure of add-on lists) and 463.5(b)
(requiring various itemized disclosures
relating to undisclosed or unselected
add-ons). As a result of the
Commission’s determination not to
finalize these sections of the proposed
rule, costs and benefits associated with
those provisions have been excluded
from the final regulatory analysis. The
Commission also has made revisions in
response to public comments, the
availability of newer data, the
identification of additional relevant
data, and the application of newer
scholarly research. The final regulatory
analysis thus builds upon the
preliminary regulatory analysis, while
incorporating several updates:
• The analysis of consumer time
savings has been revised in response to
public comments and changes following
the NPRM.
• A section quantifying the reduction
in deadweight loss resulting from the
Rule has been added, based upon recent
research that allows the Commission to
quantify both how dealer markups will
respond to price transparency and how
new and used vehicle quantities will
respond to changes in price.
• Training costs have been added for
some provisions in response to public
comments.
• Information systems costs have
been added to the Recordkeeping
section in response to public comments,
based on estimates of how much data
would be required and the cost of cloud
or on-premises data storage.
• Wages used to monetize labor costs
have been updated to reflect new data
from the Bureau of Labor Statistics.
• The number of dealers has been
updated to reflect new data from Census
County Business Patterns.
• The number of transactions subject
to the Rule has been revised in response
to public comments, and the
Commission’s identification of
additional data sources that can be used
to exclude private party and fleet
transactions.
The Final Rule contains requirements
in the following areas:
1. Prohibited misrepresentations;
2. Required disclosure of offering
price in certain advertisements and in
response to inquiry;
3. Required disclosure of total of
payments for financing and leasing
transactions;
4. Prohibition on charging for add-ons
in certain circumstances;
5. Requirement to obtain express,
informed consent before any charges;
and
6. Recordkeeping.
In the following analysis, we describe
the anticipated impacts of the Final
Rule. Where possible, we quantify the
benefits and costs and present them
separately by provision. If a benefit or
cost is quantified, we indicate the
sources of the data relied upon. If an
assumption is needed, the text makes
clear which quantities are being
assumed.
A period of 10 years is used in the
baseline scenario because FTC rules are
generally subject to review every 10
years.524 Quantifiable aggregate benefits
and costs across three different sets of
assumptions are summarized as the net
present value over this 10-year time
frame in Table 1.1. Quantifiable benefits
include time savings from a more
efficient shopping and sales process and
a reduction in deadweight loss, both of
which ultimately result from greater
transparency under the Rule.
Quantifiable costs primarily reflect the
resources expended by automobile
dealers in developing the systems
necessary to comply with the provisions
of the Rule. In addition, we expect
additional benefits and costs that we are
presently unable to quantify. Among the
unquantified benefits are time savings
that accrue to individuals who abandon
vehicle transactions entirely; additional
time savings on activities that
individuals engage in digitally under
the status quo; reductions in deadweight
loss resulting from direct price effects in
the markets for used vehicles or vehicle
add-ons; and the benefit of reduced
stress, discomfort, and unpleasantness
experienced by motor vehicle
consumers under the status quo. Among
the unquantified costs would be any
potential reductions in consumer
information resulting from changes in
dealers’ policies regarding marketing
and advertisements. The discount rate
reflects society’s preference for
receiving benefits earlier rather than
later; a higher discount rate is associated
with a greater preference for benefits in
the present. The present value is
obtained by multiplying each year’s net
benefit by a discount factor a number of
times equal to the number of years in
the future the net benefit accrues.525
TABLE 1.1—PRESENT VALUE OF NET BENEFITS (IN MILLIONS), 2024–2033
Low estimate
3% Discount
rate
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Benefits:
Time Savings ....................................
Deadweight Loss Reduction .............
Total Benefits .............................
Costs:
Finance/Lease Total of Payments
Disclosure ......................................
Offering Price Disclosure ..................
Prohibition re: Certain Add-ons &
Express, Informed Consent ..........
523 These revisions and alternatives the
Commission considered are described in detail in
the Commission’s Statement of Basis and Purpose,
as is the Commission’s explanation why the Final
Rule will attain its objectives in a manner
consistent with applicable law.
524 See Fed. Trade Comm’n, Notification of Intent
to Request Public Comment, Regulatory Review
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Base case
7% Discount
rate
3% Discount
rate
7% Discount
rate
3% Discount
rate
7% Discount
rate
$7,463
568
$6,145
468
$14,926
1,298
$12,290
1,069
$24,036
2,307
$19,790
1,899
8,031
6,613
16,224
13,359
26,343
21,690
296
46
246
46
296
46
246
46
117
0
98
0
475
406
475
406
147
128
Schedule, 87 FR 47947 (Aug. 5, 2022), https://
www.govinfo.gov/content/pkg/FR-2022-08-05/pdf/
2022-16863.pdf.
525 While whole calendar years are used here for
ease of reference, this analysis estimates costs and
benefits over a ten-year period running from the
Rule’s effective date. For the purposes of
discounting, the Commission assumes that any
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upfront costs or benefits occur immediately upon
the effective date of the Rule and are therefore not
discounted. The Commission further assumes that
ongoing costs and benefits occur at the end of each
period, such that even ongoing costs/benefits that
occur in year 1 are discounted.
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TABLE 1.1—PRESENT VALUE OF NET BENEFITS (IN MILLIONS), 2024–2033—Continued
Low estimate
3% Discount
rate
Base case
7% Discount
rate
3% Discount
rate
High estimate
7% Discount
rate
3% Discount
rate
7% Discount
rate
Prohibition on Misrepresentations ....
Recordkeeping ..................................
157
296
130
248
157
296
130
248
0
296
0
248
Total Costs ................................
1,270
1,075
1,270
1,075
559
474
Net Benefits ...............................
6,761
5,538
14,954
12,284
25,784
21,216
Note: ‘‘Low Estimate’’ reflects all lowest benefit estimates and high cost scenarios and ‘‘High Estimate’’ reflects all highest benefit estimates
and low cost scenarios. ‘‘Base Case’’ reflects base case benefit estimates and high cost scenarios. Not all impacts can be quantified; estimates
only reflect quantified costs and benefits.
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B. Estimated Benefits of Final Rule
In this section, we describe the
beneficial impacts of the Rule, by (1)
providing quantitative estimates where
possible, (2) identifying quantitative
benefits that cannot be estimated at this
time due to a lack of data, and (3)
describing benefits that can only be
assessed qualitatively. The benefits cut
across multiple areas addressed by the
Rule and these benefits are impossible
to identify separately by area. As a
result, we enumerate the benefits of the
Rule not by provision, but by category.
1. Consumer Time Savings When
Shopping for Motor Vehicles
Several provisions of the Rule would
benefit consumers by saving them time
as they complete motor vehicle
transactions. Required disclosures of
relevant prices and prohibitions of
misrepresentations, inter alia, would
save consumers time when shopping for
a vehicle by requiring the provision of
salient, material information early in the
process and eliminating time spent
pursuing misleading offers. The
Commission’s enforcement record
shows that consumer search and
shopping is sometimes influenced by
unfair or deceptive advertising that
draws consumers to a dealership in
pursuit of an advertised deal, only to
find out at some point later in the
process (if at all) that the advertised deal
is not actually available to them.526 This
bait-and-switch advertising has the
effect of wasting consumers’ time
traveling to and negotiating with
unscrupulous dealerships, time which
would otherwise be spent pursuing
truthful offers in the absence of
deception and unfairness. If consumers
are faced with hard constraints on their
time or other resources, this wasted time
may mean that they are unable to find
the deal that best fits their needs and
preferences. Additionally, motor vehicle
consumers frequently begin the process
526 See
SBP II.B–C.
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of shopping for a motor vehicle (e.g., by
visiting a dealership in response to an
ad or initiating negotiations in response
to a quoted price that is incomplete) and
then later abandon the nascent
transaction entirely when additional
information is revealed. In these
instances, consumers do not purchase or
lease a vehicle at all. The Rule would
also save consumers time by avoiding
these abandoned transactions. However,
because the Commission has been
unable to identify data to determine the
quantity of such abandoned transactions
and the amount of time spent pursuing
them, this benefit remains unquantified
in the analysis.
Obviously, many consumers end up
purchasing and leasing vehicles under
the status quo—either because full
revelation of prices and terms still
results in a mutually beneficial
transaction or because full revelation
never occurs and consumers are
deceived into completing a transaction
that is not mutually beneficial. These
consumers also spend additional,
unnecessary time discovering
information that dealers would be
required to disclose earlier once the
Rule is in effect. The Commission
expects the Rule’s required disclosures
and prohibitions against
misrepresentations to improve
information flows and consumer search
efficiency, including but not limited to,
addressing the influence of deception
and unfairness on consumer search and
shopping behavior.
The Commission’s preliminary
analysis estimated that the proposed
rule would allow consumers to spend 3
fewer hours completing each motor
vehicle transaction and result in
(quantifiable) overall time savings
valued at between $30 billion and $35
billion. In this final regulatory analysis,
the Commission takes into account the
effects of revisions to the proposed rule
and additional data, addresses industry
comments, and employs an alternative
analytical approach with a sensitivity
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analysis. This sensitivity analysis
reflects a ‘‘high-end’’ estimate that
consumers will save as many as 3.3
hours per completed transaction; a
‘‘base case’’ estimate—representing the
most likely scenario—that consumers
will save 2.05 hours per transaction; and
a possible ‘‘low-end’’ savings estimate of
1.02 hours. Using a 7% discount rate,
these time savings estimates result in a
range of between $6.1 billion and $19.8
billion in total savings, with a base case
of $12.3 billion.
In its preliminary analysis, the
Commission relied on results from the
2020 Cox Automotive Car Buyer Journey
study, which showed that consumers
spent roughly 15 hours researching,
shopping, and visiting dealerships for
each motor vehicle transaction.527 Based
on the proposed rule provisions
prohibiting misrepresentations and
requiring price transparency, the
Commission assumed each consumer
who consummated a vehicle transaction
would spend 3 fewer hours shopping
online, corresponding with dealerships,
visiting dealer locations, and negotiating
with dealer employees. The 3 hours
corresponded to 20% of an average
consumer’s time spent on such activities
in 2019 (pre-COVID).
The Commission received a number
of comments emphasizing the
unnecessary time consumers must
spend to ascertain the price and terms
when attempting to consummate a
vehicle transaction. One group of
commenters, for example, asserted that
‘‘[t]he most important factor for
consumers purchasing a vehicle is its
price, yet the price is almost impossible
to ascertain without spending hours at
the dealership.’’ 528 Another group of
commenters provided a compilation of
numerous consumer complaints,
including many that described
consumers spending hours at a
527 NPRM
at 42037 & n.180.
of Am. for Fin. Reform et al., Doc.
No. FTC–2022–0046–7607.
528 Comment
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dealership trying to ascertain the final
price and terms of the transaction.529
The improved information flow under
the Final Rule will provide quantifiable
benefits for consumers by reducing or
eliminating this unnecessary need to
spend time penetrating opaque pricing
and terms, and will provide qualitative
benefits by reducing frustration and
stress in the car buying process.
Some industry commenters
questioned the appropriateness of the
data and assumptions used to quantify
the time savings benefit. A number of
industry association commenters argued
that the 15-hour figure did not represent
a reasonable base from which time
savings attributable to the Rule could be
derived. One such commenter criticism
asserted that the publication from which
it was sourced only surveyed consumers
who used the internet during research
and shopping and therefore could not be
representative of the time spent by
consumers who do not use the internet.
Still other commenters noted that
additional data from the same
organization were available. The
Commission disagrees that the 15-hour
estimate is an unreasonable base from
which to derive time savings from the
Rule. While the Cox Automotive Study
acknowledges only internet users were
surveyed, the study also indicates its
‘‘[r]esults are weighted to be
representative of the buyer
population.’’ 530 Also, while more recent
data were available at the time of the
analysis for the NPRM, those data were
from an extraordinary period (the
COVID–19 pandemic). The Commission
expects that the data used for the
preliminary analysis are more
representative of consumer experiences
over the analysis window than the more
recent data. While not dispositive, the
limited data available since the NPRM
was published bears this hypothesis out.
In the 2021 Cox Automotive Car Buyer
Journey Study, consumers spent roughly
529 Comment of Consumer Reps. et al., Doc. No.
FTC–2022–0046–7520 at 3, 11, 12, 16, 38 (including
story from Illinois consumer describing ‘‘[spending]
about 4 hours at the dealership while the salesman
kept changing the terms of the deal . . . .’’; story
from Connecticut consumer describing how, ‘‘[a]fter
nearly three hours of paperwork . . . I was finally
presented with the official bill to pay the balance.
The price was now higher than the original adjusted
sticker.’’; story from New Jersey consumer
describing how, ‘‘[a]fter 4 hours of negotiations . . .
I finally got nearly the same price as the verified
offer [for the vehicle] but about $1000 less on my
trade-in[ ] (that was also part of the verified offer).
The [dealer] also added on Accessories ‘other
products’ [of] $474.00 . . . .’’; story from Texas
consumer describing how ‘‘[t]he [dealership]
finance manager kept me there for two hours, and
said the deal was done. I went to get my wife, when
we got back the price had gone up $3,000.00.’’).
530 2020 Cox Automotive Car Buyer Journey,
supra note 25, at 1.
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12-and-a-half hours researching,
shopping, and visiting dealerships for
each motor vehicle transaction.531 In
contrast, in the 2022 Car Buyer Journey
study, consumers spent roughly 14-anda-half hours researching, shopping, and
visiting dealerships for each motor
vehicle transaction.532 This admittedly
short trend suggests that the COVID–19
pandemic had a significant effect on
motor vehicle shopping, reducing the
amount of time the typical consumer
spent on these activities, and that time
spent on these activities has already
rebounded to previous levels.533
Another industry association
commenter suggested that the figure
included categories of time use that
could not conceivably be affected by the
proposed rule, such as online research
into vehicle features, and that attention
should be restricted to time spent
shopping. The Commission finds that
several provisions in the Rule clearly
have the potential to reduce time spent
across most categories covered by the
15-hour figure, including the largest
category (‘‘Researching and Shopping
Online’’). This category of time use
would include comparing listed vehicle
prices across dealerships that, under the
Rule, would be transparent and
comparable in a way that they were not
in the status quo, thus saving consumers
time.
Some commenters also noted that the
total base of transactions reported in the
preliminary analysis appeared to
overstate the number of transactions to
which the proposed rule would apply.
First, commenters asserted that the 62.1
million transactions double-counted
new vehicle leases in the data source
from which it was obtained (2019
National Transportation Statistics, Table
1–17). Second, commenters asserted
that the number included private party
transactions that would be entirely
unaffected by the proposed rule.
Finally, commenters argued that the
transactions number contained
wholesale and fleet transactions, where
the amount of time spent researching,
shopping, and visiting dealers is likely
to be substantially different relative to a
household consumer.
The Commission has verified that the
source data were revised to fix the
erroneous double-counting of leases
531 See 2021 Cox Automotive Car Buyer Journey
Study, supra note 504, at 16.
532 See 2022 Car Buyer Journey, supra note 25, at
6.
533 Interestingly, consumer satisfaction with the
car buying process, as measured by this same
survey, was highest during the COVID–19
pandemic when the time spent on research,
shopping, and visiting dealerships was lowest, and
has since dropped back to pre-pandemic levels.
2022 Car Buyer Journey, supra note 25, at 5.
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between the time they were accessed by
the Commission for the drafting of the
preliminary analysis and the time that
comments were received. The final
analysis uses the revised data. In
addition, in response to comments that
private party transactions should be
excluded from the analysis, the
Commission is revising its analysis.
Additional data would be necessary to
quantify any time savings benefits for
wholesale and fleet transactions.
Accordingly, the Commission has
excluded all transactions occurring
through non-retail channels from the
final analysis.534
A number of comments raised
concerns about the foundations of the 3hour time-savings assumption. One
industry organization noted that the Cox
Automotive study cited in the NPRM
does not itself address the proposals in
the NPRM (which the survey, of course,
predated) and does not estimate time
savings.535 Another organization
534 When the transaction volume from the
preliminary analysis is applied to the Commission’s
current methodology and sensitivity analysis, time
savings under the Final Rule ranges from a high-end
of $35 billion to a low-end of $11 billion, with a
base case of $22 billion (assuming a 7% discount
rate). In comparison, the preliminary analysis
computed savings under the proposed rule as
approximately $31 billion (also assuming a 7%
discount rate). The residual difference in base case
savings is attributable to less time saved per
transaction—partially explained by additional
provisions in the NPRM that the Commission is not
finalizing—as well as updates to the underlying
wages used to monetize the consumer time savings.
535 This same organization commissioned a study
that was recently released asserting the proposed
rule would lead to an increase in consumer
transaction time. This survey, however, had
numerous methodological shortcomings rendering
its results unreliable. For example, the survey
presented each respondent at the outset with a
leading statement telling them the rule would
impose ‘‘new duties [that] are expected to create
additional monitoring, training, forms, and
compliance review responsibilities as well as a
modification of record keeping systems and
coordination with outside IT and other vendors’’
and ‘‘increase the time of a motor vehicle
transaction, inhibit online sales, limit price
disclosures, and increase customer confusion and
frustration.’’ Edgar Faler et al., Ctr. for Auto. Rsch.,
‘‘Assessment of Costs Associated with the
Implementation of the Federal Trade Commission
Notice of Proposed Rulemaking (RIN 2022–14214),
CFR part 463’’ 34–36 (2023), https://
www.cargroup.org/wp-content/uploads/2023/05/
CAR-Report_CFR-Part-463_Final_May-2023.pdf
(introductory instructions on the survey instrument
sent to respondents). Moreover, the survey started
with a sample size of 60 dealers (id. at 7) in an
industry with an estimated 46,525 dealers, NPRM
at 42,031 & n.154, but only 40 dealers actually
completed responses to many key questions (id. at
29). The survey does not describe how these 40–
60 dealers were chosen. Although the survey
estimates that the proposed rule would require
consumers to spend additional time on motor
vehicle transactions, this conclusion is based on the
responses of just 40 dealers and included no
consumers. Id. at 29–32. Moreover, the survey
report attributed much of this estimated increase to
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expressed confusion as to whether the
assumption was intended as a flat 3hour time savings or a 20% time
savings, asserting that dynamism in
automotive retailing will likely lead to
evolution in the total amount of time
spent shopping.
While the Commission believes its 3hour time-saving assumption in the
NPRM remains reasonable, the
Commission has conducted additional
analyses, the results of which
demonstrate the positive net benefits of
the Rule even when applying more
conservative assumptions around time
savings and adjusting for the removal of
certain proposed provisions from the
NPRM.536 Using recent figures from Cox
Automotive’s Car Buyer Journey 2019
study, the Commission notes that
consumers who do various activities in
the vehicle buying process digitally
(‘‘digital consumers’’) save time at the
dealership relative to those who do not
(‘‘non-digital consumers’’).537 The
Commission’s revised base case time
savings calculation assumes that only
the fraction of consumers who are not
currently shopping digitally will
experience time savings, and that these
savings will be proportional to the time
savings found in the Car Buyer Journey
2019 study for digital consumers.538
Because the Commission expects the
provisions of the Rule to emulate some
of the time-saving features of
completing these activities digitally, the
time savings benefits of the Rule are
assumed to be a proportion of the time
saved by status quo digital consumers,
with the proportion determined by how
closely the status quo digital shopping
experience is expected to resemble the
shopping experience for all consumers
once the Rule is in effect. Additionally,
because these numbers only reflect time
saved at the dealership of purchase, we
assume that these same consumers will
also save time on these activities to the
extent that they are initiated at
dealerships visited prior to the
dealership at which they purchase
(‘‘non-purchase dealerships’’). Based on
2020 data from Cox Automotive, the
average consumer visits 1 non-purchase
dealership for each transaction.539 Table
2.1 documents both the fraction of
consumers performing activities
digitally under the status quo and the
time saved at the dealership by these
consumers on each activity.
TABLE 2.1—COMPLETING ACTIVITIES DIGITALLY
% of Consumers
digital
(2020
digitization)
Activity
Negotiating the Purchase Price ...................................................................................................................
Select F&I Add-Ons .....................................................................................................................................
Discussing and Signing Paperwork .............................................................................................................
Get a Trade-In Offer ....................................................................................................................................
20
18
13
31
Time saved at
dealership
(2019 journey)
(minutes)
43
33
45
26
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Source: Car Buyer Journey 2019 and Digitization of End-to-End Retail.
Based on the description of these
activities and the anticipated effects of
the Rule, our base case estimates assume
that non-digital consumers will save an
amount of time negotiating a vehicle
purchase price equal to the amount of
time saved by those negotiating
purchase price digitally under the status
quo (43 minutes). For non-digital
consumers, it is currently timeconsuming to obtain comparable price
quotes from dealerships. Many
dealerships will not initiate price
negotiations in earnest without a
competing price quote in writing, which
can only be obtained by visiting a
dealership for the non-digital consumer.
Mandating offering price disclosures—
which are comparable across
dealerships by definition—early in the
shopping process will emulate the price
discovery function of negotiating prices
online, in which comparable price
quotes can be obtained (with effort) via
email.540
The Commission anticipates that the
impact of the Rule on time spent
selecting F&I add-ons and discussing
and signing paperwork will be
moderate. In our base case estimates,
non-digital consumers will save an
amount of time doing these activities
equal to the half the amount of time
saved by those doing these activities
digitally under the status quo (33 × 0.5
= 16.5 minutes and 45 × 0.5 = 22.5
minutes, respectively). Time saved
selecting add-ons flows primarily from
the prohibitions on various
misrepresentations, the mandatory
disclosures regarding whether add-ons
are required, and the prohibition on
charging for add-ons under certain
circumstances.541 Time saved
discussing and signing paperwork also
flows from the prohibitions on various
misrepresentations, several disclosures
mandated by the Rule, and the
proposed rule provisions that are not in the Final
Rule. Id. at 25.
536 In fact, the sensitivity analysis in Table 2.3 of
this final regulatory analysis presents a range of
reasonable estimates for time savings that includes
the 3-hour time-saving assumption from the
preliminary analysis in the NPRM.
537 Cox Auto. et al., ‘‘Car Buyer Journey 2019’’
(2019) [hereinafter Car Buyer Journey 2019], https://
www.coxautoinc.com/wp-content/uploads/2019/06/
2019-Car-Buyer-Journey-Study-FINAL-6-11-19.pdf.
While Cox Automotive has released subsequent Car
Buyer Journey studies, none of these subsequent
studies quantify time savings from shopping
digitally. In addition, to the extent that shoppers
compensate by spending more time at home on
these activities, these time savings should be
reduced to reflect net time savings from performing
these activities digitally. We believe that the nature
of performing these activities digitally vs. at the
dealership suggests these offsets should be small.
538 The 2020 Cox Automotive Digitization of Endto-End Retail study reports the fraction of
consumers who are already engaging in various
activities online under the status quo. Cox Auto.,
‘‘Digitization of End-to-End Retail’’ (2021)
[hereinafter Digitization of End-to-End Retail],
https://www.coxautoinc.com/wp-content/uploads/
2021/01/2020-Digitization-of-End-to-End-RetailStudy-FINAL.pdf. While the activities listed across
studies do not match perfectly, we map the activity
categories to the closest corresponding activity in
the other study and, in our final analysis, exclude
from the time savings calculation the percentage of
transactions corresponding to the fraction of
consumers already engaging in that activity online.
While it is likely that consumers shopping digitally
under the status quo will also experience some
additional time savings under the Rule, there is
insufficient data to estimate this marginal savings
and so we leave this benefit unquantified in the
analysis.
539 2020 Cox Automotive Car Buyer Journey,
supra note 25, at 15 (noting an average of 2.2
dealerships visited among new car buyers).
540 Shoppers who negotiate purchase price
digitally under the status quo will likely also obtain
time savings from mandatory offering price
disclosures, corresponding to the time and effort
they put into contacting and exchanging email with
dealerships. We lack sufficient data on the time
spent on these activities to quantify these benefits,
however.
541 See §§ 463.3(a), (b), and (f); 463.4(c); and
463.5(a) and (c). The Commission notes that time
savings would likely be higher in this category had
it determined to finalize proposed § 463.4(b), which
would have required disclosure of an add-on list.
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prohibition on charging for items
without express, informed consent.542
For non-digital consumers, considerable
time must be spent at the dealership
both closely reviewing paperwork (e.g.,
to ensure that unwanted optional addons are not being added to the
transaction; to ensure that the financing
terms, including monthly payments,
total payments, and term length, are as
expected; and to confirm that terms in
the contract generally conform to what
was discussed) and waiting for sales and
F&I staff at the dealership to consult
with managers and revise paperwork as
needed. Digital consumers, however,
may have access outside the dealership
to add-on menus where they can select
their desired F&I products affirmatively
without worry that dealership staff will
misrepresent the products or pressure
them into selecting something
unwanted. In addition, digital
consumers may receive and review
paperwork before arriving at the
dealership. This way, any necessary
revisions can be performed by the
dealership asynchronously so that the
consumer is free to spend that time as
they wish instead of being stuck in an
F&I office. The noted Rule provisions
will give consumers confidence that the
add-on options presented to them are
non-deceptive and the contract
paperwork they are asked to review will
not yield any unpleasant surprises. As
a result, on average they will neither
need to engage in such close scrutiny of
their contract documents, nor spend as
much time waiting for dealership staff
to speak to managers or make changes
as the first draft will be more likely to
conform to their expectations.543
The Commission assumes that the
Rule will likely not assist consumers
much (if at all) in reducing time spent
obtaining a trade-in offer. In our base
case estimates, we assume non-digital
consumers will not save additional time
on obtaining a trade-in offer under the
Rule. There are various provisions in
the Rule that touch trade-in offers made
by dealerships 544 and may increase
consumer confidence in dealer contracts
as discussed previously. In addition,
trade-in values are an important piece of
transaction pricing, so greater price
transparency may save consumers time
on the trade-in aspect of transactions
542 See §§ 463.3; 463.4(c), (d), and (e); and
§ 463.5(c).
543 Again, status quo digital shoppers will likely
obtain time savings on these activities as well, to
the extent that their paperwork will also be less
likely to require close scrutiny and revisions. We
lack sufficient data on the time spent on these
activities to quantify these benefits, however.
544 See §§ 463.3(i) and (j); 463.4(d).
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that involve them. There is a concern,
however, that dealers may spend more
time trying to extract maximum value
out of any given trade-in opportunity
once the Rule is in effect. Because the
Commission believes that greater
transparency in vehicle pricing and addons will lead to reduced markups on
these products (see ‘‘Reductions in
Deadweight Loss’’), it is possible that
dealers will attempt to make up these
lost profits by maximizing trade-in
margins, which may lead to increased
time spent on negotiations. Since we do
not have sufficient data to determine the
balance of these two effects, we assume
in the base case that they offset. In
sensitivity analyses where we explore
alternative assumptions, note that time
savings from this activity only apply to
the roughly 50% (by one estimate) of
vehicle purchase transactions at
dealerships where consumers trade in a
vehicle.545
Finally, data from the 2021 Cox
Automotive Car Buyer Journey Study
reveal that consumer time spent at nonpurchase dealerships is roughly 82% of
the time spent at the dealership of
purchase.546 Additionally, the average
consumer visits 1 non-purchase
dealership for each transaction, so
under the dual assumptions that (1) the
proportions of time spent at dealerships
across these activities is consistent
across purchase and non-purchase
dealerships and (2) the noted time
savings are constant as a fraction of time
spent, we multiply the time savings
numbers by this ratio to obtain the
additional time saved at non-purchase
dealerships.
Proceeding as in the preliminary
analysis, we assume that motor vehicle
purchase, financing, and lease
transactions will be stable at the 2019
level of 57.9 million transactions per
year.547 As discussed previously, the
final analysis excludes private party,
fleet, and wholesale transactions.
According to Edmunds Automotive
Industry Trends 2020, 19.3% of new
545 See Progressive, ‘‘Consumers embrace online
car buying,’’ https://www.progressive.com/resources/
insights/online-car-buying-trends/ (last visited Dec.
5, 2023).
546 See 2021 Cox Automotive Car Buyer Journey
Study, supra note 504, at 16 (noting total time of
2:09 spent ‘‘Visiting Other Dealerships/Sellers’’ and
total time of 2:37 spent ‘‘With the Dealership/Seller
Where Purchased’’).
547 See U.S. Dep’t. of Transp., Off. of the Sec’y of
Transp., Bureau of Transp. Stat., ‘‘National
Transportation Statistics 2021, 50th Anniversary
Edition’’ 21 (2021), https://www.bts.dot.gov/sites/
bts.dot.gov/files/2021-12/NTS-50th-complete-11-302021.pdf (Table 1–17).
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677
vehicle sales in 2019 were fleet sales.548
This fraction of the 17.1 million new
vehicle sales and leases in the data are
excluded from the analysis. An
Automotive News article from January
2023 (citing data from Cox Automotive)
states that 48% of all used vehicle sales
occurred outside of the retail
channel.549 As with new vehicle sales,
this fraction of the 40.8 million used
vehicle transactions in the data are
excluded from the analysis. Adding up
the covered transactions (35 million) 550
and applying the time savings
calculated from the base case
assumptions, we anticipate that the Rule
will generate a total time savings of
more than 72 million hours per year.
According to the Bureau of Labor
Statistics Occupational Employment
Statistics, the average hourly wage of
U.S. workers in 2021 was $29.76, and
recent research suggests that individuals
living in the U.S. value their non-work
time at 82% of average hourly
earnings.551 Thus, the value of nonwork time for the average U.S. worker
would be $24.4 per hour. As a result,
our final analysis refines the estimate to
a present value of between $12.3 billion
and $14.9 billion as described in Table
2.2, which translates to savings of
roughly $1.75 billion per year.552
548 See Edmunds, ‘‘Automotive Industry Trends
2020’’ 7 (2020), https://static.ed.edmundsmedia.com/unversioned/img/industry-center/
insights/2020-automotive-trends.pdf.
549 See Auto. News, ‘‘Used-vehicle volume hits
lowest mark in nearly a decade’’ (Jan. 13, 2023),
https://www.autonews.com/used-cars/used-carvolume-hits-lowest-mark-nearly-decade (estimating
19,100,000 of used vehicle sales in the year 2022
occurred within the retail channel). The same
Automotive News source reports a total used
vehicle sales number of approximately 40 million
for 2019. Id. The conclusions of the analysis are
robust to using this total figure instead.
550 A recent report by the Center for Automotive
Research estimates that there approximately 43
million non-fleet, non-private party sales in 2019
based on privately sourced data. Edgar Faler et al.,
Ctr. for Auto. Rsch., ‘‘Assessment of Costs
Associated with the Implementation of the Federal
Trade Commission Notice of Proposed Rulemaking
(RIN 2022–14214), CFR part 463’’ 5 (2023), https://
www.cargroup.org/wp-content/uploads/2023/05/
CAR-Report_CFR-Part-463_Final_May-2023.pdf.
While this would result in a savings estimate
approximately 22% higher, the Commission relies
on its analysis of the publicly available data
described herein.
551 Daniel S. Hamermesh, ‘‘What’s to Know About
Time Use? ’’ 30 J. Econ. Survs. 198, 201 (2016),
https://onlinelibrary.wiley.com/doi/epdf/10.1111/
joes.12107.
552 Note that we assume only one consumer is
involved in each transaction; to the extent that
multiple members of a household may visit
dealerships for each transaction, these calculations
are likely to underestimate the total time savings.
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TABLE 2.2—ESTIMATED BENEFITS OF TIME SAVINGS FOR COMPLETED TRANSACTIONS
2024–2033
Completed Transactions
Avg. minutes saved at dealership of purchase/other dealers (by activity): a
Negotiating the Purchase Price ...................................
Select F&I Add-Ons .....................................................
Discussing and Signing Paperwork .............................
Get a Trade-In Offer ....................................................
Hours saved per transaction ..............................................
Number of covered vehicle transactions per year b ...........
Value of time for vehicle-shopping consumers c ................
.............................................................................................
.............................................................................................
.............................................................................................
.............................................................................................
.............................................................................................
.............................................................................................
.............................................................................................
34/28
14/11
20/16
0/0
2.05
34,986,253
$24.40
Abandoned Transactions
Unquantified
Total Quantified Benefits (in millions) .................................
Total Quantified Benefits ....................................................
3% discount rate ................................................................
7% discount rate ................................................................
$14,926
$12,290
Note: Benefits have been discounted to the present at both 3% and 7% rates.
a Averages are across all retail transactions; transactions where consumers performed activity digitally under the status quo will have a time
savings of 0 for that activity.
b For total volume, National Transportation Statistics Table 1–17. For retail/non-fleet fraction, Edmunds Automotive Industry Trends 2020 (for
new vehicles), supra note 548548, and Cox Automotive via Automotive News (for used vehicles), supra note 549549.
c BLS Occupational Employment Statistics (May 2022) and Hamermesh (2016).
Due to the uncertainty surrounding
how the Rule will translate into time
savings for consumers and to which
activities it will most strongly apply, we
explore a range of alternative
assumptions regarding what fraction of
the documented time savings digital
consumers experience will be received
by non-digital consumers under the
Rule. In our low-end scenario, we
assume that the Rule will result in half
the consumer time savings of the base
case. In our high-end scenario, we
assume that all the time savings
experienced by digital consumers under
the status quo—including time saved
getting a trade-in offer—will be received
by non-digital consumers under the
Rule. The low-end assumptions
correspond to a total time savings of
more than 35.85 million hours per year
while the upper bound assumptions
correspond to a total time savings of
more than 115.47 million hours per
year. The results of this analysis are
presented in Table 2.3. Importantly,
over the whole range of these alternative
assumptions we find that benefits
exceed costs. In fact, holding other
benefit and cost estimates constant, the
time savings generated by the Rule
could be de minimis and the implied
benefits would still exceed the costs.
While there are some activities in the
car buying process that the Rule may
not affect (e.g., test driving vehicles,
etc.), the data discussed suggest that
there is ample room for the Rule to
eliminate unnecessary time across
various activities. And even though
digital consumers spend less time on
these activities, results across several
studies suggest that this reduction in
time leads to a better experience for
consumers.553
TABLE 2.3—SENSITIVITY ANALYSIS OF TIME SAVINGS
Low end
Base case
High end
Avg. minutes saved at dealership of purchase/other dealers (by activity): a
Negotiating the Purchase Price ...............
Selecting F&I Add-Ons ............................
Discussing and Signing Paperwork .........
Get a Trade-In Offer ................................
Hours saved per transaction b ........................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
17/14
7/6
10/8
0/0
1.02
34/28
14/11
20/16
0/0
2.05
34/28
27/22
39/32
18/15
3.3
Total Quantified Benefits (in millions) .............
Total Quantified Benefits ................................
3% discount rate ............................................
7% discount rate ............................................
$7,463
$6,145
$14,926
$12,290
$24,036
$19,790
Note: Benefits have been discounted to the present at both 3% and 7% rates.
a Averages are across all retail transactions; transactions where consumers performed activity digitally under the status quo will have a time
savings of 0 for that activity.
b Time savings for ‘‘Get a Trade-In Offer’’ assumed to be zero for lease transactions or sales without trade-ins (estimated at 50%).
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2. Reductions in Deadweight Loss
The status quo in this industry
features consumer search frictions,
553 See Car Buyer Journey 2019, supra note 537,
at 9 (Consumers who negotiate (88% vs. 64%) and
complete paperwork online (74% vs. 65%) are more
satisfied with their dealership experience.); 2022
Car Buyer Journey, supra note 25, at 22 (‘‘More
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shrouded prices, deception, and
obfuscation. As a result, dealers likely
charge higher prices for a number of
products and services than could be
supported once the Rule is in effect.
Recent research suggests that when
[financing] steps completed online = higher
satisfaction & less time at the dealership’’); Cox
Auto., ‘‘Cox Automotive Car Buyer Journey Study:
Pandemic Edition’’ 22 (2021), https://
www.coxautoinc.com/wp-content/uploads/2021/02/
Cox-Automotive-Car-Buyer-Journey-StudyPandemic-Edition-Summary.pdf (‘‘Heavy Digital
Buyers were the Most Satisfied’’).
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consumers are able to observe prices for
vehicles before visiting dealerships—as
is intended by the Rule—prices and
dealer profits are likely to fall.554 When
not accompanied by changes in quantity
(due to a fixed supply of the good), price
adjustments serve to transfer welfare
from one side of the market (e.g.,
dealers) to the other (e.g., consumers),
which typically have no net effect on
the outcome in a regulatory analysis.555
A decrease in vehicle prices, however,
will likely also lead to an increase in the
number sold as the supply is not fixed.
As a result, this quantity expansion
effect unambiguously increases welfare
by reducing the deadweight loss that
occurs when firms can charge prices
that are marked up over marginal costs.
3. Framework
When a policy reduces the price of a
good—either through a reduction in
firm costs or, as in this case, a reduction
in firm market power—the quantity of
the good sold will typically increase. If
679
a distortion exists in the market causing
the product in question to be sold at a
price above the marginal (social) cost of
production (e.g., a tax, an externality, or
a markup enabled by market power),
this quantity expansion has the effect of
reducing deadweight loss in that
market. In the simple case where there
is one good subject to the policy and
that good has no close substitutes or
complements, this welfare effect can be
easily illustrated as in Figure 1.
Figure 1
--3
f&
·c
P1
a..
-----~------
Quantity
-••L
Demand
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-
Expo&DWL
ii.,-~
Status Quo OWL
-
Reduction in OWL
The solid line reflects the demand for
the good, where some quantity is
purchased at a market price of p0 (point
A), which is higher than marginal costs
(MC). Because of this wedge between
price and marginal costs, there is a
reduction in welfare relative to the
outcome where prices equal marginal
costs; this deadweight loss is illustrated
on the graph by the bordered triangle
(ACD). Holding everything else
constant, when prices fall from p0 to p1,
this deadweight loss is reduced to some
extent. Part of this increase in welfare
will go to consumers, and part will go
to producers.
Imagine that this graph depicts the
market for new automobiles. The Final
Rule will increase price competition,
thus reducing market power and
shifting prices closer to marginal costs
in the new automobile market. If this
market satisfied the criteria for the
simple case described herein (i.e., no
close substitutes or complements), the
only data we would need to estimate
this change in total welfare would be
the predicted change in price, the
predicted change in quantity (which can
be calculated from an estimate of the
slope or elasticity of the demand curve
for new vehicles), and some information
or assumption about the shape of the
demand curve between points A and B.
Of course, the new automobile market is
closely linked to the used automobile
market, so this simple picture does not
capture the entire story.
When a good has a close substitute
(like used versus new vehicles), a price
decrease for that good will cause
demand for the related good to decrease.
Also, in the case of automobiles, there
is a long-run link between the new and
554 Marco A. Haan et al., ‘‘A Model of Directed
Consumer Search,’’ 61 Int’l J. Indus. Org. 223, 223–
55 (2018), https://doi.org/10.1016/
j.ijindorg.2018.09.001; Jose´ Luis Moraga-Gonzalez et
al., ‘‘Consumer Search and Prices in the Automobile
Market.’’ 90 Rev. Econ. Stud. 1394–1440 (2023),
https://doi.org/10.1093/restud/rdac047.
555 See Off. of Mgmt. & Budget, Exec. Off. of the
President, ‘‘Circular A–4’’ 38 (2003), https://
www.transportation.gov/sites/dot.gov/files/docs/
OMB%20Circular%20No.%20A-4_0.pdf: ‘‘A
regulation that restricts the supply of a good,
causing its price to rise, produces a transfer from
buyers to sellers. The net reduction in the total
surplus (consumer plus producer) is a real cost to
society, but the transfer from buyers to sellers
resulting from a higher price is not a real cost since
the net reduction automatically accounts for the
transfer from buyers to sellers.’’ To the extent any
price changes caused by the Rule result in transfers
to consumers from dealers who were in violation
of existing laws, such transfers would be consistent
with the agency’s mission of providing redress to
injured consumers and its history of doing so in
enforcement actions.
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used vehicle markets as a new vehicle
purchased today becomes a potentially
available used vehicle tomorrow. These
linkages between the markets will
dampen the demand response to any
given price change in the primary
market. In practice, this means that our
estimates of the responsiveness of new
vehicle purchases to price changes (i.e.,
the price elasticity of demand for new
vehicles) will overstate the change in
quantity resulting from a change in
prices, because such estimates typically
assume that all other prices remain
constant. In addition, if there are
distortions present in the market for
related goods (i.e., used vehicles are also
sold at a markup over marginal costs)
only examining the welfare effect in the
primary market will understate the total
welfare effect, as there will be an
analogous reduction in deadweight loss
in the market for the related good. These
linkages between markets for related
goods become difficult to explain
graphically. However, we have included
in the technical appendix an algebraic
derivation of the total welfare effect in
new and used vehicle markets resulting
from the finalization of the Rule. The
resulting formula requires estimates of
seven parameters in order to compute
the welfare effect: two ‘‘policy
elasticities’’ that reflect the
responsiveness of quantities of new and
used vehicles sold to a change in prices
in the new vehicle market after all
adjustments have occurred in both
markets, two baseline markups that
represent the differences between prices
and marginal costs for new and used
vehicles, two quantities that reflect the
aggregate costs of all new and used
vehicles sold under the status quo, and
the predicted change in prices due to
the Rule.
4. Estimation
To obtain ‘‘policy elasticities’’ we
reference a U.S. Environmental
Protection Agency report titled ‘‘The
Effects of New-Vehicle Price Changes on
New- and Used-Vehicle Markets and
Scrappage’’ (‘‘EPA Report’’).556 In this
report, the authors ‘‘developed a
theoretical model of the relationships
between new- and used-vehicle markets,
scrappage, and total vehicle inventory’’
that allows for simulation of prices and
quantities in these markets. The model
is calibrated using a range of demand
elasticity estimates from a review of the
relevant literature on auto markets. The
556 Assmt. & Standards Div., Ofc. of Transp. & Air
Quality, U.S. Env’t Prot. Agency, ‘‘The Effects of
New-Vehicle Price Changes on New- and UsedVehicle Markets and Scrappage’’ (2021), https://
cfpub.epa.gov/si/si_public_file_download.cfm?p_
download_id=543273&Lab=OTAQ.
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resulting simulations examine the longrun ‘‘steady state’’ of vehicle inventories
and demand, accounting for crossmarket demand effects as well as the
endogenous supply of used vehicles
resulting from changes in demand for
new vehicles in previous periods.
Importantly, among the outputs of their
simulations are the ‘‘policy price
elasticities’’ required by our welfare
change formula. Our base case estimates
of deadweight loss reduction use the
long-run policy price elasticities that
result from calibrating the model with
the EPA Report’s intermediate values for
the aggregate new vehicle and outside
option demand elasticities, but we
explore sensitivity to other calibration
scenarios.
To obtain baseline estimates of newvehicle markups, we refer to a recent
paper entitled ‘‘The Evolution of Market
Power in the US Automobile Industry’’
by Paul Grieco, Charles Murry, and Ali
Yurukoglu.557 The authors specify a
model of the U.S. new car industry to
explore trends in concentration and
markups. The authors find that markups
in the industry have been falling over
time generally, but have been fairly
stable since the early 2000s.558 As our
baseline, we use their most recent
estimate of industry markups, which
was 15% in 2018.559 While this estimate
reflects markups over production costs
by manufacturers and not markups over
wholesale prices paid by dealers, it is
the wedge between retail price and
production cost that matters for welfare.
As we are unaware of any publicly
available data measuring used-vehicle
markups, we explore two alternatives
that we believe reflect the limiting
cases: (1) used vehicles have no markup
and (2) used-vehicle markups are the
same as new-vehicle markups.
We obtain both quantities of new- and
used-vehicles sold as well as average
prices from National Transportation
Statistics, Table 1–17. As before, we
exclude private party, fleet, and
wholesale transactions. This exclusion
is likely to bias our estimate of the total
welfare effect downward because,
unlike the time savings benefits of the
Rule which may be restricted to dealerconsumer transactions, the price effects
of the Rule are likely to carry over to
private party and fleet transactions.
Using these aggregate figures along with
557 See Paul L. E. Grieco et al., ‘‘The Evolution of
Market Power in the US Automobile Industry’’
(2022), mimeo.
558 Paul L. E. Grieco et al., ‘‘The Evolution of
Market Power in the US Automobile Industry’’ 19
(2022), mimeo.
559 Paul L. E. Grieco et al., ‘‘The Evolution of
Market Power in the US Automobile Industry’’ 19
(2022), mimeo.
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an estimate of baseline markups, we
estimate the aggregate cost of new- and
used-vehicles sold in 2019.560
Finally, based on the academic
literature on search costs in the
automobile market, the Rule is expected
to reduce prices of new vehicles by
reducing the markup that dealers are
able to charge over marginal costs. We
have identified two papers that
empirically estimate the effect of price
transparency or reduced search frictions
on auto markups by specifying a
structural model of the new-vehicle
market, estimating the structural
parameters, and then conducting
counterfactual simulations where search
frictions are reduced. Murry and Zhou
(2020) simulate a full information
counterfactual in the Ohio automobile
market where search frictions are
eliminated entirely and find that
markups are reduced by $333.561
Moraga-Gonzalez et al. (2022) simulate
a counterfactual in the Dutch
automobile market where prices are
observed prior to costly consumer
search (i.e., visiting dealerships) and
find that markups are reduced from
40.52% to 32.59%.562 For our base case
estimates, we use the smaller Murry and
Zhou (2020) estimate, primarily because
their model is estimated using U.S. data
consistent with our setting. However,
we note that Moraga-Gonzalez et al.
offers evidence to suggest that
significantly larger changes in markups
may result from the Rule.
Using these parameters obtained from
the literature in combination, we
implement the formula for the change in
total welfare given in the technical
appendix. For each market—new and
used—the formula multiplies the policy
price elasticity by the percent change in
price to get the percent change in
quantity, and then multiplies this by the
aggregate markup (as given by the pricecost markup 563 at baseline times the
aggregate cost of baseline transactions)
to get the approximate change in total
welfare per year. As an example, our
base case estimate assumes a policy
560 Aggregate cost of good i is equal to (1¥m ) ×
i
pi × Qi, where mi, pi, and Qi are the markup, price,
and quantity sold of good i, respectively.
561 Charles Murry & Yiyi Zhou, ‘‘Consumer
Search and Automobile Dealer Colocation,’’ 66
Mgmt. Sci. 1909–1934 (2020), https://doi.org/
10.1287/mnsc.2019.3307.
562 Jose
´ Luis Moraga-Gonzalez et al., ‘‘Consumer
Search and Prices in the Automobile Market,’’ 90
Rev. Econ. Stud. 1394–1440 (2022), https://doi.org/
10.1093/restud/rdac047.
563 The baseline new vehicle markup estimate of
15% is defined as the ratio of the price-cost margin
to unit price, i.e. (pi¥MCi)/pi, and is sometimes
referred to as the Lerner index. With knowledge of
either price or marginal cost, this can be rearranged
to express the price-cost markup, i.e. (pi¥MCi)/MCi,
which is used in the formula referenced here.
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
price elasticity of new-vehicle demand
of ¥0.25, a policy price elasticity of
used-vehicle demand (with respect to
new-vehicle price) of ¥0.04, and used
car markups equal to new car markups
= 18% X $334,115,569,664
X
-0.25
X
-1 % + 18%
X
(15%), resulting in the following
calculation:
$371,555,893,248
X
-0.04
X
-1 %
= $152,143,550 per year
This annual reduction in deadweight
loss is then applied to each year of the
10-year analysis period and discounted
to the present to yield the total benefit.
We highlight this base case (bolded in
Table 2.4) but explore several scenarios
that vary along two dimensions: (1) the
‘‘policy elasticity’’ of new- and used-
vehicle demand with respect to the
change in price and (2) the existence of
baseline markups in the used-vehicle
market. In Table 2.4, baseline markups
for used vehicles vary across columns
while the relevant policy price
elasticities vary across rows: Scenario A
corresponds to new-/used-vehicle
elasticities of ¥0.14 and 0.01, Scenario
B corresponds to new-/used-vehicle
elasticities of ¥0.17 and ¥0.04,
Scenario C corresponds to new-/usedvehicle elasticities of ¥0.23 and ¥0.10,
and Scenario E corresponds to new-/
used-vehicle elasticities of ¥0.39 and
¥0.12.
TABLE 2.4—REDUCTION IN DEADWEIGHT LOSS (IN MILLIONS), 2024–2033
No used-vehicle markups
Scenario
A
B
C
D
E
Total @ 3%
discount
...............................................................................................
...............................................................................................
..............................................................................................
..............................................................................................
...............................................................................................
Symmetric markups
Total @ 7%
discount
$617
749
1,014
1,102
1,719
Total @ 3%
discount
$508
617
835
907
1,415
$568
945
1,504
1,298
2,307
Total @ 7%
discount
$468
778
1,238
1,069
1,899
5. Benefits Related to More Transparent
Negotiation
a quantitative gain, these benefits are
left unquantified in the analysis.
An additional, albeit difficult to
quantify, benefit is the reduction in
discomfort and unpleasantness that
consumers associate with negotiating
motor vehicle transactions under the
status quo. According to the 2020 Cox
Automotive Car Buyer Journey study,
filling out paperwork, negotiating
vehicle price, and dealing with
salespeople are three of the top four
frustrations for consumers at car
dealerships.564 Once the Rule is in
effect, all three of these issues will be
mitigated somewhat by the transparency
facilitated by the Rule’s required
disclosures and the time that consumers
spend shopping and negotiating motor
vehicle transactions will be less
stressful. While we expect an increase
in social welfare through this channel,
due to a lack of data allowing this more
qualitative benefit to be translated into
C. Estimated Costs of Final Rule
564 2020 Cox Automotive Car Buyer Journey,
supra note 25, at 37.
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In this section, we describe the costs
of the Rule provisions as enumerated in
SBP VII.A, provide quantitative
estimates where possible, and describe
costs that we can only assess
qualitatively. Some industry
commenters questioned the
appropriateness of the data and
assumptions used in the NPRM,
including the discussion of costs in the
preliminary regulatory analysis. The
Commission used a variety of data
sources in its calculations for the NPRM
and in the Rule, including wage data
from the Bureau of Labor Statistics
Occupational Employment Statistics,
establishment counts from U.S. Census
County Business Patterns, transaction
counts from National Transportation
Statistics, and breakdowns of motor
vehicle transactions (e.g., by financing,
GAP agreement, F&I add-ons) from
numerous industry sources. Where such
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data was not available (e.g., regarding
time devoted to compliance tasks), the
Commission made assumptions based
on a review of previous regulatory
analyses that featured similar
requirements, with adjustments made
based on our understanding of the
particulars of motor vehicle dealer
operations.565
Throughout this section, the cost of
employee time is monetized using
wages obtained from the Bureau of
Labor Statistics Industry-Specific
Occupational Employment and Wage
Estimates for Automobile Dealers.566
565 See, e.g., Off. of the Sec’y, Dep’t of Transp.,
Dkt. No. DOT–OST–2010–0140, ‘‘Enhancing Airline
Passenger Protections II—Final Regulatory
Analysis’’ (Apr. 20, 2011), https://
www.regulations.gov/document/DOT-OST-20100140-2046.
566 Applicable wage rates for the Commission’s
preliminary regulatory analysis, which was
published in its NPRM, were based on data from the
Bureau of Labor Statistics’ May 2020 National
Industry-Specific Occupational Employment and
Wage Estimates for NAICS industry category
441100—Automobile Dealers, which is available at
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Note: Benefits have been discounted to the present at both 3% and 7% rates. Scenarios correspond to those in Table 7–2 of ‘‘The Effects of
New-Vehicle Price Changes on New- and Used-Vehicle Markets and Scrappage.’’ New-vehicle demand elasticities range from ¥0.4 (Scenarios
A, B, and C) to ¥0.8 (Scenario D) to ¥1.27 (Scenario E). Outside option elasticities vary from 0 (Scenario A) to ¥0.05 (Scenarios B and D) to
¥0.14 (Scenarios C and E). New/Used cross-price elasticities are set such that substitution away from new vehicles flows almost entirely to
used-vehicles, with only small effects on the total number of vehicles. All scenarios hold scrappage elasticity fixed at ¥0.7.
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This is valid under the assumption that
the opportunity cost of hours spent in
compliance activities is hours spent in
other productive activities, the social
value of which is summarized by the
employee’s wage.567 To the extent that
these activities can be accomplished
using time during which employees
would otherwise be idle under the
status quo, our estimates will overstate
the welfare costs of the Rule.
1. Prohibited Misrepresentations
In its preliminary analysis, the
Commission presented two scenarios
that estimated the costs associated with
the Rule provisions prohibiting
misrepresentations. First, as all the
misrepresentations prohibited by the
Rule are material and therefore
deceptive under section 5 of the FTC
Act, one scenario assumed that all
motor vehicle dealers are compliant
with section 5 under the status quo and
will therefore conduct no additional
review.
The second scenario allowed for costs
incurred by firms because of the
enhanced penalty associated with
violating the Rule (relative to a de novo
violation of section 5 of the FTC Act)
under the assumption that dealers may
expend additional resources to ensure
compliance. This ‘‘heightened
compliance review’’ scenario assumed
that each of the 46,525 dealers would
have a professional spend 5 additional
minutes reviewing each public-facing
representation (assumed to be 150 per
year on average). At a labor rate of
$26.83 per hour for compliance officers
employed at auto dealers, this cost was
estimated to be $15.6 million per year.
The Commission received comments
about the appropriateness of the data
and assumptions used to estimate the
cost of complying with this provision of
the Rule. The most specific criticism
contended that the number of
documents dealers would need to
review would be ‘‘several times’’ the
150 assumed and that review would
require at least 15 minutes per
document because ‘‘dealers typically do
not fully control the advertising
platforms they use given the direct
involvement of the vehicle OEMs . . .
and that of other third parties. Also,
many dealers, and especially small
business dealers do not employ internal
compliance officers or attorneys who
could conduct marketing reviews.’’ 568
As there is scant empirical evidence
provided for these assertions, the
Commission’s preliminary estimates
remain unchanged (with the exception
of updates to more recent data where
available). However, we have conducted
a sensitivity analysis in which all labor
hours in the base case analysis are
increased by an order of magnitude, in
keeping with the spirit of the comments
discussed; see SBP VII.G. As can be seen
in the results from that analysis, the
Rule clearly still generates net benefits
for society.
TABLE 3.1—ESTIMATED COMPLIANCE COSTS FOR PROHIBITED MISREPRESENTATIONS
2024–2033
Scenario 1—No Review:
No Cost .............................................................................
Total Cost ..................................................................
Scenario 2—Heightened Compliance Review:
Number of dealers a ..........................................................
Number of documents per dealer per year ......................
Minutes of review per document ......................................
Cost per hour of review ....................................................
..................................................................................................
..................................................................................................
$0
$0
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
47,271
150
5
$31.21
Total Cost .................................................................................
Total Cost .................................................................................
3% discount rate .....................................................................
7% discount rate .....................................................................
$157,310,579
$129,526,073
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
a County Business Patterns 2021, NAICS Code 4411 (Automobile Dealers, used and new).
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2. Required Disclosure of Offering Price
in Advertisements and in Response to
Inquiry
The Rule requires all dealers to
disclose an offering price in any
advertisement that references an
individual vehicle or in response to any
consumer inquiry about an individual
vehicle. For this provision, the
Commission’s preliminary analysis
presented two cost scenarios for dealers
when complying with the Rule. First,
because dealers already price all
vehicles in inventory under the status
quo, one scenario assumed that there
would be no additional cost of
complying with this provision. This
scenario assumes that the initial pricing
https://www.bls.gov/oes/2020/may/oes_nat.htm.
Labor rates in the present analysis have been
updated based on data from the Bureau of Labor
Statistics’ May 2022 National Industry-Specific
Occupational Employment and Wage Estimates for
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and any subsequent re-pricing of
vehicles in inventory would take no (or
minimal) additional time under the
Rule.
As with the prohibition on
misrepresentations, the second scenario
considers the enhanced penalty
associated with violating the Rule and
allows for costs given that dealers may
expend additional resources to ensure
that the prices they disclose conform to
the Rule’s definition of offering price,
thus minimizing the risk of penalties
should they fail to conform to that
definition. The latter scenario assumed
that, in the first year under the Rule,
each of the 46,525 dealers would have
a sales and marketing manager spend 8
hours reviewing their policies and
procedures for determining the publicfacing prices of vehicles in inventory. In
addition, each dealer would employ a
programmer for 8 hours to update any
automated systems that need to be
updated in accordance with these new
policies and procedures. At labor rates
of $63.93 per hour and $28.90,
respectively, this cost was estimated at
$34.5 million. Both scenarios assume
that, once calculated, the time required
to train employees to include prices in
response to consumer inquiries about
specific vehicles will either be
negligible or be subsumed by training
costs included under other provisions.
Finally, the time required to deliver the
disclosures is also negligible, as prices
are already typically disclosed in
NAICS industry category 441100—Automobile
Dealers, which is available at https://www.bls.gov/
oes/current/naics4_441100.htm.
567 This assumption would hold, for example, if
both the product and labor markets in this industry
were competitive.
568 Comment of Nat’l Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8368 at 299–300.
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advertisements and in interactions with
consumers under the status quo; the
Rule just requires the price to conform
to a specific definition.
Some commenters raised issues with
the assumptions regarding the time and
resources necessary to determine
compliant prices as well as deliver the
required disclosures. The comments
asserted that vehicle prices change
frequently in response to market
conditions, which would make it
difficult to ensure that offering prices
are accurate. Additionally, comments
disputed the notion that delivery of the
information to consumers in accordance
with the Rule’s provisions would not be
costly, in terms of employee time and
consumer time. One comment suggested
that ‘‘there would be an average of three
Offering Price disclosures based there
[sic] being an average of three dealercustomer discussions regarding three
specific motor vehicles, per
transaction,’’ 569 asserting that the
frequency of these disclosures would
have implications for the cost estimates
that had not been considered in the
preliminary analysis.
If indeed the Rule required significant
additional employee time spent per
transaction, that would have
implications for the cost estimates.
However, as previously discussed, it is
the understanding of the Commission
that virtually all dealer-customer
discussions regarding specific motor
vehicles that occur under the status quo
already include time devoted to a
discussion of the vehicle’s price. The
only change under the Rule is that,
within that price discussion an offering
price (as defined by the Rule) must be
provided. The cost of determining this
price is included under the second
scenario in our preliminary analysis,
and sensitivity to the specific
assumptions of that scenario have been
explored in the Appendix. The results
from our analysis indicate that the Rule
generates net benefits for society under
a wide range of plausible assumptions
about the inputs to our cost
calculations.
Commenters also raised concerns
about the potential for behavioral
adjustment by dealerships, choosing to
refrain from advertising individual
vehicles or responding to consumer
inquiries about specific vehicles and
thus increasing consumers’ costs of
search. The Commission, however, has
not been presented with compelling
evidence that dealers will forego
competition with other dealers on price,
choosing instead to default to
advertising a focal price (such as
MSRP). Indeed, the Commission’s
offering price disclosure requirement is
similar to existing requirements in a
number of States, and the Commission
is not aware of any such behavioral
adjustments (e.g., eliminating prices
from advertisements, refusing to
respond to consumer inquiries, etc.)
having occurred in those States. As a
result, the Commission’s preliminary
estimates remain unchanged (with the
exception of updates to more recent data
where available).
TABLE 3.2—ESTIMATED COMPLIANCE COSTS FOR OFFERING PRICE DISCLOSURES
2024
Scenario 1—No Review:
No Cost ...............................................................................................................................................................................
Total Cost ....................................................................................................................................................................
Scenario 2—Calculation of Offering Price:
Number of dealers a ............................................................................................................................................................
Pricing hours per dealer .....................................................................................................................................................
Cost per hour of pricing ......................................................................................................................................................
Programming hours per dealer ...........................................................................................................................................
Cost per hour of programming ...........................................................................................................................................
47,271
8
$80.19
8
$40.24
Total Cost ....................................................................................................................................................................
$45,542,772
a County
$0
Business Patterns 2021, NAICS Code 4411 (Automobile Dealers, used and new).
3. Disclosure of Add-On List and
Associated Prices
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$0
In the NPRM, the proposed rule
would have required all dealers to
disclose an itemized menu of all
optional add-on products and services
along with prices, or price ranges, on all
dealer-operated websites, online
services, and mobile applications as
well as at all dealership locations.
Various commenters expressed concern
that the add-on list requirement would
have been too complex and potentially
confusing, as discussed in the
paragraph-by-paragraph analysis in SBP
III.D.2(b). As a result, the Commission
has determined not to finalize § 463.4(b)
of the proposed rule. While the
preliminary analysis estimated
compliance costs between
approximately $42 million and $43
million for the disclosure of add-on lists
and associated prices, those costs are
not included in the final analysis.
4. Required Disclosure of Total of
Payments for Financing/Leasing
Transactions
The Rule requires all dealers to
disclose, when representing a monthly
payment, the total of payments for the
financing or leasing contract. In
addition, in any comparison of two
payment options with different monthly
payments, the dealer is required to
disclose that the option with the lower
monthly payment features a higher total
of payments (if true).
The Commission’s preliminary
analysis presented two cost scenarios,
corresponding to different methods by
which dealers may choose to comply
with the Rule. In the first scenario, we
assumed that dealers would incur a onetime, upfront cost of both designing the
required disclosures and informing
associates of their obligations to provide
the disclosures. Importantly, ongoing
costs on a per transaction basis were
assumed to be negligible, reflecting a
compliance regime where dealers
already generate the required
information during the normal course of
business and must only convey it to
consumers at an appropriate point in
the transaction. In the second scenario,
we assumed that dealers incur an
additional ongoing cost per financed or
leased transaction in order to
communicate the required disclosures
569 Comment of Nat’l Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8368 at 300.
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to consumers in writing, reflecting a
compliance regime where dealers find it
necessary to maintain a documentary
record of compliance with the Rule.570
The upfront costs (and total costs
under Scenario 1) of complying with
this provision as estimated by the
preliminary analysis were limited to 8
hours spent by a compliance manager
(at a rate of $26.83) on the creation of
a template disclosure script that
contains the required information and
informing sales staff of their obligations
to deliver the disclosure at an
appropriate time during the transaction.
This cost was estimated at $10 million.
The preliminary estimates of
additional ongoing costs—as in Scenario
2—included 2 minutes of sales associate
time per financed/leased transaction (at
a rate of $21.84) spent on the process of
populating and delivering a printed
version of the disclosure, with $0.15 per
disclosure spent on printing costs. The
total additional cost under this scenario
is estimated at $213.4 to $249.5 million.
Comments from industry groups
asserted that the preliminary analysis
underestimated training costs and that it
would be difficult to determine the total
of payments for financing prior to
knowing the details of the transaction.
One comment contended that ‘‘these
mandates . . . necessarily would
involve significant annual training
requirements for new employees given
that . . . the average dealer experiences
an annual sales consultant turnover rate
of 67%.’’ 571 The comment further
asserted that dealers cannot determine
the total cost of a financing or leasing
agreement without knowing the terms
for which consumers qualify and what
terms they want. The comment argued
that as a result, only the scenario with
costs incurred on a per transaction basis
should be considered. Finally, the
comment argued that the per-transaction
costs in Scenario 2 are too low, both
because the Commission underestimates
the time required to deliver, discuss,
and review disclosures and because
multiple disclosures would have to be
made per transaction (as terms are
changed).
These comments misunderstand the
Commission’s analysis with respect to
the costs of complying with this
provision. Scenario 1 does not
anticipate that the dealer presents a
consumer with the total of payments for
a financing or leasing contract at the
outset of the transaction. It requires only
that, at the point where the dealer
engages in discussions regarding
different monthly payments for
financing or leasing arrangements, the
information that must be disclosed (i.e.,
the total of payments and a comparison
of these totals across differing monthly
payments) is already available to the
dealer under the status quo. The only
additional cost incurred per transaction
would be the delivery of this
information to the consumer (the
determination of which is contemplated
in the costs estimated under Scenario 1).
With respect to the comment
regarding insufficient allowance for
training costs in light of employee churn
in the industry, the Commission has
determined this to be a valid critique of
the preliminary analysis. As a result, the
final regulatory analysis includes an
additional ongoing cost for both
Scenarios. This ongoing cost includes
training for sales staff and budgets 1
hour of training for each of the 417,110
sales and related employees across the
industry, at an (average) cost of $29.43
per hour. The resulting additional
ongoing costs in both scenarios amounts
to $12.3 million per year. Further, as
discussed in a previous section, the
final analysis excludes private party,
fleet, and wholesale transactions.572 The
remainder of the Commission’s
preliminary estimates remain
unchanged (with the exception of
updates to more recent data where
available). Concerns about
underestimates of the time required to
review disclosures on a per-transaction
basis are addressed by the Commission’s
sensitivity analyses conducted in the
Appendix.
TABLE 3.4—ESTIMATED COMPLIANCE COSTS FOR FINANCING COSTS
2024 only
Scenario 1—Creation of disclosure and training
only:
Upfront costs:
Number of dealers ....................................
Compliance manager hours per dealer ....
Cost per hour of disclosure creation ........
Subtotal .............................................
Ongoing costs:
Number of sales and related employees a
Training hours per employee ...................
Cost per hour of training ..........................
Subtotal ............................................................
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Scenario 1—Total Cost ...................................
Scenario 2—Disclosures per transaction:
Covered new vehicle sales per year b .............
% New vehicle sales involving financing c .......
Covered used vehicle sales per year ..............
% Used vehicle sales involving financing .......
Covered new vehicle leases per year .............
570 While disclosures of this nature are already
required to be present in the financing contract by
the Truth in Lending Act (TILA), the Rule would
change the timing of a subset of those disclosures.
As a result, the dealer may have to develop and
deliver a separate document in the event that the
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.................................................................................
.................................................................................
.................................................................................
47,271
8
$31.21
..............................
..............................
..............................
.................................................................................
$11,802,623
..............................
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
417,110
1
$29.43
3%
7%
3%
7%
....................................................
....................................................
....................................................
....................................................
..............................
..............................
..............................
..............................
$104,712,908
$86,218,307
$116,515,532
$98,020,931
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
..............................
..............................
10,343,319
81%
21,219,640
35%
3,423,294
discount
discount
discount
discount
rate
rate
rate
rate
standard TILA disclosure has not yet been
generated at the point where disclosure is required
under the Rule.
571 Comment of Nat’l Auto Dealers Ass’n, Doc.
No. FTC–2022–0046–8368 at 301.
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572 Without cross-tabulations of fleet sales and
sales involving financing, we assume that these are
independent such that the fraction of covered
transactions involving financing is equal to the
fraction of covered transaction times the fraction of
financed transactions.
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685
TABLE 3.4—ESTIMATED COMPLIANCE COSTS FOR FINANCING COSTS—Continued
2024 only
2024–2033
Total transactions involving monthly payments/financing.
Disclosure minutes per transaction .................
Cost per hour of disclosure .............................
Printing cost per disclosure .............................
.................................................................................
..............................
19,228,256
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
2
$28.41
$0.15
Subtotal ............................................................
3%
7%
3%
7%
..............................
..............................
..............................
..............................
$179,930,957
$148,151,196
$296,446,489
$246,172,126
Total Cost ........................................................
discount
discount
discount
discount
rate
rate
rate
rate
....................................................
....................................................
....................................................
....................................................
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
a Bureau of Labor Statistics Industry-Specific Occupational Employment and Wage Estimates for NAICS Code 441100—Automobile Dealers,
May 2021.
b For total volume, National Transportation Statistics Table 1–17. For retail/non-fleet fraction, Edmunds Automotive Industry Trends 2020 (for
new vehicle) and Cox Automotive via Automotive News (for used vehicles).
c Melinda Zabritski, Experian Info. Sols. Inc., ‘‘State of the Automotive Finance Market Q4 2020’’.
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5. Prohibition on Charging for Add-Ons
That Provide No Benefit
The Rule prohibits dealers from
charging for add-on products or services
from which the targeted consumer
would not benefit. Compliance with this
provision will require dealers to
develop policies and transaction-level
rules about when consumers can be
charged for add-on products and
services. The Rule as proposed in the
NPRM also would have included
additional provisions relating to addons that have not been finalized. These
included a prohibition on charging for
optional add-on products or services
unless dealership employees made a
number of disclosures at various points
before finalizing a transaction. This
provision would have required each
dealer to design form disclosures, create
a system for populating these forms,
train their sales staff on the disclosure
requirements, and provide the
disclosures in writing, with the
appropriate information filled in, to
each consumer prior to completing the
transaction.
The Commission’s preliminary
analysis relating to the cost of
complying with these disclosure
requirements budgeted for 8 hours of
compliance manager time (at a cost of
$26.83 per hour) and 4 hours of sales
manager time (at a cost of $63.93 per
hour) to design disclosure forms, and an
additional 8 hours of programmer time
(at a cost of $28.90) to create a system
to populate these forms. The
preliminary analysis also budgeted for 2
minutes of sales associate time (at a rate
of $21.84 per hour) and $0.11 in
printing/electronic delivery costs per
disclosure, with the number of
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disclosures determined by the fraction
of transactions involving optional addons and/or financing.
In response to numerous comments,
the Commission has determined not to
finalize the proposal in § 463.5(b),
which would have required the delivery
of written disclosures and
acknowledgement via signature of those
disclosures by consumers. Various
commenters were concerned that the
add-on disclosures would add
documents and time to the transaction.
In response to these comments, the
Commission has determined to omit
what would have been the only
provision affirmatively requiring the
dealer and consumer to review
additional documentation during a
transaction. As a result, while the
preliminary analysis estimated
compliance costs between
approximately $883 million and $1
billion for the disclosure of total costs
for cash and financed transactions with
optional add-on products, the cost
estimate in the final analysis is on the
order of one-tenth to one-half of the
preliminary estimate (depending on the
scenario).
As a result, the Commission has
substantially revised the cost analysis in
this section. First, the Commission
assumes that each dealer will employ 8
hours of compliance manager time (at a
rate of $31.21) and 8 hours of sales
manager time (at a rate of $80.19) in the
first year under the Rule, to cull add-ons
with no value from their offerings and
develop policies regarding when certain
add-ons may or may not be sold.
Second, the Commission budgets for 1
hour of training per year for each of the
417,110 sales and related employees
across the industry, to apprise them of
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these policies and their obligations
under the Rule. Finally, the Commission
includes a second cost scenario in
which dealers will choose to deliver one
itemized disclosure to each customer
before the finalization of each
transaction. Although this is not
required under the Final Rule, dealers
may wish to have documentation of
compliance with the provisions of the
Rule. As in the preliminary analysis, the
Commission assumes that each dealer
will employ 8 hours of compliance
manager time and 4 hours of sales
manager time creating this disclosure
and 8 hours of programmer time
creating a system to populate these
forms when provided inputs by sales
staff. The same occupational wage data
have been used, but the rates have been
updated to match the most recent data
available. We further assume, as in the
preliminary analysis, that sales staff will
spend 2 minutes per disclosure (at a rate
of $28.41 per hour) updating, printing,
and delivering these forms to consumers
and that the physical costs of delivering
the disclosure are roughly $.11 per
disclosure.573 Finally, as discussed in a
previous section, the final analysis
excludes private party, fleet, and
wholesale transactions.
573 The physical costs are $.15 per paper
disclosure and $.02 per electronic disclosure,
assuming that 27% are made electronically. This
assumption is informed by a consumer survey that
indicates 73% of consumers with motor vehicles
prefer to receive registration renewal notices by
mail as opposed to electronically. See Consumer
Action, ‘‘Your opinion wanted: Paper vs. electronic
bills, statements and other communications’’ 4
(2018–2019), https://www.consumer-action.org/
downloads/Consumer_Action_Paper_v_electronic_
survey.pdf (showing that 1800 of 2456 respondents
who owned and needed to periodically register a
motor vehicle preferred mail notices).
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TABLE 3.5—ESTIMATED COMPLIANCE COSTS FOR PROHIBITION ON CERTAIN ADD-ONS
2024 only
Scenario 1—Policies and Training Only:
Upfront costs:
Number of dealers ....................................
Compliance manager hours per dealer ....
Cost per hour of compliance manager .....
Sales manager hours per dealer ..............
Cost per hour of sales manager ..............
2024–2033
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
47,271
8
$31.21
8
$80.19
..............................
..............................
..............................
..............................
..............................
Subtotal .............................................
Ongoing costs:
Number of sales and related employees
Training hours per employee ...................
Cost per hour of training ..........................
.................................................................................
$42,127,915
..............................
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
417,110
1
$29.43
Scenario 1—Subtotal .......................................
3% discount rate ....................................................
7% discount rate ....................................................
..............................
..............................
$146,840,824
$128,346,223
Scenario 2—Disclosure creation and delivery:
Number of dealers ...........................................
Compliance manager hours per dealer ...........
Cost per hour of compliance manager ............
Sales manager hours per dealer .....................
Cost per hour of sales manager .....................
Programmer hours per dealer .........................
Cost per hour of programmer ..........................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
47,271
8
$31.21
4
$80.19
8
$40.24
..............................
..............................
..............................
..............................
..............................
..............................
..............................
Subtotal ....................................................
.................................................................................
$42,182,750
..............................
Disclosure delivery (per transaction):
New vehicle sales per year .............................
Used vehicle sales per year ............................
Minutes per disclosure ....................................
Cost per hour of disclosure .............................
Physical costs per disclosure ..........................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
..............................
..............................
10,343,319
21,219,640
2
$28.41
$0.11
3%
7%
3%
7%
..............................
..............................
..............................
..............................
$285,904,302
$235,407,319
$474,927,875
$405,936,291
Subtotal ....................................................
Scenario 2—Total Cost ............................
discount
discount
discount
discount
rate
rate
rate
rate
....................................................
....................................................
....................................................
....................................................
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
6. Requirement To Obtain Express,
Informed Consent Before Any Charges
The Rule requires dealers to obtain
express, informed consent before
charging any consumer for any product
or service in association with the sale,
financing, or lease of a vehicle. Because
we presume that all dealers who are
complying with the law currently have
policies in place to prevent charges
without consent, we assume that there
will be no additional costs imposed by
this provision.
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7. Recordkeeping
The Final Rule requires dealers to
retain records of all documents
pertaining to Rule compliance. These
recordkeeping requirements include:
• Copies of all materially different
marketing materials, sales scripts, and
training materials that discuss sales
prices and financing or lease terms.
• Records demonstrating that all addons charged for meet the requirements
stated in the Rule, including
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calculations of loan-to-value ratios in
contracts including GAP agreements.
• Copies of all purchase orders,
financing and lease contracts signed by
the consumer (whether or not final
approval is received), and all written
communications with any consumer
who signs a purchase order or financing
or lease contract.
• Copies of all written consumer
complaints, inquiries related to add-ons,
and inquiries and responses about
individual vehicles.
Most of these documents are already
produced in the normal course of
business under the status quo, or the
costs of creating them have already been
accounted for in previous sections. In its
preliminary analysis, the Commission
assumed that each dealer would incur
an upfront cost, employing 8 hours of
programmer time, 5 hours of clerical
time, 1 hour of sales manager time, and
1 hour of compliance officer time, at
hourly rates of $28.90, $18.37, $63.93,
and $26.83, respectively, in order to
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upgrade their systems and create the
templates necessary to accommodate
retention of all relevant materials. The
Commission also assumed that each
dealer would employ 1 additional
minute of sales staff time per transaction
to populate forms and store relevant
materials.
One industry commenter contended
that the proposed rule would impose
substantial and costly recordkeeping
mandates, citing primarily the various
channels through which dealers would
be required to capture and retain
communications. The Commission
believes the recordkeeping requirements
strike an appropriate balance, requiring
the retention of materials needed to
allow effective enforcement while being
mindful of dealer burden. In addition,
the recordkeeping requirements are
similar to analogous requirements in
other Commission disclosure rules, as
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tailored to individual industries and
markets.574
As such, the Commission’s final
analysis retains its preliminary
estimates—appropriately updated where
more recent data were available—with a
few changes. First, we made
adjustments to the cost estimates
associated with the required loan-tovalue calculations for all transactions
with GAP agreements. Based on a
comment from one industry group, we
revised down the share of covered new
and used vehicle sales with a GAP
agreement to 17%.575 As in the
preliminary analysis, for these
transactions sales staff will spend an
additional minute to generate and store
the relevant calculations. As discussed
in a previous section, the final analysis
excludes private party, fleet, and
wholesale transactions. In addition, the
expansion of the volume of records that
dealers are required to retain and
manage will likely require investment in
additional IT systems and hardware,
687
which was left unquantified in the
preliminary analysis. After additional
research, the Commission estimates that
each dealer will need to spend
approximately $300 per year on storage
(either on premises or in the cloud) to
house the records that the Rule requires
them to maintain. Based on a review of
the transaction records we have
received from dealers through
investigations, this amount is likely to
be more than sufficient for
compliance.576
TABLE 3.6—ESTIMATED COMPLIANCE COSTS FOR RECORDKEEPING
2024 only
2024–2033
Updating systems:
Number of dealers ...........................................
Programming hours per dealer .......................
Cost per hour of programming ........................
Clerical hours per dealer .................................
Cost per hour of clerical work .........................
Sales manager hours per dealer .....................
Cost per hour of sales manager review ..........
Compliance manager hours per dealer ...........
Cost per hour of compliance review ................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
47,271
8
$40.24
5
$20.16
1
$80.19
1
$31.21
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
Subtotal ....................................................
.................................................................................
$25,248,387
..............................
Hardware and Storage (per year):
Number of dealers ...........................................
Cost of hardware/storage ................................
.................................................................................
.................................................................................
..............................
..............................
47,271
$300
.................................................................................
.................................................................................
.................................................................................
..............................
..............................
..............................
31,562,959
17%
5,444,502
.................................................................................
.................................................................................
..............................
..............................
1
$28.41
Subtotal ....................................................
Subtotal ....................................................
3% discount rate ....................................................
7% discount rate ....................................................
..............................
..............................
$270,444,391
$222,677,967
Total Cost ..........................................
Total Cost ..........................................
3% discount rate ....................................................
7% discount rate ....................................................
..............................
..............................
$295,692,777
$247,926,354
Recordkeeping (per transaction):
Number of covered motor vehicle sales ..........
% of sales with GAP agreement a ...................
Number of motor vehicle sales with GAP
agreement.
Sales staff minutes per transaction .................
Cost per hour of recordkeeping ......................
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
a Comment of Nat’l Auto. Dealers Ass’n, Doc. No. FTC–2022–0046–8368 at 12 n.43.
D. Other Impacts of Final Rule
khammond on DSKJM1Z7X2PROD with RULES2
As the status quo in this industry
features consumer search frictions,
shrouded prices, deception, and
obfuscation, dealers likely charge higher
prices for a number of products and
services than could be supported once
the Rule is in effect. SBP VII.B
discussed the Commission’s expectation
that prices are likely to adjust in
574 16 CFR 310.5 (Telemarketing Sales Rule); 16
CFR 437.7 (Business Opportunity Rule); 16 CFR
453.6 (Funeral Industry Practices Rule); 16 CFR
301.41 (Fur Products Labeling).
575 Comment of Nat’l Auto. Dealers Ass’n, Doc.
No. FTC–2022–0046–8368 at 12 n.43 (indicating
15.3% (18.2%) for new (used) vehicles). These rates
were weighted by transactions counts to calculate
an overall rate of 17%.
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response to the transparency facilitated
by the Rule, and quantified the benefits
that result when vehicle quantities
increase in response to a more
transparent and less deceptive
equilibrium. The price changes in the
new vehicle market discussed in SBP
VII.B will also have the effect of
transferring $3.4 billion per year from
dealers whose conduct under the status
quo would not have complied with the
Rule to consumers. In addition, other
prices may be impacted by the Rule,
such as used vehicle prices and add-on
prices. As we have insufficient data to
predict these price effects, neither the
transfers associated with these potential
price changes nor the resulting quantity
adjustments and deadweight loss
reductions are quantified in the current
576 Our review of dealer transaction records
suggests that a typical transaction generates 3.4 MB
of data under the status quo. Given the average
number of transactions per dealer, this suggests that
storing all these records would require dedicated
space of roughly 4.2 GB per year. With a two-year
retention window, this corresponds to 8.4 GB of
storage at any given time. We estimate that the
(annual) amount budgeted here should be sufficient
to maintain at least 1 TB of storage—either on
premises or through a cloud storage vendor—which
is sufficient for more than 100 times the data
storage capacity necessary to retain all transaction
files generated by a typical dealership in a year
under the status quo. The Commission anticipates
that this amount of data storage capacity will be
more than sufficient to also allow for dealers to
keep any necessary records of correspondence with
consumers who ultimately do not complete
transactions at the dealership.
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analysis. Finally, it may be the case that
enhanced transparency of the Rule leads
to fewer of certain types of transactions
relative to the status quo. Recent
evidence suggests that price shrouding
of the kind that is prevalent in the motor
vehicle market results in consumers
spending more than they would
otherwise.577 We expect that this
phenomenon may extend especially to
the motor vehicle add-on market, where
the Commission has compiled
substantial evidence that individuals
frequently inadvertently purchase addons that they did not want and
ultimately will not use.578 While much
of this effect may ultimately be
transfers, we reiterate that to the extent
they represent transfers from dishonest
dealers to consumers, this may be
considered a benefit of the Rule.
In addition, deceptive practices by
dishonest dealers lead consumers to
engage with those dealers instead of
honest dealerships. Once the Rule is in
effect, some business that would
otherwise have gone to dealers using
bait-and-switch tactics or deceptive
door opening advertisements will now
go to honest dealerships. Again,
assuming that the costs of the firms are
similar, any one-for-one diversion of
sales from one set of businesses to
another is generally characterized as a
transfer under OMB guidelines.
However, in this case, it would
represent a transfer from the set of
dishonest dealers to honest dealers,
which may weigh differently if profits
from law violations are not counted
towards social welfare in the regulatory
analysis.
E. Conclusion
The Commission has attempted to
catalog and quantify the incremental
benefits and costs of the provisions
included in the Final Rule.
Extrapolating these benefits over the 10year assessment period and discounting
to the present provides an estimate of
the present value for total benefits and
costs of the Rule, with the difference—
net benefits—providing one measure of
the value of regulation.
Using our base case estimates, the
present value of quantified benefits for
consumers from the Rule’s requirements
over a 10-year period using a 7%
discount rate is estimated at $13.4
billion. The present value of quantified
costs for covered motor vehicle dealers
of complying with the Rule’s
requirements over a 10-year period
using a 7% discount rate is estimated at
$1.1 billion. This generates an estimate
of the present value of quantified net
benefits equal to $12.3 billion using a
discount rate of 7%. Using the best (or
worst) case assumptions discussed in
the preceding analysis results in net
benefits of $21.2 billion (or $5.5 billion)
using a discount rate of 7%.
Given that we expect unquantified
benefits to outweigh unquantified costs
for this Rule, this regulatory analysis
indicates that adoption of the Rule
would result in benefits to the public
that outweigh the costs.
PRESENT VALUE OF NET BENEFITS (IN MILLIONS), 2024–2033
Low estimate
3% Discount
rate
Benefits:
Time Savings ....................................
Deadweight Loss Reduction .............
Base case
7% Discount
rate
3% Discount
rate
High estimate
7% Discount
rate
3% Discount
rate
7% Discount
rate
$7,463
568
$6,145
468
$14,926
1,298
$12,290
1,069
$24,036
2,307
$19,790
1,899
Total Benefits .............................
Costs:
Finance/Lease Total of Payments
Disclosure ......................................
Offering Price Disclosure ..................
Prohibition Re Certain Add-ons &
Express, Informed Consent ..........
Prohibition on Misrepresentations ....
Recordkeeping ..................................
8,031
6,613
16,224
13,359
26,343
21,690
296
46
246
46
296
46
246
46
117
0
98
0
475
157
296
406
130
248
475
157
296
406
130
248
147
0
296
128
0
248
Total Costs ................................
1,270
1,075
1,270
1,075
559
474
Net Benefits ...............................
6,761
5,538
14,954
12,284
25,784
21,216
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Note: ‘‘Low Estimate’’ reflects all lowest benefit estimates and high cost scenarios and ‘‘High Estimate’’ reflects all highest benefit estimates
and low cost scenarios. ‘‘Base Case’’ reflects base case benefit estimates and high cost scenarios. Not all impacts can be quantified; estimates
only reflect quantified costs and benefits.
577 See Tom Blake et al., ‘‘Price Salience and
Product Choice,’’ 40 Mktg. Sci. 619–36 (2021),
https://doi.org/10.1287/mksc.2020.1261.
578 See Nat’l Consumer Law Ctr., ‘‘Auto Add-ons
Add Up: How Dealer Discretion Drives Excessive,
Inconsistent, and Discriminatory Pricing’’ (Oct. 1,
2017), https://www.nclc.org/images/pdf/car_sales/
report-auto-add-on.pdf; Consumers for Auto
Reliability and Safety, Comment Letter on Motor
Vehicle Roundtables, Project No. P104811 at 2–3
(Apr. 1, 2012), https://www.ftc.gov/sites/default/
files/documents/public_comments/publicroundtables-protecting-consumers-sale-and-leasingmotor-vehicles-project-no.p104811-00108/0010882875.pdf (citing a U.S. Department of Defense data
call summary that found that the vast majority of
military counselors have clients with auto financing
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problems and cited ‘‘loan packing’’ and yo-yo
financing as the most frequent auto lending abuses
affecting servicemembers); Adam J. Levitin, ‘‘The
Fast and the Usurious: Putting the Brakes on Auto
Lending Abuses,’’ 108 Geo. L.J. 1257, 1265–66
(2020), https://www.law.georgetown.edu/
georgetown-law-journal/wp-content/uploads/sites/
26/2020/05/Levitin_The-Fast-and-the-UsuriousPutting-the-Brakes-on-Auto-Lending-Abuses.pdf
(discussing ‘‘loan packing’’ as the sale of add-on
products that are falsely represented as being
required in order to obtain financing.); Complaint
¶¶ 12–19, Fed. Trade Comm’n v. Liberty Chevrolet,
Inc., No. 1:20–cv–03945 (S.D.N.Y. May 21, 2020)
(alleging deceptive and unauthorized add-on
charges in consumers’ transactions); Complaint
¶¶ 59–64, Fed. Trade. Comm’n v. Universal City
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Nissan, No. 2:16–cv–07329 (C.D. Cal. Sept. 29,
2016) (alleging deceptive and unauthorized add-on
charges in consumers’ transactions); Complaint
¶¶ 6, 9, TT of Longwood, Inc., No. C–4531 (F.T.C.
July 2, 2015) (alleging misrepresentations regarding
prices for added features); see also Auto Buyer
Study, supra note 25, at 14 (‘‘Several participants
who thought that they had not purchased add-ons,
or that the add-ons were included at no additional
charge, were surprised to learn, when going through
the paperwork, that they had in fact paid extra for
add-ons. This is consistent with consumers’
experiencing fatigue during the buying process or
confusion with a financially complex transaction,
but would also be consistent with dealer
misrepresentations.’’).
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
F. Appendix: Derivation of Deadweight
Loss Reduction
The derivation of the formula for the
reduction in deadweight loss from the
Rule follows from ‘‘Sufficient Statistics
Revisited’’ by Henrik Kleven.579 In the
source article, the wedge between costs
and prices is tax rates, but here we
consider producer markups; the
fundamental principles are unchanged.
We have a mass of consumers i with
utility function ui(xiO, xiN, xiU) over new
cars, used cars, and the numeraire (good
0) who face the following budget
constraint:
Here, vi(q) is the indirect utility
function for consumer i, so the first term
is consumer surplus and the second
term is producer surplus, while m is the
value of a dollar of profit. The change
in welfare from policy q, translated into
dollars by dividing by m, is:
dW(0)/d0 _
dTi _ ari .
µ
- i de
ae di
(1 + rj)xj = yi
j
f
The first term is the total effect on
profit from the reform and the second
term is the ‘‘mechanical’’ effect;
µ
Where
-
f
assuming quantities stay constant, how
much profits will fall if the policy goes
into effect. We can rewrite this as
follows:
[ f i id logxj 1 .
de
di
. L, rixi
i
j=O
policy . We make the following
additional assumptions/simplifications:
1. The outside good is priced at cost.
2. All consumers face the same
markups so Tik = Tk.
3. For simplicity, all elasticities are
assumed to be cost share-weighted
averages of individual effects, so
As a result, the welfare change from
the Auto Rule (q) is:
Assuming that the Rule affects only
markups for new vehicles, we can
rewrite the ‘‘policy elasticities’’ as a
product of a price elasticity and the
elasticity of price with respect to the
Rule, as follows:
where
is the long-run ‘‘policy price elasticity’’
of demand for good w.r.t. the price of
good , including the effects that a price
change has on the prices of related
goods. The formula accounts for
demand feedback effects between the
new and used car markets but assumes
no dynamics in the path from the policy
to the long-run steady-state. Computing
this formula requires estimates of seven
parameters: two ‘‘policy price
elasticities’’ that reflect the
responsiveness of quantities of new and
used vehicles sold to a change in prices
in the new vehicle market after all
adjustments have occurred in both
markets, two baseline markups that
represent the differences between prices
and marginal costs for new/used
vehicles, two quantities that reflect the
aggregate cost of all new/used vehicles
sold under the status quo, and the
predicted change in prices due to the
Rule. Calibration of these parameters is
discussed in the main text.
579 See Henrik J. Kleven, ‘‘Sufficient Statistics
Revisited.’’ 13 Annual Rev. Econ. 515–38. (2021),
https://doi.org/10.1146/annurev-economics-060220023547.
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G. Appendix: Uncertainty Analysis
While the main text uses alternative
assumptions to explore sensitivity to a
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=
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Ejk
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is labelled the ‘‘policy elasticity’’ for
good and consumer with respect to
ER04JA24.011
dW(0)/d0 _
given markups Tij for good j and
consumer i and income Yi for consumer
i. Pre-markup prices are normalized to
one so xij is the cost of consumer i’s
purchase of good j. Total profits from
the consumption of consumer i are Ti =
SjTijx ij.
Define a policy to be evaluated as q.
Total welfare is defined as:
ER04JA24.010
L
689
690
Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
number of discrete scenarios, in this
appendix we allow variation in most of
the assumptions that underlie our
model. This Monte Carlo analysis
procedure allows us to more fully
characterize the uncertainty around our
central estimate of net benefits, under
the assumption that our basic model is
specified correctly. Most of the
assumptions in our analysis refer to
amounts of time, either amounts of time
dealerships employees must spend on a
compliance task or amounts of time that
consumers save on various activities
related to the automobile shopping
process. Deviations for these
assumptions are centered on the
parameters used in the main text.
Elsewhere, as with assumptions
regarding fractions or proportions, our
base case is often an extreme case (i.e.,
0 or 1). In these cases, deviations are
typically not centered on the base case
and are allowed to vary across the
whole range as dictated by the
parameter. Still, we can expect the
average results from this sensitivity
analysis to be similar to the result in the
main text. The object of interest here is
the distribution of estimates, which
indicates the expected variation in net
benefits if the true parameters deviate
from our predictions (with errors of the
form modeled).
For most assumptions, we draw from
a symmetric, triangular distribution
around the base case assumption with a
specified upper and lower bound. In
this distribution, the probability of
drawing particular parameter value
increases linearly from the lower bound
to the base case assumption before
decreasing linearly to the upper bound,
such that the area inscribed by the
triangle is equal to 1. We emphasize this
distribution because it is a parsimonious
way to incorporate variation in
parameter values over a finite range and
incorporates our preferred estimates as
the most likely outcome. For a few
parameters where we think it is
appropriate to de-emphasize the main
estimate parameter, we draw from a
uniform distribution. Importantly, all
draws are independent; there is no
correlation between the deviations
drawn in any given Monte Carlo trial.
An additional sensitivity analysis
considers a situation where our errors
across all labor time parameters are
correlated; specifically, that all of our
estimates of the time required for
compliance tasks are 1/10th of the true
time required.
To incorporate uncertainty in time
savings benefits to consumers, we allow
the time saved by digital consumers to
vary by up to ten minutes more or less
than the main analysis parameters. The
share of these time savings received by
non-digital consumers under the Rule is
modeled as uniformly distributed
between zero (no savings) and one
(savings equivalent to what digital
consumers receive in the status quo).
TABLE A.1—ALTERNATIVE PARAMETERS: BENEFITS OF TIME SAVINGS FOR COMPLETED TRANSACTIONS
Base case
Parameter
Monte Carlo
Parameter value
Price Negotiation Time Savings ..................................
Add-on Negotiation Time Savings ..............................
Paperwork Time Savings ............................................
Trade-In Negotiation Time Savings ............................
Fraction of Price Time Savings Under Rule ...............
Fraction of Add-on Time Savings Under Rule ............
Fraction of Paperwork Time Savings Under Rule ......
Fraction of Trade-In Time Savings Under Rule ..........
For the deadweight loss reduction
component of benefits, we explore
sensitivity only to baseline used-vehicle
markups, allowing them to vary from 0
to the baseline new-vehicle markup of
Modeled distribution
43
33
45
26
1.0
0.5
0.5
0.0
Distribution lower
bound
Triangular .........................
Triangular .........................
Triangular .........................
Triangular .........................
Uniform .............................
Uniform .............................
Uniform .............................
Uniform .............................
15%. In the main text, we explore a
number of scenarios for deadweight loss
reduction corresponding to greater and
lesser demand elasticities as well.
The following tables describe the
distributions we model for cost
Distribution upper
bound
33
23
35
16
0
0
0
0
53
43
55
36
1
1
1
1
parameters in the simulation exercise.
All cost parameters are assumed to be
drawn from triangular distributions. The
tables follow the same order as the
discussion in the main text.
TABLE A.2—ALTERNATIVE PARAMETERS: COSTS OF MISREPRESENTATION PROHIBITION COMPLIANCE
Base case
Parameter
Monte Carlo
Parameter value
Document Review Minutes .........................................
Documents Reviewed .................................................
Modeled distribution
5
150
Distribution lower
bound
Triangular .........................
Triangular .........................
0
100
Distribution upper
bound
10
200
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TABLE A.3—ALTERNATIVE PARAMETERS: COSTS OF OFFERING PRICE DISCLOSURES
Base case
Parameter
Parameter value
Template Creation Sales Manager Hours ..................
Template Creation Web Developer Hours ..................
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8
8
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Distribution lower
bound
Triangular .........................
Triangular .........................
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4
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12
12
Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
691
TABLE A.5—ALTERNATIVE PARAMETERS: COSTS OF FINANCING DISCLOSURES
Base case
Parameter
Monte Carlo
Parameter value
Disclosure Creation Compliance Manager Hours ......
Disclosure Training Hours ...........................................
Disclosure Delivery Time Minutes ..............................
Printing Costs ..............................................................
Modeled distribution
8
1
2
0.15
Triangular
Triangular
Triangular
Triangular
Distribution lower
bound
.........................
.........................
.........................
.........................
4
0
0
0.10
Distribution upper
bound
12
2
4
0.20
TABLE A.6—ALTERNATIVE PARAMETERS: COSTS OF ITEMIZED DISCLOSURES
Base case
Parameter
Monte Carlo
Parameter value
Electronic Disclosure Share (Scenario 2 only) ...........
Upfront Sales Manager Hours (Scenario 1) ...............
Upfront Compliance Manager Hours (Scenario 1) .....
Disclosure Training Hours (Scenario 1) ......................
Disclosure Creation Sales Manager Hours (Scenario
2 only).
Disclosure Creation Compliance Manager Hours
(Scenario 2 only).
Disclosure Creation Web Developer Hours (Scenario
2 only).
Disclosure Delivery Minutes (Scenario 2 only) ...........
Printing Costs (Scenario 2 only) .................................
Electronic Disclosure Costs (Scenario 2 only) ...........
Modeled distribution
0.27
8
8
1
4
Triangular
Triangular
Triangular
Triangular
Triangular
Distribution lower
bound
Distribution upper
bound
.........................
.........................
.........................
.........................
.........................
0.04
4
4
0
2
0.50
12
12
2
6
8
Triangular .........................
4
12
8
Triangular .........................
4
12
2
0.15
0.02
Triangular .........................
Triangular .........................
Triangular .........................
0
0.10
0
4
0.20
0.04
TABLE A.7—ALTERNATIVE PARAMETERS: RECORDKEEPING COSTS
Base case
Parameter
Parameter value
GAP Sales Share ........................................................
GAP Sale Minutes .......................................................
Upfront Web Developer Hours ....................................
Upfront Clerical Hours .................................................
Upfront Sales Manager Hours ....................................
Upfront Compliance Manager Hours ..........................
IT Hardware Costs ......................................................
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We simulate 1,000 scenarios drawing
from these parameter distributions,
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Modeled distribution
0.17
1
8
5
1
1
300
Triangular
Triangular
Triangular
Triangular
Triangular
Triangular
Triangular
.........................
.........................
.........................
.........................
.........................
.........................
.........................
recording the costs and benefits of each
potential outcome. The distribution of
PO 00000
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Distribution lower
bound
0.07
0
4
2
0
0
100
Distribution upper
bound
0.27
2
12
8
2
2
500
costs and benefits is plotted in the
following table for discount rates of 3%
and 7%.
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Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
Distribution of Benefits and Costs
Monte Carlo Simulation, n=1000
1
I
20.00-+----+1----------------·--
..'·",
C
I
-,-1
1--.l--1
15.00--·-·~·1·, - - - - - - - - - •- - - - - - - - ,--,
__ ~ Benefits
.2
}-----{
,--.l--a
a:i
I
I
fa-
10.00
I
.... - - : - -
CJ Costs
I
.... - - - - f
J
-__,
,------
I
I
"'"-,--'
I
:
I
.
__ __
5,00----.~-----------:------___
_....
0.00---------------------3% discount rate
Differencing the costs and benefits
from each simulation iteration yields a
7% discount rate
distribution of net benefits under the
various parameter draws. We again plot
this distribution under 3% and 7%
discount rates.
Distribution ·of Net Benefits
Monte Carfo Simulation, n=1000
........
_i ... , .
.1 - - - - - - - - - - - - - " " - - - - - - - - - - · · · - · · - · - · · - - -
·,.
/
I
/
~
\
I
I
:E'
I
~
~
·,
\
\
I
\
.05 - · · - · - - - - - ~ , .
/
i
i
··-----·---~\.---
\
/
\
\
\
I
,:
✓
\
~
0.00.
5.00
' •, .....
15.00
10.00
20.00
25.00
This exercise finds heterogeneity in
net benefits under the alternative
parameter distributions, but the Rule
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3% discount rate
- •- , 7% discount rate
still yields positive net benefits in all
simulated outcomes.
Finally, to examine the sensitivity of
the net benefits conclusions to the
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possibility of systematic
underestimating of labor costs, we
calculate costs and benefits in a scenario
where all labor costs turn out to be ten
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Net Benefit {$Billions)
Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
times larger than the parameter values
in the main text. All non-labor hours
costs (including benefits hours, wage
693
rates, and prevalence counts) are
unchanged in this analysis.
TABLE A.8—PRESENT VALUE OF NET BENEFITS (IN MILLIONS), LABOR COSTS × 10, 2024–2033
Base case
3% Discount rate
Benefits:
Time savings ....................................................................................................................................
Deadweight Loss Reduction .............................................................................................................
7% Discount rate
$14,926
1,298
$12,290
1,069
Total Benefits ............................................................................................................................
Costs:
Prohibition on Misrepresentations ....................................................................................................
Offering Price Disclosure ..................................................................................................................
Finance/Lease Total of Payments Disclosure ..................................................................................
Prohibition re: Certain Add-ons & Express, Informed Consent .......................................................
Recordkeeping ..................................................................................................................................
16,224
13,359
1,573
455
2,743
4,471
1,868
1,295
455
2,279
3,830
1,583
Total Costs ................................................................................................................................
11,111
9,443
Net Benefits ...............................................................................................................................
5,114
3,916
Note: ‘‘Base Case’’ reflects base case benefit estimates and high cost scenarios with ten times the labor costs as in the main analysis. Not all
impacts can be quantified; estimates only reflect quantified costs and benefits.
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs
designated this Rule as a ‘‘major rule,’’
as defined by 5 U.S.C. 804(2).
U.S.C. 45(a)(1)) to violate any applicable
provision of this part, directly or
indirectly, including the recordkeeping
requirements which are necessary to
prevent such unfair or deceptive acts or
practices and to enforce this part.
List of Subjects in 16 CFR Part 463
§ 463.2
Consumer protection, Motor vehicles,
Reporting and recordkeeping
requirements, Trade practices.
■ For the reasons stated in the preamble,
the Federal Trade Commission adds part
463 to subchapter D of Title 16 of the
Code of Federal Regulations to read as
follows:
(a) ‘‘Add-on’’ or ‘‘Add-on product(s)
or Service(s)’’ means any product(s) or
service(s) not provided to the consumer
or installed on the Vehicle by the
Vehicle manufacturer and for which the
Dealer, directly or indirectly, charges a
consumer in connection with a Vehicle
sale, lease, or financing transaction.
(b)–(c) [Reserved]
(d) ‘‘Clear(ly) and Conspicuous(ly)’’
means in a manner that is difficult to
miss (i.e., easily noticeable) and easily
understandable, including in all of the
following ways:
(1) In any communication that is
solely visual or solely audible, the
disclosure must be made through the
same means through which the
communication is presented. In any
communication made through both
visual and audible means, such as a
television advertisement, the disclosure
must be presented simultaneously in
both the visual and audible portions of
the communication even if the
representation requiring the disclosure
is made in only one means.
(2) A visual disclosure, by its size,
contrast, location, the length of time it
appears, and other characteristics, must
stand out from any accompanying text
or other visual elements so that it is
easily noticed, read, and understood.
VIII. Other Matters
PART 463—COMBATING AUTO
RETAIL SCAMS TRADE REGULATION
RULE
Sec.
463.1 Authority.
463.2 Definitions.
463.3 Prohibited misrepresentations.
463.4 Disclosure requirements.
463.5 Dealer charges for Add-ons and other
items.
463.6 Recordkeeping.
463.7 Waiver not permitted.
463.8 Severability.
463.9 Relation to State laws.
khammond on DSKJM1Z7X2PROD with RULES2
Authority: 15 U.S.C. 41 et seq.; 12 U.S.C.
5519.
§ 463.1
Authority.
This part is promulgated pursuant to
section 1029 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act of 2010, 12 U.S.C. 5519(d). It is an
unfair or deceptive act or practice
within the meaning of section 5(a)(1) of
the Federal Trade Commission Act (15
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(3) An audible disclosure, including
by telephone or streaming video, must
be delivered in a volume, speed, and
cadence sufficient for ordinary
consumers to easily hear and
understand it.
(4) In any communication using an
interactive electronic medium, such as
the internet or software, the disclosure
must be unavoidable.
(5) The disclosure must use diction
and syntax understandable to ordinary
consumers and must appear in each
language in which the representation
that requires the disclosure appears.
(6) The disclosure must comply with
these requirements in each medium
through which it is received.
(7) The disclosure must not be
contradicted or mitigated by, or
inconsistent with, anything else in the
communication.
(e) ‘‘Covered Motor Vehicle’’ or
‘‘Vehicle’’ means any self-propelled
vehicle designed for transporting
persons or property on a public street,
highway, or road. For purposes of this
part, the term Covered Motor Vehicle
does not include 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.
(f) ‘‘Covered Motor Vehicle Dealer’’ or
‘‘Dealer’’ means any person, including
any individual or entity, or resident in
the United States, or any territory of the
United States, that:
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(1) Is licensed by a State, a territory
of the United States, or the District of
Columbia to engage in the sale of
Covered Motor Vehicles;
(2) Takes title to, holds an ownership
interest in, or takes physical custody of
Covered Motor Vehicles; and
(3) Is predominantly engaged in the
sale and servicing of Covered Motor
Vehicles, the leasing and servicing of
Covered Motor Vehicles, or both.
(g) ‘‘Express, Informed Consent’’
means an affirmative act communicating
unambiguous assent to be charged,
made after receiving and in close
proximity to a Clear and Conspicuous
disclosure, in writing, and also orally
for in-person transactions, of the
following:
(1) What the charge is for; and
(2) The amount of the charge,
including, if the charge is for a product
or service, all fees and costs to be
charged to the consumer over the period
of repayment with and without the
product or service. The following are
examples of what does not constitute
Express, Informed Consent:
(i) A signed or initialed document, by
itself;
(ii) Prechecked boxes; or
(iii) An agreement obtained through
any practice designed or manipulated
with the substantial effect of subverting
or impairing user autonomy, decisionmaking, or choice.
(h) ‘‘GAP Agreement’’ means an
agreement to indemnify a Vehicle
purchaser or lessee for any of the
difference between the actual cash value
of the Vehicle in the event of an
unrecovered theft or total loss and the
amount owed on the Vehicle pursuant
to the terms of a loan, lease agreement,
or installment sales contract used to
purchase or lease the Vehicle, or to
waive the unpaid difference between
money received from the purchaser’s or
lessee’s Vehicle insurer and some or all
of the amount owed on the Vehicle at
the time of the unrecovered theft or total
loss, including products or services
otherwise titled ‘‘Guaranteed
Automobile Protection Agreement,’’
‘‘Guaranteed Asset Protection
Agreement,’’ ‘‘GAP insurance,’’ or ‘‘GAP
Waiver.’’
(i) ‘‘Government Charges’’ means all
fees or charges imposed by a Federal,
State, or local government agency, unit,
or department, including taxes, license
and registration costs, inspection or
certification costs, and any other such
fees or charges.
(j) ‘‘Material’’ or ‘‘Materially’’ means
likely to affect a person’s choice of, or
conduct regarding, goods or services.
(k) ‘‘Offering Price’’ means the full
cash price for which a Dealer will sell
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or finance the Vehicle to any consumer,
provided that the Dealer may exclude
only required Government Charges.
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.4 and 463.5.
§ 463.3
§ 463.4
Prohibited misrepresentations.
It is a violation of this part and an
unfair or deceptive act or practice in
violation of section 5 of the Federal
Trade Commission Act for any Covered
Motor Vehicle Dealer to make any
misrepresentation, expressly or by
implication, regarding Material
information about the following:
(a) The costs or terms of purchasing,
financing, or leasing a Vehicle.
(b) Any costs, limitation, benefit, or
any other aspect of an Add-on Product
or Service.
(c) Whether the terms are, or
transaction is, for financing or a lease.
(d) The availability of any rebates or
discounts that are factored into the
advertised price but not available to all
consumers.
(e) The availability of Vehicles at an
advertised price.
(f) Whether any consumer has been or
will be preapproved or guaranteed for
any product, service, or term.
(g) Any information on or about a
consumer’s application for financing.
(h) When the transaction is final or
binding on all parties.
(i) Keeping cash down payments or
trade-in Vehicles, charging fees, or
initiating legal process or any action if
a transaction is not finalized or if the
consumer does not wish to engage in a
transaction.
(j) Whether or when a Dealer will pay
off some or all of the financing or lease
on a consumer’s trade-in Vehicle.
(k) Whether consumer reviews or
ratings are unbiased, independent, or
ordinary consumer reviews or ratings of
the Dealer or the Dealer’s products or
services.
(l) Whether the Dealer or any of the
Dealer’s personnel or products or
services is or was affiliated with,
endorsed or approved by, or otherwise
associated with the United States
government or any Federal, State, or
local government agency, unit, or
department, including the United States
Department of Defense or its Military
Departments.
(m) Whether consumers have won a
prize or sweepstakes.
(n) Whether, or under what
circumstances, a Vehicle may be moved,
including across State lines or out of the
country.
(o) Whether, or under what
circumstances, a Vehicle may be
repossessed.
(p) Any of the required disclosures
identified in this part.
(q) The requirements in this section
also are prescribed for the purpose of
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Fmt 4701
Sfmt 4700
Disclosure requirements.
It is a violation of this part and an
unfair or deceptive act or practice in
violation of section 5 of the Federal
Trade Commission Act for any Covered
Motor Vehicle Dealer to fail to make any
disclosure required by this section,
Clearly and Conspicuously.
(a) Offering Price. In connection with
the sale or financing of Vehicles, a
Vehicle’s Offering Price must be
disclosed:
(1) In any advertisement that
references, expressly or by implication,
a specific Vehicle;
(2) In any advertisement that
represents, expressly or by implication,
any monetary amount or financing term
for any Vehicle; and
(3) In any communication with a
consumer that includes a reference,
expressly or by implication, regarding a
specific Vehicle, or any monetary
amount or financing term for any
Vehicle. With respect to such
communications:
(i) The Offering Price for the Vehicle
must be disclosed in the Dealer’s first
response regarding that specific Vehicle
to the consumer; and
(ii) If the communication or response
is in writing, the Offering Price must be
disclosed in writing. The requirements
in this paragraph (a) also are prescribed
for the purpose of preventing the unfair
or deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and (b) and 463.5(c).
(b) [Reserved]
(c) Add-ons not required. When
making any representation, expressly or
by implication, directly or indirectly,
about an Add-on Product or Service, the
Dealer must disclose that the Add-on is
not required and the consumer can
purchase or lease the Vehicle without
the Add-on, if true. If the representation
is in writing, the disclosure must be in
writing. The requirements in this
paragraph (c) also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and (b) and 463.5(c).
(d) Total of payments and
consideration for a financed or lease
transaction. (1) When making any
representation, expressly or by
implication, directly or indirectly, about
a monthly payment for any Vehicle, the
Dealer must disclose the total amount
the consumer will pay to purchase or
lease the Vehicle at that monthly
payment after making all payments as
scheduled. If the representation is in
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04JAR2
Federal Register / Vol. 89, No. 3 / Thursday, January 4, 2024 / Rules and Regulations
writing, the disclosure must be in
writing.
(2) If the total amount disclosed
assumes the consumer will provide
consideration (for example, in the form
of a cash down payment or trade-in
valuation), the Dealer must disclose the
amount of consideration to be provided
by the consumer. If the representation is
in writing, the disclosure must be in
writing.
(3) The requirements in this
paragraph (d) also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and 463.5(c).
(e) Monthly payments comparison.
When making any comparison between
payment options, expressly or by
implication, directly or indirectly, that
includes discussion of a lower monthly
payment, the Dealer must disclose that
the lower monthly payment will
increase the total amount the consumer
will pay to purchase or lease the
Vehicle, if true. If the representation is
in writing, the disclosure must be in
writing. The requirements in this
paragraph (e) also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in §§ 463.3(a)
and 463.5(c).
§ 463.5 Dealer charges for Add-ons and
other items.
khammond on DSKJM1Z7X2PROD with RULES2
It is a violation of this part and an
unfair or deceptive act or practice in
violation of section 5 of the Federal
Trade Commission Act for any Covered
Motor Vehicle Dealer, in connection
with the sale or financing of Vehicles,
to charge for any of the following.
(a) Add-ons that provide no benefit. A
Dealer may not charge for an Add-on
Product or Service if the consumer
would not benefit from such an Add-on
Product or Service, including:
(1) Nitrogen-filled tire-related
products or services that contain no
more nitrogen than naturally exists in
the air; or
(2) Products or services that do not
provide coverage for the Vehicle, the
consumer, or the transaction or that are
duplicative of warranty coverage for the
Vehicle, including a GAP Agreement if
the consumer’s Vehicle or neighborhood
is excluded from coverage or the loan-
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17:45 Jan 03, 2024
Jkt 262001
to-value ratio would result in the
consumer not benefiting financially
from the product or service.
(3) The requirements in this
paragraph (a) also are prescribed for the
purpose of preventing the unfair or
deceptive acts or practices defined in
this part, including those in § 463.3(a)
and (b) and paragraph (c) of this section.
(b) [Reserved]
(c) Any item without Express,
Informed Consent. A Dealer may not
charge a consumer for any item unless
the Dealer obtains the Express, Informed
Consent of the consumer for the charge.
The requirements in this paragraph (c)
also are prescribed for the purpose of
preventing the unfair or deceptive acts
or practices defined in this part,
including those in §§ 463.3(a) and (b),
463.4, and paragraph (a) of this section.
§ 463.6
Recordkeeping.
(a) Any Covered Motor Vehicle Dealer
subject to this part must create and
retain, for a period of twenty-four
months from the date the record is
created, all records necessary to
demonstrate compliance with this part,
including the following records:
(1) Copies of all Materially different
advertisements, sales scripts, training
materials, and marketing materials
regarding the price, financing, or lease
of a Vehicle, that the Dealer
disseminated during the relevant time
period; Provided that a typical example
of a credit or lease advertisement may
be retained for advertisements that
include different Vehicles, or different
amounts for the same credit or lease
terms, where the advertisements are
otherwise not Materially different;
(2) [Reserved]
(3) Copies of all purchase orders;
financing and lease documents with the
Dealer signed by the consumer, whether
or not final approval is received for a
financing or lease transaction; and all
written communications relating to
sales, financing, or leasing between the
Dealer and any consumer who signs a
purchase order or financing or lease
contract with the Dealer;
(4) Records demonstrating that Addons in consumers’ contracts meet the
requirements of § 463.5, including
copies of all service contracts, GAP
Agreements and calculations of loan-to-
PO 00000
Frm 00107
Fmt 4701
Sfmt 9990
695
value ratios in contracts including GAP
Agreements; and
(5) Copies of all written consumer
complaints relating to sales, financing,
or leasing, inquiries related to Add-ons,
and inquiries and responses about
Vehicles referenced in § 463.4.
(b) Any Dealer subject to this part may
keep the records required by paragraph
(a) of this section in any legible form,
and in the same manner, format, or
place as they may already keep such
records in the ordinary course of
business. Failure to keep all records
required under paragraph (a) of this
section will be a violation of this part.
§ 463.7
Waiver not permitted.
It is a violation of this part for any
person to obtain, or attempt to obtain, a
waiver from any consumer of any
protection provided by or any right of
the consumer under this part.
§ 463.8
Severability.
The provisions of this part are
separate and severable from one
another. If any provision is stayed or
determined to be invalid, it is the
Commission’s intention that the
remaining provisions will continue in
effect.
§ 463.9
Relation to State laws.
(a) In general. This part will not be
construed as superseding, altering, or
affecting any other State statute,
regulation, order, or interpretation
relating to Covered Motor Vehicle
Dealer requirements, except to the
extent that such statute, regulation,
order, or interpretation is inconsistent
with the provisions of this part, and
then only to the extent of the
inconsistency.
(b) Greater protection under State law.
For purposes of this section, a State
statute, regulation, order, or
interpretation is not inconsistent with
the provisions of this part if the
protection such statute, regulation,
order, or interpretation affords any
consumer is greater than the protection
provided under this part.
By direction of the Commission.
Joel Christie,
Acting Secretary.
[FR Doc. 2023–27997 Filed 12–28–23; 8:45 am]
BILLING CODE P
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Agencies
[Federal Register Volume 89, Number 3 (Thursday, January 4, 2024)]
[Rules and Regulations]
[Pages 590-695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27997]
[[Page 589]]
Vol. 89
Thursday,
No. 3
January 4, 2024
Part III
Federal Trade Commission
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16 CFR Part 463
Combating Auto Retail Scams Trade Regulation Rule; Final Rule
Federal Register / Vol. 89 , No. 3 / Thursday, January 4, 2024 /
Rules and Regulations
[[Page 590]]
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FEDERAL TRADE COMMISSION
16 CFR Part 463
RIN 3084-AB72
Combating Auto Retail Scams Trade Regulation Rule
AGENCY: Federal Trade Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is
issuing this Combating Auto Retail Scams Trade Regulation Rule (``CARS
Rule,'' ``Rule,'' or ``Final Rule'') and Statement of Basis and Purpose
(``SBP'') related to the sale, financing, and leasing of covered motor
vehicles by covered motor vehicle dealers. The Final Rule, among other
things, prohibits motor vehicle dealers from making certain
misrepresentations in the course of selling, leasing, or arranging
financing for motor vehicles, requires accurate pricing disclosures in
dealers' advertising and sales communications, requires dealers to
obtain consumers' express, informed consent for charges, prohibits the
sale of any add-on product or service that confers no benefit to the
consumer, and requires dealers to keep records of certain
advertisements and customer transactions.
DATES: This rule is effective July 30, 2024.
ADDRESSES: Copies of this document are available on the Commission's
website, www.ftc.gov.
FOR FURTHER INFORMATION CONTACT: Daniel Dwyer or Sanya Shahrasbi,
Division of Financial Practices, Bureau of Consumer Protection, Federal
Trade Commission, 202-326-2957 (Dwyer), 202-326-2709 (Shahrasbi),
[email protected], [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Statutory Authority
B. Commission Actions Following the Dodd-Frank Act and the
Rulemaking Process
II. Motor Vehicle Financing and Leasing
A. Overview of the Motor Vehicle Marketplace
B. Deceptive and Unfair Practices in the Motor Vehicle
Marketplace
1. Bait-and-Switch Tactics
2. Unlawful Practices Relating to Add-On Products or Services
and Hidden Charges
C. Law Enforcement and Other Responses
III. Section-by-Section Analysis
A. Sec. 463.1: Authority
B. Sec. 463.2: Definitions
1. Overview
2. Definition-by-Definition Analysis
(a) Add-On or Add-On Product(s) or Service(s)
(b) Add-On List
(c) Cash Price Without Optional Add-Ons
(d) Clearly and Conspicuously
(e) Motor Vehicle (finalized as ```Covered Motor Vehicle' or
`Vehicle' '')
(f) Dealer or Motor Vehicle Dealer (finalized as ```Covered
Motor Vehicle Dealer' or `Dealer' '')
(g) Express, Informed Consent
(h) GAP Agreement
(l) Government Charges
(j) Material or Materially
(k) Offering Price
C. Sec. 463.3: Prohibited Misrepresentations
1. General Comments
2. Paragraph-by-Paragraph Analysis of Sec. 463.3
(a) The Costs or Terms of Purchasing, Financing, or Leasing a
Vehicle
(b) Any Costs, Limitation, Benefit, or Any Other Aspect of an
Add-On Product or Service
(c) Whether Terms Are, or Transaction Is, for Financing or a
Lease
(d) The Availability of Any Rebates or Discounts That Are
Factored Into the Advertised Price but Not Available to All
Consumers
(e) The Availability of Vehicles at an Advertised Price
(f) Whether Any Consumer Has Been or Will Be Preapproved or
Guaranteed for Any Product, Service, or Term
(g) Any Information on or About a Consumer's Application for
Financing
(h) When the Transaction Is Final or Binding on All Parties
(i) Keeping Cash Down Payments or Trade-in Vehicles, Charging
Fees, or Initiating Legal Process or Any Action If a Transaction Is
Not Finalized or If the Consumer Does Not Wish To Engage in a
Transaction
(i) Keeping Cash Down Payments or Trade-in Vehicles, Charging
Fees, or Initiating Legal Process or Any Action If a Transaction Is
Not Finalized or If the Consumer Does Not Wish To Engage in a
Transaction
(j) Whether or When a Dealer Will Pay Off Some or All of the
Financing or Lease on a Consumer's Trade-in Vehicle
(k) Whether Consumer Reviews or Ratings Are Unbiased,
Independent, or Ordinary Consumer Reviews or Ratings of the Dealer
or the Dealer's Products or Services
(l) Whether the Dealer or Any of the Dealer's Personnel or
Products or Services Is or Was Affiliated With, Endorsed or Approved
by, or Otherwise Associated With the United States Government or Any
Federal, State, or Local Government Agency, Unit, or Department,
Including the United States Department of Defense or Its Military
Departments
(m) Whether Consumers Have Won a Prize or Sweepstakes
(n) Whether, or Under What Circumstances, a Vehicle May Be
Moved, Including Across State Lines or Out of the Country
(o) Whether, or Under What Circumstances, a Vehicle May Be
Repossessed
(p) Any of the Required Disclosures Identified in This Part
D. Sec. 463.4: Disclosure Requirements
1. Overview
2. Paragraph-by-Paragraph Analysis of Sec. 463.4
(a) Offering Price
(b) Add-On List
(c) Add-Ons Not Required
(d) Total of Payments and Consideration for a Financed or Lease
Transaction
(e) Monthly Payments Comparison
E. Sec. 463.5: Dealer Charges for Add-Ons and Other Items
1. Overview
2. Paragraph-by-Paragraph Analysis of Sec. 463.5
(a) Add-Ons That Provide No Benefit
(b) Undisclosed or Unselected Add-Ons
(c) Any Item Without Express, Informed Consent
F. Sec. 463.6: Recordkeeping
G. Sec. 463.7: Waiver Not Permitted
H. Sec. 463.8: Severability
I. Sec. 463.9: Relation to State Laws
IV. Effective Date
V. Paperwork Reduction Act
A. Add-On List Disclosures
B. Disclosures Relating to Cash Price Without Optional Add-Ons
C. Prohibited Misrepresentations and Required Disclosures
D. Recordkeeping
E. Capital and Other Non-Labor Costs
1. Disclosures
2. Recordkeeping
VI. Regulatory Flexibility Act
A. Significant Impact Analysis
1. Comments on Significant Impact
2. Certification of the Final Rule
(a) Industry Averages
(b) Dealer Size Based on the Number of Employees
B. Initial and Final Regulatory Flexibility Analysis
1. Comments on the Initial Regulatory Flexibility Analysis
(a) Description of the Reasons Why Action by the Agency Is Being
Considered
(b) Succinct Statement of the Objectives of, and Legal Basis
for, the Proposed Rule
(c) Description of and, Where Feasible, Estimate of the Number
of Small Entities to Which the Proposed Rule Will Apply
(d) Description of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements of the Proposed Rule
(e) Duplicative, Overlapping, or Conflicting Federal Rules
(f) Description of Any Significant Alternatives to the Proposed
Rule Which Accomplish the Stated Objectives of Applicable Statutes
and Which Minimize Any Significant Economic Impact of the Proposed
Rule on Small Entities
2. Final Regulatory Flexibility Analysis
(a) Statement of the Need for, and Objectives of, the Rule
(b) Issues Raised by Comments, Including Comments by the Chief
Counsel for Advocacy of the SBA, the Commission's Assessment and
Response, and Any Changes Made as a Result
[[Page 591]]
(c) Description and Estimate of the Number of Small Entities to
Which the Final Rule Will Apply or an Explanation of Why No Such
Estimate Is Available
(d) Description of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements
(e) Description of the Steps the Commission Has Taken To
Minimize the Significant Economic Impact on Small Entities
Consistent With the Stated Objectives of Applicable Statutes
VII. Final Regulatory Analysis Under Section 22 of the FTC Act
A. Introduction
B. Estimated Benefits of Final Rule
1. Consumer Time Savings When Shopping for Motor Vehicles
2. Reductions in Deadweight Loss
3. Framework
4. Estimation
5. Benefits Related to More Transparent Negotiation
C. Estimated Costs of Final Rule
1. Prohibited Misrepresentations
2. Required Disclosure of Offering Price in Advertisements and
in Response to Inquiry
3. Disclosure of Add-On List and Associated Prices
4. Required Disclosure of Total of Payments for Financing/
Leasing Transactions
5. Prohibition on Charging for Add-Ons that Provide No Benefit
6. Requirement to Obtain Express, Informed Consent Before Any
Charges
7. Recordkeeping
D. Other Impacts of Final Rule
E. Conclusion
F. Appendix: Derivation of Deadweight Loss Reduction
G. Appendix: Uncertainty Analysis
VIII. Other Matters
I. Background
A. Statutory Authority
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(``Dodd-Frank Act'') was signed into law in 2010.\1\ Section 1029 of
the Dodd-Frank Act authorizes the FTC to prescribe rules with respect
to unfair or deceptive acts or practices by motor vehicle dealers.\2\
The FTC is authorized to do so under the FTC Act and in accordance with
section 553 of the Administrative Procedure Act (``APA'').\3\ The grant
of APA rulemaking authority set forth in section 1029 of the Dodd-Frank
Act became effective as of July 21, 2011--the designated ``transfer
date'' established by the Treasury Department.\4\
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\1\ Public Law 111-203, 124 Stat. 1376 (2010).
\2\ 12 U.S.C. 5519(d). See 12 U.S.C. 5519(f)(1) and (2) for
definitions of the terms ``motor vehicle'' and ``motor vehicle
dealer'' under section 1029 of the Dodd-Frank Act, respectively.
\3\ See 12 U.S.C. 5519(a) (discussing the authority over ``motor
vehicle dealer[s] that [are] predominantly engaged in the sale and
servicing of motor vehicles, the leasing and servicing of motor
vehicles, or both''); 12 U.S.C. 5519(d) (``Notwithstanding section
57a of title 15, the Federal Trade Commission is authorized to
prescribe rules under sections 45 and 57a(a)(1)(B) of title 15[ ] in
accordance with section 553 of title 5, with respect to a person
described in subsection (a).''); 5 U.S.C. 553. Because the
Commission has authority to promulgate this Rule in accordance with
the APA, it is not required to include a statement as to the
prevalence of the acts or practices treated by the Rule under
section 18(d) of the FTC Act. Compare 12 U.S.C. 5519(d) and (a)
(providing the FTC with APA rulemaking authority for purposes of
section 1029 of the Dodd-Frank Act), with 15 U.S.C. 57a(b)(3)
(requiring a statement as to prevalence for certain rulemaking
proceedings by the Commission under non-APA procedures), and 15
U.S.C. 57a(b)(1) (establishing that certain rulemaking proceedings
by the Commission under non-APA procedures are subject to
requirements in addition to those under the APA).
\4\ See 12 U.S.C. 5411(a).
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B. Commission Actions Following the Dodd-Frank Act and the Rulemaking
Process
Following enactment of the Dodd-Frank Act, the Commission published
in the Federal Register a notice discussing its authority to prescribe
rules with respect to unfair or deceptive acts or practices by motor
vehicle dealers and announcing that it would be hosting a series of
public roundtables to explore consumer protection issues pertaining to
motor vehicle sales and leasing, including what consumer protection
issues, if any, exist that could be addressed through a possible
rulemaking.\5\ The Commission sought participation from regulators,
consumer advocates, industry participants, and other interested parties
and ultimately held three such public roundtables.\6\
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\5\ 76 FR 14014, 14015 (Mar. 15, 2011).
\6\ See Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing
& Leasing Motor Vehicles'' (Apr. 12, 2011), https://www.ftc.gov/news-events/events/2011/04/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Detroit,
Michigan); Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing &
Leasing Motor Vehicles'' (Aug. 2, 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in San Antonio,
Texas); Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing &
Leasing Motor Vehicles'' (Nov. 17, 2011), https://www.ftc.gov/news-events/events/2011/11/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Washington,
District of Columbia).
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The Commission subsequently focused on enforcement and business
guidance in the motor vehicle dealer marketplace. As discussed in SBP
II.C,\7\ however, certain unfair and deceptive acts or practices have
persisted, despite more than a decade of enforcement and education.
Accordingly, on June 23, 2022, the Commission announced a notice of
proposed rulemaking (``NPRM'') addressing unfair or deceptive acts or
practices by motor vehicle dealers.\8\ That notice was published in the
Federal Register on July 13, 2022.\9\ The NPRM, among other things,
proposed to (i) prohibit motor vehicle dealers from making certain
misrepresentations, (ii) require accurate pricing disclosures, (iii)
prohibit the sale of any add-on product or service that confers no
benefit to the consumer, (iv) require express, informed consent for
add-ons and other charges, and (v) impose certain recordkeeping
requirements. The comment period for the NPRM closed on September 12,
2022.
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\7\ As used herein, references to the ``Statement of Basis and
Purpose'' or ``SBP'' refer to the portions of this document that
precede the regulatory text of the Final Rule. References to the
``Rule,'' ``Final Rule,'' or ``CARS Rule'' refer to the text in part
463--Combating Auto Retail Scams (``CARS'') Trade Regulation Rule.
Because the Final Rule is narrower than the proposed Motor Vehicle
Dealers Trade Regulation Rule in the NPRM, the Commission has
modified the Rule title to reflect the more limited scope.
\8\ See Press Release, Fed. Trade Comm'n, ``FTC Proposes Rule to
Ban Junk Fees, Bait-and-Switch Tactics Plaguing Car Buyers'' (June
23, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-proposes-rule-ban-junk-fees-bait-switch-tactics-plaguing-car-buyers.
\9\ See Fed. Trade Comm'n, Notice of Proposed Rulemaking, Motor
Vehicle Dealers Trade Regulation Rule, 87 FR 42012 (released June
23, 2022; published July 13, 2022) [hereinafter NPRM], https://www.govinfo.gov/content/pkg/FR-2022-07-13/pdf/2022-14214.pdf.
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In response to the NPRM and proposed rule, the Commission received
more than 27,000 comments from stakeholders representing a wide range
of viewpoints.\10\ These stakeholders included numerous individual
consumers who described deceptive practices during recent car purchases
and many who discussed current or former military service and deceptive
and predatory practices common near military installations.\11\
Commenters
[[Page 592]]
also included dealerships and their employees, industry groups,
consumer and community groups, and Federal and State lawmakers and law
enforcement agencies. Many commenters, such as consumers, some dealers
and dealer employees, consumer groups, and lawmakers and enforcers,
were supportive of the proposed rule in whole or in part. Many of these
commenters also urged the FTC to include additional protections for
consumers and law-abiding businesses, while others, such as industry
groups, dealers, and dealer employees, asked questions or criticized
the proposal.\12\ These comments and responses to comments are
discussed primarily in the discussion of the Final Rule in SBP III.
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\10\ The Commission received 27,349 comment submissions filed
online in response to its NPRM. See Gen. Servs. Admin., Dkt. No.
FTC-2022-0046, Proposed Rule, Motor Vehicle Dealers Trade Regulation
Rule (July 13, 2022), https://www.regulations.gov/document/FTC-2022-0046-0001 (noting comments received). To facilitate public access,
over 11,000 such comments have been posted publicly on
Regulations.gov at https://www.regulations.gov/document/FTC-2022-0046-0001/comment (noting posted comments). As explained at
Regulations.gov, agencies may choose to redact or withhold certain
submissions (or portions thereof) such as those containing private
or proprietary information, inappropriate language, or duplicate/
near duplicate examples of a mass-mail campaign. See Gen. Servs.
Admin., Regulations.gov Frequently Asked Questions, Find Dockets,
Documents, and Comments FAQs, ``How are comments counted and posted
to Regulations.gov?,'' https://www.regulations.gov/faq?anchor=downloadingdata (last visited Dec. 5, 2023). The
Commission has considered all timely and responsive public comments
it received in response to its NPRM.
\11\ See, e.g., Individual commenter, Doc. No. FTC-2022-0046-
4648 (``As a young Marine stationed in a military town I was taken
advantage of by a dealership when purchasing my first car. It set me
back financially for years. I know of many young military people who
purchased vehicle[ ]s and we[ ]re instantly so far upside down after
leaving the dealership with thousands of dollars in add on junk
charges . . . .''); Individual commenter, Doc. No. FTC-2022-0046-
0542 (``As a former member of the Military, the amount of scams and
horror stories I have heard regarding young service members buying
cars is absurd. . . . Someone shouldn't have to do hours of research
on how to buy a car so they don't get taken advantage of.'');
Individual commenter, Doc. No. FTC-2022-0046-0637 (``As a small
business owner and active duty military member I have played the
role of both a buyer, toiling for hours to just reach fair deals on
vehicles, as well as that of an advocate for my Sailors who have
been preyed upon by local dealerships. Nowhere else in our society
do so many average citizens have to mentally prepare for a battle
over fair pricing and treatment for something that is realistically
a modern necessity.''); Individual commenter, Doc. No. FTC-2022-
0046-9840 (``I can't list the number of times I have either seen, or
have stepped in a situation, where car dealers have either attempted
to take, or have successfully taken, advantage of a young military
member or their family by baiting and switching when it came to the
price of a car, or stated that the price was one amount, only to be
charged, and over-charged a higher amount. These dealers have even
attempted to pull unethical tricks on me and my wife, even after
they found out that I was a military member, a combat veteran, that
was serving this great nation.''); Individual commenter, Doc. No.
FTC-2022-0046-0845 (``Predatory practices like [bait-and-switch
pricing] are common near military installations . . . .'').
\12\ Industry commenters claimed that many of the areas covered
by the proposed rule are already addressed in industry guidance. The
Commission notes that, although industry guidance can provide
helpful information to dealers, dealers who choose not to follow
such guidance, or who engage in deceptive or unfair practices,
subject their customers to significant harm. The Rule addresses such
practices, thus protecting consumers and law-abiding dealers.
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The Commission notes that it has undertaken careful review and
consideration of each of the comments it received in response to its
NPRM. The Commission has dedicated the majority of its section-by-
section analysis to descriptions of, and responses to, comments or
portions thereof that were critical of the Commission's proposal or
that urged the Commission to adopt additional requirements. Thus, to
ensure that this document also reflects the many comments in the public
record from stakeholders who supported the proposal as is, the
Commission has excerpted a number of such comments in portions of its
SBP.
II. Motor Vehicle Financing and Leasing
A. Overview of the Motor Vehicle Marketplace
For many consumers, buying or leasing a motor vehicle is essential,
expensive, and time-consuming.\13\ Americans rely on their vehicles for
work, school, childcare, groceries, medical visits, and many other
important tasks in their daily lives.\14\ These vehicles have become
increasingly costly: the average price of a new vehicle sold at a new
car dealership in 2022 was more than $46,000,\15\ while the average
price of a used vehicle sold at such dealerships was more than
$30,000.\16\ By the second quarter of 2023, the average monthly payment
for used cars reached $533, and the average monthly payment for new
cars reached $741--both record highs.\17\ Vehicles are now many
consumers' largest expense--on a par with housing, child care and food,
and accounting for 16% of the median annual household income before
taxes.\18\ In 2022 alone, Americans spent more than $720 billion on
motor vehicles and vehicle parts.\19\
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\13\ Unless otherwise indicated, the terms ``auto,''
``automobile,'' ``car,'' ``motor vehicle,'' and ``vehicle,'' as used
in this SBP and the Commission's final regulatory analysis, refer to
``Covered Motor Vehicle'' as defined in this part.
\14\ During 2017 to 2022, an average of 91% of American workers
who did not work from home drove to work. See U.S. Census Bureau,
``American Community Survey: Means of Transportation to Work by
Selected Characteristics, 2022: ACS 1-Year Estimates Subject
Tables'' (2023), https://data.census.gov/table?q=Commuting&tid=ACSST1Y2022.S0802 (reporting 110,245,368
workers 16 years and over who drove alone to work in a car, truck,
or van, and 13,881,067 workers 16 years and over who drove by
carpool to work in a car, truck or van, together accounting for 91%
of the total of 136,196,004 workers 16 years and over who did not
work from home); U.S. Census Bureau, ``American Community Survey:
Means of Transportation to Work by Selected Characteristics, 2021:
2017-2021 ACS 5-Year Estimates Subject Tables'' (2022), https://data.census.gov/table?q=Commuting&tid=ACSST5Y2021.S0802 (reporting
113,724,271 workers 16 years and over who drove alone to work in a
car, truck, or van, and 13,340,838 workers 16 years and over who
drove by carpool to work in a car, truck or van, together accounting
for 91% of the total of 140,223,271 workers 16 years and over who
did not work from home).
\15\ Nat'l Auto. Dealers Ass'n, ``NADA Data 2022'' 7, https://www.nada.org/media/4695/download?inline (noting average retail
selling price of $46,287 for new vehicles sold by dealerships in
2022).
\16\ Id. at 10 (noting average retail selling price of $30,736
for used vehicles sold by new-vehicle dealerships in 2022).
\17\ Lydia DePillis, ``How the Costs of Car Ownership Add Up,''
N.Y. Times (Oct. 6, 2023), https://www.nytimes.com/interactive/2023/10/07/business/car-ownership-costs.html (citing average monthly
payment figures from TransUnion).
\18\ Id. (citing data from AAA and the U.S. Census Bureau).
\19\ Bureau of Econ. Analysis, ``National Data: National Income
and Product Accounts, Personal Consumption Expenditures by Major
Type of Product'' tbl. 2.3.5, https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI2NSJdXX0= (last revised July 27, 2023) (listing
estimated annual expenditure rates of between $713.1 billion and
$737.1 billion in 2022).
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Given these costs, many consumers who purchase a motor vehicle rely
on financing to complete their purchases. According to public reports,
81% of new motor vehicle purchases, and nearly 35% of used vehicle
purchases, are financed.\20\ By the first quarter of 2023, Americans
had more than 107 million outstanding auto financing accounts and owed
more than $1.56 trillion thereon,\21\ making auto finance the third-
largest source of debt for U.S. consumers, and the second-largest for
U.S. consumers ages 40 and over.\22\ Servicemembers have an average of
twice as much auto debt as civilians--particularly young
servicemembers, who generally require vehicles for transportation while
living on military bases.\23\ By the age of 24, around 20
[[Page 593]]
percent of young servicemembers have at least $20,000 in auto debt,
which equates to nearly two-thirds of an enlisted soldier's typical
base salary at that age.\24\
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\20\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of
the Automotive Finance Market Q4 2020'' 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf
(on file with the Commission).
\21\ Fed. Rsrv. Bank of N.Y., ``Quarterly Report on Household
Debt and Credit, 2023: Q1'' 3-4 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., ``Data Underlying Report''
on ``Page 3 Data'' and ``Page 4 Data'' tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing number
of open ``Auto Loan'' accounts and total outstanding balance in such
accounts).
\22\ Fed. Rsrv. Bank of N.Y., ``Quarterly Report on Household
Debt and Credit, 2023: Q1'' 3, 21 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., ``Data Underlying Report''
on ``Page 3 Data'' and ``Page 21 Data'' tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing total
``Auto Loan'' debt balance compared to other product type
categories).
\23\ See Consumer Fin. Prot. Bureau, ``Financially Fit?
Comparing the Credit Records of Young Servicemembers and Civilians''
27 (July 2020), https://files.consumerfinance.gov/f/documents/cfpb_financially-fit_credit-young-servicemembers-civilians_report_2020-07.pdf.
\24\ See Consumer Fin. Prot. Bureau, ``Protecting Servicemembers
from Costly Auto Loans and Wrongful Repossessions'' (July 18, 2022),
https://www.consumerfinance.gov/about-us/blog/protecting-servicemembers-from-costly-auto-loans-and-wrongful-repossessions/.
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In addition to the expense, the process of buying or leasing a
vehicle is often time-consuming and arduous. It can take several hours
or days to finalize a transaction,\25\ on top of the hours it can take,
particularly in rural areas, to drive to a dealership.\26\ Consumers
may need to take time off work or arrange childcare, and families with
a single vehicle may be forced to delay other important appointments
due to the length of the vehicle-buying or -leasing process.
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\25\ Mary W. Sullivan, Matthew T. Jones & Carole L. Reynolds,
Fed. Trade Comm'n, ``The Auto Buyer Study: Lessons from In-Depth
Consumer Interviews and Related Research'' 15 (July 2020)
[hereinafter Auto Buyer Study], https://www.ftc.gov/system/files/documents/reports/auto-buyer-study-lessons-depth-consumer-interviews-related-research/bcpreportsautobuyerstudy.pdf (noting
that the purchase transactions in the FTC's qualitative study often
took 5 hours or more to complete, with some extending over several
days); Cf. Cox Auto., ``2020 Cox Automotive Car Buyer Journey'' 6
(2020) [hereinafter 2020 Cox Automotive Car Buyer Journey], https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf
(reporting average consumer time spent shopping for a vehicle at 14
hours, 53 minutes); Cox Auto., ``2022 Car Buyer Journey: Top Trends
Edition'' 6 (2023) [hereinafter 2022 Car Buyer Journey], https://www.coxautoinc.com/wp-content/uploads/2023/01/2022-Car-Buyer-Journey-Top-Trends.pdf (reporting average consumer time spent
shopping for a vehicle at 14 hours, 39 minutes).
\26\ For example, consumers have complained about going to a
dealership based on an offer that the dealer refuses to honor only
after they have spent hours driving there and additional time on the
lot. See, e.g., Complaint ]] 23-26, Fed. Trade Comm'n v. N. Am.
Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022)
(alleging that many consumers drive hours to dealerships based on
the advertised prices; that test-driving and selecting a vehicle,
and negotiating the price and financing terms, is an often hours-
long process; and that, after this time, dealers falsely told
consumers that add-on products or packages were required to purchase
or finance the vehicle, even though they were not included in the
low prices advertised or disclosed to consumers who called to
confirm prices).
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Most consumers--approximately 70%--finance vehicle purchases
through a motor vehicle dealer,\27\ using what is known as dealer-
provided ``indirect'' financing.\28\ This financing is typically
offered through dealers' financing and insurance (``F&I'') offices,
which may also offer leasing and add-on products or services. In the
dealer-provided financing scenario, the dealer collects financial
information about the consumer and forwards that information to
prospective motor vehicle financing entities. These financing entities
evaluate this information and, in the process, determine whether, and
on what terms, to provide credit.\29\ These terms include the ``buy
rate'': a risk-based finance charge that reflects the interest rate at
which the entity will finance the deal.\30\ Dealers often add a finance
charge called a ``dealer reserve'' or ``markup'' to the buy rate.\31\
Unlike the buy rate, the markup is not based on the underwriting risk
or credit characteristics of the applicant, and dealers retain the
markup as profit.\32\ New vehicle dealers average a gross profit of
about $2,444 per vehicle,\33\ more than half of which comes from the
dealers' F&I offices. Independent used vehicle dealers averaged a gross
profit of more than $6,000 per vehicle, as of 2019.\34\ While some used
vehicle dealerships do not have a separate F&I office, more than half
of such dealerships sell add-on products.\35\
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\27\ Unless otherwise indicated, the terms ``dealer,''
``dealership,'' and ``motor vehicle dealer'' as used in this SBP and
the Commission's final regulatory analysis refer to `` `Covered
Motor Vehicle Dealer' or `Dealer' '' as defined in this part.
\28\ See Nat'l Auto. Dealers Ass'n, ``Dealer-Assisted Financing
Benefits Consumers,'' https://www.nada.org/autofinance/[https://web.archive.org/web/20220416131718/https://www.nada.org/autofinance/
] (Apr. 16, 2022) (noting that 7 out of 10 consumers finance through
their dealership). This is also known as ``dealer financing,''
because consumers obtain financing through the dealer that partners
with other entities in the financing process.
\29\ Dealers often originate the contract governing the
extension of retail credit or retail leases and then sell, or
otherwise assign, these contracts to unaffiliated third-party
finance or leasing sources, including such third parties the dealer
may have contacted in the course of arranging dealer-provided
``indirect'' financing. See Consumer Fin. Prot. Bureau, ``Automobile
Finance Examination Procedures'' 3 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf.
\30\ See Nat'l Auto. Dealers Ass'n, Nat'l Ass'n of Minority
Auto. Dealers & Am. Int'l Auto. Dealers Ass'n, ``Fair Credit
Compliance Policy & Program'' 2 (2015), https://www.nada.org/media/4558/download?inline. (defining ``buy rate'' as ``the rate at which
the finance source will purchase the credit contract from the
dealer'').
\31\ See, e.g., id. at 1 n.4 & accompanying text.
\32\ Id. (describing this as the amount dealers earn for
arranging financing, measured as the difference between the
consumer's annual percentage rate (``APR'') and the wholesale ``buy
rate'' at which a finance source buys the finance contract from the
dealer, and noting that finance sources typically permit dealers to
retain the dealer participation).
\33\ Nat'l Auto. Dealers Ass'n, ``Average Dealership Profile'' 1
(2020), https://www.nada.org/media/4136/download?attachment[https://web.archive.org/web/20220623204158/https://www.nada.org/media/4136/download?attachment] (June 23, 2022).
\34\ Nat'l Indep. Auto. Dealers Ass'n, ``NIADA Used Car Industry
Report 2020'' 21 (2020).
\35\ Id. at 8, 10.
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Six to eight percent of financed vehicle purchases use what is
called ``buy here, pay here'' dealers.\36\ In this scenario, consumers
typically borrow from, and make their payments directly to, the
dealership.
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\36\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of
the Automotive Finance Market Q2 2020'' 8 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf [https://web.archive.org/web/20201106002015/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf] (Mar. 6, 2023).
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The remainder of financed vehicle transactions use what is commonly
referred to as ``direct'' financing, provided by a credit union, bank,
or other financing entity.\37\ In this scenario, consumers typically
receive an interest rate quote from the financing entity prior to
arriving at a dealership to purchase a vehicle, and use the financing
to pay for their chosen vehicle.\38\ Dealerships do not profit on the
financing portion of the vehicle sale transaction when a consumer
arranges financing directly.
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\37\ Consumer Fin. Prot. Bureau, ``Automobile Finance
Examination Procedures'' 4 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf.
\38\ Consumer Fin. Prot. Bureau, ``Consumer Voices on Automobile
Financing'' 5 (June 2016), https://files.consumerfinance.gov/f/documents/201606_cfpb_consumer-voices-on-automobile-financing.pdf.
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Finally, consumers may choose to lease a vehicle from a dealership
rather than purchase one. In this scenario, consumers may drive a
vehicle for a set period of time--typically around three years \39\--
and for a certain maximum number of miles--typically 10,000-15,000
miles per year--in exchange for an upfront payment, a monthly payment,
and fees before, during, and at the end of the lease, including for
excess wear and usage over the mileage limit.\40\ When consumers lease
a vehicle, they do not own it, and they must return the vehicle when
the lease expires, though they may have the option to purchase
[[Page 594]]
the vehicle at the end of the lease period. Nearly 27% of new vehicles
are leased, as are just over 8% of used vehicles.\41\
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\39\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of
the Automotive Finance Market Q4 2020'' 26 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [https://web.archive.org/web/20210311174922/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf] (Mar. 6, 2023).
\40\ See Fed. Trade Comm'n, ``Financing or Leasing a Car,''
https://www.consumer.ftc.gov/articles/0056-financing-or-leasing-car
(last visited Dec. 5, 2023) (``The annual mileage limit in most
standard leases is 15,000 or less.''); Consumer Fin. Prot. Bureau,
``What should I know about the differences between leasing and
buying a vehicle?,'' https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-the-differences-between-leasing-and-buying-a-vehicle-en-815/ (last visited Aug. 24, 2023) (``Most leases restrict
your mileage to 10,000-15,000 miles per year.'').
\41\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of
the Automotive Finance Market Q4 2020'' 5 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf] (Mar. 6,
2023).
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B. Deceptive and Unfair Practices in the Motor Vehicle Marketplace
Section 5 of the Federal Trade Commission Act (``FTC Act''), as
amended (15 U.S.C. 45), authorizes the FTC to address deceptive or
unfair acts or practices in or affecting commerce, including in the
motor vehicle marketplace.
An act or practice is deceptive if there is a representation,
omission, or other practice that is likely to mislead consumers acting
reasonably under the circumstances and is material to consumers--that
is, it is likely to affect consumers' conduct or decisions with regard
to a product or service.\42\ Deceptive conduct can involve omission of
material information, the disclosure of which is necessary to prevent
the claim, practice, or sale from being misleading.\43\
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\42\ See Fed. Trade Comm'n, ``FTC Policy Statement on
Deception'' 2, 5, 103 F.T.C. 174 (1984) [hereinafter FTC Policy
Statement on Deception] (appended to Cliffdale Assocs., Inc., 103
F.T.C. 110, 183 (1984)), https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
\43\ Id.
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An act or practice is considered unfair under section 5 of the FTC
Act if: (1) it causes, or is likely to cause, substantial injury to
consumers; (2) the injury is not reasonably avoidable by consumers; and
(3) the injury is not outweighed by countervailing benefits to
consumers or to competition.\44\
---------------------------------------------------------------------------
\44\ 15 U.S.C. 45(n).
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In each of the past four years, the FTC received more than 100,000
complaints regarding motor vehicle sales, financing, service and
warranties, and rentals and leasing.\45\ This industry is also
consistently at or near the top of private sources of consumer
complaints.\46\ Many of these complaints concerned deceptive or unfair
acts or practices affecting U.S. consumers. Complaints about motor
vehicle transactions are regularly in the top ten complaint categories
tracked by the FTC.\47\ For military consumers as well, auto-related
complaints are among the top 10 complaint categories outside of
identity theft.\48\
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\45\ See, e.g., Fed. Trade Comm'n, ``Consumer Sentinel Network
Data Book 2022'' app. B3 at 85 (Feb. 2023) [hereinafter Consumer
Sentinel Network Data Book 2022], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN-Data-Book-2022.pdf (reporting complaints about new
and used motor vehicle sales, financing, service & warranties, and
rentals & leasing, collectively, of more than 100,000 in 2020, 2021,
and 2022); Fed. Trade Comm'n, ``Consumer Sentinel Network Data Book
2021'' app. B3 at 85 (Feb. 2022) [hereinafter Consumer Sentinel
Network Data Book 2021], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN%20Annual%20Data%20Book%202021%20Final%20PDF.pdf (reporting
complaints about new and used motor vehicle sales, financing,
service & warranties, and rentals & leasing, collectively, of more
than 100,000 in 2019, 2020, and 2021).
\46\ According to commenters, complaints to the Better Business
Bureau about new and used auto dealers, when combined, have been
either the first or second highest regarding any industry in the
U.S. for the past twenty years. See Comment of Nat'l Consumer L.
Ctr. et al., Doc. No. FTC-2022-0046-7607 at ii; see also Better Bus.
Bureau, ``BBB Complaint and Inquiry Statistics,'' https://www.bbb.org/all/bbb-complaint-statistics (last visited Dec. 5, 2023)
(listing complaint statistics from 2010 through 2022, sorted by
industry). In addition, for the past seven years annual surveys of
State and local consumer protection agencies have reported that
auto-related complaints were the top complaint received from
consumers. See Comment of Nat'l Consumer L. Ctr. et al., Doc. No.
FTC-2022-0046-7607 at 13; Consumer Fed'n of Am., ``2022 Consumer
Complaint Survey Report'' 4-5 (May 2023), https://consumerfed.org/wp-content/uploads/2023/05/2022-Consumer-Complaint-Survey-Report.pdf
(``For the seventh year in a row, auto sales, leases and repairs are
the #1 complaint category. Consumers filed complaints about add-on
products and services, bait and switch pricing, and mechanical
condition issues.'').
\47\ See Consumer Sentinel Network Data Book 2021, supra note
45, at 8 (listing vehicle-related complaints as the seventh most
common report category, outside of identity theft, in 2021);
Consumer Sentinel Network Data Book 2022, supra note 45, at 8
(listing motor vehicle-related complaints as the fifth most common
report category, outside of identity theft, in 2022).
\48\ See Consumer Sentinel Network Data Book 2021, supra note
45, at 18 (listing vehicle-related complaints as the eighth most
common complaint category for military consumers, outside of
identity theft categories, in 2021); Consumer Sentinel Network Data
Book 2022, supra note 45, at 18 (listing vehicle-related complaints
as the ninth most common complaint category for military consumers,
outside of identity theft categories, in 2022).
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Moreover, law enforcement experience shows that complaints are just
the tip of the iceberg.\49\ The Commission's recent enforcement action
against a large, multistate dealership group is illustrative of this
point in the motor vehicle marketplace: in that matter, the Commission
received 391 complaints--about add-ons and other issues--over a
several-month period prior to filing a complaint against the thirteenth
largest dealership group in the country by revenue as of 2020.\50\
However, in a survey of the dealer's customers over the same time
period, 83% of respondents--or at least 16,848 customers--indicated
they were subject to the dealer's unlawful practices related to add-ons
alone.\51\
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\49\ See, e.g., United States v. Brien, 617 F.2d 299, 308 (1st
Cir. 1980); United States v. Offs. Known as 50 State Distrib. Co.,
708 F.2d 1371, 1374-75 (9th Cir. 1983); Keith B. Anderson, Fed.
Trade Comm'n, ``Consumer Fraud in the United States: An FTC Survey''
80 (2004), https://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states-ftc-survey/040805confraudrpt.pdf (staff report noting consumers who reported
they were victims of fraud complained to an official source only 8.4
percent of the time, filing complaints with the BBB in 3.5 percent
of incidents and to a Federal agency, including the FTC, in only 1.4
percent of cases).
\50\ See Complaint, Fed. Trade Comm'n v. N. Am. Auto. Servs.,
Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022); see also
WardsAuto, ``WardsAuto 2020 Megadealer 100,'' https://www.wardsauto.com/dealers/wardsauto-2020-megadealer-100-industry-force (last visited Dec. 5, 2023) (listing Napleton Automotive Group
as the 13th-ranked dealership group by total revenue).
\51\ Complaint ] 27, Fed. Trade Comm'n v. N. Am. Auto. Servs.,
Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022) (alleging that
defendants buried charges for add-ons in voluminous paperwork,
making them difficult to detect); see Press Release, Fed. Trade
Comm'n, ``FTC Returns Additional $857,000 To Consumers Harmed by
Napleton Auto's Junk Fees and Discriminatory Practices'' (Nov. 20,
2023), https://www.ftc.gov/news-events/news/press-releases/2023/11/ftc-returns-additional-857000-consumers-harmed-napleton-autos-junk-fees-discriminatory-practices.
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Similarly, in other contexts where companies were charged with
making misrepresentations or engaging in misconduct regarding add-on
products, information obtained after filing has shown widespread harm
far beyond the initial consumer complaint volumes reported prior to
filing.\52\
---------------------------------------------------------------------------
\52\ For example, in a recent action involving deceptive pre-
approval claims, the FTC had received roughly 30 complaints about
the company's pre-approval conduct in the five-year period prior to
announcing its action. But in the five months following announcement
of the action, more than 900 additional consumers came forward with
complaints about the conduct. See Press Release, Fed. Trade Comm'n,
``FTC Announces Claims Process for Consumers Harmed by Credit Karma
`Pre-Approved' Offers for Which They Were Denied'' (Dec. 5, 2023),
https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-announces-claims-process-consumers-harmed-credit-karma-pre-approved-offers-which-they-were (``[W]ithin five months of that announcement,
the agency received nearly 900 more such complaints'').
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As examined in greater detail in the paragraphs that follow,
consumers in the motor vehicle marketplace are confronted with chronic
deceptive or unfair practices, including bait-and-switch tactics and
hidden charges.\53\
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\53\ While other issues exist in the motor vehicle sales,
financing, and leasing space, including issues involving
discrimination, financing application falsification, data privacy
and security, and yo-yo financing, this Rule's core focus is on
misrepresentations and add-on and pricing practices.
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1. Bait-and-Switch Tactics
Advertisements for motor vehicles are often consumers' first
contact in the vehicle-buying or -leasing process. Dealers utilize a
variety of means to
[[Page 595]]
reach consumers, including social media and online advertisements,
television and radio commercials, and direct mail marketing. New
vehicle dealers spend an average of more than $700 on advertising per
vehicle sold \54\--more than two-thirds of which goes toward online
advertising.\55\
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\54\ Nat'l Auto. Dealers Ass'n, ``NADA Data 2022'' 15, https://www.nada.org/media/4695/download?inline (listing average dealership
advertising per new vehicle sold of $718 in 2022, and $602 in 2021).
\55\ Id. at 16 (listing 68.2% of estimated advertising
expenditures by medium as internet expenditures).
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The FTC has brought many law enforcement actions involving motor
vehicle dealers' deceptive advertising and other unlawful tactics. Such
actions have charged dealers with, inter alia, making
misrepresentations regarding the price of a vehicle, the availability
of discounts and rebates, the monthly payment amount for a financed
purchase or lease, the amount due at signing, and whether an offer
pertains to a purchase or a lease.\56\ Other such actions have charged
dealers with misrepresentations regarding whether the dealer or
consumer is responsible for paying off ``negative equity,'' i.e., the
outstanding debt on a vehicle that is being ``traded in'' as part of
another vehicle purchase.\57\ And in other FTC actions, some dealers
have lured potential buyers through financial incentives incidental to
the purchase, such as deceptive promises of a valuable prize that is
redeemable only by visiting the dealership.\58\
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\56\ See, e.g., Complaint, Timonium Chrysler, Inc., No. C-4429
(F.T.C. Jan. 28, 2014) (alleging dealership advertised internet
prices and dealer discounts that were only available through rebates
not applicable to the typical consumer); Complaint, Ganley Ford
West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014) (alleging dealership
advertised discounts on vehicle prices, but failed to disclose that
discounts were only available on the most expensive models);
Complaint, Progressive Chevrolet Co., No. C-4578 (F.T.C. June 13,
2016) (alleging deceptive failure to disclose material conditions of
obtaining the lease monthly payment in their online and print
advertising); Complaint ]] 38-46, Fed. Trade Comm'n v. Tate's Auto
Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31,
2018) (alleging that company issued advertisements for attractive
terms but concealed that the terms were only applicable to lease
offers); Complaint ]] 36-38, United States v. New World Auto
Imports, Inc., No. 3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016)
(alleging misrepresentation that terms were for financing instead of
leasing); Complaint ]] 85-87, Fed. Trade Comm'n v. Universal City
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging
that dealerships claimed consumers could finance the purchase of
vehicles with attractive terms and buried disclosures indicating
that such terms were applicable to leases only).
\57\ Complaint ]] 82-84, Fed. Trade Comm'n v. Universal City
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging
misrepresentation that dealer would pay off a consumer's trade-in
when in fact consumers were still responsible for outstanding debt
on trade-in vehicles); Complaint ]] 17-19, TXVT Ltd. P'ship, No. C-
4508 (F.T.C. Feb. 12, 2015) (alleging misrepresentation in leasing
advertising that the dealership would pay off the negative equity of
a consumer's trade in vehicle, when in fact, it was merely rolled
into the financed amount for the consumer's newly financed vehicle).
\58\ See, e.g., Complaint ]] 12, 17-19, Traffic Jam Events, LLC,
No. 9395 (F.T.C. Aug. 7, 2020); Complaint ]] 4, 7-9, Fowlerville
Ford, Inc., No. C-4433 (F.T.C. Feb. 20, 2014).
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Deceptive tactics can cause significant consumer harm and impede
competition, competitively disadvantaging law-abiding dealers. When
dealerships advertise prices, discounts, or other terms that are not
actually available to typical consumers, consumers who select that
dealership instead of others spend time visiting the dealership or
otherwise interacting with the dealership under false pretenses.
2. Unlawful Practices Relating to Add-On Products or Services and
Hidden Charges
Another key consumer protection concern is the sale of add-on
products or services in a deceptive or unfair manner. Add-ons in
connection with the sale or financing of motor vehicles include
extended warranties, service and maintenance plans, payment programs,
guaranteed automobile or asset protection (``GAP'') agreements,
emergency road service, VIN etching and other theft protection devices,
and undercoating. Individual add-ons can cost consumers thousands of
dollars and can significantly increase the overall cost to the consumer
in the transaction.\59\ Moreover, in the past two years, dealers have
substantially increased prices for these add-ons, notwithstanding that
such products or services largely are not constrained by supply.\60\
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\59\ See, e.g., Complaint ]] 25, 27-28, Fed. Trade Comm'n v. N.
Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022).
\60\ See Ben Eisen, ``Car Dealer Markups Helped Drive Inflation,
Study Finds,'' Wall St. J., Apr. 23, 2023, https://www.wsj.com/articles/car-dealer-markups-helped-drive-inflation-study-finds-7c1d5a2d; U.S. Bureau of Labor Statistics, ``Automotive Dealerships
2019-2022: Dealer Markup Increases Drive New-Vehicle Consumer
Inflation'' (Apr. 2023), https://www.bls.gov/opub/mlr/2023/article/automotive-dealerships-markups.htm.
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A significant consumer protection concern is consumers paying for
add-ons without knowing about, or expressly agreeing to, these products
or services.\61\ This type of payment packing has been a particular
concern in the military community.\62\ The protracted and paperwork-
heavy vehicle-buying or -leasing process can make it difficult for
consumers to spot add-on charges, particularly when advertised prices
or payment terms do not mention add-ons.\63\ If consumers are financing
or leasing the vehicle, they undergo a separate financing process after
selecting a vehicle, which can include wading through a thick stack of
dense paperwork filled with fine print.\64\ For example, according to
an FTC law enforcement action, consumers visiting one large dealership
group were required to complete a stack of paperwork that ran more than
sixty pages and required more than a dozen signatures.\65\ This
paperwork can include hidden charges for add-on products or services,
causing consumers
[[Page 596]]
to purchase those add-ons without knowing about or agreeing to them, or
without knowing or agreeing to their costs or other key terms.\66\
Unscrupulous dealers are able to slip the often considerable additional
costs for these items past consumers unnoticed and into purchase
contracts through a variety of means, including by not mentioning them
at all,\67\ or by focusing consumers' attention on other aspects of the
complex transaction, such as monthly payments, which might increase
only marginally with the addition of prorated add-on costs, or may even
be made to decrease if the financing term is extended.\68\ This type of
conduct can target immigrants, communities of color, and
servicemembers.\69\ In other instances, dealers might wait until late
in the transaction to mention add-ons, and then do so in a misleading
manner. For example, participants in an FTC qualitative study on
consumers' car-buying experiences cited situations where dealers waited
until the financing stage to mention add-ons, after consumers believed
they had agreed on terms, and even though many add-ons have nothing to
do with financing and were not mentioned at all during the sales
process or when prices were initially negotiated.\70\ According to FTC
enforcement actions, dealers also have represented that add-ons are
required when in fact they are not,\71\ have misrepresented the
purported benefits of add-ons, and have failed to disclose material
limitations.\72\
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\61\ See Nat'l Consumer L. Ctr., ``Auto Add-ons Add Up: How
Dealer Discretion Drives Excessive, Arbitrary, and Discriminatory
Pricing'' (Oct. 1, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf; Adam J. Levitin, ``The Fast and the
Usurious: Putting the Brakes on Auto Lending Abuses,'' 108 Geo. L.J.
1257, 1265-66 (2020), https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf
(discussing ``loan packing'' as the sale of add-on products that are
falsely represented as being required in order to obtain financing);
Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc.,
No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive and
unauthorized add-on charges in consumers' transactions); Complaint
]] 59-64, Fed. Trade Comm'n v. Universal City Nissan, Inc., No.
2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging deceptive and
unauthorized add-on charges in consumers' transactions); Complaint
]] 6, 9, TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015)
(alleging misrepresentations regarding prices for added features);
see also Auto Buyer Study, supra note 25, at 14 (``Several
participants who thought that they had not purchased add-ons, or
that the add-ons were included at no additional charge, were
surprised to learn, when going through the paperwork, that they had
in fact paid extra for add-ons. This is consistent with consumers'
experiencing fatigue during the buying process or confusion with a
financially complex transaction, but would also be consistent with
dealer misrepresentations.'').
\62\ Consumers for Auto Reliability and Safety, Comment Letter
on Motor Vehicle Roundtables, Project No. P104811 at 2-3 (Apr. 1,
2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf
(citing a U.S. Department of Defense data call summary that found
that the vast majority of military counselors have clients with auto
financing problems and cited ``loan packing'' and yo-yo financing as
the most frequent auto lending abuses affecting servicemembers).
\63\ Complaint ]] 17-19, Fed. Trade Comm'n v. Liberty Chevrolet,
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Complaint ] 60,
Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329
(C.D. Cal. Sept. 29, 2016); Carole L. Reynolds & Stephanie E. Cox,
Fed. Trade Comm'n, ``Buckle Up: Navigating Auto Sales and
Financing'' (2020) [hereinafter Buckle Up], https://www.ftc.gov/reports/buckle-navigating-auto-sales-financing.
\64\ See, e.g., Buckle Up, supra note 63, at 10-11 (noting the
long, complex transaction process); Complaint ]] 23-28, Fed. Trade
Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill.
Mar. 31, 2022) (same).
\65\ Complaint ] 24, Fed. Trade Comm'n v. N. Am. Auto. Servs.,
Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see also Buckle
Up, supra note 63, at 10-11.
\66\ Complaint ]] 25, 27, 29-32, Fed. Trade Comm'n v. N. Am.
Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see
also Complaint ]] 17-19, Fed. Trade Comm'n v. Liberty Chevrolet,
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Dale Irwin, Slough
Connealy Irwin & Madden LLC, Comment Letter on Public Roundtables:
Protecting Consumers in the Sale and Leasing of Motor Vehicles,
Project No. P104811, Submission No. 558507-00060 (Dec. 29, 2011),
https://www.regulations.gov/comment/FTC-2022-0036-0051 (consumer
protection lawyer noting ``payment packing'' among problems ``that
cry out for scrutiny and regulation''); Michael Archer, Comment
Letter on Public Roundtables: Protecting Consumers in the Sale and
Leasing of Motor Vehicles, Project No. P104811, Submission No.
558507-00041 at 3 (Aug. 6, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0014 (workshop panelist stating, ``I have seen
cases wherein the dealer uses financing to pack in extra costs or to
wipe out trade-in value.''); Dawn Smith, Comment Letter on Public
Roundtables: Protecting Consumers in the Sale and Leasing of Motor
Vehicles, Project No. P104811, Submission No. 558507-00027 (July 27,
2011), https://www.regulations.gov/comment/FTC-2022-0036-0043
(``Confusing or misleading sales terms[.] Extra fees was [sic] added
at the time of purchase and to this day I still do not understand
what the fee was for; it made the payment higher.''); Carrie
Ferraro, Legal Servs. of N.J., Comment Letter on Public Roundtables:
Protecting Consumers in the Sale and Leasing of Motor Vehicles,
Project No. P104811, Submission No. 558507-00061 (Dec. 29, 2011),
https://www.regulations.gov/comment/FTC-2022-0036-0059 (citing
``[d]ealers engage[d] in packing'' as an example of the common
consumer complaints of car-sales-related fraud received by LSNJ's
legal advice hotline); Rosemary Shahan, Consumers for Auto
Reliability and Safety, Comment Letter on Public Roundtables:
Protecting Consumers in the Sale and Leasing of Motor Vehicles,
Project No. P104811, Submission No. 558507-00069 at 3 (Jan. 31,
2012), https://www.regulations.gov/comment/FTC-2022-0036-0069
(noting that ``[m]any common auto scams do not generate complaints
in proportion to how pervasive or costly the practices are, simply
because the consumers generally remain unaware they have been
scammed,'' including as a result of ``[l]oan packing''); Mary W.
Sullivan, Matthew T. Jones & Carole L. Reynolds, Fed. Trade Comm'n,
``The Auto Buyer Study: Lessons from In-Depth Consumer Interviews
and Related Research,'' Supplemental Appendix: Redacted Interview
Transcripts at 525 (2020) [hereinafter Auto Buyer Study: Appendix],
https://www.ftc.gov/system/files/documents/reports/buckle-navigating-auto-sales-financing/bcpstaffreportautobuyerstudysuppappendix.pdf (Study participant
169810: consumer had ``additional items'' charges on contract that
consumer could not identify); id. at 730, 740-42 (Study participant
188329: dealer did not tell consumer about GAP or service contract
but consumer was charged $599 and $1,950 for those add-ons,
respectively); Press Release, N.Y. State Att'y Gen., ``A.G.
Schneiderman Announces Nearly $14 Million Settlement with NYC and
Westchester Auto Dealerships for Deceptive Practices that Resulted
in Inflated Car Prices'' (June 17, 2015), https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-nearly-14-million-settlement-nyc-and-westchester-auto (``This settlement is part of the [New
York] attorney general's wider initiative to end the practice of
`jamming,' unlawfully charging consumers for hidden purchases by car
dealerships.'').
\67\ Under the Truth in Lending Act (``TILA'') and its
implementing Regulation Z, required add-on products or services must
be factored into the APR and the finance charge disclosed during the
transaction. See 15 U.S.C. 1605, 1606, 1638; 12 CFR 226.4,
226.18(b), (d), (e), and 226.22. It is legally impermissible for
dealers to include charges for such products in a consumer's
contract without disclosing them. See, e.g., Complaint ]] 57-60,
Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 1:03-CV-
2648 (N.D. Ga. Sept. 4, 2003) (alleging violations for failure to
include the cost of required add-on products in the finance charge
and annual percentage rate disclosed to consumers).
\68\ See, e.g., Buckle Up, supra note 63, at 6; Fed. Trade
Comm'n, Military Consumer Financial Workshop, Panel 1, Tr. 19:25-41
(July 19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; Fed. Trade Comm'n, ``The Road Ahead:
Selling, Financing & Leasing Motor Vehicles,'' Public Roundtable,
Session 2, Tr. at 40-41 (Aug. 2 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (noting that optional products and services are often
already included in the monthly payment prices advertised or
quoted); Christopher Kukla, Ctr. for Responsible Lending, Comment
Letter on Public Roundtables: Protecting Consumers in the Sale and
Leasing of Motor Vehicles, Project No. P104811, Submission No.
558507-00071 at 10 (Feb. 1, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0068 (discussing how dealers conceal packing
by expressing an increase in price in terms of monthly payment);
Att'ys General of 31 States & DC, Comment Letter on Public
Roundtables: Protecting Consumers in the Sale and Leasing of Motor
Vehicles, Project No. P104811, Submission No. 558507-00112 at 5
(Apr. 13, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0124 (discussing the ``age-old auto salesperson's trick'' of quoting
monthly payment prices without disclosing that the quote includes
the cost of optional items that the customer has not yet agreed to
purchase).
\69\ See, e.g., Complaint ]] 9, 26, Fed. Trade Comm'n v. Liberty
Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (charging
defendants with discriminating on the basis of race, color, and
national origin by charging higher interest rates and inflated
fees); Press Release, N.Y. State Att'y Gen., ``Attorney General
James Delivers Restitution to New Yorkers Cheated by Auto
Dealership'' (Nov. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-delivers-restitution-new-yorkers-cheated-auto-dealership (dealership targeted Chinese speakers for unlawful
payment packing or ``jamming''); Military Consumer Financial
Workshop, Tr. 19:21 (July 19, 2017), https://www.ftc.gov/news-events/events/2017/07/military-consumer-workshop (panelist
discussing servicemembers experiencing payment packing); see also
Fed. Trade Comm'n, ``Staff Perspective: A Closer Look at the
Military Consumer Financial Workshop'' 2-3 (Feb. 2018), https://www.ftc.gov/system/files/documents/reports/closer-look-military-consumer-financial-workshop-federal-trade-commission-staff-perspective/military_consumer_workshop_-_staff_perspective_2-2-18.pdf (explaining the unique situation of servicemembers whose
steady paychecks make them attractive customers for dealers, while
having no or minimal credit history, meaning they qualify for less
advantageous credit terms and higher interest rate financing).
\70\ See, e.g., Buckle Up, supra note 63, at 6 (observing that
the introduction of ``add-ons during financing discussions caused
several participants' total sale price to balloon from the cash
price''); id. at 9 (observing that, for most consumers in the study,
``add-ons did not come up until the financing process, if at all,
after a long car-buying process and at a time when the consumer
often felt pressure to close the deal''); id. (noting that most
study participants' contracts included add-ons charges, but that
many ``were unclear what those add-ons included, and sometimes did
not realize they had purchased any add-ons at all''); id. at 7
(explaining situations where the consumer reached the financing
office after negotiating with the sales staff and were then told
that the agreed upon price was not compatible with key financing
terms--for example, a promised rebate or discount could not be
combined with an advertised interest rate).
\71\ Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty Chevrolet,
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive
and unauthorized add-on charges in consumers' transactions);
Complaint ]] 59-64, Fed. Trade Comm'n v. Universal City Nissan,
Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging
deceptive and unauthorized add-on charges in consumers'
transactions); Complaint ]] 6, 9, TT of Longwood, No. C-4531 (F.T.C.
July 2, 2015) (alleging misrepresentations regarding prices for
added features); see also Auto Buyer Study, supra note 25, at 14.
\72\ Complaint ]] 4-14, Nat'l Payment Network, Inc., No. C-4521
(F.T.C. May 4, 2015) (alleging failure to disclose fees associated
with financing program; misleading savings claims in
advertisements); Complaint ]] 4-13, Matt Blatt Inc., No. C-4532
(F.T.C. July 2, 2015) (alleging failure to disclose fees associated
with financing program; misleading savings claims); Buckle Up, supra
note 63, at 10 (noting that some Auto Buyer Study participants did
not fully understand material aspects of extended warranties or
service plans they purchased and ``were surprised to discover during
the interview that their plans had unexpected limitations'' or that
``they had to pay out-of-pocket for repairs or services that were
not covered''; for example, one ``consumer purchased a `Lifetime'
maintenance plan, only to discover later that he received a one-year
plan that covered periodic oil changes''). Cf. Consent Order ]] 10-
16, Santander Consumer USA, Inc., CFPB No. 2018-BCFP-0008 (Nov. 20,
2018) (finding that defendant sold GAP product allegedly providing
``full coverage'' to consumers with loan-to-value ratios (``LTVs'')
above 125%, when in fact coverage was limited to 125% of LTV).
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[[Page 597]]
Indeed, as previously noted, in a recent FTC enforcement action,
the Commission cited a survey finding that 83% of consumers from the
named dealers were charged for add-on products or services that they
did not authorize or as a result of deceptive claims.\73\
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\73\ Complaint ] 27, Fed. Trade Comm'n v. N. Am. Auto. Servs.,
Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022).
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One participant in an FTC qualitative study of consumers' car-
buying experiences summed up these issues during an interview after
having purchased a vehicle.\74\ The consumer purchased a $2,000 service
contract that the dealer falsely said was free, and a $900 GAP
agreement that the dealer falsely said was mandatory. The consumer only
learned about these purchases during the study interview. This consumer
remarked:
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\74\ The study is described in the Commission's reports: Auto
Buyer Study, supra note 25, and Buckle Up, supra note 63. Some
industry commenters critiqued the FTC's reliance on this qualitative
study. The Commission notes that the study provides helpful
qualitative insight from consumer interviews regarding their recent
motor vehicle purchases and is one of the many sources the
Commission has considered, including consumer complaints,
enforcement actions, outreach and dialogue with stakeholders and
consumer groups, among others, as described in this SBP and in the
NPRM.
I feel I've been taken advantage of, to be honest with you. Even
though I thought that I was getting a great deal with the interest
rate, but I know [sic] see that they're also very sneaky about
putting stuff on your paperwork. They only let you skim through the
paperwork that you have to sign and they just kind of tell you what
it is. This is this, this is that, this is this, and then you just
sign it away. You're so tired, you're so worn down, you don't want
to be there no more. You just want to get it done and over with.
They take advantage of that. Yes, they still play this friendly
card, you know, thank you for your business card kind of thing. Like
I said, they never lose. They never lose.\75\
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\75\ Auto Buyer Study: Appendix, supra note 66, at 130 (Study
participant 152288); see also id. at 202-03 (Study participant
180267: dealership included a charge for GAP in the final paperwork
but not in retail sales contract); id. at 296 (Study participant
146748: consumer learned during interview with FTC that consumer
purchased GAP: ``maybe they're just throwing that in there without
telling you'').
Similarly, in response to the Commission's notice of proposed
rulemaking, thousands of commenters described issues they faced when
purchasing, financing, or leasing a vehicle. Many comments the
Commission received in support of the NPRM were from self-identified
military consumers and dealership employees. Examples of supportive
comments include the following:
As a young Marine stationed in a military town I was taken
advantage of by a dealership when purchasing my first car. It set me
back financially for years. I know of many young military people who
purchased vehicle[]s and we[]re instantly so far upside down after
leaving the dealership with thousands of dollars in add on junk charges
. . . . Please make it more difficult for dishonest dealers like these
to financially burden young Americans and Americans of any age for that
matter.\76\
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\76\ Individual commenter, Doc. No. FTC-2022-0046-4648.
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Imagine going to a restaurant franchise and order[ing] a
burger and fries for $10 and the franchise employees say[,] `Sorry that
will be $25 dollars, there is a $10 restaurant adjustment price due to
market conditions and $5 for us to place and document your order.' You
would walk away without hesitation because that would [be] absolutely
ridiculous. Yet, dealerships are allowed to do exactly that. . . . IT
IS TIME TO CHANGE AND PROTECT CONSUMERS[.]\77\
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\77\ Individual commenter, Doc. No. FTC-2022-0046-0016.
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As in many other areas, it is the vulnerable in our
society who are probably most affected by such deceptive practices. . .
. Sadly, it is often these very people who desperately need a
dependable, affordable car for transportation to work, school,
shopping, or medical care. To entice, pressure, or trick people into
buying a car that is more than they can afford sets them up for
financial failure, not only in possibly having a needed car
repossessed, but in long-term damage to their credit. . . . In closing,
I would be extremely happy to see rules such as those described above
enacted, and don't think these could come a day too soon. It's a step
in the right direction for the protection of the consumer.\78\
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\78\ Individual commenter, Doc. No. FTC-2022-0046-1216.
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None of us working here at the dealership in sales benefit
from [unfair and deceptive practices]. We cringe as much as every
customer and have to show up to work every[ ]day and hope we are not
forced to screw someone with these BS products. . . . I would hope when
[t]he regulators are making their decisions, they understand the
positive implications this would have for dealership employees both
financially and mentally.\79\
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\79\ Individual commenter, Doc. No. FTC-2022-0046-3615.
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Generally, I'm not a person in favor of government
regulation. However, as a potential customer and cash buyer, I feel
there is certainly a need to bring car dealers back into check. I'm
just looking for a more honest and transparent process. I don't want to
be taken advantage of. I certainly don't want my family members or
[s]oldiers to be taken advantage of. Therefore, I feel it is in the
best interest of future customers to support this regulation.\80\
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\80\ Individual commenter, Doc. No. FTC-2022-0046-7366.
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I cannot stress enough my support for these new rules.
Currently, dealerships across the US, including the one I work for,
have made the car buying process needlessly confusing, expensive, and
frustrating by engaging in false advertising and hidden add-on
products.\81\
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\81\ Individual commenter, Doc. No. FTC-2022-0046-3693.
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I can tell you after many years of car buying I have NEVER
walked out of a dealership feeling good. Even worse, I've never
purchased a car feeling like I fully understood what I was getting. . .
. Looking forward to seeing the change happen SOON! \82\
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\82\ Individual commenter, Doc. No. FTC-2022-0046-3678.
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When I buy a gallon of milk from the store, the price is
written next to the milk. When I go pay, I pay the price advertised
next to the milk. Would it be OK if I go up to pay and that gallon of
milk had anywhere between 1% and 1,200% markup depending on the day,
what you look like, what you drove to the store in, if you're a man or
a woman? \83\
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\83\ Individual commenter, Doc. No. FTC-2022-0046-1479.
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We ended up having to drive 3 hours to the [vehicle we]
wanted. Upon arriving to pick[ ]up the car we were told there was a
[$]4,300 increase over MSRP. We were told if we didn't take it they had
someone else waiting to purchase it. We needed the car and didn't have
time to hunt down another one so ended up purchasing it. Very
disappointed in the long and awful process.\84\
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\84\ Individual commenter, Doc. No. FTC-2022-0046-1878.
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The worst is dealing with car dealers. You never know what
the real price is on a vehicle until you spend a few hours with them.
Mandatory add[-] on[ ]s, market availability surcharges, doc fees that
vary from dealer to dealer. . . . Then dealing with the finance manager
who tr[ie]s to sell you everything you don't[ ]need. They high pressure
the consumer on purchasing extend[ed] warranties. There
[[Page 598]]
needs [to be] some sort of policing [of] these unscrupulous car dealers
to protect the buyers.\85\
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\85\ Individual commenter, Doc. No. FTC-2022-0046-0825.
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This is a good start to making car purchasing a better
experience. . . . I remember looking at a Lexus and being told by the
dealership, the only one in the state, that [S]cotchguard and
undercoating were mandatory and they refused to sell any vehicles
without them. There were two Acura dealerships in town and one of them
included `free' lifetime oil changes that I didn't learn about until
negotiating the price and had already spent two hours in negotiations.
All of these services/price adjustments were not disclosed at the start
of the negotiation and were only revealed either in the manager's
office or when the purchase agreement was presented to me by the
salesperson. After spending time on the test drive and negotiating the
price, it felt that these last minute price adjustments were being
revealed that late in the process so that I wouldn't leave.\86\
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\86\ Individual commenter, Doc. No. FTC-2022-0046-4833.
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Please enact and enforce these regulations to protect
vulnerable consumers from predatory business practices enjoyed by
dealers. Our family experienced such practices when trying to purchase
a vehicle in early 2022. It was only after five hours at the dealership
that we discovered the dealer had added on a $3,000 market adjustment
and $3,100 in other add-ons (nitrogen-filled tires, LoJack, paint
protection) to MSRP. This raised the price by about $6,000 and caused
us to use extra PTO over that week to find a new vehicle at a price
within our budget. Greater transparency in the car-buying process is
desperately needed to protect vulnerable consumers--who usually lack
any bargaining power--against power dealer networks and their special
interest groups. . . .\87\
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\87\ Individual commenter, Doc. No. FTC-2022-0046-1690.
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C. Law Enforcement and Other Responses
The Commission has taken action to protect consumers from deceptive
and unfair acts or practices in the motor vehicle marketplace. As noted
in the NPRM, the Commission has brought more than 50 auto law
enforcement actions; \88\ led two law enforcement sweeps, including one
that involved 181 State enforcement actions; \89\ published two reports
on a qualitative study of consumer experiences while purchasing motor
vehicles; and held workshops with various stakeholders to discuss the
motor vehicle marketplace.\90\
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\88\ Complaint, Fed. Trade Comm'n v. Rhinelander Auto Ctr.,
Inc., No. 3:23-cv-00737 (W.D. Wis. Oct. 24, 2023); Complaint, Fed.
Trade Comm'n v. Passport Auto. Grp., Inc., No. 8:22-cv-02670-GLS (D.
Md. Oct. 18, 2022); Complaint, Fed. Trade Comm'n v. N. Am. Auto.
Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022);
Complaint, Traffic Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020);
Complaint, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-
cv-03945 (S.D.N.Y. May 21, 2020); Complaint, Federal-Mogul
Motorparts LLC, No. C-4717 (F.T.C. May 12, 2020); Complaint,
LightYear Dealer Techs., LLC, No. C-4687 (F.T.C. Sept. 3, 2019);
Complaint, Fed. Trade Comm'n v. Passport Imports, Inc., No. 8:18-cv-
03118 (D. Md. Oct. 10, 2018); Complaint, Fed. Trade Comm'n v. Tate's
Auto Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31,
2018); Complaint, Cowboy AG, LLC, No. C-4639 (F.T.C. Jan. 4, 2018);
Complaint, Fed. Trade Comm'n v. Norm Reeves, Inc., No. 8:17-cv-01942
(C.D. Cal. Nov. 3, 2017); Complaint, Asbury Auto. Grp., Inc., No. C-
4606 (F.T.C. Mar. 22, 2017); Complaint, CarMax, Inc., No. C-4605
(F.T.C. Mar. 22, 2017); Complaint, West-Herr Auto. Grp., Inc., No.
C-4607 (F.T.C. Mar. 22, 2017); Complaint, Fed. Trade Comm'n v.
Volkswagen Grp. of Am., Inc., No. 3:16-cv-01534 (N.D. Cal. Jan. 31,
2017); Complaint, Fed. Trade Comm'n v. Uber Techs., Inc., No. 3:17-
cv-00261 (N.D. Cal. Jan. 19, 2017); Complaint, Gen. Motors LLC, No.
C-4596 (F.T.C. Dec. 8, 2016); Complaint, Jim Koons Mgmt. Co., No. C-
4598 (F.T.C. Dec. 8, 2016); Complaint, Lithia Motors, Inc., No. C-
4597 (F.T.C. Dec. 8, 2016); Complaint, Fed. Trade Comm'n v.
Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sep. 29,
2016); Complaint, United States v. New World Auto Imports, Inc., No.
3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016); Complaint, Progressive
Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016); Complaint, BMW of
N. Am., LLC, No. C-4555 (F.T.C. Oct. 21, 2015); Complaint, United
States v. Tricolor Auto Acceptance, LLC, No. 3:15-cv-3002 (N.D. Tex.
Sept. 15, 2015); Complaint, JS Autoworld, Inc., No. C-4535 (F.T.C.
Aug. 13, 2015); Complaint, TC Dealership, L.P., No. C-4536 (F.T.C.
Aug. 13, 2015); Complaint, Matt Blatt Inc., No. C-4532 (F.T.C. July
2, 2015); Complaint, TT of Longwood, Inc., No. C-4531 (F.T.C. July
2, 2015); Complaint, Fin. Select, Inc., No. C-4528 (F.T.C. June 2,
2015); Complaint, First Am. Title Lending of Ga., LLC, No. C-4529
(F.T.C. June 2, 2015); Complaint, City Nissan Inc., No. C-4524
(F.T.C. May 4, 2015); Complaint, Jim Burke Auto., Inc., No. C-4523
(F.T.C. May 4, 2015); Complaint, Nat'l Payment Network, Inc., No. C-
4521 (F.T.C. May 4, 2015); Complaint, TXVT Ltd. P'ship, No. C-4508
(F.T.C. Feb. 12, 2015); Complaint, Fed. Trade Comm'n v. Regency Fin.
Servs., LLC, No. 1:15-cv-20270-DPG (S.D. Fla. Jan. 26, 2015);
Complaint, United States v. Billion Auto, Inc., No. 5:14-cv-04118-
MWB (N.D. Iowa Dec. 11, 2014); Complaint, Fed. Trade Comm'n v. Ramey
Motors, Inc., No. 1:14-cv-29603 (S.D. W. Va. Dec. 11, 2014);
Complaint, Fed. Trade Comm'n v. Consumer Portfolio Servs., Inc., No.
14-cv-00819 (C.D. Cal. May 28, 2014); Complaint, Nissan N. Am.,
Inc., No. C-4454 (F.T.C. May 1, 2014); Complaint, TBWA Worldwide,
Inc., No. C-4455 (F.T.C. May 1, 2014); Complaint, Bill Robertson &
Sons, Inc., No. C-4451 (F.T.C. Apr. 11, 2014); Complaint, Paramount
Kia of Hickory, LLC, No. C-4450 (F.T.C. Apr. 11, 2014); Complaint,
Fed. Trade Comm'n v. Abernathy Motor Co., No. 3:14-cv-00063-BRW
(E.D. Ark. Mar. 12, 2014); Complaint, Fowlerville Ford, Inc., No. C-
4433 (F.T.C. Feb. 20, 2014); Complaint, Infiniti of Clarendon Hills,
Inc., No. C-4438 (F.T.C. Feb. 20, 2014); Complaint, Luis Alfonso
Sierra, No. C-4434 (F.T.C. Feb. 20, 2014); Complaint, Mohammad
Sabha, No. C-4435 (F.T.C. Feb. 20, 2014); Complaint, Norm Reeves,
Inc., No. C-4436 (F.T.C. Feb. 20, 2014); Complaint, Ganley Ford
West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014); Complaint, Timonium
Chrysler, Inc., No. C-4429 (F.T.C. Jan. 28, 2014); Complaint,
Courtesy Auto Grp., Inc., No. 9359 (F.T.C. Jan. 7, 2014); Complaint,
Franklin's Budget Car Sales, Inc., No. C-4371 (F.T.C. Oct. 3, 2012);
Complaint, Fed. Trade Comm'n v. Matthew J. Loewen, No. 2:12-cv-
01207-MJP (W.D. Wash. July 13, 2012); Complaint, Key Hyundai of
Manchester, LLC, No. C-4358 (F.T.C. May 4, 2012); Complaint, Billion
Auto, Inc., No. C-4356 (F.T.C. May 1, 2012); Complaint, Frank Myers
AutoMaxx, LLC, No. C-4353 (F.T.C. Apr. 19, 2012); Complaint, Ramey
Motors, Inc., No. C-4354 (F.T.C. Apr. 19, 2012); Complaint, Fed.
Trade Comm'n v. Hope for Car Owners, LLC, No. 2:12-cv-00778-GEB-EFB
(E.D. Cal. Mar. 27, 2012); Complaint, Fed. Trade Comm'n v. NAFSO
VLM, Inc., No. 2:12-cv-00781-KJM-EFB (E.D. Cal. Mar. 27, 2012);
Complaint, Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No.
1:03-CV-2648 (N.D. Ga. Sept. 4, 2003); Complaint, Pacifico Ardmore,
Inc., No. C-3920 (F.T.C. Feb. 7, 2000).
\89\ Operation Steer Clear and Operation Ruse Control, brought
with State law enforcement partners around the nation and Canada,
encompassed 252 enforcement actions. See Press Release, Fed. Trade
Comm'n, ``Multiple Law Enforcement Partners Announce Crackdown on
Deception, Fraud in Auto Sales, Financing and Leasing'' (Mar. 26,
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown.
\90\ For example, the FTC has held public workshops: (1) in
conjunction with the National Highway Traffic Safety Administration
to examine the consumer privacy and security issues posed by
automated and connected motor vehicles, see Fed. Trade Comm'n,
``Connected Cars: Privacy, Security Issues Related to Connected,
Automated Vehicles'' (June 28, 2017), https://www.ftc.gov/news-events/events-calendar/2017/06/connected-cars-privacy-security-issues-related-connected; (2) to explore competition and related
issues in the U.S. motor vehicle distribution system including how
consumers and businesses may be affected by State regulations and
emerging trends in the industry, see Fed. Trade Comm'n, ``Auto
Distribution: Current Issues & Future Trends'' (Jan. 19, 2016),
https://www.ftc.gov/news-events/events-calendar/2016/01/auto-distribution-current-issues-future-trends; (3) on military consumer
financial issues, including automobile purchases, financing, and
leasing, see Fed. Trade Comm'n, ``Military Consumer Workshop'' (July
19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; and (4) through a series of three roundtables on
numerous issues in selling, financing, and leasing automobiles, see
Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing & Leasing
Motor Vehicles'' (Apr. 12, 2011), https://www.ftc.gov/news-events/events-calendar/2011/04/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing &
Leasing Motor Vehicles'' (Aug. 2, 2011), https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, ``The Road Ahead: Selling,
Financing & Leasing Motor Vehicles'' (Nov. 17, 2011), https://www.ftc.gov/news-events/events-calendar/2011/11/road-ahead-selling-financing-leasing-motor-vehicles; see also Consumers for Auto
Reliability and Safety, Comment Letter on Motor Vehicle Roundtables,
Project No. P104811, at 6 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (stating that the Director of the
Navy-Marine Corps Relief Society in San Diego indicated before the
California Assembly Committee on Banking and Finance that ``the
number one issue they are confronted with is used car dealers who
are taking advantage of military personnel''). These events, and
others, have included speakers representing consumers, dealers,
regulators, and other industry stakeholders.
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[[Page 599]]
As discussed in the NPRM, the Commission's law enforcement partners
have also brought actions addressing unfair, abusive, and deceptive
practices in the motor vehicle industry. For example, the Consumer
Financial Protection Bureau (``CFPB'') has taken action against third-
party motor vehicle financing entities in matters that raise similar,
and sometimes identical, claims of deceptive and unfair acts or
practices as have been at issue in FTC enforcement actions.\91\
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\91\ The CFPB has brought at least 23 enforcement actions
involving motor vehicles, financing, or add-on products or services.
See Consent Order ]] 3, 13-57, Toyota Motor Credit Corp., CFPB No.
2023-CFPB-0015 (Nov. 20, 2023) (finding auto lender engaged in
unfair or abusive acts or practices by making it unreasonably
difficult for consumers to cancel unwanted add-ons; failing to
ensure consumers received refunds of payments they had made for
certain add-ons that had become void and worthless; and failing to
provide refunds owed to consumers who canceled their vehicle service
agreements);
Complaint ]] 75-104, CFPB v. USASF Servicing, LLC, No. 1:23-cv-
03433-VMC (N.D. Ga. Aug. 2, 2023) (alleging auto loan servicer
illegally disabled and repossessed consumers' vehicles, wrongfully
double-billed consumers, misapplied payments, and failed to ensure
refunds of unearned GAP premiums to which consumers were entitled);
Consent Order ]] 7-33, TMX Finance LLC, CFPB No. 2023-CFPB-0001
(Feb. 23, 2023) (finding auto lender understated and inaccurately
disclosed the finance charge and annual percentage rate on loans and
unfairly charged borrowers for a product that provided no benefit);
Complaint ]] 33-135, 171-226, CFPB v. Credit Acceptance Corp., No.
1:23-cv-00038 (S.D.N.Y. Jan. 4, 2023) (alleging indirect auto lender
misrepresented key terms of loans provided to subprime and deep-
subprime consumers and substantially assisted dealers in the
deceptive sale of add-on products); Consent Order ]] 7-22, Wells
Fargo Bank, N.A., CFPB No. 2022-CFPB-0011 (Dec. 20, 2022) (finding
bank incorrectly applied borrowers' auto loan payments, erroneously
assessed fees and interest, wrongly repossessed borrowers' vehicles,
and failed to ensure borrowers received refunds of unearned GAP fees
at early payoff); Consent Order ]] 4-55, Hyundai Capital America,
CFPB No. 2022-CFPB-0005 (July 26, 2022) (finding auto finance
company furnished inaccurate information about consumers to credit
reporting agencies); Consent Order ]] 4-14, 3rd Generation, Inc.,
CFPB No. 2021-CFPB-0003 (May 21, 2021) (finding subprime auto loan
servicer charged interest on late payments of fees without the
knowledge or consent of consumers); Consent Order ]] 8-50, Santander
Consumer USA Inc., CFPB No. 2020-BCFP-0027 (Dec. 22, 2020) (finding
auto finance company provided inaccurate records to credit reporting
agencies); Consent Order ]] 11-52, Nissan Motor Acceptance Corp.,
CFPB No. 2020-BCFP-0017 (Oct. 13, 2020) (finding auto finance
company misrepresented financing extension agreements,
repossessions, and limitations to consumer bankruptcy protections);
Consent Order ]] 8-22, Lobel Fin. Corp., CFPB No. 2020-BCFP-0016
(Sept. 21, 2020) (finding auto-loan servicer unfairly charged
delinquent consumers add-on charges in the form of Loss Damage
Waiver premiums); Consent Order ]] 6-30, Santander Consumer USA
Inc., CFPB No. 2018-BCFP-0008 (Nov. 20, 2018) (finding auto finance
company sold GAP to consumers with LTV over 125%, misrepresenting
that such consumers would be fully covered with total loss);
Consent Order ]] 27-39, Wells Fargo Bank, N.A., CFPB No. 2018-
BCFP-0001 (Apr. 20, 2018) (finding bank imposed duplicative or
unnecessary forced-placed auto loan insurance on consumers); Consent
Order ]] 12-23, Toyota Motor Credit Corp., CFPB No. 2016-CFPB-0002
(Feb. 2, 2016) (finding auto finance company engaged in
discriminatory pricing markup for motor vehicle financing, without
regard to creditworthiness); Consent Order ]] 73-75, Y King S Corp.,
CFPB No. 2016-CFPB-0001 (Jan. 21, 2016) (finding used car dealer
failed to disclose mandatory add-ons as financing charges); Consent
Order ]] 12-51, Interstate Auto Grp., Inc., CFPB No. 2015-CFPB-0032
(Dec. 17, 2015) (finding dealership and financing company reported
information they knew or had reasonable cause to believe was
inaccurate to credit reporting entities, harming consumer credit);
Consent Order ]] 7-90, Westlake Servs., LLC, CFPB No. 2015-CFPB-0026
(Sept. 30, 2015) (finding indirect auto financing entity used
illegal debt collection tactics); Consent Order ]] 8-23, Fifth Third
Bank, CFPB No. 2015-CFPB-0024 (Sept. 28, 2015) (finding
discrimination against loan applicants in credit applications based
on characteristics such as race and national origin); Consent Order
]] 9-24, Am. Honda Fin. Corp., CFPB No. 2015-CFPB-0014 (July 14,
2015) (same);
Consent Order ]] 4-60, DriveTime Auto. Grp., Inc., CFPB No.
2014-CFPB-0017 (Nov. 19, 2014) (finding buy-here-pay-here dealership
made harassing debt collection calls and provided inaccurate credit
information to credit reporting agencies); Consent Order ]] 4-37,
First Investors Fin. Servs. Grp., Inc., CFPB No. 2014-CFPB-0012
(Aug. 20, 2014) (finding auto financing company provided inaccurate
records to credit reporting agencies); Consent Order ]] 7-27, Ally
Fin. Inc., CFPB No. 2013-CFPB-0010 (Dec. 20, 2013) (finding auto
lender engaged in discriminatory pricing); Consent Order ]] 14-29,
U.S. Bank Nat'l Ass'n, CFPB No. 2013-CFPB-0004 (June 26, 2013)
(finding bank failed to properly disclose all the fees charged to
participants in the companies' Military Installment Loans and
Educational Services auto loans program, and misrepresented the true
cost and coverage of add-on products financed along with the auto
loans); Consent Order ]] 10-22, Dealers' Fin. Servs., LLC, CFPB No.
2013-CFPB-0004 (June 26, 2013) (finding financing company made
deceptive statements regarding the cost of add-on products and the
scope of coverage of the vehicle service contract).
In addition, States have engaged in enforcement actions alleging
similar dealer misconduct in the motor vehicle dealer marketplace, and
have implemented legislative and regulatory measures to address
corresponding consumer protection issues. With regard to law
enforcement, State regulators and Attorneys General have participated
in law enforcement sweeps with the FTC, and have filed hundreds of
actions alleging unlawful conduct by motor vehicle dealerships across
the country.\92\ Furthermore, with regard to legislative and regulatory
efforts, at least four States have enacted consumer protection measures
relating to pricing or add-ons by motor vehicle dealers.\93\ For
example, to ``ensure that dealers do not add in hidden or undisclosed
costs after the price for a vehicle has been advertised,'' Oregon
promulgated a rule that requires dealerships to state an ``offering
price'' that is the actual offer and amount the consumer can pay to own
the vehicle, excluding only taxes and other specific items.\94\
California and Wisconsin have similarly enacted laws that make it
unlawful for dealerships to advertise a total price without including
additional costs to the purchaser outside the mandatory tax, title, and
registration fees.\95\ Other States, such as Indiana, have enacted
codes that prohibit the sale of add-ons in certain circumstances.\96\
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\92\ Operation Steer Clear and Operation Ruse Control, brought
with State law enforcement partners around the nation and Canada,
encompassed 252 enforcement actions. See Press Release, Fed. Trade
Comm'n, ``Multiple Law Enforcement Partners Announce Crackdown on
Deception, Fraud in Auto Sales, Financing and Leasing'' (Mar. 26,
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown. Separately,
the California Attorney General's office sued a dealership chain
under State consumer protection laws for deceiving consumers about
add-on product charges and misrepresenting consumers' income on
credit applications; the alleged practices specifically targeted
low-income consumers with subprime credit. Complaint ]] 37-86,
People v. Paul Blanco's Good Car Co. Auto Grp., No. RG-19036081
(Cal. Super. Ct. Sept. 23, 2019).
\93\ See, e.g., Cal. Veh. Code 11713.1(b), (c); Or. Admin. R.
137-020-0020(3)(c); Wis. Admin. Code Trans. 139.03(3); Ind. Code 24-
4.5-3-202.
\94\ Or. Admin. R. 137-020-0020(3)(c); Official Commentary, Or.
Admin. R. 137-020-0020(3)(c).
\95\ Cal. Veh. Code 11713.1(b), (c); Wis. Admin. Code Trans.
139.03(3).
\96\ Ind. Code 24-4.5-3-202(3)(e)(ix) (prohibiting the sale of
any GAP coverage when the LTV is less than 80%); Cal. Civ. Code
2982.12(a)(5)(B) (prohibiting the sale of any GAP waiver in three
scenarios, including when the amount financed for the vehicle
exceeds the amount covered by the GAP waiver).
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The Commission and its law enforcement partners also regularly
provide business guidance and consumer education regarding the motor
vehicle marketplace. The Commission has compiled its motor vehicle
business guidance into a portal on its website, with links to guidance
documents, frequently asked questions, and legal resources.\97\
Likewise, the Commission provides a web page for consumers to learn
more about buying, financing, and leasing motor vehicles.\98\ Several
States have published similar such guidance manuals for motor vehicle
dealers,\99\
[[Page 600]]
while others have provided online consumer education resources.\100\
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\97\ See Fed. Trade Comm'n, Business Guidance, ``Automobiles,''
https://www.ftc.gov/business-guidance/industry/automobiles (last
visited Dec. 5, 2023).
\98\ See Fed. Trade Comm'n, ``Buying and Owning a Car,'' https://consumer.ftc.gov/shopping-and-donating/buying-and-owning-car (last
visited Dec. 5, 2023).
\99\ See, e.g., Ill. Sec'y of State Police, Dealer Handbook
(Apr. 2022), https://www.ilsos.gov/publications/pdf_publications/sos_dop66.pdf; Wis. DOT--Div. of Motor Vehicles, Motor Vehicle
Salesperson Manual--2020, https://wisconsindot.gov/Documents/dmv/shared/salesmanual-20.pdf; Enf't Div. of the Tex. Dep't of Motor
Vehicles, Motor Vehicle Dealer Manual (2017), https://www.txdmv.gov/sites/default/files/body-files/Motor_Vehicle_Dealer_Manual.pdf.
\100\ See, e.g., Cal. Dept. of Just., ``Buying and Maintaining a
Car,'' https://oag.ca.gov/consumers/general/cars (last visited Dec.
5, 2023); Fla. Highway Safety & Motor Vehicles, ``Buying from a
Licensed Dealer,'' https://www.flhsmv.gov/safety-center/consumer-education/buying-vehicle-florida/buying-licensed-dealer (last
visited Dec. 5, 2023); Or. Dep't of Just., ``Buying a Vehicle,''
https://www.doj.state.or.us/consumer-protection/motor-vehicles/buying-a-vehicle/ (last visited Dec. 5, 2023).
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While some commenters stated that existing Federal and State
efforts are sufficient, recent Commission and partner actions indicate
that misconduct has persisted despite prior law enforcement and other
efforts, and despite the NPRM's detailed description of chronic
problems relating to bait-and-switch tactics and hidden add-on and
other charges. For example, in a recent enforcement action, filed after
publication of the NPRM, the Commission charged several auto dealer
locations in an auto dealership group with misrepresenting the price of
vehicles. According to the complaint, the dealers advertised one price
to lure consumers to their dealerships, then charged them hundreds to
thousands of dollars more than the advertised price by tacking on bogus
extra fees for inspection, reconditioning, preparation, and
certification.\101\ The action also addressed the practice of dealers
charging Black and Latino consumers these fees more often and in higher
amounts.\102\
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\101\ Complaint ] 17, Fed. Trade Comm'n v. Passport Auto. Grp.,
Inc., No. 8:22-cv-2670 (D. Md. Oct. 18, 2022).
\102\ Id. ] 18. Recent actions outside the auto marketplace,
even in transactions that may not be as complex and time consuming
as motor vehicle transactions, further illustrate unfair and
deceptive practices related to advertising, add-ons, and hidden
charges. In one such action, the court noted ``the realities of the
disparate bargaining power'' between the corporate defendant and its
customers, adding that customers ``might have believed the [add-on]
fees were mandatory,'' and ``might not have had the time'' to
negotiate or complain about them. Fed. Trade Comm'n v. FleetCor
Techs., Inc., 1:19-cv-5727, 2022 WL 3350066, at *13 (N.D. Ga. Aug.
9, 2022) (granting the Commission's motion to exclude the
defendant's expert testimony); see also Fed. Trade Comm'n v.
FleetCor Techs., Inc., 620 F. Supp. 3d 1268, 1337 (N.D. Ga. 2022)
(finding on summary judgment that (1) defendants did not tell
consumers about fees at sign-up; (2) disclosures about fees in
contractual documents were inadequate; and (3) defendants failed to
get consent to add-on charges); id. at 1334 (concluding that
defendants had ``charged a slew of fees that: were never
discoverable to customers [and] were obscured by undecipherable
language''); Complaint ]] 41-43, Fed. Trade Comm'n v. Harris
Originals of NY, Inc., No. 2:22-cv-4260 (E.D.N.Y. July 20, 2022)
(alleging that a jewelry company charged military consumers for add-
on products without their consent or under false pretenses);
Complaint ]] 61-73, Fed. Trade Comm'n v. Benefytt Techs., Inc., No.
8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging illegal add-on
charges by healthcare companies); Complaint ]] 1-4, Fed. Trade
Comm'n v. First Am. Payment Sys., LP, No. 4:22-cv-654 (E.D. Tex.
July 29, 2022) (alleging that a payment processing company
misrepresented the terms and costs of its services, resulting in
unexpected and unauthorized fees); Fed. Trade Comm'n, Notice of
Proposed Rulemaking, Trade Regulation Rule on Unfair or Deceptive
Fees, 88 FR 77420, 77435-37 (released Oct. 11, 2023; published Nov.
9, 2023), https://www.govinfo.gov/content/pkg/FR-2023-11-09/pdf/2023-24234.pdf.
Multiple actions by partners since publication of the Commission's
NPRM have involved auto add-ons. The Commission and the State of
Wisconsin alleged that a dealership group, its current and former
owners, and its general manager deceived consumers by tacking on
hundreds or even thousands of dollars for add-ons without those
consumers' authorization or by leading the consumers to believe the
add-ons were mandatory, and doing so disproportionately more frequently
with American Indian customers.\103\ The CFPB and the New York State
Office of the Attorney General alleged that a subprime auto lender knew
or recklessly disregarded that dealers were tricking borrowers into
purchasing add-on products without their knowledge or consent and had
incentivized such behavior.\104\ In addition, the Commonwealth of
Massachusetts has brought two recent cases involving unfair add-on
pricing practices.\105\ In one such case, Massachusetts emphasized the
dynamics of auto transactions that frequently lead to deceptive and
unfair practices, particularly with respect to add-ons, noting that
add-on products ``are often sprung on consumers in the final steps of
completing a transaction'' after ``multiple rounds of negotiation on
the price of a car and/or car financing.'' \106\
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\103\ Complaint ]] 3-5, 11-18, 33-43, 48-51, Fed. Trade Comm'n
v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737 (W.D. Wis. Oct.
24, 2023).
\104\ Complaint ]] 128-30, CFPB v. Credit Acceptance Corp., No.
1:23-cv-38 (S.D.N.Y. Jan. 4, 2023).
\105\ Complaint ] 3, Massachusetts v. Jaffarian's Serv., Inc.,
No. 2277-cv-881 (Mass. Super. Ct. Sept. 15, 2022); Assurance of
Discontinuance ]] 7-9, In re Hometown Auto Framingham, Inc., No.
2384-cv-116 (Mass. Super. Ct. Jan. 17, 2023).
\106\ Complaint ] 5, Massachusetts v. Jaffarian's Serv., Inc.,
No. 2277-cv-881 (Mass. Super. Ct. Jan. 17, 2023).
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Efforts to combat deceptive and unfair practices in the motor
vehicle industry since the NPRM have gone beyond enforcement actions.
The CFPB announced that it uncovered several unlawful practices through
supervisory examinations, including auto loan servicers charging for
add-ons that provide no benefit to the consumer \107\ and failing to
ensure consumers received refunds for add-on products that no longer
offered any benefits.\108\ In addition, the State of California enacted
new legislation that regulates a particular type of add-on product--GAP
agreements.\109\ A press release introducing the legislation cited
concerns about unfair practices in the sale of GAP agreements, stating
that this add-on has little value and is often targeted at consumers
with lower incomes and subprime credit.\110\ California's law requires
several disclosures related to GAP agreements, including disclosures
pertaining to their financed cost and informing consumers that such
products are optional.\111\ The law also prohibits the sale of GAP
agreements that will not actually cover consumers' debt.\112\
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\107\ Consumer Fin. Prot. Bureau, ``Supervisory Highlights:
Issue 24, Summer 2021'' 3-4 (June 2021), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf (finding servicers added and
maintained unnecessary collateral protection insurance (CPI) when
consumers had adequate insurance and thus the CPI provided no
benefit to the consumers, and also when consumers' vehicles had been
repossessed even though no actual insurance protection was provided
after repossession).
\108\ Consumer Fin. Prot. Bureau, ``Supervisory Highlights:
Issue 28, Fall 2022'' 4-5 (Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf (finding consumers paid off their
vehicle financing early but servicers failed to ensure consumers
received refunds for unearned fees related to add-on products which
no longer offered any possible benefit to consumers after payoff).
\109\ Cal. Civ. Code 2982.12.
\110\ Press Release, Off. of the Att'y Gen. of Cal., ``Attorney
General Bonta and Assemblymember Maienschein Announce Legislation to
Strengthen Protections for Car Buyers'' (Feb. 16, 2022), https://oag.ca.gov/news/press-releases/attorney-general-bonta-and-assemblymember-maienschein-announce-legislation.
\111\ Cal. Civ. Code 2982.12.
\112\ Id.
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Despite the array of actions by the Commission and its partners,
unfairness and deception continue in the motor vehicle marketplace,
including (1) deceptive or unfair sales and advertising tactics and (2)
hidden charges, particularly with respect to add-on products or
services. To address the harm these issues inflict on consumers and on
law-abiding dealers, the Final Rule, in general:
Prohibits dealers from making misrepresentations regarding
material information, including about the cost of the vehicle, the
financing terms, and the availability of rebates or discounts;
Requires dealers to disclose the offering price of the
vehicle--its full cash price, provided that dealers may exclude
required government charges; that optional add-ons are not required;
the total of payments for the vehicle when making a representation
about monthly payment; and that a discussed lower monthly payment will
increase
[[Page 601]]
the total amount the consumer will pay, if true;
Prohibits dealers from charging for add-on products or
services that provide no benefit to the consumer; and
Requires dealers to obtain express, informed consent from
the consumer for any charge.
As discussed in the section-by section analysis in SBP III and in
response to comments, the Commission is declining to finalize certain
provisions proposed in the NPRM, including the provision that dealers
must disclose a list of prices for all optional add-on products or
services, and the provision that dealers must obtain certain signed
declinations from consumers prior to charging for optional add-on
products or services. The Commission also is finalizing the defined
terms ``Covered Motor Vehicle'' and ``Covered Motor Vehicle Dealer'' to
reflect edits to narrow the scope of these definitions compared to the
scope of the terms ``Motor Vehicle'' and ``Motor Vehicle Dealer'' in
the NPRM.
III. Section-by-Section Analysis
The following discussion provides a section-by-section analysis
that states the provisions proposed in the NPRM, and discusses the
comments received, the Commission's responses to comments, and the
provisions adopted in the Final Rule.\113\
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\113\ Regarding the thousands of comments received, the
Commission notes that many commenters raised similar concerns or
addressed overlapping issues. To avoid repetition, the Commission
has endeavored to respond to issues raised in similar comments
together. Responses provided in any given section apply equally to
comments addressing the same subject in the context of other
sections. Moreover, throughout the SBP, the Commission discusses
justifications for the Final Rule that are informed by its careful
consideration of all comments received, even where that discussion
is not linked to a particular comment.
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A. Sec. 463.1: Authority
Section 463.1 states that the Final Rule is promulgated pursuant to
section 1029 of the Dodd-Frank Act, and that it is an unfair or
deceptive act or practice within the meaning of section 5(a)(1) of the
FTC Act to violate, directly or indirectly, any provision of the Final
Rule, including the recordkeeping requirements, which are necessary to
prevent such unfair or deceptive acts or practices and to enforce this
Rule.\114\ The prohibition against violating any applicable provision
``directly or indirectly'' applies to each section of part 463. As
discussed in SBP I.A, section 1029 authorizes the FTC to prescribe
rules under Sections 5 and 18(a)(1)(B) of the FTC Act with respect to
motor vehicle dealers predominantly engaged in the sale and servicing
of motor vehicles, the leasing and servicing of motor vehicles, or
both.\115\
[[Page 602]]
The Final Rule defines with specificity certain unfair or deceptive
acts or practices; the Final Rule provisions are also ``prescribed for
the purpose of preventing such acts or practices.'' \116\
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\114\ The proposed authority provision in the NPRM omitted the
second reference to ``unfair'' acts or practices with regard to the
proposed recordkeeping requirements; the Final Rule consistently
refers to both ``unfair'' and ``deceptive'' acts or practices
together.
\115\ One industry group argued that the proposed rule violated
the APA because it did not comply with the FTC's rule requiring
publication of an Advance Notice of Proposed Rulemaking (``ANPR''),
16 CFR 1.10. Section 1.10, however, like the rest of subpart B of
part 1 of the Commission's Rules of Practice, applies only to
``proceedings for the promulgation of rules as provided in section
18(a)(1)(B) of the Federal Trade Commission Act.'' 16 CFR 1.7. The
ANPR requirement in section 1.10 implements section 18(b)(2) of the
FTC Act, which requires an ANPR when the Commission promulgates
rules under the procedures set forth in that section. In this case,
the FTC is acting under statutory authority under section 1029(d) of
the Dodd-Frank Act, see NPRM at 42031, which authorizes the
Commission to promulgate rules using the APA's informal notice-and-
comment procedure, see 5 U.S.C. 553, notwithstanding the additional
procedural requirements set forth in section 18. Accordingly, this
rulemaking is governed by subpart C of part 1 of the Commission's
Rules of Practice, which ``sets forth procedures for the
promulgation of rules under authority other than section 18(a)(1)(B)
of the FTC Act.'' 16 CFR 1.21. Neither subpart C nor the APA
requires publication of an ANPR.
This is consistent with Commission practice in prior notices to
issue or amend regulations, including with the Made in USA Labeling
Rule, the Children's Online Privacy Protection Act Rule, and the
Telemarketing Sales Rule. See, e.g., Fed. Trade Comm'n, Notice of
Proposed Rulemaking, Made in USA Labeling Rule, 85 FR 43162 (July
16, 2020), https://www.govinfo.gov/content/pkg/FR-2020-07-16/pdf/2020-13902.pdf (issuing original notice of proposed rulemaking that
was not preceded by an advance notice of proposed rulemaking); Fed.
Trade Comm'n, Notice of Proposed Rulemaking, Children's Online
Privacy Protection Rule, 64 FR 22750 (Apr. 27, 1999), https://www.govinfo.gov/content/pkg/FR-1999-04-27/pdf/99-10250.pdf (same);
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing
Sales Rule, 60 FR 8313 (Feb. 14, 1995), https://www.govinfo.gov/content/pkg/FR-1995-02-14/pdf/95-3537.pdf (same); Fed. Trade Comm'n,
Notice of Proposed Rulemaking, Telemarketing Sales Rule, 78 FR 41200
(July 19, 2013), https://www.govinfo.gov/content/pkg/FR-2013-07-09/pdf/2013-12886.pdf (issuing notice of proposed rulemaking for rule
amendment that was not preceded by an advance notice of proposed
rulemaking); Fed. Trade Comm'n, Proposed Rule, Children's Online
Privacy Protection Rule, 76 FR 59804 (Sept. 27, 2011), https://www.govinfo.gov/content/pkg/FR-2011-09-27/pdf/2011-24314.pdf (same);
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing
Sales Rule, 74 FR 41988 (Aug. 19, 2009), https://www.govinfo.gov/content/pkg/FR-2009-08-19/pdf/E9-19749.pdf (same); Fed. Trade
Comm'n, Notice of Proposed Rulemaking, Children's Online Privacy
Protection Rule, 70 FR 2580 (Jan. 14, 2005), https://www.govinfo.gov/content/pkg/FR-2005-01-14/pdf/05-877.pdf (same);
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing
Sales Rule, 69 FR 67287 (Nov. 17, 2004), https://www.govinfo.gov/content/pkg/FR-2004-11-17/pdf/04-25470.pdf (same); Fed. Trade
Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 69
FR 7330 (Feb. 13, 2004), https://www.govinfo.gov/content/pkg/FR-2004-02-13/pdf/04-3287.pdf (same); Fed. Trade Comm'n, Notice of
Proposed Rulemaking, Telemarketing Sales Rule, 67 FR 4492 (Jan. 30,
2002), https://www.govinfo.gov/content/pkg/FR-2002-01-30/pdf/02-1998.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking,
Children's Online Privacy Protection Rule, 66 FR 54963 (Oct. 31,
2001), https://www.govinfo.gov/content/pkg/FR-2001-10-31/pdf/01-27390.pdf (same). This is also true of regulation amendments
pursuant to the authority under which this Final Rule is
promulgated--that which Congress granted to the Commission under
section 1029 of the Dodd-Frank Act, 15 U.S.C. 5519, pertaining to
motor vehicle dealers. See, e.g., Fed. Trade Comm'n, Notice of
Proposed Rulemaking, Used Motor Vehicle Trade Regulation Rule, 77 FR
74746, 74748 (Dec. 17, 2012), https://www.govinfo.gov/content/pkg/FR-2012-12-17/pdf/2012-29920.pdf (``Because the Dodd-Frank Act
authorized the Commission to use APA procedures for notice and
public comment in issuing or amending rules with respect to motor
vehicle dealers, the FTC will not use the procedures set forth in
Section 18 of the FTC Act, 15 U.S.C. 57a, with respect to these
proposed revisions to the Used Car Rule and the Used Car Buyers
Guide. Accordingly, the Commission is publishing this Notice of
Proposed Rulemaking pursuant to Section 553 of the APA.''); see also
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Privacy of
Consumer Financial Information Rule Under the Gramm-Leach-Bliley Act
(``Privacy Rule''), 84 FR 13150 (Apr. 4, 2019), https://www.govinfo.gov/content/pkg/FR-2019-04-04/pdf/2019-06039.pdf
(issuing notice of proposed rulemaking for rule amendment that was
not preceded by an advance notice of proposed rulemaking).
This same commenter argued the FTC had not complied with the
``Principles of Regulation'' enumerated in section 1(b) of Executive
Order 12866. See Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-
2022-0046-8368 at 34-36 & n.123; E.O. 12866 3(b) (defining
``Agency'' to mean an authority of the United States ``other than
those considered to be independent regulatory agencies''). This
provision of the Executive Order does not apply to independent
agencies such as the FTC. Regardless, the Commission did take into
account the principles set forth in section 1(b), as is evident
throughout the NPRM. See, e.g., NPRM at 42015-17 (identifying
problems in the marketplace); id. at 42028-42031 (soliciting
comments on alternative approaches); id. at 42036-42044 (assessing
costs and benefits).
The same commenter also argued that the Commission's denial of
its request to extend the comment period prejudiced the commenter's
ability to collect and provide data pertaining to the proposed rule
and was inconsistent with the Commission's grant of extensions in
other rulemakings. As described in its letter, the Commission also
received requests opposing an extension of the comment period. See
Letter, Fed. Trade Comm'n, ``Duration of the Public Comment Period
in Matter No. P204800'' (Aug. 23, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Matter%20No.%20204800%20-%20Letter%20re%20Extension%20for%20publication.pdf. In the letter,
the Commission noted its ongoing engagement with stakeholders on
issues relating to the sale, financing, and lease of motor vehicles,
since before its 2011 Federal Register notice inviting stakeholder
feedback on these issues and continuing since that time. See Fed.
Trade Comm'n, Public Roundtables: Protecting Consumers in the Sale
and Leasing of Motor Vehicles, 76 FR 14,014 (Mar. 15, 2011), https://www.federalregister.gov/documents/2011/03/15/2011-5873/public-roundtables-protecting-consumers-in-the-sale-and-leasing-of-motor-vehicles. The Commission determined that a sixty-day comment period,
along with an additional twenty days following the public
announcement and release of the NPRM and prior to its publication in
the Federal Register, provided meaningful opportunity to comment.
See also Steven J. Balla, ``Public Commenting on Federal Agency
Regulations: Research on Current Practices and Recommendations to
the Administrative Conference of the United States'' App. A (2011),
https://www.acus.gov/sites/default/files/documents/Consolidated-Reports-%2B-Memoranda.pdf (reporting data from a pool of 703 comment
periods associated with actions by dozens of Federal agencies, and
finding that the average duration of comment periods for proposed
agency actions was 38.7 days, and 45.1 days for actions that are
economically significant).
\116\ 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include
requirements prescribed for the purpose of preventing'' unfair or
deceptive acts or practices).
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B. Sec. 463.2: Definitions
1. Overview
The proposed rule included definitions for the following terms:
``Add-on'' or ``Add-on Product(s) or Service(s)''; ``Add-on List'';
``Cash Price without Optional Add-ons''; ``Clearly and Conspicuously'';
``Dealer'' or ``Motor Vehicle Dealer''; ``Express, Informed Consent'';
``GAP Agreement''; ``Government Charges''; ``Material'' or
``Materially''; ``Motor Vehicle''; and ``Offering Price.'' In the
definition-by-definition analysis in SBP III.B.2, the Commission
discusses each definition proposed in the NPRM, relevant comments that
are not otherwise addressed in the discussion of the corresponding
substantive provisions of the Final Rule, and the definition the
Commission is finalizing.
2. Definition-by-Definition Analysis
(a) Add-On or Add-On Product(s) or Service(s)
The proposed rule defined ``Add-on'' or ``Add-on Product(s) or
Service(s)'' as ``any product(s) or service(s) not provided to the
consumer or installed on the vehicle by the motor vehicle manufacturer
and for which the Motor Vehicle Dealer, directly or indirectly, charges
a consumer in connection with a vehicle sale, lease, or financing
transaction.'' This term appeared in the following definitions and
substantive provisions of the rule proposal: the definitions of ``Add-
on List'' and ``Cash Price without Optional Add-ons''; the Prohibited
Misrepresentations provision at proposed Sec. 463.3(b); the add-on
list disclosure provision at proposed Sec. 463.4(b); the requirement
to disclose that add-ons are not required at proposed Sec. 463.4(c);
the prohibition against charging for add-ons that provide the consumer
no benefit at proposed Sec. 463.5(a); and the proposed provision
relating to undisclosed or unselected add-ons at Sec. 463.5(b). As
discussed in the following paragraphs, in response to stakeholder
comments, the Commission declines to finalize certain of these
provisions; in the Final Rule, this term appears in paragraph (a) of
the Prohibited Misrepresentations section (Sec. 463.3); the Disclosure
Requirements provision in paragraph (c) of Sec. 463.4; and the
provision in Sec. 463.5(a) titled ``Dealer Charges for Add-ons and
Other Items'' and subtitled ``Add-ons that provide no benefit.''
For the following reasons, the Commission adopts the definition of
``Add-on'' or ``Add-on Product(s) or Service(s)'' largely as proposed,
with conforming modifications to reflect changes to the defined terms
```Covered Motor Vehicle' or `Vehicle''' and ```Covered Motor Vehicle
Dealer' or ``Dealer''' as described in more detail in the discussion of
Sec. 463.2(e) and (f), in SBP III.B.2(e) and (f).
The Commission received several comments relating to the scope of
its proposed definition for ``Add-on'' or ``Add-on Product(s) or
Service(s).'' Industry association and other commenters recommended
that the Commission broaden the definition to include manufacturer-
provided products or services, expressing concern that exclusion of
such products or services would put other companies that provide such
items at a competitive disadvantage. Products or services provided by
manufacturers, however, are already covered by several provisions of
the Final Rule. Under the substantive provisions the Commission is
finalizing, dealers are prohibited from making misrepresentations
regarding material information, including about the ``costs or terms of
purchasing, financing, or leasing a Vehicle'' (Sec. 463.3(a)); must
disclose the vehicle's true ``Offering Price,'' which includes any
amounts dealers charge for items already installed or provided by the
manufacturer (Sec. Sec. 463.4(a) and 463.2(k)); and are required to
obtain ``Express, Informed Consent'' for charges for any item
(Sec. Sec. 463.5(c) and 463.2(g)). The additional substantive add-on-
specific provisions \117\ address harms associated with products or
services not provided to the consumer or installed on the vehicle by
the motor vehicle manufacturer. Commenters did not provide evidence
that the proposed provisions covering manufacturer-provided products or
services would be insufficient to address consumer harm. Accordingly,
the Commission has determined not to include manufacturer-provided
products or services within this defined term. The Commission will
continue to monitor this issue to determine whether additional action
is warranted.
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\117\ Sec. Sec. 463.3(b), 463.4(c), 463.5(a).
---------------------------------------------------------------------------
One individual commenter expressed concern that, under the
Commission's proposed definition, dealers could raise the price of a
vehicle by advertising additional products or services, such as ``free
lifetime benefits'' with the vehicle, and that dealers could mislead
consumers by charging more for the vehicle based on a supposedly
``free'' add-on.\118\ The Commission notes that the Rule the Commission
is finalizing contains several provisions relating to this concern. For
example, dealers are prohibited from making misrepresentations under
Sec. 463.3, including misrepresentations regarding ``costs,
limitation, benefit, or any other aspect'' of add-ons.\119\
Furthermore, dealers are required to disclose a vehicle's offering
price, which must include charges for required add-ons; this disclosure
will allow consumers to know the true price of the vehicle and
comparison shop before selecting and visiting a particular
dealership.\120\
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\118\ Individual commenter, Doc. No. FTC-2022-0046-7445 at 10-
11.
\119\ Sec. 463.3(b) (emphasis added).
\120\ See Sec. Sec. 463.2(k) (defining Offering Price),
463.4(a) (requiring disclosure of Offering Price); see also Sec.
463.3(p) (prohibiting misrepresentations regarding the disclosures
required by the Final Rule).
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Several dealership association commenters expressed concern that
the proposed definition was too broad, contending that it might apply
to hundreds of items and include fees, such as a processing or document
fee, that a dealer charges a consumer. As discussed in SBP III.B.2(b),
III.D.2(b), and III.E.2(b), upon careful review of comments, including
comments regarding the breadth of this requirement, the Commission has
determined not to finalize the provision that would have required
listing all optional add-ons--the ``Add-on List'' definition and the
associated requirement that dealers disclose such a list--as well as
proposed Sec. 463.5(b) relating to undisclosed or unselected add-
ons.\121\ The remaining substantive provisions that use the term ``Add-
ons'' prohibit misrepresentations (Sec. 463.3(b)); require dealers to
disclose, if true, that add-ons are not required (Sec. 463.4(c)); and
prohibit charges for add-ons that provide the consumer no benefit
(Sec. 463.5(a)). The law already prohibits misrepresentations,
regardless of the product or service at issue; dealers that offer
consumers additional products or services are already required to ask
[[Page 603]]
consumers if they want such products, rather than suggesting that such
products or services are mandatory, when they are not; and any hardship
associated with refraining from charging for products or services that
provide consumers no benefits are outweighed by the harms to consumers
and competition from permitting this practice, as explained in the
analysis of Sec. 463.5(a).
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\121\ See NPRM at 42044, 42046 (proposed Sec. Sec. 463.2(b),
463.4(b), 463.5(b)).
---------------------------------------------------------------------------
Commenters including an industry association suggested limiting the
definition to products or services sold at the ``point of vehicle
purchase'' to clarify that indirect charges, such as the inclusion of a
one-year subscription to a satellite radio service, need not be
separately itemized.\122\ The industry association commenter suggested
that, as proposed, the definition would include charges for which
dealers and consumers ``would otherwise not account.'' \123\ The
Commission has determined not to finalize the add-on list and form
requirements in proposed Sec. Sec. 463.4(b) and 463.5(b). For the
provisions being finalized, excluding subscription charges, or
including only items added to the vehicle at the ``point of vehicle
purchase,'' would narrow the definition of ``Add-on'' and the
corresponding requirements in a manner that would allow for deceptive
or unfair practices, including by allowing dealers to represent a price
that is not the offering price, or to deceptively state that add-ons
are required. In the example provided by the commenter, if the
satellite radio subscription service is mandatory, it needs to be
included in the offering price of the vehicle, as required by Sec.
463.4(a) of the Final Rule; if it is not mandatory, the dealer needs to
disclose, when making any representations about the service, that it is
not required under Sec. 463.4(c). Further, regardless of whether such
a product or service is mandatory or optional, dealers must follow
other aspects of the Final Rule, including by not making any
misrepresentations about the subscription under Sec. 463.3 and by
obtaining the express, informed consent of the consumer for the
associated charges under Sec. 463.5(c).
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\122\ Comment of Serv. Cont. Indus. Council, Guaranteed Asset
Prot. All., & Motor Vehicle Prot. Prods. Ass'n, Doc. No. FTC-2022-
0046-8113 at 13-14.
\123\ Id. at 13.
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Another industry association commenter contended that add-ons sold
in the marine industry are typically different than those offered in
the context of automobile sales and described in the NPRM. While all
motor vehicle dealers must refrain from engaging in deceptive or unfair
conduct relating to add-ons, the Commission is excluding recreational
boats and marine equipment from the Final Rule's definition of ``
`Covered Motor Vehicle' or `Vehicle,' '' as discussed in additional
detail in the definition-by-definition analysis of Sec. 463.2(e) in
SBP III.B.2(e).
An industry association commenter and comments from a number of
dealership associations noted that certain State laws already regulate
the sale of add-ons, including, for example, laws in many States that
regulate vehicle sales contracts or deceptive sales practices generally
or that regulate insurance products. To the extent that the Final
Rule's add-on provisions may duplicate State law, commenters have
provided no evidence that any such duplication in the provisions that
incorporate this defined term--which prohibit misrepresentations,
require disclosures in the event add-ons are not required, and prohibit
charges for add-ons from which the consumer would not benefit--will
harm consumers or competition. Moreover, the Final Rule provides
additional remedies that will benefit consumers who encounter conduct
that is already illegal under State or Federal law, including by adding
a mechanism for the Commission to redress consumers injured by a
dealer's violation of the rule, and will assist law-abiding dealers
that presently lose business to competitors that act unlawfully. Under
the Final Rule, State laws may provide more or less specific
requirements as long as such requirements are not inconsistent with
part 463, as set forth at Sec. 463.9, and in the event of an
inconsistency, the Rule only affects such State law to the extent of
the inconsistency.\124\
---------------------------------------------------------------------------
\124\ See, e.g., English v. Gen. Elec. Co., 496 U.S. 72, 79
(1990).
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A few dealership association commenters expressed concern that the
proposed definition of ``Add-on Products or Services'' would include
insurance-related products, such as credit life and credit disability
insurance, and as such, could implicate the McCarran-Ferguson Act's
reverse-preemption of certain Federal laws that ``invalidate, impair,
or supersede'' State laws enacted ``for the purpose of regulating the
business of insurance.'' \125\ Commenters have provided no evidence
that the Rule will invalidate, impair, or supersede State laws enacted
for the purpose of regulating the business of insurance.\126\ To the
contrary, the Final Rule addresses deceptive or unfair conduct--it
prohibits dealers, inter alia, from making misrepresentations regarding
material information about add-ons, from failing to disclose when add-
ons are not required, and from charging for add-ons from which the
consumer would not benefit. Nor has the Commission been presented with
evidence that the Rule's other substantive provisions (prohibiting
misrepresentations; requiring disclosures of a vehicle's offering price
and about total of payments; and requiring consumers' express, informed
consent before charging them) invalidate, impair, or supersede State
laws enacted for the purpose of regulating insurance.\127\
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\125\ See 15 U.S.C. 1012(b).
\126\ See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129
(1982) (setting forth test for whether an activity constitutes the
``business of insurance''); Humana Inc. v. Forsyth, 525 U.S. 299,
307-08 (1999) (establishing criteria for whether a Federal law
operates to ``invalidate, impair, or supersede'' State law).
\127\ The Supreme Court has refused to interpret the McCarran
Ferguson Act to invalidate Federal law when applied to remedy a
misrepresentation and undo the harm caused by alleged deception. See
SEC v. Nat'l Sec., Inc., 393 U.S. 453, 462 (1969). Moreover, lower
courts have rejected precisely the concern raised by the commenter
about credit life insurance. See Fed. Trade Comm'n. v. Dixie Fin.
Co., 695 F.2d 926, 930 (5th Cir. 1983) (McCarran Ferguson Act does
not preclude FTC investigation of ``whether the sale of insurance is
a precondition to the arrangement of credit''); Fed. Trade Comm'n v.
Mfrs. Hanover Consumer Servs., Inc., 567 F. Supp. 992, 94 (E.D. Pa.
1983) (same).
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A number of industry and dealership association commenters
contended that, as proposed, this definition may extend to products or
services that are provided by the manufacturer but that are installed
by a distributor of motor vehicles, or alternatively, by the dealer, at
the instruction of the manufacturer. Relatedly, a State governmental
association commenter expressed concern that the proposed definition
could create confusion with regard to the sale of used vehicles, where
a prior owner of a vehicle may have added a product to the vehicle. The
commenter contended that a motor vehicle dealer selling the used
vehicle may be unaware of the added product, and further, that listing
any such items may confuse buyers.
To the extent the commenters' concerns stem from the proposed
provisions related to add-on lists and proposed Sec. 463.5(b)'s
provisions related to separate disclosures, the Commission is not
finalizing those provisions. Under the provisions being finalized, if a
product is provided to the dealer by the manufacturer or another
entity, and a consumer chooses to have the product
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installed and pay for it, the dealer may install it and charge for it,
as long as the dealer complies with the provisions of the Final Rule,
including by disclosing that the product is not required and by
obtaining the consumer's express, informed consent for the charge. If
the manufacturer requires the dealer to install the product or if the
dealer chooses to install the product, and the dealer requires any
consumer to pay charges for it, the amount of the charge must be
included in the vehicle's offering price, and the dealer must comply
with other aspects of the Final Rule, including the express, informed
consent requirement. Relatedly, regarding used vehicles, if a prior
owner of such a vehicle installed an add-on, and the dealer that
subsequently sells such a vehicle requires any consumer to pay charges
for the add-on, the amount of those charges must be included in the
vehicle's offering price and the dealer must comply with other aspects
of the Final Rule, including the express, informed consent requirement
at Sec. 463.5(c). If, alternatively, the dealer does not require any
consumers to pay for the pre-installed add-on, then the dealer does not
have to add that amount to the vehicle's offering price, and there is
no charge for that add-on for which the dealer must obtain express,
informed consent. Thus, the definition of ``Add-on'' and the Rule
requirements being finalized address deceptive or unfair price and add-
on disclosures and hidden charges without requiring dealers to list or
itemize charges that they do not impose on consumers. For the reasons
explained in this section, the Commission is finalizing the definition
of ``Add-on'' or ``Add-on Product(s) or Service(s)'' largely as
proposed, with conforming modifications to reflect changes to the
defined terms ```Covered Motor Vehicle' or `Vehicle''' and ```Covered
Motor Vehicle Dealer' or `Dealer''' as described in more detail in the
discussion of Sec. 463.2(e) and (f), in SBP III.B.2(e) and (f).
(b) Add-On List
The NPRM proposed defining the term ``Add-on List,'' which appeared
in the associated Add-on List disclosure provision at proposed Sec.
463.4(b), as well as in the recordkeeping provision at proposed Sec.
463.6(a)(2). Based on the following, the Commission has determined not
to include this definition in its Final Rule.
Several commenters supported the substantive add-on list proposal
and its associated definition, and commenters including consumer
advocacy organizations urged the Commission to finalize additional
related restrictions or disclosures, such as requiring add-on prices to
be fixed and non-negotiable, or requiring a distinct add-on list for
each vehicle sold. Other commenters, including dealership associations,
raised concerns that, as proposed, the add-on list definition could
impose significant economic burdens on dealerships for a disclosure
that, in some circumstances, might be too voluminous to be optimally
meaningful to consumers, or permit price ranges that could be too broad
to prevent abuses and effectively inform consumers.
After careful consideration, and in light of the concerns raised by
commenters, the Commission has determined not to include the add-on
list disclosure provision at proposed Sec. 463.4(b) or the
recordkeeping provision at proposed Sec. 463.6(a)(2) in its Final
Rule, and therefore will not include a definition of the term ``Add-on
List'' in its Final Rule. Here, as elsewhere, the Commission remains
committed to promoting fair, non-deceptive, and competitive markets for
consumer products and services; it will continue to monitor the
marketplace for add-on-related acts or practices that are unfair or
deceptive, and will evaluate whether to propose additional measures
pertaining to such products and services.
(c) Cash Price Without Optional Add-Ons
The NPRM proposed defining the term ``Cash Price without Optional
Add-ons,'' which appeared in the proposed provision addressing
undisclosed or unselected add-ons at Sec. 463.5(b). Based on the
following, the Commission is declining to finalize this definition.
A number of commenters favored the proposed provision and
definition, and several, including consumer advocacy organizations,
urged the Commission to include additional requirements, such as
requiring the proposed disclosure documents associated with this
proposed definition to be available in different languages, while
others, including a dealership association, raised concerns that the
definition and relevant provision were burdensome or confusing for
dealers.
As explained in additional detail in SBP III.E.2(b) with respect to
Sec. 463.5(b), in light of commenter concerns that the proposed
provision using this term would increase costs for legitimate dealers
and add to the time and paperwork for consumers in an already lengthy,
paperwork-heavy transaction, the Commission has elected not to include
a Cash Price without Optional Add-ons disclosure requirement in its
Final Rule. Thus, after careful consideration, and in light of the
concerns raised by commenters, the Commission has determined not to
include a definition of ``Cash Price without Optional Add-ons'' in its
Final Rule.
(d) Clearly and Conspicuously
The proposed rule defined the term ``Clearly and Conspicuously'' as
``in a manner that is difficult to miss (i.e., easily noticeable) and
easily understandable,'' including in all of seven enumerated ways,
listing proposed requirements for ``any communication that is solely
visual or solely audible,'' ``[a] visual disclosure,'' ``[a]n audible
disclosure,'' and ``any communication using an interactive electronic
medium,'' and providing, inter alia, that such disclosures ``must use
diction and syntax understandable to ordinary consumers and must appear
in each language in which the representation that requires the
disclosure appears'' and ``must not be contradicted or mitigated by, or
inconsistent with, anything else in the communication.'' Based on the
following, the Commission is finalizing this definition largely as
proposed, with a modification to clarify that the definition applies
whether the term appears as an adjective or an adverb, by adding the
parentheses in the following manner to the defined term: ``Clear(ly)
and Conspicuous(ly).''
Some consumer advocacy organization commenters favored the
Commission's proposed definition while also suggesting that the
Commission include a provision requiring translation of any deal
consummating documents, including buyer's orders and retail installment
sales contracts, into the language in which the negotiations were
conducted. This issue, however, is addressed by Sec. 463.5(c) of the
Rule, which requires express, informed consent for each item
charged.\128\ As explained in additional detail in the paragraph-by-
paragraph analysis of Sec. 463.5(c) in SBP III.E.2(c), if a deal-
consummating document is provided in a language that the consumer does
not understand, and the document's contents are not otherwise clearly
understood by the consumer, then the consumer is in no position to give
unambiguous assent to the charges described therein. The Commission
therefore has determined not to add
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such a provision to its ``Clear(ly) and Conspicuous(ly)'' definition.
However, the Commission will continue to monitor the marketplace and
determine whether further language requirements or additional measures
are warranted to address deceptive or unfair practices--particularly
those that target or otherwise disproportionately impact language-
minority communities.
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\128\ The language requirements, as they relate to obtaining
express, informed consent, are further explained in the discussion
of Sec. 463.5(c) in SBP III.E.2(c).
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