Unpacking FTC's Vehicle Shopping Rule: A Reynolds Legal Perspective on Compliance and Transparency in Auto Sales

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Join us as we delve into the intricacies of the Federal Trade Commission's controversial Vehicle Shopping Rule in the automotive industry. In this episode, representing Reynolds and Reynolds legal expert Matt Chacey, Product Development Attorney and Sales Director for Compliance Team, Jason Gaskill, shed light on the implications of this new regulation for car buyers and dealers alike.

Critics of the Vehicle Shopping Rule argue that it may lead to increased costs, more paperwork, and a longer sales process, potentially making the car buying experience more cumbersome for consumers. With members of Congress closely monitoring the situation, concerns are being raised about the rule's impact and the need for legislative action to address perceived shortcomings.

FTC enforcement actions, resulting in significant settlements, have put every dealer under the regulatory radar. From transparency in consumer transactions to the prohibition of misrepresentations, the importance of clarity and honesty in sales practices cannot be overstated.

Matt and Jason discuss the complexities of compliance, highlighting issues such as conflicting language in documents, the inclusion of arbitration clauses, and the presentation of optional products to customers. They emphasize the need for transparency and strategic redundancy in conveying information to customers, ensuring that they understand the terms and conditions of each product offered.

Tune in to gain valuable insights into navigating the evolving regulatory landscape, protecting dealerships, and promoting transparency in auto sales. Learn how to ensure that customers are well-informed about their options and rights, empowering them to make informed decisions with confidence.

Status:

On Jan. 18, the FTC postponed the VSR’s effective date of July 30, 2024 pending judicial review in response to a petition for review filed by NADA in the U.S. Court of Appeals for the Fifth Circuit. (See NADA’s opening brief.) NADA-supported language to deny FTC funding to enforce the VSR was included in the FY25 FSGG appropriations bill that passed the House FSGG subcommittee on June 5.         

NADA also supports the “FTC REDO Act” (H.R. 7101/S. 3014) which would stop the VSR and require the FTC to follow certain procedures to ensure the rule is the result of an informed process if it chooses to “REDO” the rule. The bill requires the FTC to 1) issue an Advance Notice of Proposed Rulemaking; 2) conduct a quantitative study on auto retailing; 3) undertake consumer testing; and 4) publish a cost benefit analysis based on actual data. The FTC failed to perform these essential steps before finalizing its rule. Members of Congress are urged to cosponsor the “FTC REDO Act” to stop the flawed VSR and prevent the FTC from needlessly imposing significant burdens and costs on consumers and small business dealers.

Main Points:

✔️This FTC rule will add time, costs, and complexity for car-buyers and make it harder to conduct online sales. Vehicle sales are already extensively regulated with a document-intensive process, yet the FTC finalized these mandates without testing whether they enhance consumer understanding, education or protection. Under the rule, every time a consumer asks about a specific vehicle or monthly payments, it would involve new written forms harming the industry’s ability to streamline and modernize the car buying process.  

✔️The VSR is duplicative as all the harms the rule is aimed at addressing are already against the law, and the agency presently has sufficient enforcement authority to police any alleged wrongdoing. The rule will duplicate and, in some cases, conflict with, extensive state and federal laws that protect consumers (e.g., the Federal Truth-in-Lending Act). The rule introduces ambiguous terms such as “express informed consent” and states that a customer signature by itself will NOT suffice, contrary to many state laws. 

✔️The FTC’s rule dramatically increases the agency’s power without an informed regulatory process and will severely harm small businesses. The rule empowers the FTC to issue $51,744 per violation fines against dealers for unnecessary and vague requirements. The rule also imposes new recordkeeping burdens that more closely resemble retention requirements for supervised financial institutions, such as forcing dealers to capture every written communication, including texts.

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