[Federal Register Volume 81, Number 223 (Friday, November 18, 2016)]
[Rules and Regulations]
[Pages 81664-81685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27694]
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FEDERAL TRADE COMMISSION
16 CFR Part 455
RIN 3084-AB05
Used Motor Vehicle Trade Regulation Rule
AGENCY: Federal Trade Commission.
ACTION: Final rule.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'')
amends the Used Motor Vehicle Trade Regulation Rule (``Rule'' or ``Used
Car Rule''). The Final Rule adopts the following proposals: adding a
Buyers Guide statement recommending that consumers obtain a vehicle
history report (``VHR''), and directing them to an FTC website for more
information about VHRs and safety recalls; revising the Buyers Guide
statement describing the meaning of an ``As Is'' sale in which a dealer
offers a vehicle for sale without a warranty; adding boxes to the front
of the Buyers Guide where dealers can indicate additional warranty and
service contract coverage; adding a Spanish statement to the English
Buyers Guide advising consumers to ask for a copy of the Buyers Guide
in Spanish if the dealer is conducting the sale in Spanish (and
providing a Spanish translation of the optional consumer acknowledgment
of receipt of the Buyers Guide); and adding air bags and catalytic
converters to the list of major defects on the back of the Buyers
Guide.
DATES: This Rule is effective on January 27, 2017.
ADDRESSES: Copies of this document are available on the Commission's
website, www.ftc.gov.
FOR FURTHER INFORMATION CONTACT: John C. Hallerud, (312) 960-5634,
Attorney, Midwest Region, Federal Trade Commission, 55 West Monroe
Street, Suite 1825, Chicago, IL 60603.
SUPPLEMENTARY INFORMATION:
I. Background
The Used Car Rule requires dealers to display on used cars offered
for sale a window sticker called a ``Buyers Guide'' containing warranty
and other information. The Commission promulgated the Used Car Rule in
1984, and the Rule became effective in 1985.\1\ One of the principal
goals of the Used Car Rule is to prevent oral misrepresentations and
unfair omissions of material facts by used car dealers concerning
warranty coverage. To accomplish that goal, the Rule provides a uniform
method for disclosing warranty information on the ``Buyers Guide.'' The
Rule requires used car dealers to disclose on the Buyers Guide whether
they are offering a used car for sale with a dealer's warranty and, if
so, the basic terms, including the duration of coverage, the percentage
of total repair costs to be paid by the dealer, and the exact systems
covered by the warranty. The Rule additionally provides that the Buyers
Guide disclosures are to be incorporated by reference into the sales
contract, and are to govern in the event of an inconsistency between
the Buyers Guide and the sales contract. The Rule requires Spanish
language versions of the Buyers Guide when dealers conduct sales in
Spanish. The Rule also requires other disclosures that must be printed
directly on the Buyers Guide, including: a suggestion that consumers
ask the dealer if a pre-purchase inspection is permitted; a warning
against reliance on spoken promises that are not confirmed in writing;
and a list of fourteen major systems of a used motor vehicle and the
major defects that may occur in these systems (``List of Systems'').
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\1\ 49 FR 45692 (Nov. 19, 1984).
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In July 2008, the Commission commenced its periodic regulatory
review of the Rule (``Regulatory Review'') to examine its efficacy,
costs, and benefits, and to determine whether to retain, to modify, or
to rescind the Rule.\2\ The Commission also asked for public comments
on the Spanish translation of the Buyers Guide, the List of Systems and
defects on the back of the Buyers Guide, and whether to revise the
Buyers Guide by adding boxes where dealers could disclose non-dealer
warranties offered by third parties.\3\ The Commission received twenty-
five comments from twenty-one commenters, including an automobile
auction firm, an automotive repair firm, an online seller of used cars,
automobile dealers, individual consumers, a consumer protection
attorney, a group of consumer advocacy organizations, national
automobile dealers' associations, state automobile dealers'
associations, suppliers of dealer forms, county consumer protection
agencies, the National Association of Attorneys General, the
International Association of Lemon Law Administrators, and the
Wisconsin Department of Transportation.\4\ Among other things,
commenters recommended that the Commission require dealers to provide
consumers with VHRs.\5\
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\2\ 73 FR 42285 (July 21, 2008).
\3\ 73 FR 42285.
\4\ https://www.ftc.gov/policy/public-comments/initiative-259;
https://www.ftc.gov/policy/public-comments/initiative-294.
\5\ https://www.ftc.gov/policy/public-comments/initiative-259;
https://www.ftc.gov/policy/public-comments/initiative-294.
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In December 2012, the FTC issued a notice of proposed rulemaking
(``NPRM'') with proposed changes to the Rule.\6\ In the NPRM, the
Commission proposed adding a statement to the Buyers Guide advising
consumers about
[[Page 81665]]
the availability of VHRs and directing consumers to an FTC website for
more information about those reports; changing the statement on the
Buyers Guide that describes the meaning of ``As Is'' when a dealer
offers to sell a used vehicle without a warranty; and adding a
statement, in Spanish, to the English Buyers Guide advising Spanish-
speaking consumers to ask for a Spanish Buyers Guide if they could not
read the English version. The NPRM also requested comments on revising
the Buyers Guide to include non-dealer warranty boxes and a revised
List of Systems that contained airbags and catalytic converters. In
response to the NPRM, the Commission received nearly 150 comments from
members of the public, including automobile dealers, consumer
attorneys, consumer advocacy organizations, automobile dealer
associations, providers of VHRs, legal aid agencies, consumer
protection agencies, and state attorneys general.\7\
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\6\ 77 FR 74746 (Dec. 17, 2012).
\7\ Public comments on the NPRM are available at: https://www.ftc.gov/policy/public-comments/initiative-460.
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After reviewing the comments, the Commission published a
supplemental notice of proposed rulemaking (``SNPRM'').\8\ In the
SNPRM, the Commission proposed additional modifications to address
concerns raised by commenters and sought comments on alternative
proposals and issues that commenters identified in response to the
NPRM. The Commission proposed amending the Rule to require that dealers
who had obtained a VHR on an individual vehicle indicate on the Buyers
Guide that they had obtained such a report and would provide a copy to
consumers who requested one. The proposal retained, with modifications,
the statement proposed in the NPRM to encourage consumers to obtain
VHRs, to search for safety recalls, and to visit a proposed FTC website
for more information. The proposed amended Rule would not have required
dealers to obtain VHRs and would not have mandated a specific type of
VHR or designated a specific provider of the reports.
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\8\ 79 FR 70804 (Nov. 28, 2014). Public comments on the SNPRM
are available at: https://www.ftc.gov/policy/public-comments/initiative-583. Comments cited in this notice are identified by the
name of the commenter (organization or individual) followed by the
year of the comment. The designation (2015) identifies comments made
in reference to the SNPRM and (2013) identifies comments made in
reference to the NPRM (e.g., Center for Auto Safety (``CAS'') (2015)
is the CAS comment on the SNPRM).
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The Commission also proposed modifying the Buyers Guide statement
that describes the meaning of an ``As Is'' sale in light of comments
concerning a revision of the statement proposed in the NPRM. The ``As
Is'' statement is meant to clarify that a dealer is offering the
vehicle for sale without a warranty, i.e., without any undertaking or
promise by the dealer to be responsible for post-sale repairs to the
vehicle. The Commission also sought comments on providing boxes on the
front of the Buyers Guide where dealers could disclose manufacturer and
other non-dealer warranties, a Spanish statement on the English Buyers
Guide advising Spanish-speaking consumers to ask for a Spanish Buyers
Guide, and a revision to the descriptive language on the ``Implied
Warranties Only'' Buyers Guide.
After reviewing the entire record, the Commission declines to adopt
the approach proposed in the SNPRM, which would have required dealers
that had obtained a VHR to check a new Buyers Guide box indicating that
they had obtained a VHR and would provide a copy upon request. Instead,
similar to what was proposed in the NPRM, the Commission has decided to
add a statement to the Buyers Guide encouraging consumers to seek
vehicle history information and directing consumers to an FTC website
for more information. The Commission is aware that the marketplace for
vehicle history information is changing rapidly and will continue to
monitor developments in this area.
The Commission also has decided to revise the ``As Is'' statement
proposed in the SNPRM. The revised statement in the Final Rule is:
AS IS--NO DEALER WARRANTY
THE DEALER DOES NOT PROVIDE ANY WARRANTY FOR ANY REPAIRS AFTER SALE.
(See Figure 1). The Commission is also adopting the revised
``Implied Warranties Only'' disclosure proposed in the NPRM for use in
jurisdictions that prohibit ``As Is'' used vehicle sales.\9\ (Figure
2).
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\9\ See 16 CFR 455.2(b)(ii), 77 FR at 74768, 74770 (Figure 2).
The Commission did not receive comments on the proposed revision to
the ``Implied Warranties Only'' disclosure.
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The Commission has decided to modify the Buyers Guide in other ways
proposed in the NPRM and SNPRM. The modified Buyers Guide in the Final
Rule includes boxes on the front of the Buyers Guide where dealers can
disclose manufacturer and other non-dealer warranties. The Commission
is also reformatting the Service Contract box on the front of the
Buyers Guide to make it flush with the non-dealer warranty boxes.
The Commission is adding a statement in Spanish to the front of the
English Buyers Guide. The statement alerts Spanish-speaking consumers
who cannot read the English Buyers Guide to ask for a Spanish Buyers
Guide, if the dealer conducts the sale in Spanish. The additional
Spanish statement is not intended to change the Rule's existing
requirement that dealers provide a Spanish Buyers Guide if the dealer
conducts a sale in Spanish.
II. Basis for Final Rule and Analysis of Public Comments
The Commission received forty-one comments during the SNPRM comment
period from groups and individuals. The Commission has considered those
comments as well as the comments submitted in response to the NPRM and
the 2008 Regulatory Review in promulgating the Final Rule. Commenters
on the three notices include consumer advocacy groups, industry trade
associations, state attorneys general (``State AGs''),\10\ state
regulatory agencies, attorneys who practice consumer law, and
individual consumers.
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\10\ Although the state attorneys general commented
collectively, the group of state attorneys general who joined the
comment on the NPRM differs from the group who commented on the
SNPRM. State AG Group (2015) refers to the Mar. 17, 2015, SNPRM
comment, and State AG Group (2013) refers to the Mar. 13, 2013, NPRM
comment.
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A. Vehicle History Information
i. Commission Decision and Summary
The Commission has decided to modify the Buyers Guide by adding a
statement that advises consumers to obtain VHRs and to visit an FTC
website for more information. The Final Rule is similar to the approach
proposed in the NPRM, in which the Commission proposed a Buyers Guide
containing a statement that advised consumers to obtain VHRs and
directed consumers to an FTC website for more information.\11\ In the
SNPRM, the Commission proposed an alternative approach that would have
required dealers who had obtained VHRs to check a box so indicating and
to provide a copy of the report to consumers upon request. As described
in greater detail below, commenters provided a range of views about
both proposals and discussed various other approaches to disclosing
vehicle history information.
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\11\ 77 FR at 74754-74756.
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The informational approach to VHRs adopted here should help reduce
deception and consumer injury that could result from undisclosed or
deceptive disclosure of title brands or other pieces of problematic
history. It
[[Page 81666]]
reduces the potential that, under the SNPRM approach, consumers will
rely too much on particular VHRs and dealers as a source of mechanical
condition information, and instead directs consumers to a source of
information on the FTC's website which is independent of the dealer.
Moreover, the informational approach does not appreciably increase the
burden on dealers beyond that already imposed by the Rule. By
recommending that consumers obtain their own VHRs from whatever source
best suits their needs, the Buyers Guide may make consumers more
educated about VHRs and prompt more consumers to make appropriate use
of them.
In reaching this decision, the Commission has considered the
differences in VHRs and providers, the strengths and limitations of
VHRs, and the evolving development of the collection and distribution
of vehicle history information. The Commission notes that consumers
currently can gain access to VHRs at no cost from many dealers,
automobile market websites, buying services, and other sources and can
purchase VHRs at a nominal cost from commercial vendors. This approach
balances the benefits to consumers of vehicle history information and
the burden of requiring dealers to procure and disclose vehicle history
information.
ii. Sources of Vehicle History Information
Vehicle history information is available from a variety of public
and private sources. These sources include state titling agencies
(e.g., departments of motor vehicles (``DMVs'')), the National Motor
Vehicle Title Identification System (``NMVTIS''), and commercial
vehicle history providers, such as CARFAX and Experian's AutoCheck.
NMVTIS is a nationwide electronic database of vehicle history
information created pursuant to the Anti-Car Theft Act of 1992.\12\
NMVTIS was created to prevent the introduction or reintroduction of
stolen motor vehicles into interstate commerce, to protect states and
individual and commercial consumers from fraud, to reduce the use of
stolen vehicles for illicit purposes including funding of criminal
enterprises, and to provide consumers protection from unsafe
vehicles.\13\ It is designed to enable nationwide access to title
information submitted by state titling agencies, and information
concerning junk or salvage vehicles that insurers, recyclers, and
salvage yards are required by law to submit.\14\ It is intended to
serve as a reliable source of title and brand history.\15\ NMVTIS is
limited to providing data on five key indicators associated with
preventing auto fraud and theft: Current title information, brand
history, odometer reading, total loss history, and salvage history.\16\
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\12\ 49 U.S.C. 30501-30505. The United States Department of
Justice published the final rule implementing NMVTIS in 2009. 28 CFR
part 25, subpart B, 74 FR 5740 (Jan. 30, 2009). For a detailed
discussion of NMVTIS information, and limitations of that
information, see http://www.vehiclehistory.gov/nmvtis_consumers.html.
\13\ See Understanding an NMVTIS Vehicle History Report,
available at: http://www.vehiclehistory.gov/nmvtis_understandingvhr.html.
\14\ Id.
\15\ Brands are descriptive labels (applied by state motor
vehicle titling agencies) regarding the status of a motor vehicle,
such as ``junk,'' ``salvage,'' and ``flood.'' NMVTIS keeps a history
of all brands that have been assigned to the vehicle by any state.
See id. Individual state laws determine the application of title
brands. The meaning of a brand and the brands that states assign
differ by state.
\16\ http://www.vehiclehistory.gov/nmvtis_understandingvhr.html.
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Although NMVTIS is intended to be a reliable source of vehicle
brand and title history, it does not contain detailed repair history
and may not include significant damage history.\17\ For example,
information on previous significant damage may not be included in
NMVTIS if a vehicle was never determined to be a ``total loss'' by an
insurer (or other appropriate entity) or branded by a DMV.\18\ On the
other hand, an insurer may be required to report a vehicle as a ``total
loss'' even if the state's titling agency does not brand it as ``junk''
or ``salvage.'' \19\
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\17\ See Consumer Access Product Disclaimer available through:
http://www.vehiclehistory.gov/index.html.
\18\ See Id.
\19\ Id.
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The NMVTIS Web site, www.vehiclehistory.gov, contains live links to
the Web sites of approved commercial vendors that sell NMVTIS reports
to the public.\20\ Consumers can purchase NMVTIS reports from these
vendors for a few dollars. Approved vendors to both consumers and
dealers are subject to quality control standards designed to ensure
consistency with the intent and purpose of the Anti-Car Theft Act and
its implementing regulations.
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\20\ The American Association of Motor Vehicle Administrators
(``AAMVA'') operates NMVTIS under the oversight of the Department of
Justice. AAMVA is responsible for approving vendors. Approved NMVTIS
vendors must comply with quality control standards and are monitored
by AAMVA.
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Title and other vehicle history information are also available in
commercial reports from vendors such as CARFAX and Experian's
AutoCheck. CARFAX and AutoCheck enable consumers to purchase VHRs, and
some dealers distribute them to consumers free of charge. CARFAX and
AutoCheck obtain data from state titling agencies, insurers, repair
facilities, automobile auctions, salvage facilities, and fleet rental
firms. These reports can include information on prior ownership, usage,
damage, repair history, etc. They may even disclose whether a vehicle
has had regular oil changes. Both CARFAX and AutoCheck offer mobile
apps that allow real-time access to their reports. In addition, both
CARFAX and AutoCheck offer consumers an option to pay a flat fee to
receive multiple reports.
Commercial VHRs may include vehicle condition data from sources
other than NMVTIS.\21\ According to CARFAX, NMVTIS reports carry
limited title, odometer, brand, and salvage/total loss information,
whereas commercial reports may contain ``a wealth of information about
brands, total losses, prior wrecks, airbag deployments, open recalls,
odometer readings, and even maintenance history.'' \22\ Experian noted
that its AutoCheck VHRs can include information about fire and flood
damage; accident damage, including the number and severity of any
accidents; number of prior owners; auction inspection announcements;
salvage, theft, or lemon; \23\ fleet or rental use; frame damage;
service and maintenance records; and manufacturer recalls.\24\
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\21\ Consumer Access Product Disclaimer available through:
http://www.vehiclehistory.gov/index.html.
\22\ CARFAX (2013) at 1.
\23\ State ``lemon'' laws typically require a manufacturer to
buy back a new vehicle if defects in the vehicle cannot be repaired
after a reasonable number of attempts. See Lemon Law Basics
available from the Int'l Ass'n of Lemon Law Administrators
(``IALLA'') at http://ialla.net/pub_1.htm. Some states use the title
brands lemon, lemon law buyback, or manufacturer buyback, or similar
terms, to designate vehicles that have been reacquired by a
manufacturer under a state lemon law.
\24\ Experian (2013) at 3.
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iii. Summary of Procedural History and Vehicle History Proposals
In the NPRM, the Commission proposed a statement on the Buyers
Guide informing consumers about the availability of VHRs and advising
consumers to obtain the reports. In response, many consumer advocacy
groups, the State AG Group, and some NMVTIS vendors recommended that
the Commission require dealers to obtain NMVTIS reports and/or adopt
California Assembly Bill 1215 (``AB 1215'') (codified as Cal. Vehicle
Code 11713.26), or some variation of it.\25\ AB
[[Page 81667]]
1215 requires dealers to obtain NMVTIS reports and to affix a warning
label to a vehicle if the NMVTIS report shows a previous salvage or
other state title brand or contains some other reported event, such as
a total loss report from an insurance company. Broadly speaking,
dealers' groups and the leading vendors of commercial VHRs opposed
requiring dealers to obtain NMVTIS or commercial reports, or a
regulation that would effectively choose one type of provider of VHRs
over others.\26\
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\25\ E.g., Consumers for Auto Reliability and Safety (``CARS''),
et al. (2013) (fourteen consumer advocacy groups joined the
comment); Legal Aid Justice Center (``LAJC'') (2013) (CARS joined
the comment); Nat'l Salvage Vehicle Reporting Program (``NSVRP'')
(2013); Nat'l Vehicle Service (``NVS'') (2013); CARCO (2013); ADD
(2013) at 3-4; State AG Group (2015) (``we encourage the FTC to
require dealers to obtain a NMVTIS report'').
\26\ CARFAX (2013) at 3 (FTC should not choose ``exclusive
technology and system by only providing information about a single
public or private source of vehicle history''); Experian (2013) at
5-6 (NPRM ``strikes a good balance in protecting used car consumers
without being overly burdensome;'' FTC should not promote one
provider or source of vehicle history information over another;
NMVTS statute defines what information is included in a NMVTIS
report and therefore NMVTIS reports are not likely to be as
``robust'' as commercial reports); NADA (2013) at 3 (questioning
whether Rule permits NPRM proposed VHR statement and commenting that
proposed Web site should not endorse, link to, or otherwise imply
legitimacy of any particular vehicle history company, report, or
service); NIADA (2013) at 3 (commending Commission for not requiring
dealers to provide vehicle history reports/damage history).
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Rather than issuing a final rule based on the NPRM or AB 1215, the
Commission published the SNPRM to seek comments on requiring dealers to
disclose on the Buyers Guide if they had a VHR and to provide a copy of
whatever report they had to requesting consumers. The SNPRM also
invited public comments on several other approaches to vehicle history
information proposed in the comments on the NPRM. The various
approaches ranged from recommending that the Rule not address vehicle
history information at all to approaches that generally fell somewhere
between the NPRM's informational approach and the required disclosures
of AB 1215.
iv. Analysis of Comments
a. The Commission's Authority To Promulgate a Rule Addressing Vehicle
History Information
The National Automobile Dealers Association (``NADA'') and the
National Independent Automobile Dealers Association (``NIADA'') argue
that a rule provision dealing with VHRs would exceed the Commission's
authority.\27\ Specifically, they contend that the Used Car Rule was
promulgated under Title I of the Magnuson-Moss Warranty Act, 15 U.S.C.
2309(b), which directs the Commission to initiate ``a rulemaking
proceeding dealing with warranties and warranty practices in connection
with the sale of used motor vehicles,'' and that vehicle history
information is unrelated to warranty and warranty practices.\28\
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\27\ See NADA (2015) at 3-4; NIADA (2015) at 3. NADA is the
national trade association of manufacturer-franchised new vehicle
dealers. NIADA is the national trade association of independent non-
franchised used vehicle dealers.
\28\ Public Law No. 93-637, formally known as the Magnuson-Moss
Warranty--Federal Trade Commission Improvements Act, has two titles.
Title I concerns consumer product warranties and includes a
provision directing the FTC to ``initiate within one year after the
date of enactment of this Act a rulemaking proceeding dealing with
warranties and warranty practices in connection with the sale of
used motor vehicles.'' 15 U.S.C. 2309(b). Title II amended various
parts of the FTC Act and added what is currently section 18 of the
FTC Act, which specifies the applicable procedures when the
Commission issues a trade regulation rule.
Section 18 rulemakings are sometimes called Magnuson-Moss
rulemakings, after the name of the bill that created section 18 of
the FTC Act. But rulemakings under Title I of the Magnuson-Moss
Warranty Act--that is, rulemakings related to warranties--are
governed by the procedural requirements described in 15 U.S.C.
2309(a), not by the procedural requirements described in section 18
of the FTC Act. For warranty rulemakings under 15 U.S.C. 2309(a),
the Commission is required to follow the notice-and-comment
procedures in 5 U.S.C. 553 and additionally to provide ``interested
persons an opportunity for oral presentations of data, views, and
arguments.'' 15 U.S.C. 2309(a).
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NADA, but not NIADA, further argues that the Commission must use
more elaborate rulemaking procedures than those specified by the
Administrative Procedure Act (``APA'') \29\ in order to reach certain
independent dealers that sell used cars but (under NADA's
interpretation) do not ``service'' them.\30\ Section 1029 of the Dodd-
Frank Act (``DFA'') \31\ authorizes the FTC to use the more informal
APA rulemaking procedures to prescribe rules with respect to motor
vehicle dealers 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(a), (d). According to NADA, certain
entities that are subject to the Used Car Rule (although apparently
none of NADA's members themselves) are not ``predominantly engaged in
the sale and servicing'' of motor vehicles because they only sell and
do not service vehicles.\32\ NADA thus argues that, to reach these
entities, any amendments affecting all dealers subject to the Used Car
Rule must be promulgated using the heightened procedures required by
section 18 of the FTC Act.\33\
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\29\ 5 U.S.C. 500-596.
\30\ See NADA (2015) at 4.
\31\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, sec. 1029 (codified at 12 U.S.C. 5519).
\32\ See NADA (2015) Exh. A at 6 & n.6.
\33\ NADA (2015) Exh. A at 1, 8. NADA also argues that, ``[a]t
the very least, the FTC cannot go below'' the hybrid rulemaking
procedures found in 15 U.S.C. 2309(a)--i.e., the notice-and-comment
procedures of 5 U.S.C. 553 plus an opportunity for oral
presentations. NADA (2015) Exh. A at 6 n.7.
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(1) The Commission Has Statutory Authority To Issue These Rule
Amendments
NADA and NIADA argue that the Commission lacks statutory authority
to issue these Rule amendments. That argument, however, founders on the
mistaken premise that the Rule rests solely on the Magnuson-Moss
Warranty Act and not also on the FTC Act. As discussed in more detail
below, the Rule has historically rested on both Title I of the
Magnuson-Moss Warranty Act and the Commission's authority under the FTC
Act to issue rules addressing deceptive acts or practices. In the
current proceeding, the Commission is issuing the rule amendments
solely under the latter authority.
Ever since the Used Car Rule was promulgated, the Commission has
made clear that the authority for the Rule ``is derived from two
sources'': Title I of the Magnuson-Moss Warranty Act and the FTC
Act.\34\ The specific authority under the FTC Act is section 18, which
authorizes the FTC to issue trade regulation rules that ``define with
specificity acts or practices which are unfair or deceptive'' within
the meaning of section 5 of the FTC Act.
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\34\ See Trade Regulation Rule; Sale of Used Motor Vehicles, 49
FR 45692, 45703 (Nov. 19, 1984). For this same reason, the authority
citation for part 455 has always cited both statutes. See id. at
45725; Regulatory Flexibility Act and Periodic Review of Used Motor
Vehicle Trade Regulation Rule, 60 FR 62195, 62205 (Dec. 5, 1995).
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The dual bases of statutory authority are also reflected in the
Rule's existing provisions and the procedures that the Commission used
to promulgate the Rule. Some of the current provisions in the Used Car
Rule deal with unfair or deceptive acts or practices that are not
directly related to warranties or warranty practices.\35\ Moreover,
given that the Rule is in part a trade regulation rule, the Commission
followed the more elaborate procedures in section 18 of the FTC Act
when promulgating the Used Car Rule, not the simpler procedures that
would have been available if the Rule had been issued solely under the
Magnuson-Moss Warranty Act.
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\35\ See, e.g., 16 CFR 455.1(a)(1) (making it a deceptive act or
practice for any used vehicle dealer to misrepresent the mechanical
condition of a used vehicle).
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NADA and NIADA are thus incorrect in arguing that the VHR
amendments exceed the FTC's rulemaking authority.
[[Page 81668]]
The rule amendments are based solely on the Commission's authority
under the FTC Act to issue rules addressing deceptive acts or
practices. In particular, the VHR amendments will help prevent
deception in the market for used vehicles, as previously discussed in
the NPRM and as further explained herein.\36\ The Commission has
properly acted under sections 5 and 18 of the FTC Act in promulgating
the VHR amendments.
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\36\ 77 FR at 74755-56; section II.A.iv.f., supra.
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(2) The DFA Authorizes the Commission To Issue These Rule Amendments
Pursuant to APA Procedures
Section 1029 of the DFA authorizes standard APA rulemaking
procedures when the Commission uses its section 5 and section 18
rulemaking authority to address unfair or deceptive acts or practices
by motor vehicle dealers. The DFA defines a ``motor vehicle dealer'' to
mean someone who is (1) licensed by a State or territory to sell motor
vehicles, and (2) takes title, owns, or has physical custody of
them.\37\
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\37\ DFA 1029(f)(2).
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Section 1029(d) authorizes the FTC ``to prescribe rules under
sections 5 and 18(a)(1)(B) of the Federal Trade Commission Act'' with
respect to motor vehicle dealers that are ``predominantly engaged in
the sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both.'' \38\ The DFA authorizes the Commission to
promulgate such rules ``in accordance with'' the APA procedures in 5
U.S.C. 553, ``[n]otwithstanding section 18 of the Federal Trade
Commission Act.'' DFA 1029(d).
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\38\ DFA 1029(a), (d).
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NADA argues that some non-franchised used car dealers are outside
the scope of DFA 1029(a) because they sell but do not ``service''
vehicles.\39\ This argument, however, relies on an unduly narrow
interpretation of ``servicing.'' Although the DFA does not define
``servicing,'' the plain meaning of that term, along with the statutory
language in DFA 1029(b)(3), suggests that the term should be read
broadly to encompass activities such as ``repair, refurbishment, [or]
maintenance,'' as well as other services.\40\
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\39\ See NADA (2015) Exh. A at 6 & n.6. It is unclear from
NADA's comment whether NADA is separately arguing that certain
entities subject to the Used Car Rule fall outside the DFA's
definition of ``motor vehicle dealer'' which is limited to entities
licensed by a State or territory to sell motor vehicles. 12 U.S.C.
5519(f)(2)(A). To the extent that NADA is making this assertion,
NADA does not develop it and the Commission therefore declines to
address it. In any event, many, if not all, used vehicle sellers
subject to the Rule are also required to be licensed by the state or
territory in which they do business.
\40\ See DFA 1029(b)(3) (creating a category of persons who
offer or provide ``a consumer financial product or service not
involving or related 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'' (emphasis added)).
---------------------------------------------------------------------------
That definition captures activities undertaken by essentially all
used car dealers. For example, whether or not they offer post-sale
repair or maintenance services, used car dealers routinely prepare
vehicles for sale by addressing any obvious mechanical problems and, as
the Commission has previously noted, by undertaking the ``general
industry practice of appearance reconditioning.'' \41\ Such activities
are a type of ``servicing'' within the plain meaning of that term and
fall easily within the category of ``refurbishment'' activities
mentioned in DFA 1029(b)(3). Because the Commission previously
determined that used car dealers ``routinely'' recondition vehicles,
id., and NADA has not offered any evidence that used car dealers have
stopped engaging in this ``general industry practice,'' the Commission
finds that dealers' practice of reconditioning vehicles is sufficient
to satisfy DFA 1029(a)'s ``and servicing'' language.
---------------------------------------------------------------------------
\41\ 49 FR at 45701. The record contains no evidence that the
industry practice of reconditioning used vehicles is less widespread
today than it was in 1984 when the Commission adopted the Rule.
---------------------------------------------------------------------------
The legislative history of DFA 1029 likewise confirms that Congress
intended to preserve the FTC's existing rulemaking authority over auto
dealers but streamline the procedures applicable to all such dealers,
not only to an arbitrarily defined subset of them. When Congress
enacted section 1029 of DFA, Congress sought to achieve two ends.
First, Congress was aware of and intended to preserve the FTC's
existing authority over auto dealers. For example, Representative Frank
said, ``We are not increasing the authority that the FTC has. There is
no further grant of powers other than what the FTC already has.'' \42\
Senator Dodd similarly stated, ``The Federal Trade Commission has
jurisdiction on--on automobile dealerships so we're not breaking new
ground. We're just, in fact, providing some tools for them to do this
job.'' \43\
---------------------------------------------------------------------------
\42\ Transcript of House-Senate Conference Committee Markup of
H.R. 4173, Financial Regulatory Overhaul Bill (June 24, 2010),
http://www.cq.com/doc/congressionaltranscripts-3690270 (last visited
Dec. 4, 2015).
\43\ Transcript of House-Senate Conference Committee Markup of
H.R. 4173, Financial Regulatory Overhaul Bill (June 22, 2010),
http://www.cq.com/doc/congressionaltranscripts-3693204 (last visited
Dec. 4, 2015).
---------------------------------------------------------------------------
Second, Congress was aware that the FTC's existing section 18
rulemaking process is time consuming and wanted to speed up the FTC's
rulemaking process with respect to auto dealers. As Representative
Frank explained, the reason for section 1029 was to ``expedite the
ability of the FTC to act responding to'' concerns about dealers'
unfair or deceptive acts or practices.\44\ Representative Watt noted
that requiring the FTC to use its existing section 18 procedures ``that
could take up to eight years before you can do something to respond to
some predatory practice'' might create ``very bad consequences.'' \45\
---------------------------------------------------------------------------
\44\ Transcript of House-Senate Conference Committee Markup of
H.R. 4173, Financial Regulatory Overhaul Bill (June 24, 2010),
http://www.cq.com/doc/congressionaltranscripts-3690270 (last visited
Dec. 4, 2015).
\45\ Id.
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Congress never suggested that it intended to apply the expedited
rulemaking procedures to only a subset of the car dealers who are
subject to the FTC's jurisdiction. Moreover, Congress had no clear
basis for requiring different rulemaking procedures for different used-
car dealers depending on what types of post-sale services those dealers
happened to offer. In short, NADA's argument not only conflicts with
the statutory text and legislative history, but would serve no rational
policy objective.
Finally, as discussed, NADA's argument about the scope of the FTC's
APA rule-making authority rests on an unduly narrow interpretation of
``servicing'' that includes only post-sale activities and excludes pre-
sale activities such as refurbishing. But NADA's members are franchised
dealers who are required to offer post-sale or post-lease servicing and
warranty work as part of their franchise agreements. NADA's procedural
argument could thus apply only to a subset of the non-franchised
dealers separately represented in part by NIADA, which, notably, does
not make the argument. The record contains no data to support NADA's
assumption that many non-franchised dealers provide no post-sale
``servicing,'' which suggests that NADA's argument on this point may
have limited applicability even if the term ``servicing'' were
construed narrowly to include only post-sale activities.
b. Incorporating the Disclosure of Vehicle History Information Into the
Rule
Some commenters raised arguments against including vehicle history
information in the Buyers Guide. First,
[[Page 81669]]
NADA and NIADA commented that the Rule and the Buyers Guide are limited
to warranty disclosures and that the disclosure of vehicle history
information is outside the scope of the Rule.\46\ As explained above in
subsection (a), this argument is based on a misunderstanding of the
Rule's purpose. From its inception, the Rule has addressed unfair or
deceptive acts or practices as well as warranty practices.\47\ For this
reason, the Buyers Guide already contains information that is primarily
intended to help prevent consumer deception and that is not directly
related to warranty disclosures, such as the spoken promises warning,
the list of major defects and systems, and the advice to ask about a
pre-purchase inspection.
---------------------------------------------------------------------------
\46\ NADA (2015) at 5; NIADA (2015) at 3; see also NADA (2015)
Exhibit A, note 1 (questioning whether, in 1984, the Commission
exceeded its Magnuson Moss authority by adopting the pre-purchase
inspection notice).
\47\ For example, the Rule provides that misrepresenting the
mechanical condition of a vehicle is a deceptive act or practice
when a used vehicle dealer sells or offers to sell a used vehicle.
16 CFR 455.1(a)(1). See note 35 supra.
---------------------------------------------------------------------------
The Commission concludes that incorporating vehicle history
information into the Rule fits within the general framework of the
existing Rule and would benefit consumers by reducing deception in the
used car market. Encouraging consumers to obtain VHRs independently
will serve to direct consumers to an additional source of pre-sale
information that is not controlled by the dealer and thereby lessen the
consumer's reliance on dealers for information. The incorporation of
vehicle history information should help reduce deception by
unscrupulous dealers, because any misrepresentations will be
contradicted by information that consumers have obtained independently.
Second, NADA and CARFAX commented that including vehicle history
information on the Buyers Guide is not necessary because dealers
already obtain and share commercial VHRs with consumers.\48\ Of course,
not all dealers obtain and share VHR information, and the prevalence of
the practice among non-franchised independent dealers is unclear.\49\
In addition, unscrupulous dealers might provide out-of-date reports or
pick reports that contain the least amount of negative data. A
statement on the Buyers Guide about the availability of VHRs will help
ensure that consumers are not deceived by such practices.
---------------------------------------------------------------------------
\48\ NADA (2015) at 6-7 (NADA's comment is limited to the
practices of franchised new vehicle dealers); CARFAX (2015) at 12.
\49\ See NIADA (2015) at 8 (NIADA does not know how frequently
independent dealers who access commercial VHRs provide them to
consumers).
---------------------------------------------------------------------------
Finally, some commenters expressed doubt about the reliability of
vehicle history information.\50\ NADA commented that, although general
information related to vehicle history might be appropriate on a
Commission website, a reference to specific commercial providers would
not.\51\ NADA argued that consumers could gain a false sense of
security from the reports, especially if they are required by the
government and impliedly have the Commission's imprimatur on them.\52\
For those reasons, NADA commented that the FTC should include a
disclaimer about the limitations of VHRs, if the reports are mentioned
at all.\53\
---------------------------------------------------------------------------
\50\ See, e.g., NADA (2015) at 5 (``it is important to
understand that VHRs are unreliable and limited . . . only as good
as the information available to the VHR providers.'').
\51\ NADA (2013) at 3 (FTC website, if created at all, ``should
be limited to educational materials and should not endorse, link to,
or otherwise imply the legitimacy of any particular vehicle history
company, report, or service.'').
\52\ NADA (2013) at 4.
\53\ NADA (2015) at 9; NADA (2013) at 4.
---------------------------------------------------------------------------
A disclaimer, however, is unnecessary because the reports are
typically dated and contain disclaimers about the limits of the data in
them.\54\ In addition, the website listed on the Buyers Guide includes
information about the limits of data in VHRs.
---------------------------------------------------------------------------
\54\ See, e.g., NMVTIS Consumer Access Product Disclaimer
available at www.vehiclehistory.gov.
---------------------------------------------------------------------------
Some commenters approved of the informational approach proposed by
the NPRM, i.e., adding a statement to the Buyers Guide advising
consumers to obtain a VHR and directing consumers to an FTC
website.\55\ Two vehicle history vendors commented that the FTC should
avoid promoting a particular vendor or type of technology to deliver
VHRs.\56\ In addition, the auto dealer associations recommended that
the Rule not favor a particular source of vehicle history
information.\57\ NIADA commented that the NPRM's proposed approach of
directing consumers to a website and advising an independent inspection
is ``an acceptable compromise.'' \58\ Experian commented that the NPRM
proposal ``strikes a good balance in protecting used car consumers
without being overly burdensome.'' \59\
---------------------------------------------------------------------------
\55\ E.g., CARFAX (2013) at 1.
\56\ CARFAX (2013) at 2-3; Experian (2013) at 1.
\57\ NADA (2013) at 4; NIADA (2013) at 3.
\58\ NIADA (2013) at 3.
\59\ Experian (2013) at 5.
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The Commission has decided to use an informational approach to
vehicle history that reduces consumer reliance on dealers for
information. The chosen approach does not endorse any type of or vendor
of vehicle history information. Encouraging consumers to obtain VHRs
independently will reduce deception in the marketplace by directing
consumers to sources of information about the vehicles that they are
considering buying that are not controlled by the selling dealer and
thereby reduce the potential for consumers to rely upon
misrepresentations from unscrupulous dealers.
c. Alternative Approaches to Incorporating Vehicle History Information
Into the Rule
The commenters who recommended incorporating vehicle history
information into the Rule proposed several different approaches. Some
favored an informational approach; some recommended a Rule that, like
AB 1215, would require dealers to obtain VHRs and to disclose
information about them to consumers; some suggested various approaches
in between. Below, the Commission discusses why it has declined to
adopt three of the alternative approaches recommended by commenters.
First, in response to the NPRM and the SNPRM, the State AG Group,
other regulators, and consumer advocacy groups stated that they prefer
an approach like AB 1215 along with a requirement that dealers obtain
and provide consumers with NMVTIS reports.\60\ For example, the
National Consumer Law Center commented that dealers should be required
to obtain a report that includes up-to-date vehicle history information
from NMVTIS.\61\ Otherwise dealers might pick reports that contain the
least amount of negative data, and VHR vendors might produce
[[Page 81670]]
reports to cater to dealer demand for more favorable reports.\62\
---------------------------------------------------------------------------
\60\ State AG Group (2015) at 7; CAS (2015) at 1 (required
disclosure of NMVTIS information); Nat'l Consumer Law Center
(``NCLC''), et al. (comment joined by five consumer advocacy group
including CARS) (2015) at 1-4 (FTC should require dealers to obtain
VHRs that meet a minimum standard of containing NMVTIS information);
CARS (2013) at 2 (FTC should require dealers to check NMVTIS and
post AB 1215 warning label); Consumers Union (2015) at 1 (FTC should
require dealers to check NMVTIS and other auto history databases as
appropriate); Steinbach (consumer attorney) (2015) at 2 (FTC should
incorporate NMVTIS data into Buyers Guide or require dealers to
provide NMVTIS reports); Maier (consumer attorney) (2015) (FTC
should require NMVTIS and safety recall information); Holcomb (VA
DMV) (2015); NSVRP (2015) (FTC should adopt AB 1215); Stiger (Los
Angeles County Department of Consumer Affairs) (2015) (noting that
AB 1215 has been beneficial, office approves of SNPRM proposal to
require dealers to indicate if they have a VHR and to provide a copy
upon request).
\61\ NCLC (2015) at 4.
\62\ NCLC (2015) at 3. See also NIADA (2015) at 3 (unscrupulous
dealers may engage in VHR shopping); NSVRP (2015) at 3 (allowing any
commercial report, instead of NMVTIS, would enable VHR shopping);
Boyer (Nov. 20, 2014) (will companies evolve ``to provide less
objective and more `positively spun' reports for dealers?'').
---------------------------------------------------------------------------
The Commission, however, has decided that it will not adopt an
amended Rule modeled on AB 1215 for the reasons already stated in the
SNPRM.\63\ In addition, the Commission cannot give dealers the
protection from liability for inaccuracies in NMVTIS reports provided
by AB 1215.\64\ The Commission recognizes the limitations of VHR
information as an indicator of a vehicle's current mechanical condition
and does not wish to over-emphasize the value of VHR information over
other potentially more probative sources of information, such as a pre-
purchase mechanical inspection. In addition, requiring dealers to
provide NMVTIS reports might discourage consumers from investigating
other types of VHRs from other vendors.
---------------------------------------------------------------------------
\63\ 79 FR at 70808.
\64\ AB 1215 grants dealers immunity from liability for
inaccuracies, errors, and omissions in NMVTIS reports. Cal. Veh.
Code 11713.26(f).
---------------------------------------------------------------------------
Second, as an alternative to the AB 1215 approach, the State AG
Group proposed a vehicle history disclosure model similar to the SNPRM
with the addition of a ``branded title checkbox'' that the dealer would
be required to check to indicate that the vehicle's title had a
brand.\65\ Like the SNPRM, the State AG Group's proposal would not
require dealers to obtain VHRs or designate a type of or vendor of
VHRs.\66\
---------------------------------------------------------------------------
\65\ State AG Group (2015) at 6; State AG Group (2013) at 5-6
(the ``branded'' title checkbox would indicate that the vehicle's
title ``will carry one or more of the following brands: Salvage,
Prior Salvage, Rebuilt, Remanufactured, Flood, Lemon Law, or similar
brand.'').
\66\ State AG Group (2015) at 6.
---------------------------------------------------------------------------
The ``branded title check box'' proposal from the State AG Group
suffers from a number of practical problems if dealers are not also
required to obtain either NMVTIS reports or other VHRs. Without a
requirement that dealers obtain a VHR, the branded title check box
could encourage dealers to forego VHRs entirely or to acquire only
favorable ones. In addition, if an unchecked box, indicating that the
dealer is unaware that the vehicle has a branded title, is incorporated
into the contract as the dealer's affirmative representation that the
vehicle in fact does not have a branded title, the dealer could face
liability if a subsequent VHR shows a branded title. The lack of a
checkmark could also suggest to consumers that the vehicle is in good
condition when the lack of a checkmark is actually the far more limited
representation that the dealer does not know whether the vehicle has a
branded title.
Third, CAS commented that its preferred approach is ``something of
a hybrid'' between AB 1215 and the State AG Group's approach.\67\ CAS
would require dealers to obtain and to disclose NMVTIS reports, as
required by AB 1215, and to check a box, similar to the branded title
box suggested by the State AG Group, disclosing if the vehicle has a
title brand.\68\ CAS envisions an improved disclosure box along with
information about vehicle histories on the Buyers Guide and the FTC
websites.\69\ Dealers who check the box would be required to provide a
copy of any reports that they have obtained to requesting
consumers.\70\ CAS would require dealers to keep any report that they
view for as long as the dealer possesses the vehicle to which the
report applies.\71\
---------------------------------------------------------------------------
\67\ CAS (2015) at 1.
\68\ CAS (2015) at 1.
\69\ CAS suggests an improved disclosure box. CAS (2015) at 1,
note 2. Staff understands an improved disclosure box to mean one
that provides more information on the Buyers Guide about what the
NMVTIS report reveals, presumably similar to the AB 1215 warning
label, rather than simply an indication that the NMVTIS report (or
other VHR) indicates that the vehicle has a branded title.
\70\ Id. at 2. CAS would consider permitting dealers to provide
only the most recent report if the dealer has obtained multiple
reports from the same provider.
\71\ Id. at 2.
---------------------------------------------------------------------------
As noted, the Commission has decided against following AB 1215 and
requiring dealers to obtain NMVTIS reports.\72\ The Commission is also
not adopting the branded title check box proposed by the State AG
Group, and favored by CAS, for the reasons previously discussed.
---------------------------------------------------------------------------
\72\ See 79 FR at 70808.
---------------------------------------------------------------------------
The Commission is also not adopting the CAS approach because of the
recordkeeping that it seems to necessarily entail. The CAS approach
would impose new recordkeeping obligations by requiring dealers to keep
copies of any reports that they view. The purpose of the CAS
recordkeeping requirement is to prevent dealers from selecting
favorable reports or from, for example, viewing reports online, but not
printing or storing them, or obtaining information orally without ever
viewing, or possessing, an actual report. But it is not clear how the
Commission could construct detailed rules about when a dealer will be
deemed to have viewed a report that would encompass all situations or
how the Commission would enforce those rules if they could be devised.
d. Comments on the SNPRM Approach to Vehicle History Reports
As noted above, in the SNPRM, the Commission proposed requiring
dealers who had obtained VHRs to check a box so indicating and to
provide a copy of the report to consumers upon request. The SNPRM
proposal also contained additional text recommending that consumers
obtain a VHR, regardless of whether the box was checked, and advising
that consumers visit an FTC website for information on how to obtain a
VHR, how to search for safety recalls, and other topics. Many
commenters criticized the SNPRM approach.
Consumer advocacy groups identified several problems with the SNPRM
vehicle history approach. CAS, other consumer advocacy groups, and the
State AG Group note that dealers could avoid revealing negative
information in VHRs by, for example, picking and choosing among reports
to select the most favorable report, discarding older (or newer)
reports, selecting a report that showed the fewest problems, or
selecting a vendor that generates reports showing minimal problems.\73\
As noted, CAS commented that it prefers the State AG Group's approach
(requiring a title brand disclosure on the Buyers Guide and providing a
copy of the most recent report from each vendor) if the Commission does
not require dealers to provide NMVTIS reports.\74\ CAS notes that
either approach could be supplemented with a requirement that dealers
provide copies of the VHRs that the dealer possesses, but also tacitly
acknowledges the difficulty in devising and implementing such a
requirement.\75\
---------------------------------------------------------------------------
\73\ Id. at 2; State AG Group (2015) at 7 (dealers should not be
able to skirt requirement by discarding an observed VHR prior to
sale); NCLC (2015) at 2 (dealer could have third-party auctioneer or
broker pull report so that dealer does not possess it).
\74\ Id. at 2.
\75\ Id. at 3 (Requiring dealers to provide VHRs upon request
``will require very well-drafted controls on dealer practices
regarding vehicle history reports.'').
---------------------------------------------------------------------------
NADA further questioned the value of VHRs to consumers. NADA
reiterated its earlier comments that VHRs are unreliable and of limited
utility, which NADA states VHR vendors acknowledge in their own
disclaimers about the accuracy, reliability, or completeness of the
data in the reports.\76\ Given these
[[Page 81671]]
limitations, NADA, and others, commented that the SNPRM's checkbox
proposal could raise the prominence of VHR information in consumers'
minds to an inappropriately high level.\77\
---------------------------------------------------------------------------
\76\ NADA (2015) at 5-6, note 9. See also, e.g., Kelly (NJ AG
Div. Consumer Affairs) (2015) (unreliable information in CARFAX
reports); Kramer (Oregon DMV) (2015) at 1 (NMVTIS is limited because
not all states participate and NMVTIS information is not independent
information such as service records).
\77\ NADA (2015) at 4; Carlson (2015) (adding VHR to Buyers
Guide would give increased credibility to the reports); Copart
(vehicle auctioneer) (2015) at 1 (FTC should not endorse VHRs but
should continue to emphasize pre-purchase mechanical inspections,
which will ``provide more consumer protection than an often
incomplete vehicle history report.'').
---------------------------------------------------------------------------
Dealers' groups identified several additional problems with the
vehicle history approach proposed in the SNPRM. NADA questioned the
need for a rule about VHRs in the first instance because most
franchised dealers, and potentially other dealers, already provide VHRs
to consumers and because of a lack of evidence that dealers fail to
disclose known title brands.\78\ NADA commented that requiring dealers
to indicate on the Buyers Guide whether they have a report and
requiring dealers to provide it would make it less likely that dealers
will continue to obtain and to distribute the reports because of the
risk that the VHR information will be incorporated into the contract
and that the dealer will be construed to have made a warranty about
it.\79\ NIADA also raised concerns about dealer exposure to liability
for third-party VHR information that the dealer does not control,\80\
which is potentially compounded by unreported repairs, poor reporting
procedures, and different brands/classifications in each state.\81\
---------------------------------------------------------------------------
\78\ NADA (2015) at 6-7 and 12.
\79\ NADA (2015) at 10. NADA estimated that 95% of franchised
dealers are customers of one or both of the two major VHR retailers
and ``routinely'' share the reports with their customers.
\80\ NIADA (2015) at 4-6.
\81\ NIADA (2015) at 5.
---------------------------------------------------------------------------
Both NADA and NIADA commented that the SNPRM does not define a
VHR.\82\ NIADA stated that, without a definition, dealers would have to
guess when to check a box indicating that they have a report.\83\ NIADA
also noted that, in addition to the well-known providers of VHRs such
as NMVTIS and commercial vendors, other sources, such as banks,
insurers, and service facilities potentially have information on used
cars that could be construed to constitute VHRs.\84\ NADA proposed
defining VHRs as third-party reports from state titling agencies,
NMVTIS, or commercial vendors.\85\
---------------------------------------------------------------------------
\82\ NADA (2015) at 16; NIADA (2015) at 4.
\83\ NIADA (2015) at 4.
\84\ NIADA (2015) at 4.
\85\ NADA (2015) at 16.
---------------------------------------------------------------------------
The commenters disagreed about whether dealers or consumers should
be required to pay for copies of the VHRs contemplated by the SNPRM.
Dealers' groups commented that dealers should be permitted to pass
along their costs to consumers.\86\ That cost could increase depending
upon how often dealers must provide the reports because, dealers'
groups and others commented, the SNPRM does not identify the point in a
transaction when a dealer would become obligated to provide the
reports.\87\ Although NADA indicates that franchised dealers now
routinely share VHR information with consumers,\88\ NADA questioned
whether licensing agreements would permit dealers to share those
reports with all potential customers if doing so were to be required by
the Rule.\89\
---------------------------------------------------------------------------
\86\ NADA (2015) at 13; NIADA (2015) at 7; Texas Automobile
Dealers Ass'n (2015) (``TADA'') at 2; Crowl, All Star Autos, Inc.
(automobile dealer) (00021) (dealers should not be required to
provide an expensive $16.99 VHR to every customer).
\87\ NIADA (2015) at 7; TADA (2015) at 2 (although unlikely, a
consumer could request a VHR on every vehicle on a dealer's lot).
\88\ NADA (2015) at 7.
\89\ NADA (2015) at 14.
---------------------------------------------------------------------------
Consumer advocacy groups, the State AG Group, and other commenters
would place the costs of VHRs on dealers.\90\ NCLC commented that the
dealer would need to purchase only one report per vehicle, and provide
the reports to successive consumers, whereas those same consumers would
each need to purchase a separate report for the same vehicle.\91\
Moreover, consumers who looked at several vehicles when shopping would
need to purchase multiple reports.\92\ NCLC commented that asking
consumers to obtain reports on their own is impractical because of the
cost of the reports, especially multiple reports.\93\ NCLC and
Consumers Union commented that some consumers might have Internet
access only away from the dealership, at home or work, and would have
to review the reports off-site and then return to the dealership to use
the information.\94\
---------------------------------------------------------------------------
\90\ State AG Group (2015) at 8; NCLC (2015) at 4-5.
\91\ NCLC (2015) at 3-4. NCLC notes that [at the time of its
comment] CARFAX offered unlimited reports for a period of 60 days at
a cost of $54.99, and AutoCheck offered unlimited reports for 30
days for $44.99, sums that NCLC notes are beyond the reach of many
consumers.
\92\ NCLC (2015) at 3.
\93\ NCLC (2015) at 4. However, consumers may be able to reduce
their costs for multiple commercial reports in several ways. NADA
notes that commercial VHR providers offer lower prices on a per
report basis for multiple reports. NADA (2015) at 10, fn. 22. The
AutoCheck and CARFAX websites corroborate NADA's statement, for
example, consumers can purchase twenty-five AutoCheck reports for
$49.99, http://www.autocheck.com/vehiclehistory/autocheck/en/AutoCheck-vehicle-history-reports/25-Reports-for-21-Days/p/10025, or
five CARFAX reports for $49.99, ten dollars more than the price of a
single report ($39.99), https://secure.carfax.com/creditCard.cfx?partner=CAR&partnerSiteLocation=4. In addition,
commercial VHRs such as those offered by CARFAX are in many cases
available for free through dealers' websites or websites listing
used cars, such as AutoTrader.com and Cars.com. CARFAX (2015) at 2.
\94\ NCLC (2015) at 4; Consumers Union (2015) at 2. However, the
Commission notes that the increased use of smart phones may enable
consumers to obtain mobile access to VHRs when consumers are on a
dealer's lot shopping for a used vehicle.
---------------------------------------------------------------------------
The American Association of Motor Vehicle Administrators supported
disclosure of vehicle history data at the point of sale. Both it and
the Virginia DMV commented that the FTC should recommend or reference
only VHRs that integrate NMVTIS data because NMVTIS is a
congressionally mandated database.\95\
---------------------------------------------------------------------------
\95\ AAMVA (2015) at 1; Holcomb (VA DMV) (2015). AAMVA is the
association of state DMV administrators. AAMVA operates NMVTIS under
the oversight of the United States Department of Justice. http://www.vehiclehistory.gov/nmvtis_faq.html#operates.
---------------------------------------------------------------------------
e. Incorporating Safety Recall Information
A number of commenters urged the Commission to address safety
recalls in an amended Rule. Several recommended that the Commission
prohibit the sale of vehicles with open recalls.\96\ Other commenters
urged the Commission to require dealers to disclose if a vehicle is
subject to an unrepaired (i.e., ``open'') recall \97\ or at least to
check if a vehicle is subject to an open recall.\98\ Consumers Union
[[Page 81672]]
recommended two boxes where dealers would indicate whether they had (or
had not) repaired a vehicle in compliance with any applicable recall
notices.\99\
---------------------------------------------------------------------------
\96\ NCLC (2015) at 5-7; CAS (2015) at 4 (contending that ``[i]t
is an unlawful trade practice under the FTC Act for a dealer to sell
a vehicle with an open safety recall and the Commission should be
using all its rulemaking and enforcement power to end that
practice.''); Steinbach (consumer attorney) (2015) at 7; NSVRP
(2015) at 6-9 (recommending that the Commission require dealers to
check for open recalls; would prefer that Commission require dealers
to repair open recalls before offering vehicles for sale, but
believes Commission lacks the authority to enact such a
requirement); Karwoski, SEA, Inc. (2015) (Commission should require
dealers to disclose open recalls and require franchised dealers to
repair open recalls on franchise brand vehicles that they sell).
\97\ State AG Group (2015) at 8 (proposing revised statement
that places greater emphasis on recalls than the SNPRM statement);
U.S. D.O.T. (2015) at 2-3 (recommending a Buyers Guide box for
dealers to check if they have found safety recalls that have not
been completed and directing consumers to check for open recalls at
www.safercar.gov); Strassburger (Alliance of Automobile
Manufacturers) (2015) (recommending that the Buyers Guide direct
consumers to safercar.gov to check for open safety recalls).
\98\ Spiller (NVS) (2015) at 2; Frias (North American Export
Committee) (2015) at 2.
\99\ Consumers Union (2015) at 4-5.
---------------------------------------------------------------------------
Rather than adopt these proposals, the Commission has decided to
address safety recalls by including a Buyers Guide statement directing
consumers to check for open safety recalls by visiting safercar.gov.
The Commission recognizes the significant public safety concerns
associated with vehicle recalls, including in the used car marketplace,
and is aware that potential legislation to address this public safety
issue is under consideration and has NHTSA's support.\100\ We believe
that legislative bodies and NHTSA, as the federal agency primarily
tasked with ensuring motor vehicle safety, are best situated to
consider and resolve the many issues implicated by such proposals--
including, for example, the competitive effects they would have on
independent dealerships that are not authorized to make repairs, the
effect they could have on used vehicle trade-ins, the fact that
remedies for some recalls may remain unavailable for significant
periods of time, and other factors affecting the costs and benefits to
consumers.
---------------------------------------------------------------------------
\100\ See, e.g., NHTSA (2015) at 3 (describing the Department of
Transportation's proposed reauthorization bill, the GROW AMERICA
Act, which would give the Department the authority to require used
car dealers to remedy safety recalls before resale.).
---------------------------------------------------------------------------
The Commission does note, however, that under the FTC Act's
existing prohibition on deceptive acts and practices, an advertiser's
claims may trigger the need for the advertiser to disclose information
about open safety recalls. For example, the Commission approved for
public comment proposed consent orders concerning advertising that,
according to the Commission's complaints, touted the benefits of
rigorous inspections of used vehicles, but failed to disclose
adequately that some of the vehicles were subject to open safety
recalls.\101\ Those proposed settlements would curb deceptive conduct
by requiring the respondents to qualify their inspection claims,
wherever they make them, with clear and conspicuous disclosures
informing consumers that their used vehicles may be subject to
unrepaired recalls for safety issues and explaining how to determine
whether an individual vehicle is subject to an open recall. Further,
the proposed orders would prohibit the respondents from making
misrepresentations regarding recall status or safety, and require them
to notify recent past consumers regarding recalls.
---------------------------------------------------------------------------
\101\ The Commission's press release announcing the proposed
settlements is available at https://www.ftc.gov/news-events/press-releases/2016/01/gm-jim-koons-management-lithia-motors-inc-settle-ftc-actions.
---------------------------------------------------------------------------
f. Final Rule on Vehicle History Reports and Safety Recall Information
The Commission has considered the comments and entire record and
has decided to adopt a final rule similar to what it initially proposed
in the NPRM. Accordingly, the Commission is revising the Buyers Guide
to include a statement advising consumers to obtain a VHR and directing
consumers to an FTC website for more information. The Buyers Guide VHR
statement appears in Figures 1 and 2. The Spanish translation appears
in Figures 4 and 5.
As described above, the views expressed by the commenters include
those advocating that the Rule and the Buyers Guide should not address
vehicle history information at all, those favoring an informational
approach, and those favoring an approach that, like AB 1215, would
require dealers to obtain VHRs (specifically a NMVTIS report in the
case of AB1215) and to disclose information about them to consumers,
and various approaches in between.
The Final Rule incorporates an informational approach to VHRs.
Revising the Buyers Guide by directing consumers to obtain a vehicle
history report should help reduce consumer injury and deception that
could result from undisclosed or deceptive disclosure of title brands
or other pieces of problematic history. The SNPRM approach could
encourage consumers to rely too much on particular VHRs and dealers for
mechanical condition information to the neglect of information
available from sources independent of dealers. On the other hand,
specifying the source of or type of VHR that consumers consult, such as
AB 1215 does, could discourage consumers from choosing VHRs that best
suit their needs. Finally, an informational approach to VHR disclosures
should not increase the burden on dealers much beyond what the Rule
already imposes.
The Commission agrees that the SNPRM approach to VHR disclosures
suffers from practical problems raised by the commenters. Among these
is whether the Commission must define a VHR, or adopt a standard, such
as NMVTIS, for the minimum amount of information that a VHR must
contain to comply with a VHR disclosure requirement. Another question
is whether the Commission would have to define what it means to obtain
a report and whether the Commission can prevent dealers from viewing a
report online or discarding reports. Other problematic issues also
would arise, such as whether consumers or dealers should bear the cost
of the reports. If dealers bear the cost, should they be required to
produce reports to all requesting consumers, or should they be required
to provide reports only to bona fide potential customers rather than,
for example, to all casual shoppers? The Commission notes that the
SNPRM approach could create an incentive for dealers to shop for
reports that minimize or do not include negative information and for
vendors to produce such reports.
In addition, requiring dealers to produce any VHRs that the dealer
possesses, as proposed by the SNPRM, could reduce the availability of
VHRs that dealers currently provide because of dealer liability
concerns. Such a requirement would likely necessitate an extensive, and
potentially unwieldy, rule defining what constitutes a VHR and when a
dealer will be deemed to have obtained a VHR that would likely be
difficult to apply in all situations.
Moreover, the marketplace for VHRs is evolving rapidly. Consumers
currently can purchase the reports from commercial vendors for between
$2 and $40 per report and can also gain access to them at no cost from
many dealers, automobile market websites, buying services, etc.\102\
The Commission is concerned that a mandatory approach to vehicle
history information disclosure could have the unintended effect of
impeding these developments and reducing consumer access to current and
reliable vehicle history information.
---------------------------------------------------------------------------
\102\ See note 93 infra. (consumers can purchase twenty-five
AutoCheck reports for $49.99).
---------------------------------------------------------------------------
The Commission is also adding language to the Buyers Guide
statement directing consumers to check for open safety recalls by
visiting safercar.gov. In its comment on the SNPRM, NHTSA recommended
treating safety recalls in a manner similar to the SNPRM's treatment of
VHRs. NHTSA proposed a box that dealers would check if they had
searched for information about open recalls, which dealers would then
be obligated to provide to consumers upon request.\103\ Given that the
Commission is adopting an informational approach to VHRs by directing
consumers to obtain them independently, the Commission is also adopting
a similar approach to safety recall information.\104\
---------------------------------------------------------------------------
\103\ NHTSA (2015) at 2.
\104\ As suggested by CAS, the Buyers Guide in the Final Rule
uses the term ``check for'' safety recalls instead of ``search'' for
recalls. CAS (2015), note 8.
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[[Page 81673]]
B. ``As Is'' Statement
i. Summary
The existing Buyers Guide contains a box that dealers who offer to
sell a used car without a warranty are required to mark to indicate
that the vehicle is offered ``As Is,'' i.e., without a warranty from
the dealer. Adjacent to that box is a statement describing the meaning
of the term ``As Is.'' In the NPRM, the Commission proposed modifying
that statement to make it easier to read and to understand, but not to
change the statement's meaning. In the SNPRM, the Commission proposed a
revised formulation of the ``As Is'' statement and sought comments on
other ``As Is'' statements.
After reviewing the comments that addressed the ``As Is''
statement, the Commission has decided to adopt the following ``As Is''
statement on the Buyers Guide which will appear next to a box that
dealers would check in appropriate circumstances:
AS IS--NO DEALER WARRANTY
THE DEALER DOES NOT PROVIDE A WARRANTY FOR ANY REPAIRS AFTER SALE.
The statement is intended to convey nothing more than that the
dealer does not intend to provide post-sale repairs under a warranty.
Dealer groups strenuously objected to the Commission's SNPRM proposal
to include the statement, ``But you may have other legal rights and
remedies for dealer misconduct.'' \105\ Consumer advocacy groups raised
concerns that the SNPRM revision misstated dealers' potential
obligations in some circumstances. The Commission has attempted to
balance these concerns with a simple statement that concerns the
warranty responsibilities that the dealer intends to disclaim. The fact
that the dealer does not provide a warranty does not foreclose the
possibility that a dealer could have post-sale repair obligations in
some circumstances.
---------------------------------------------------------------------------
\105\ NADA (2015) at 18; NIADA (2015) at 7.
---------------------------------------------------------------------------
ii. Existing ``As Is'' Statement
The existing ``As Is'' statement on the Buyers Guide has been part
of the Buyers Guide since the Rule's promulgation in 1984. The ``As
Is'' statement was formulated to correct consumer misunderstanding of
the term ``As Is.'' \106\ The existing Buyers Guide states:
---------------------------------------------------------------------------
\106\ 49 FR at 45722-45723.
---------------------------------------------------------------------------
AS IS--NO WARRANTY
YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes no
responsibility for any repairs regardless of any oral statements about
the vehicle.
The Commission identified dealer oral misrepresentations regarding both
mechanical condition and dealer after-sale repair responsibility in
adopting the existing ``As Is'' disclosure.\107\ The Commission
concluded that a clear ``As Is'' disclosure would reduce consumer
reliance on oral promises to repair problems that arise after sale,
which may be difficult to enforce.\108\
---------------------------------------------------------------------------
\107\ 49 FR at 45705-45706.
\108\ 49 FR at 45722. See also 49 FR 45697 (discussing parol
evidence rule exclusion of evidence of oral statements that
contradict written contract terms).
---------------------------------------------------------------------------
iii. NPRM ``As Is'' Statement
In the NPRM, the Commission proposed revising the Buyers Guide ``As
Is'' statement to improve readability and to clarify the meaning of the
term ``As Is.'' The Buyers Guide in the NPRM stated:
AS IS--NO DEALER WARRANTY
THE DEALER WON'T PAY FOR ANY REPAIRS. The dealer is not responsible for
any repairs, regardless of what anybody tells you. (``NPRM `As Is'
Statement'').\109\
---------------------------------------------------------------------------
\109\ 77 FR at 74769 (Figure 1).
---------------------------------------------------------------------------
iv. SNPRM ``As Is'' Statement
After reviewing the comments filed in response to the NPRM, the
Commission, in the SNPRM, proposed retaining the ``regardless of any
oral statements about the vehicle'' from the existing Rule and added
``but you may have other legal rights and remedies for dealer
misconduct.'' Thus, the Buyers Guide in the SNPRM contains the
following ``As Is'' statement:
AS IS--NO DEALER WARRANTY
THE DEALER WILL NOT PAY FOR ANY REPAIRS. The dealer does not accept
responsibility to make or to pay for any repairs to this vehicle after
you buy it regardless of any oral statements about the vehicle. But you
may have other legal rights and remedies for dealer misconduct.
(``SNRPRM `As Is' Statement'').
v. Comments and Analysis
NCLC commented that the phrase ``regardless of any oral
statements'' is ``troubling'' because ``[i]t is likely to convey to
consumers that the dealer has the right not to stand behind its oral
statements.'' \110\ According to NCLC, however, ``under most states'
laws, when the dealer has made statements about a vehicle's condition,
it no longer has the ability to decline to accept responsibility for
repairs necessary to bring the vehicle up to that condition.'' \111\
Attorneys representing consumers agreed that the language could
understate a dealer's potential liability for oral
misrepresentations.\112\
---------------------------------------------------------------------------
\110\ NCLC (2015) at 7.
\111\ Id.
\112\ Flinn (2015) (Georgia attorney) (seller could be
responsible for oral misrepresentations when vehicle is sold ``As
Is''; contracts induced by fraudulent misrepresentation are
voidable); Gayle (2015) (Virginia consumer attorney). Cf. Moskos
(2015) (South Carolina attorney) (suggests adding language to Buyers
Guide that dealer is responsible for fraud regardless of what is on
the Buyers Guide; judges sometimes accept dealer claim that it is
not responsible for frame damage because possible frame damage is
listed on back of Buyers Guide).
---------------------------------------------------------------------------
The State AG Group proposed eliminating the use of ``As Is''
entirely.\113\ The group observed that the focus of the statement
should be on the ``fact that the dealer is not providing a warranty,
rather than the potentially confusing or misleading statements that the
dealer is selling a vehicle `as is' or that it `will not pay for any
repairs.' '' \114\ Dealers' groups likewise emphasized that the
disclosure should be about whether the dealer is providing a
warranty.\115\
---------------------------------------------------------------------------
\113\ State AG Group (2015) at 4-5.
\114\ State AG Group (2015) at 5.
\115\ NADA (2015) at 18 (``should be one and only one goal in
including this language [an explanatory phrase], and that is to
explain that the dealer is not offering a warranty on the used
vehicle.'').
---------------------------------------------------------------------------
The Commission agrees that the description of an ``As Is'' sale
should focus on whether the dealer is offering a warranty rather than
on an affirmative statement that the dealer will not pay for repairs.
Likewise, the disclosure should not focus on an affirmative statement
about a consumer's likely obligation in an ``As Is'' sale (``you will
pay all costs for any repairs.''). Accordingly, the Commission has
decided to delete the affirmative statements concerning the dealer's
and consumer's respective obligations. Instead, the Commission has
revised the Buyers Guide to add the explanatory statement, ``the dealer
does not provide a warranty for any repairs after sale.''
The Commission, however, has decided to retain the term ``As Is.''
As noted in the 1984 rulemaking, the Uniform Commercial Code
specifically identifies using ``As Is'' as a method to disclaim implied
warranties.\116\
---------------------------------------------------------------------------
\116\ 49 FR 45697 note 59; Uniform Commercial Code 2-316(3)(a).
---------------------------------------------------------------------------
To balance the potential of the ``regardless of oral statements''
language to insulate dealers from liability and to dissuade consumers
from pursuing remedies for oral misrepresentations that may be
available in some circumstances, the Commission, in the SNPRM, proposed
adding ``but you may
[[Page 81674]]
have other legal rights and remedies for dealer misconduct.'' \117\ The
proposed language was a variation of language suggested by the State AG
Group \118\ and, with several formulations, favored by various consumer
advocacy organizations.\119\
---------------------------------------------------------------------------
\117\ 79 FR at 70809.
\118\ The State AG Group proposed ``But, you may have legal
rights if the dealer concealed problems with the vehicle or its
history.'' State AG Group (2013) at 5.
\119\ Various commenters proposed additional revisions but also
approved of the phrase ``but you may have other legal rights and
remedies for dealer misconduct.'' E.g., NCLC (2015) at 6-7;
Steinbach (consumer attorney) (2015) at 7; State AG Group 015 at 4-5
(listing three acceptable alternatives: ``however, you may have
legal rights if the dealer concealed problems with the vehicle or
its history''; ``but you may have other legal rights if the dealer
misrepresents the vehicle's condition or engages in other
misconduct''; ``but you may have other legal rights and remedies for
dealer misconduct'').
---------------------------------------------------------------------------
Dealers' organizations strongly objected to the proposed language.
NIADA commented that ``one is hard pressed not to read the third
sentence as anything more than a provocation of consumers to search for
dealer misconduct whether it exists or not.'' \120\ NADA commented that
the proposed language is ``gratuitous'' and implies that dealers ``are
engaged in `misconduct' because they are offering a vehicle `as is' and
without a warranty.'' \121\
---------------------------------------------------------------------------
\120\ NIADA (2015) at 7.
\121\ NADA (2015) at 18.
---------------------------------------------------------------------------
The Commission has decided against including the phrase ``but you
may have other legal rights and remedies for dealer misconduct,'' as it
had proposed in the SNPRM. The Commission agrees that the phrase may
suggest that dealer misconduct exists or that consumers should look for
it when none exists. Simplifying the description of an ``As Is'' sale
to one in which the ``dealer does not provide a warranty'' should
lessen the likelihood of consumer confusion and provide clearer
guidance on whether a dealer affirmatively offers a warranty.
The Commission has decided to adopt a simplified ``As Is''
statement to address comments about whether the existing statement on
the Buyers Guide clearly conveys that the dealer is not offering a
warranty. The Commission has also considered the comments critical of
various formulations of the phrase ``regardless of any oral statements
about the vehicle'' and has decided to delete the phrase. The
Commission notes that the Buyers Guide will continue to warn consumers
that oral promises are difficult to enforce and to advise that
consumers ask the dealer to put all promises in writing.
C. Non-Dealer Warranty Boxes
The proposed Buyers Guide in the SNPRM included boxes (``non-dealer
warranty boxes'') that dealers could check to indicate whether an
unexpired manufacturer warranty, a manufacturer used car warranty, or
some other warranty applies, and whether a service contract is
available. The version of the Buyers Guide proposed in the NPRM
included similar boxes on the back of the Buyers Guide.\122\ NPRM
commenters who addressed the non-dealer warranty boxes uniformly
recommended moving the disclosures to the front of the Buyers Guide
where they will be more accessible to consumers.\123\ SNPRM commenters
also favored the boxes and placing them on the front, although some of
these commenters proposed modifications to the boxes and making
disclosure of unexpired manufacturers' warranties mandatory.
---------------------------------------------------------------------------
\122\ 77 FR at 74771 (Figure 3).
\123\ E.g., American Ass'n for Justice (2013) at 2; Bolliger
(2013) (Florida attorney); CAS (2013) at 2; CARS (2013) at 8;
Crabtree (2013); Domonoske (2013); Elias (2013) (Florida Dep't of
Regulatory and Economic Resources--Consumer Protection); Kaufman
(2013): Klarquist (2013); Kraft, Karen, Credit Counseling (2013);
Richards, Casper & Casper (2013); Speer, James, Virginia Poverty Law
Center (2013); Thomson (2013); Wells (2013); NACA (2013) at 2; Ohio
Ass'n for Justice (2013) at 2; Wholesale Forms (2013) at 1, 2.
---------------------------------------------------------------------------
As suggested by the comments, the Commission has decided to make
the non-dealer warranty boxes more prominent and accessible by moving
them to the front of the Buyers Guide, as proposed in the SNPRM and
shown in Figures 1 and 2. The Commission is also modifying the existing
Rule's description of a service contract as proposed in the SNPRM and
making the service contract box flush with the non-dealer warranty
boxes.\124\
---------------------------------------------------------------------------
\124\ The State AG Group suggested making the service contract
box flush and clearly separated from the non-dealer warranty boxes.
State AG (2015) at 5.
---------------------------------------------------------------------------
The Commission has also decided to modify the statement that
dealers may use on the Buyers Guide to disclose the applicability of an
unexpired manufacturer's warranty.\125\ In its NPRM comment, CAS
suggested that the unexpired manufacturer's warranty box should state
that ``[t]he manufacturer's original warranty has not expired on some
components of the vehicle'' because, according to CAS, that language is
``more consistent with the different coverages that are in current
warranties.'' \126\ The AG Group also supported CAS's proposed
language.\127\ In its comments on the SNPRM, CAS proposed an
alternative, the ``manufacturer's warranty coverage period has not
expired.'' \128\ As noted by CAS, the current language suggests that a
manufacturer's unexpired warranty is bumper-to-bumper coverage whereas
only some components may be covered.\129\
---------------------------------------------------------------------------
\125\ 16 CFR 455.2(b)(v) permits dealers that wish to disclose
the applicability of an unexpired manufacturer's warranty to state
``The manufacturer's original warranty has not expired on the
vehicle.''
The Final Rule permits dealers to use their existing stock of
Buyers Guides for up to one year after the effective date of the
Rule amendments. It includes a revised disclosure that dealers must
use if they choose to disclose unexpired manufacturers' warranties,
or other non-dealer warranties, using those Buyers Guides.
\126\ CAS (2013) at 3.
\127\ State AG Group (2015) at 3-6.
\128\ CAS (2015) at 3. CAS also commented that the disclosure of
an unexpired manufacturer's warranty should be mandatory, and, if
not made mandatory, the space on the front of the Buyers Guide
should not be wasted on the disclosure.
\129\ CAS (2015) at 4.
---------------------------------------------------------------------------
The Commission has decided to adopt the language initially proposed
by CAS to disclose unexpired manufacturer's warranties because the
language more accurately describes that an unexpired manufacturer's
warranty typically refers to warranty coverage over some components of
a used vehicle rather than the bumper-to-bumper coverage associated
with a new vehicle. Accordingly, the amended Final Rule will provide
dealers the ability to disclose that a ``manufacturer's original
warranty has not expired on some components of the vehicle.''
For the reasons discussed in the NPRM, the Commission declines to
make the disclosure of non-dealer warranties mandatory on the Buyers
Guide.\130\ The Commission believes that a statement on the Buyers
Guide encouraging consumers to request more information about non-
dealer warranties will help ensure that consumers are not deceived if
the dealer chooses to use the existence of a non-dealer warranty as a
selling point. To ensure that consumers understand the scope of any
non-dealer warranty, the disclosure advises consumers to ``ask the
dealer for a copy of the warranty document and an
[[Page 81675]]
explanation of warranty coverage, exclusions, and repair obligations.''
\131\
---------------------------------------------------------------------------
\130\ 77 FR at 74753. As the Commission noted when it adopted
the Rule in 1984, dealers subject to the Used Car Rule should be
aware that the provisions of the Magnuson-Moss Warranty Act
(``MMWA'') and the Commission's rules interpreting the MMWA are
fully applicable to any written warranty offered in connection with
the sale of a used car. Used vehicle dealers should therefore
consult the terms of the MMWA and the Commission's rules
interpreting the MMWA for a clear explanation of the duties arising
under the MMWA. See 49 FR at 45,709 (citing 15 U.S.C. 2302-2308; 16
CFR parts 700 (interpretations of the MMWA); 701 (disclosure of
written consumer product warranty terms and conditions); 702
(presale availability of written warranty terms); and 703 (informal
dispute settlement procedures)).
\131\ See Figure 1.
---------------------------------------------------------------------------
D. Spanish Sales
The Commission has decided to add a revised statement, in Spanish,
to the front of the English Buyers Guide advising Spanish-speaking
consumers who cannot read the English Buyers Guide to ask for a copy of
the Spanish Buyers Guide if the dealer conducts the sale in Spanish. A
proposed Spanish statement was included in the Buyers Guide published
with the NPRM and incorporated into the SNPRM Buyers Guide.\132\ The
Rule prescribes a Spanish Buyers Guide and requires its use if a dealer
conducts a sale in Spanish.\133\ Dealers' groups commented that the
proposed statement (``if you are unable to read this document in
English, ask your salesperson for a copy in Spanish'') potentially
could have expanded dealers' obligation to use Spanish Guides.\134\
Recognizing this concern and not intending any change in the Rule's
requirement regarding Spanish Buyers Guides, the Commission has changed
the statement to advise consumers to ask for the Buyers Guide in
Spanish if the dealer is conducting the sale in Spanish.
---------------------------------------------------------------------------
\132\ See SNPRM Figures 1 and 2, 79 FR 70818-70819; NPRM Figures
1 and 2, 77 FR at 74769 and 74770.
\133\ 16 CFR 455.5.
\134\ NADA (2015) at 19, 20.
---------------------------------------------------------------------------
The Rule permits dealers to add an optional signature line to the
back of the Buyers Guide where consumers can acknowledge receipt of the
Buyers Guide.\135\ As recommended by the Texas Automobile Dealers
Association, the Commission has adopted a translation of the
acknowledgment statement into the Final Rule.\136\
---------------------------------------------------------------------------
\135\ 16 CFR 455.2(f).
\136\ Texas Automobile Dealers Association (00032) at 4. See
revised 16 CFR 455.5.
---------------------------------------------------------------------------
E. Miscellaneous NPRM Buyers Guide Modifications Incorporated in the
Final Rule
The Final Rule and Buyers Guide incorporate text and other
modifications to the Buyers Guide that the Commission proposed in the
NPRM. The Buyers Guide's statement advising consumers to ask the dealer
about a mechanical inspection has been relocated above the proposed
vehicle history information box to enhance its prominence.\137\ The
Final Rule retains the use of the terms ``dealer warranty'' and ``non-
dealer warranty'' proposed in the NPRM. Finally, the Buyers Guide
incorporates the NPRM's proposed modifications to the description of
``Implied Warranties Only'' on the version of the Buyers Guide for use
in jurisdictions that prohibit dealers from waiving implied warranties
\138\ and the description of a service contract on the front of the
Buyers Guide.\139\
---------------------------------------------------------------------------
\137\ The following statement has been on the Buyers Guide since
the Rule's promulgation in 1984: ASK THE DEALER IF YOUR MECHANIC CAN
INSPECT THE VEHICLE ON OR OFF THE LOT. See Figures 1 and 2.
\138\ See 16 CFR 455.2(b)(1)(ii); Figure 2.
\139\ Id.
---------------------------------------------------------------------------
In the NPRM, the Commission proposed adding air bags and catalytic
converters, as part of the exhaust system, to the list of some major
defects that may occur in used vehicles.\140\ The Commission did not
receive comments on the proposal. The revised Buyers Guide includes air
bags and catalytic converters in the list of major defects.\141\
---------------------------------------------------------------------------
\140\ 77 FR at 74760.
\141\ See Figures 3 and 6 (Spanish).
---------------------------------------------------------------------------
F. Modification of Service-Contract Provisions
When the Commission promulgated the Rule in 1984, the Commission
noted that it did not intend to regulate those service contracts that
are ``excluded from the Commission's jurisdiction by the McCarran-
Ferguson Act.'' \142\ Consistent with that intent, the Commission has
decided to adopt the revisions proposed in the SNPRM.\143\ Therefore,
Sec. 455.1(d)(7) and Sec. 455.2(b)(3) will be amended so that they
correspond more closely with the statutory language of the McCarran-
Ferguson Act.\144\
---------------------------------------------------------------------------
\142\ Trade Regulation Rule Concerning Sale of Used Motor
Vehicles, 49 FR 45692, 45709 (Nov. 19, 1984).
\143\ 79 FR at 70810.
\144\ 15 U.S.C. 1012(b).
---------------------------------------------------------------------------
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \145\ requires that the
Commission conduct an initial and a final analysis of the anticipated
economic impact of the amendments on small entities. The purpose of a
regulatory flexibility analysis is to ensure the agency considers the
impacts on small entities and examines regulatory alternatives that
could achieve the regulatory purpose while minimizing burdens on small
entities. The RFA \146\ provides that such an analysis is not required
if the agency head certifies that the regulatory action will not have a
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\145\ 5 U.S.C. 601-612.
\146\ 5 U.S.C. 605.
---------------------------------------------------------------------------
The Commission believes that the amendments will not have a
significant economic impact on small entities, although they will
likely affect a substantial number of small entities. The Rule, and the
amendments, apply primarily to independent used vehicle dealers and
franchised new vehicle dealers, which typically also sell used
vehicles, such as vehicles traded for new car purchases. Most dealers
would be classified as small businesses, as explained infra.
The amendments revise the Buyers Guide that the Rule requires
dealers to display on used vehicles by changing pre-printed disclosures
that appear on the Buyers Guide and adding boxes that dealers can check
if they choose to disclose additional information concerning non-dealer
warranties. Although the amendments will require that dealers
eventually substitute the revised Buyers Guides, the amendments permit
dealers to use their existing stock of Buyers Guides for up to one year
after the effective date of these Rule amendments before doing so. The
Rule already permits dealers to make the disclosures in the check
boxes, but the check boxes will make the disclosures easier for those
dealers who choose to make them. Therefore, the Commission certifies
that amending the Rule will not have a significant economic impact on a
substantial number of small businesses.
The Final Rule is similar to the rule proposed in the NPRM. In its
Initial Regulatory Flexibility Analysis (``IRFA''), the Commission
determined that the NPRM Proposed Rule was not likely to have a
significant economic impact on a substantial number of small
entities.\147\ The only additional burden that the Final Rule, like the
Proposed Rule, places on dealers is the substitution of new Buyers
Guides for the ones that dealers currently use, but dealers will be
permitted to use their existing stock of Buyers Guides for up to one
year after the effective date of these Rule amendments. The new Buyers
Guide makes disclosing non-dealer warranties easier for those dealers
who choose to disclose them, but does not require additional
disclosures regarding non-dealer warranties.
---------------------------------------------------------------------------
\147\ 77 FR 74765.
---------------------------------------------------------------------------
Although the Commission certifies under the RFA that the amendments
will not have a significant impact on a substantial number of small
entities, the Commission nonetheless has determined that publishing a
final regulatory flexibility analysis (FRFA) is appropriate to ensure
that the impact of the amendments is fully addressed.
[[Page 81676]]
Therefore, the Commission has prepared the following analysis:
A. Need for and Objectives of the Amendments
The purpose of the amendments is to provide material information
about vehicle histories and used car warranties to help protect
consumers from dealer misrepresentations and to aid consumers in making
informed choices when purchasing a used vehicle. In particular, the
amendments seek to promote consumer awareness of vehicle history
information, to clarify the meaning of ``as is'' in the sale of used
vehicles without warranties, to make disclosures concerning non-dealer
warranties more prominent, to improve Spanish-speaking consumers'
access to the Spanish Buyers Guide during sales conducted in Spanish,
and to provide additional information about defects that may be found
in used vehicles.
B. Significant Issues Raised in Public Comments
None of the comments disputed the Initial Regulatory Flexibility
Analysis in the NPRM or in the SNPRM. In the SNPRM, the Commission
proposed that dealers indicate on the Buyers Guide that they had
obtained a VHR and, if so, provide a copy of the VHR to consumers upon
request. Commenters questioned whether the cost of providing copies of
VHRs to consumers should be borne by consumers or dealers. The Final
Rule does not require dealers to provide copies of VHRs to consumers,
but instead a pre-printed statement on the Buyers Guide recommends that
consumers visit an FTC website to learn more about obtaining VHRs.
Accordingly, the amendments will not require dealers to bear the cost
of providing VHRs to consumers.
The Commission did not receive any comments from the Small Business
Administration Chief Counsel for Advocacy.
C. Small Entities to Which the Amendments Will Apply
The Used Car Rule primarily applies to ``dealers'' defined as ``any
individual or business which sells or offers for sale a used vehicle
after selling or offering for sale five (5) or more used vehicles in
the previous twelve months.'' \148\ The Commission believes that many
of these dealers are small businesses according to the applicable Small
Business Administration (``SBA'') size standards. Under those
standards, the SBA would classify as small businesses independent used
car dealers having annual receipts of less than $25 million and
franchised new car dealers, which also typically sell used cars, having
fewer than 200 employees each.\149\
---------------------------------------------------------------------------
\148\ 16 CFR 455.1(d)(3).
\149\ Table of Small Bus. Size Standards Matched to North
American Indus. Classification System Codes, 13 CFR 121.201
(available at: https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-small-business-size-stand), updated Feb. 26, 2016. Used car dealers are
classified as NAICS 441120 and franchised new car dealers as NAICS
441110.
---------------------------------------------------------------------------
Most independent used vehicle dealers would be classified as small
businesses. In 2012, the United States' 37,892 independent used vehicle
dealers \150\ had average total sales of $4,228,137.\151\ These used
vehicle dealers' average annual revenue is well below the maximum $25
million in annual sales established by the SBA for classification as a
small business. Therefore, these used vehicle dealers would be
classified as small businesses.
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\150\ NIADA Used Car Industry Report 2013, at 16. The most
recent figures published by NIADA are for 2012.
\151\ Id. at 20. Used vehicle sales accounted for 38.29%
($1,618,954) of those sales.
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The SBA would also classify many franchised new car dealers as
small businesses. In 2015, the nation's 16,545 franchised new car
dealers \152\ had an average of sixty-seven employees,\153\ well below
the 200-employee maximum established by the SBA for classification as a
small business.\154\
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\152\ NADA Data 2015 at 3. (available at: https://www.nada.org/nadadata/.).
\153\ Id. at 17.
\154\ Table of Small Bus. Size Standards at 23.
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D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements, Including Classes of Covered Small Entities and
Professional Skills Needed To Comply
The Used Car Rule imposes disclosure obligations on used vehicle
dealers, but does not impose any reporting or recordkeeping
requirements. Specifically, the Rule requires dealers to complete and
to display a Buyers Guide on each used car offered for sale. Neither
the existing Rule nor the Final Rule requires dealers to disclose non-
dealer warranties. Under the existing Rule, dealers who choose to
disclose non-dealer warranties, in particular, unexpired manufacturer's
warranties, may do so by adding a statement to the Buyers Guide that is
prescribed by the Rule. The Final Rule permits dealers to disclose
unexpired manufacturer's warranties and other third-party warranties,
but does not require that dealers make those disclosures. For those
dealers who choose to disclose non-dealer warranties, the Final Rule
should make the disclosure easier because dealers can make the
disclosures by checking a box on the Buyers Guide rather than adding a
statement prescribed by the Rule.
In other Federal Register submissions, the Commission has concluded
that professional skills needed to comply with the rule are possessed
by clerical or administrative staff.\155\ The professional skills
necessary to comply with the Rule as modified by the amendments are the
same as those necessary to comply with the existing Rule.
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\155\ See, e.g., 79 FR 70814, note 101; Request for Extension of
Clearance, 78 FR 59032, 59033 (Sept. 25, 2013).
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E. Significant Alternatives to the Amendments
The Commission has not proposed any specific small entity exemption
or other significant alternatives because the amendments simply modify
the pre-printed disclosures that dealers are already required to make
in connection with offering used cars for sale.
The Commission believes that the Final Rule will help reduce
potential deception by promoting consumer awareness of vehicle history
information, consumer understanding of the meaning of ``As Is'' in used
vehicle sales transactions in which a dealer disclaims warranties, and
consumer awareness of warranties that may apply to a used vehicle. The
revised Buyers Guide contains pre-printed statements that direct
consumers to consumer-oriented websites for additional information,
including live links to outside sources of information. The Rule also
requires dealers to complete parts of the Buyers Guide by, among other
things, listing the VIN and indicating the warranty coverage, if any,
that applies to the vehicle. A downloadable, fillable version of the
revised Buyers Guide is available on the Commission's Web site.
The Rule also provides that the Buyers Guide is incorporated into
the sales contract. The Rule requires that dealers complete a Buyers
Guide for each used vehicle offered for sale, display a physical Buyers
Guide on the vehicle, and provide a copy of that Buyers Guide to
consumers. Therefore, consumers are able to see the Buyers Guide
disclosures upon even a casual inspection of a used vehicle that they
are considering buying. Consumers likely expect to see a physical label
on used cars because disclosure labels (``Monroney'' stickers) are
required to be affixed to new cars.\156\ In staff's enforcement
experience, used vehicle dealers routinely place point of sale
[[Page 81677]]
advertising statements (e.g., ``low miles,'' ``one owner'') directly on
vehicles to capture consumers' attention. Similarly, the Commission
continues to believe that a Buyers Guide displayed on a used vehicle
will most effectively capture a consumer's attention.
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\156\ See 15 U.S.C. 1232.
---------------------------------------------------------------------------
The Commission considered several different approaches to vehicle
history information discussed in the comments. In the SNPRM, the
Commission proposed requiring dealers who have VHRs to disclose that
fact on the Buyers Guide and to provide copies of the reports to
requesting consumers. In the NPRM, the Commission proposed placing a
statement on the Buyers Guide that would advise consumers about the
availability of vehicle history information and direct consumers to an
FTC website for more information. The Commission also considered
requiring dealers to obtain VHRs. such as NMVTIS reports, and requiring
dealers to make disclosures similar to those required by California's
AB 1215. Currently consumers can gain access to VHRs at no cost from
many dealers, automobile marketplace websites, buying services, etc.,
and from commercial vendors at a nominal cost. Given the availability
of various sources for and types of VHRs, the Commission has chosen not
to require that dealers obtain reports or to designate specific types
of reports or specific vendors. In doing so, the Commission sought to
balance the burden placed on dealers with the goals of promoting
consumer choice and access to vehicle history information.
The Commission considered comments on the Buyers Guide ``As Is''
statement and the various formulations of the statement proposed by the
comments. The Commission chose the ``As Is'' statement in this Final
Rule because the Commission believes that the statement clearly and
accurately describes the meaning of ``As Is.''
The Commission considered comments on the non-dealer warranty boxes
proposed in the NPRM. In response to those comments, the Commission has
moved those boxes to the front of the Buyers Guide.
Under these circumstances, the Commission does not believe a
special exemption for small entities or significant compliance
alternatives are necessary or appropriate to minimize the compliance
burden, if any, on small entities while achieving the intended purposes
of the amendments.
IV. Regulatory Analysis
Under section 22 of the FTC Act, the Commission must issue a
regulatory analysis for a proceeding to amend a rule only when it: (1)
Estimates that the amendment will have an annual effect on the national
economy of $100,000,000 or more; (2) estimates that the amendment will
cause a substantial change in the cost or price of certain categories
of goods or services; or (3) otherwise determines that the amendment
will have a significant effect upon covered entities or upon consumers.
After careful consideration of the comments, and the record as a
whole, the Commission has determined that there are no facts in the
record, or other reasons to believe, that these amendments will have
significant effects on the national economy, on the cost of goods or
services, or on covered parties or consumers. No commenter provided a
cost estimate of the amendments. Moreover, none indicated that the
amendments would have an annual impact of more than $100,000,000, cause
substantial change in the cost of goods or services, or otherwise have
a significant effect upon covered entities or consumers.
In any event, to the extent, if any, these final rule amendments
will have such effects, the Commission has explained above the need
for, and the objectives of, the final amendments; the regulatory
alternatives that the Commission considered; the projected benefits and
adverse economic or other effects, if any, of the amendments; the
reasons that the final amendments will attain their intended objectives
in a manner consistent with applicable law; the reasons for the
particular amendments that the agency has adopted; and the significant
issues raised by public comments, including the Commission's assessment
of and response to those comments on those issues.
V. Paperwork Reduction Act
The existing Rule contains no recordkeeping or reporting
requirements, but it does contain disclosure requirements that
constitute ``information collection requirements'' as defined by 5 CFR
1320.3(c) under the Office of Management and Budget (``OMB'')
regulations that implement the Paperwork Reduction Act (``PRA''). OMB
has approved the Rule's existing information collection requirements
through Jan. 31, 2017 (OMB Control No. 3084-0108).
As discussed above, the Commission is retaining the requirement
that dealers must display a Buyers Guide on used cars offered for sale
and is updating the text of the disclosures that dealers must provide
in the Buyers Guide. The Commission is also amending the Buyers Guide
to provide dealers with a method to disclose optional additional
information about non-dealer warranties. The amendments about non-
dealer warranties do not require dealers to disclose this additional
information nor do they alter the Rule's existing disclosure
requirements or impose recordkeeping requirements.
The Commission has made amended Buyers Guides available on its Web
site for downloading by dealers free of charge. The Commission expects
that current suppliers of Buyers Guides, such as commercial vendors and
dealer trade associations, will supply dealers with amended Buyers
Guides. Accordingly, individual dealer cost to obtain amended Buyers
Guides should increase only marginally, if at all.
As explained in the NPRM, FTC staff has estimated that dealers will
make the optional disclosures on 25% of used cars offered for sale.
Dealers who choose to make the optional disclosures should obtain
amended Buyers Guides and complete them by checking additional boxes
not appearing on the current Buyers Guide. Staff has in the past
estimated that completing Buyers Guides requires approximately 2
minutes per vehicle for vehicles sold without a warranty and 3 minutes
per vehicle for vehicles sold with a warranty.\157\ Staff believes that
checking the additional boxes should require dealers no more than an
additional 30 seconds per vehicle.\158\ Thus, based on 27,966,551 used
cars sold,\159\ making the optional disclosures presented by the
amendments would increase estimated burden by 58,264 hours (25% x
27,966,551 vehicles sold x 1/120 hour per vehicle).
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\157\ See, e.g., 78 FR 59032, 59032 (Sept. 25, 2013) (Notice:
``Agency Information Collection Activities; Proposed Collection;
Comment Request; Extension.'').
\158\ Previously, dealers who opted to disclose the
applicability of manufacturers' warranties could do so by adding a
statement to the Buyers Guide, 16 CFR 455.2(2)(b)(v), which likely
would take longer than simply checking a box to make the same
disclosure. The projected increment of 30 seconds is a combined
reflection of time saved through the latter means and the
incremental time accorded to checking off additional boxes tied to
new disclosures under the Final Rule.
\159\ NIADA's Used Car Industry Report 2016, at 31 (citing NADA
data for the total number of used vehicles sold by franchised and
independent dealers in 2015).
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Staff also anticipates that dealers can use lower level clerical
staff at a mean hourly wage of $15.33 per hour \160\ to
[[Page 81678]]
complete the Buyers Guides, so incremental labor costs associated with
making the optional disclosures will total $893,187 per year [58,264
hours x $15.33 per hour].
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\160\ The hourly rate is based on the Bureau of Labor Statistics
estimate of the mean hourly wage for office clerks, general.
Occupational Employment and Wages, May 2015, 43-9061 Office Clerks,
General, available at: http://www.bls.gov/oes/current/oes439061.htm.
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Estimating, as stated above, that dealers will make the optional
disclosures on 25% of the 27,966,551 used cars offered for sale, and
assuming further a cost of thirty cents per preprinted Buyers Guide,
incremental purchase costs per year will total $2,097,491. Any other
capital costs associated with the amendments are likely to be minimal.
This analysis is consistent with the analysis provided in the NPRM, but
has been updated with more recent data regarding the number of used
vehicles sold and labor costs tied to making the optional disclosures
for those sales. None of the comments disputed the PRA analysis in the
NPRM.
List of Subjects in 16 CFR Part 455
Motor vehicles, Trade practices.
For the reasons set forth in the preamble, the Federal Trade
Commission amends part 455 of title 16, Code of Federal Regulations, as
follows:
PART 455--USED MOTOR VEHICLE TRADE REGULATION RULE
0
1. The authority citation for part 455 continues to read as follows:
Authority: 15 U.S.C. 2309; 15 U.S.C. 41-58.
0
2. Amend Sec. 455.1 by revising paragraph (d)(7) to read as follows:
Sec. 455.1 General duties of a used vehicle dealer; definitions.
* * * * *
(d) * * *
(7) Service contract means a contract in writing for any period of
time or any specific mileage to refund, repair, replace, or maintain a
used vehicle and provided at an extra charge beyond the price of the
used vehicle, unless offering such contract is ``the business of
insurance'' and such business is regulated by State law.
* * * * *
0
3. Amend Sec. 455.2 by revising paragraph (a) introductory text,
paragraph (a)(2), and paragraph (b) to read as follows:
Sec. 455.2 Consumer sales--window form.
(a) General duty. Before you offer a used vehicle for sale to a
consumer, you must prepare, fill in as applicable and display on that
vehicle the applicable ``Buyers Guide'' illustrated by Figures 1-2 at
the end of this part. Dealers may use remaining stocks of the version
of the Buyers Guide in effect prior to the effective date of this Rule
for up to one year after that effective date (i.e., until January 27,
2018). Dealers who opt to use their existing stock and choose to
disclose the applicability of a non-dealer warranty, must add the
following as applicable below the ``Full/Limited Warranty'' disclosure:
``Manufacturer's Warranty still applies. The manufacturer's original
warranty has not expired on the vehicle;'' ``Manufacturer's Used
Vehicle Warranty Applies;'' or ``Other Used Vehicle Warranty Applies,''
followed by the statement, ``Ask the dealer for a copy of the warranty
document and an explanation of warranty coverage, exclusions, and
repair obligations.''
* * * * *
(2) The capitalization, punctuation and wording of all items,
headings, and text on the form must be exactly as required by this
Rule. The entire form must be printed in 100% black ink on a white
stock no smaller than 11 inches high by 7\1/4\ inches wide in the type
styles, sizes and format indicated. When filling out the form, follow
the directions in paragraphs (b) through (f) of this section and Sec.
455.4.
(b) Warranties--(1) No Implied Warranty--``As Is''/No Dealer
Warranty. (i) If you offer the vehicle without any implied warranty,
i.e., ``as is,'' mark the box appearing in Figure 1. If you offer the
vehicle with implied warranties only, substitute the IMPLIED WARRANTIES
ONLY disclosure specified in paragraph (b)(1)(ii) of this section, and
mark the IMPLIED WARRANTIES ONLY box illustrated by Figure 2. If you
first offer the vehicle ``as is'' or with implied warranties only but
then sell it with a warranty, cross out the ``As Is--No Dealer
Warranty'' or ``Implied Warranties Only'' disclosure, and fill in the
warranty terms in accordance with paragraph (b)(2) of this section.
(ii) If your State law limits or prohibits ``as is'' sales of
vehicles, that State law overrides this part and this rule does not
give you the right to sell ``as is.'' In such States, the heading ``As
Is--No Dealer Warranty'' and the paragraph immediately accompanying
that phrase must be deleted from the form, and the following heading
and paragraph must be substituted as illustrated in the Buyers Guide in
Figure 2. If you sell vehicles in States that permit ``as is'' sales,
but you choose to offer implied warranties only, you must also use the
following disclosure instead of ``As Is--No Dealer Warranty'' as
illustrated by the Buyers Guide in Figure 2. See Sec. 455.5 for the
Spanish version of this disclosure.
IMPLIED WARRANTIES ONLY
The dealer doesn't make any promises to fix things that need
repair when you buy the vehicle or afterward. But implied warranties
under your state's laws may give you some rights to have the dealer
take care of serious problems that were not apparent when you bought
the vehicle.
(2) Full/Limited Warranty. If you offer the vehicle with a
warranty, briefly describe the warranty terms in the space provided.
This description must include the following warranty information:
(i) Whether the warranty offered is ``Full'' or ``Limited.'' Mark
the box next to the appropriate designation. A ``Full'' warranty is
defined by the Federal Minimum Standards for Warranty set forth in
section 104 of the Magnuson-Moss Act, 15 U.S.C. 2304 (1975). The
Magnuson-Moss Act does not apply to vehicles manufactured before July
4, 1975. Therefore, if you choose not to designate ``Full'' or
``Limited'' for such vehicles, cross out both designations, leaving
only ``Warranty.''
(ii) Which of the specific systems are covered (for example,
``engine, transmission, differential''). You cannot use shorthand, such
as ``drive train'' or ``power train'' for covered systems.
(iii) The duration (for example, ``30 days or 1,000 miles,
whichever occurs first'').
(iv) The percentage of the repair cost paid by you (for example,
``The dealer will pay 100% of the labor and 100% of the parts.'')
(v) You may, but are not required to, disclose that a warranty from
a source other than the dealer applies to the vehicle. If you choose to
disclose the applicability of a non-dealer warranty, mark the
applicable box or boxes beneath ``NON-DEALER WARRANTIES FOR THIS
VEHICLE'' to indicate: ``MANUFACTURER'S WARRANTY STILL APPLIES. The
manufacturer's original warranty has not expired on some components of
the vehicle,'' ``MANUFACTURER'S USED VEHICLE WARRANTY APPLIES,'' and/or
``OTHER USED VEHICLE WARRANTY APPLIES.''
If, following negotiations, you and the buyer agree to changes in
the warranty coverage, mark the changes on the form, as appropriate. If
you first offer the vehicle with a warranty, but then sell it without
one, cross out the offered warranty and mark either the ``As Is--No
Dealer Warranty'' box or the ``Implied Warranties Only'' box, as
appropriate.
(3) Service contracts. If you make a service contract available on
the vehicle,
[[Page 81679]]
you must add the following heading and paragraph below the Non-Dealer
Warranties Section and mark the box labeled ``Service Contract,''
unless offering such service contract is ``the business of insurance''
and such business is regulated by State law. See Sec. 455.5 for the
Spanish version of this disclosure.
[square] SERVICE CONTRACT. A service contract on this vehicle is
available for an extra charge. Ask for details about coverage,
deductible, price, and exclusions. If you buy a service contract
within 90 days of your purchase of this vehicle, implied warranties
under your state's laws may give you additional rights.
* * * * *
0
3. Revise Sec. 455.5 to read as follows:
Sec. 455.5 Spanish language sales.
(a) If you conduct a sale in Spanish, the window form required by
Sec. 455.2 and the contract disclosures required by Sec. 455.3 must
be in that language. You may display on a vehicle both an English
language window form and a Spanish language translation of that form.
Use the translation and layout for Spanish language sales in Figures 4,
5, and 6.
(b) Use the following language for the ``Implied Warranties Only''
disclosure when required by Sec. 455.2(b)(1) as illustrated by Figure
5:
SOLO GARANT[Iacute]AS IMPL[Iacute]CITAS
El concesionario no hace ninguna promesa de reparar lo que sea
necesario cuando compre el veh[iacute]culo o posteriormente. Sin
embargo, las garant[iacute]as impl[iacute]citas seg[uacute]n las
leyes estatales podr[iacute]an darle algunos derechos para hacer que
el concesionario se encargue de ciertos problemas que no fueran
evidentes cuando compr[oacute] el veh[iacute]culo.
(c) Use the following language for the ``Service Contract''
disclosure required by Sec. 455.2(b)(3) as illustrated by Figures 4
and 5:
CONTRATO DE MANTENIMIENTO. Con un cargo adicional, puede obtener
un contrato de mantenimiento para este veh[iacute]culo. Pregunte
acerca de los detalles de la cobertura, los deducibles, el precio y
las exclusiones. Si compra un contrato de mantenimiento dentro de
los 90 d[iacute]as desde el momento en que compr[oacute] el
veh[iacute]culo, las garant[iacute]as impl[iacute]citas seg[uacute]n
las leyes de su estado podr[iacute]an darle derechos adicionales.
(d) Use the following language if you choose to use the Optional
Signature Line provided by Sec. 455.2(f):
Por este medio confirmo que he recibido copia de la Gu[iacute]a
del Comprador al momento de la compraventa.
0
4. Add Figures 1 through 6 to part 455 to read as follows:
BILLING CODE 6750-01-P
[[Page 81680]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.402
[[Page 81681]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.403
[[Page 81682]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.404
[[Page 81683]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.405
[[Page 81684]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.406
[[Page 81685]]
[GRAPHIC] [TIFF OMITTED] TR18NO16.407
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016-27694 Filed 11-17-16; 8:45 am]
BILLING CODE 6750-01-C