[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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.

---------------------------------------------------------------------------

[[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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \155\ See, e.g., 79 FR 70814, note 101; Request for Extension of 
Clearance, 78 FR 59032, 59033 (Sept. 25, 2013).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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].
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

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[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