In April and June of 2018, the Federal Trade Commission, in concert with 12 partner agencies in states, made headlines in conducting a “Compliance Sweep” of car dealerships focused on the amended Used Car Rule. Several aspects of the story were noteworthy. 

First, many pundits feel “safer” now that the CFPB has been, at least partially, “defanged” due to the change in leadership in the post-Richard Cordray era (the crusading leader of the CFPB having resigned in November). This story shows that while enforcement efforts by the CFPB may have lessened, states and other agencies have filled the void left by the CFPB for regulatory enforcement. 

In this case, it is also remarkable that some very different agencies worked together: the California, Texas, and Ohio DMVs, a district attorney’s office from four different California counties, the attorney general from the State of Washington, consumer protection agencies from Chicago and New York City, and the Florida Bureau of Dealer Services. Could this happen in your state?

Under the Used Car Rule Amendment, which took effect on Jan. 28, car dealers must display a revised window sticker (better known as the Buyer’s Guide) on every used car offered for sale. The Used Car Rule applies in all states except Maine and Wisconsin. The Used Car Rule does not apply to motorcycle sales, agricultural equipment sales and vehicles sold for scrap or parts with a salvage certification. 

The penalties for failure to comply are very steep — $41,484 per violation! So what are the changes, and what are the challenges associated with the changes?

Rule Changes

The description in the revised Buyer’s Guide of an “as is” sale has been changed to clarify that it only refers to whether or not the vehicle is offered with a warranty from the dealer. (Note that the question of whether you are permitted to sell a used vehicle “as is” is          governed by state law.) Boxes have been placed on the front of the Buyer’s Guide for dealers to check to show if the vehicle is covered by a third-party warranty, if a service contract may be available, or if an unexpired manufacturer’s warranty still applies. 

Airbags (probably because of the Takata recall) and catalytic converters have been added to the Buyer’s Guide’s list of major defects that may occur in used vehicles. Spanish statements have been added in the English-language Buyer’s Guide advising Spanish-speaking consumers to request the Buyer’s Guide in Spanish for sales conducted in Spanish, and there is a Spanish translation of the acknowledgment of the receipt of the Spanish translation of the Buyer’s Guide. 

In addition, the revised Buyer’ Guide recommends that consumers get a vehicle history report and check for safety recalls before buying a used car, referring consumers to FTC.gov/usedcars and SaferCar.gov, respectively.

New forms almost always give rise to new questions. For instance, can more than one box be checked if more than one non-dealer warranty applies to a used vehicle? 

Yes. 

What box is checked for CPO vehicles where a manufacturer’s warranty is part of the purchase price? This would depend on whether or not the warranty extends the original new-vehicle warranty or is a manufacturer’s used-car warranty that is different from an extension of the original new car warranty. For the former, check “Manufacturer’s warranty still applies”; for the latter, check “Manufacturer’s used-vehicle warranty applies.” 

Note that the Used Car Rule treats service contracts differently than warranties. The main difference in the definitions of the two products is that a warranty is included as part of the sales price, while a service contract is provided at an extra charge beyond the price of the used vehicle. There are additional disclosure requirements for service contracts.

A New Era in Compliance

The takeaway from this story is that, in 2018, compliance continues to be necessary in dealerships, regardless of the enforcement body. In today’s marketplace, many state agencies have stepped into the shoes of the CFPB and are even banding together to come after dealerships that are not compliant, and such compliance failures can be very costly. 

In the compliance sweep conducted by the FTC and state agencies, 30% of the vehicles inspected displayed no Buyer’s Guide and, of those cars with a Buyer’s Guide, a little more than half displayed the old and invalid version. Don’t let your dealer clients get caught up in the next compliance sweep. Make sure they are (properly) using the revised Buyer’s Guide today!

DISCLAIMER: Content provided in this article is intended for informational purposes only and should not be construed as legal advice and should not be relied upon or acted upon without you retaining counsel to provide specific legal advise based upon your particular situation, jurisdiction and circumstances. No duties are assumed, intended, or created by this communication. No attorney-client relationship is being created by your review or use of this material.

Robert J. “Bob” Wilson Esq. is a Philadelphia lawyer and general counsel for ARMD Resource Group. He is the principal of Wilson Law Firm and has over 30 years of experience both as a counselor and as a litigator in state and federal courts.