I have been receiving more questions about the Federal Trade Commission’s (FTC) changes related to advertising and record keeping. While I have previously summarized the tentative new rules, allow me to take a deeper dive for you. I do wish to point out one important point before moving on. Even if the Vehicle Shopping Rule is struck down by the courts, the FTC has implemented the Junk Fee Rule which would then be applicable to new motor vehicle dealers. While I will address the Junk Fee Rule later, I did not wish this important legal point to go without emphasis. Some brief background: In December of 2023, the FTC introduced the Combating Auto Retail Scams (CARS) Rule in an effort to address alleged deceptive practices in the auto retail industry. This rule, aimed at creating greater transparency and fairness for consumers, will significantly impact new motor vehicle dealers once it goes into effect. I believe a more accurate description is the term used by NADA, and that is the Vehicle Shopping Rule. I will refer to it as the latter hereafter. The legality of the Vehicle Shopping Rule is being reviewed by the Fifth Circuit for the United States Court of Appeals. Oral arguments were heard on Oct. 9, 2024, and a ruling is expected by the end of the year. What follows is a look at the requirements for auto dealers if the Vehicle Shopping Rule is enforced by the Courts as written. KEY REQUIREMENTS FOR DEALERS UNDER THE RULE Should the Vehicle Shopping Rule become effective, new motor vehicle dealers will need to comply with several key requirements. These include clear disclosures on pricing, financing and add-ons, as well as limits on certain fees and practices. Here’s a general breakdown of what will be required: 1. Disclosure of “Offering Price” Dealers must clearly present an “Offering Price” for the vehicle, which includes any dealer fees and “add-ons” that the consumer must pay to buy or lease the vehicle. This “Offering Price” is required to COUNSELOR’S CORNER The Vehicle Shopping Rule and the Junk Fee Rule be disclosed at the time the consumer asks about a specific vehicle, or there is an advertisement showing an amount or financing term on any vehicle or group of vehicles. You can state that the “Offering Price” is negotiable. “Add-ons” are defined as products or services not supplied or installed by the vehicle manufacturer yet charged to the consumer (directly or indirectly) in the context of the vehicle’s sale or lease. “Add-ons” are commonly thought of as physical items that are pre-installed on the vehicle, such as window tint, paint protection, etching, theft deterrent products, roof racks, etc. The only items that do not have to be included in this “Offering Price” are state-mandated fees and taxes. However, and this is very important, our West Virginia documentary fee is not a state-mandated fee, it is a state-allowed fee. Consequently, a motor vehicle dealer will be required to add any documentary fee to the “Offering Price.” The “Offering Price” can then state that it is the price “plus government fees and taxes.” 2. Clear Financing Disclosures Dealers must disclose financing terms transparently, including the annual percentage rate (APR), total interest over the loan term and other financing costs. A major change within the Vehicle Shopping Rule goes beyond your normal Reg. Z (financing) or Reg. M. (leasing) disclosures. When a salesperson or manager presents the “Offering Price,” they are also required to now disclose the monthly payment, the total amount repaid and any down payment. These requirements are beyond, and in addition to, the normal Reg. M and Reg. Z requirements, the trigger being the requirement to disclose the “Offering Price.” To emphasize again, while you can preclude government fees and taxes from the “Offering Price,” best practice would be to clearly state that any “Offering Price,” or total amount repaid, excludes government fees and taxes and that those are additions. 3. Add-On Product Transparency and Value Admittedly, the new proposed Vehicle Shopping Rule is vague regarding its add-on product policies. Add-ons, such as extended warranties, insurance products or By Johnnie Brown, Esq. Pullin, Fowler, Flanagan, Brown & Poe PLLC WVADA NEWS 24
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