COUNSELOR’S CORNER By Johnnie E. Brown, Esq. Pullin, Fowler, Flanagan, Brown & Poe, PLLC Let me state the obvious: things are changing fast and furious in our marketplace. The challenges come simultaneously from the Federal Trade Commission (FTC) and our manufacturers. Manufacturers are attempting to change the franchise model to an agency model used in Europe that gives substantial, if not complete, control over the retail process of selling a motor vehicle to the retail customer. Likewise, the FTC is attempting to create legal regulations to mandate precise actions by finance and insurance office employees. The purpose of this article is to provide you with a summary of a proposed FTC rule which specifically deals with how a new motor vehicle dealer will be allowed to sell a motor vehicle and voluntary protection products to a retail customer. Currently, the proposed rule is receiving comments. The West Virginia Automobile Dealers Association (WVADA) has filed opposing comments on your behalf. Those full-length comments are available on the FTC and WVADA websites. Amazingly, while a motor vehicle dealer is anxiously engaged in complying with the new safeguard rules – which are also implemented by the FTC if the FTC is successful in implementing these proposed regulatory changes – the FTC will dramatically change how any motor vehicle dealer operates within the finance and insurance office with the retail customer. The rule is only 13 pages long, but there are a total of 126 pages of explanation and rationale to consider. Following is a summary of the more significant changes. 1. The proposed rule uses the broad term “addon product(s) and service(s)” to encompass not only voluntary protection products but also those accessories which may be described as hard add-ons or accessories to a motor vehicle. After using the broad term “add-on product(s) and service(s),” the new FTC proposed rule will require an extremely detailed showing of how each “add-on product(s) and service(s)” must be disclosed to a retail customer. For example, the FTC states that the disclosure for each product or service must contain pricing for “the typical consumer” without really providing a standard or definition of what the “typical consumer” looks like. We all can appreciate that there is no “typical consumer” and that voluntary protection products can be customized. Extended service contracts come in a variety of terms and coverage and are priced differently depending upon the make, model and age of the vehicle. Consequently, there is no “typical consumer” in our marketplace to cover any one product. The proposed rule would require the dealer to disclose, clearly and conspicuously, a list of all “add-on product(s) and service(s)” on its website, online service, or mobile application. This requires disclosure of the pricing of these add-ons when advertising a motor vehicle. 2. One of the more significant changes is that a dealer would have to provide the motor vehicle’s cash price without any optional “add-on product(s) and service(s)” so that the customer can purchase the vehicle without considering any voluntary protection products. This would be called the “offering price.” This could certainly change the dynamic of the transaction and vehicle pricing when many dealers currently look at the transaction as a whole instead of only focusing on the price of the motor vehicle. I believe this will undoubtedly increase the price of motor vehicles for retail customers. 3. The FTC has also proposed a rule requiring that all disclosures be “clear and conspicuous” and uses a seven-part test to illustrate this standard. The proposed rule generally defines “clear and conspicuous” as “difficult to miss (i.e., easily noticeable) and easily understandable . . .” 4. This “clear and conspicuous” standard will further be complicated by the requirement that the motor vehicle dealer will have to prove that a customer gave their “express, informed consent” when purchasing any “add-on product(s) and service(s).” The proposed rule literally states that a mere signature or customer initials on a form or a “checkmark” on a pre-printed Continued on page 12 The New FTC Rules: What You Need to Know wvcar.com 10 WVADA
RkJQdWJsaXNoZXIy ODQxMjUw