The Federal Trade Commission has decided to retain its Used Car Rule,
which requires automobile dealers to post important warranty information
in "Buyers Guides" on any used cars they offer for sale. According to
FTC Bureau of Consumer Protection Director Jodie Bernstein, "The FTC's
Used Car Rule gives consumers critical information about who will pay
for repairs when something goes wrong, and that's key to avoiding
consumer confusion and dissatisfaction."
The FTC also made several amendments to the rule, including one that
will permit dealers to hang Buyers Guides on rear-view or side mirrors,
for example, rather than requiring that they be posted on side windows.
This amendment will provide car dealers with greater flexibility in
posting, yet still allow consumers to view the Buyers Guides easily.
A discussion of the FTC's decision is published in the Dec. 5 Federal
Register and the effective date of these amendments will be Jan. 4,
The Commission's Used Car Rule, which became effective in May 1985,
requires that dealers post a completed Buyers Guide at all times on each
used car they offer for sale. Dealers must disclose on the Buyers Guide
whether the vehicle is covered by a warranty and, if so, the type and
duration of the warranty coverage, or whether the vehicle is being sold
"as is -- no warranty." The information in the Buyers Guide also becomes
a part of the sales contract and overrides any contrary provisions
contained in this contract, under the FTC rule.
In recent years, the FTC has enforced the rule using a "sweep" approach,
under which the Commission teams up with law- enforcement officials at
the state level and check several or all of the car lots in a given area
to determine whether they are providing this important pre-purchase
information as required by the rule. The FTC also uses individual
complaints about rule violations as a means of targeting non-complying
dealers for enforcement action. As a result of both enforcement sweeps
and following up on consumer complaints, the FTC has brought 81 cases
against dealers for rule violations. The states have supplemented this
federal effort with hundreds more actions, often using their authority
to write citations on the spot. The FTC's Bernstein urged consumers to
look for the Buyers Guides when shopping for used cars, adding that the
warranty -- how long it lasts and what it covers -- is something that
they may be able to negotiate with the dealer, just as they can
negotiate the price.
In May 1994, the Commission sought public comment regarding a number of
questions pertaining to the operation and effectiveness of the rule,
whether it has had a significant impact on a substantial number of small
entities, and whether it should be modified or rescinded. After
considering the 26 comments received, the FTC found that the rule has
served a valuable function and, given that used automobiles are
generally one of the most frequently complained about consumer topics,
that there is a continuing need for it. The Commission also found that
the rule has not imposed significant costs on dealers who are governed
by it (the average cost of a Buyers Guide is 7.6 cents). Because the
Commission's review has demonstrated that the rule is a cost effective
means of providing valuable information to consumers, the Commission has
decided to retain the rule.
The Commission, however, is amending the rule to:
* permit dealers to post Buyers Guides anywhere on a used vehicle,
instead of requiring that they be posted on a side window, provided that
the Guides are conspicuously and prominently displayed and that both
sides can be read easily;
* allow, but not require, dealers to obtain a consumer's signature on
the Buyers Guide, if accompanied by a disclosure that the buyer is
acknowledging receipt of the Buyers Guide at the close of the sale.
(Prior to this amendment, dealers were prohibited from changing the
Buyers Guide in any way, although the FTC had not brought any
enforcement actions against dealers who chose to keep copies of
consumer-signed Buyers Guides on file to demonstrate that consumers had
received the information. The amended rule clarifies that this practice
is permissible.); and
* make several minor grammatical changes to the Spanish language
version of the Buyers Guide.
The Commission vote to retain the Used Car Rule with the amendments was
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