# Combating Auto Retail Scams Trade Regulation Rule > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2023-27997 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** January 4, 2024 - **Citation:** 89 FR 590 ## Text FEDERAL TRADE COMMISSION 16 CFR Part 463 RIN 3084-AB72 Combating Auto Retail Scams Trade Regulation Rule AGENCY: Federal Trade Commission. ACTION: Final rule. SUMMARY: The Federal Trade Commission (“FTC” or “Commission”) is issuing this Combating Auto Retail Scams Trade Regulation Rule (“CARS Rule,” “Rule,” or “Final Rule”) and Statement of Basis and Purpose (“SBP”) related to the sale, financing, and leasing of covered motor vehicles by covered motor vehicle dealers. The Final Rule, among other things, prohibits motor vehicle dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing for motor vehicles, requires accurate pricing disclosures in dealers' advertising and sales communications, requires dealers to obtain consumers' express, informed consent for charges, prohibits the sale of any add-on product or service that confers no benefit to the consumer, and requires dealers to keep records of certain advertisements and customer transactions. DATES: This rule is effective July 30, 2024. ADDRESSES: Copies of this document are available on the Commission's website, www.ftc.gov. FOR FURTHER INFORMATION CONTACT: Daniel Dwyer or Sanya Shahrasbi, Division of Financial Practices, Bureau of Consumer Protection, Federal Trade Commission, 202-326-2957 (Dwyer), 202-326-2709 (Shahrasbi), ddwyer@ftc.gov, sshahrasbi@ftc.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Background A. Statutory Authority B. Commission Actions Following the Dodd-Frank Act and the Rulemaking Process II. Motor Vehicle Financing and Leasing A. Overview of the Motor Vehicle Marketplace B. Deceptive and Unfair Practices in the Motor Vehicle Marketplace 1. Bait-and-Switch Tactics 2. Unlawful Practices Relating to Add-On Products or Services and Hidden Charges C. Law Enforcement and Other Responses III. Section-by-Section Analysis A. § 463.1: Authority B. § 463.2: Definitions 1. Overview 2. Definition-by-Definition Analysis (a) Add-On or Add-On Product(s) or Service(s) (b) Add-On List (c) Cash Price Without Optional Add-Ons (d) Clearly and Conspicuously (e) Motor Vehicle (finalized as “`Covered Motor Vehicle' or `Vehicle' ”) (f) Dealer or Motor Vehicle Dealer (finalized as “`Covered Motor Vehicle Dealer' or `Dealer' ”) (g) Express, Informed Consent (h) GAP Agreement (l) Government Charges (j) Material or Materially (k) Offering Price C. § 463.3: Prohibited Misrepresentations 1. General Comments 2. Paragraph-by-Paragraph Analysis of § 463.3 (a) The Costs or Terms of Purchasing, Financing, or Leasing a Vehicle (b) Any Costs, Limitation, Benefit, or Any Other Aspect of an Add-On Product or Service (c) Whether Terms Are, or Transaction Is, for Financing or a Lease (d) The Availability of Any Rebates or Discounts That Are Factored Into the Advertised Price but Not Available to All Consumers (e) The Availability of Vehicles at an Advertised Price (f) Whether Any Consumer Has Been or Will Be Preapproved or Guaranteed for Any Product, Service, or Term (g) Any Information on or About a Consumer's Application for Financing (h) When the Transaction Is Final or Binding on All Parties (i) Keeping Cash Down Payments or Trade-in Vehicles, Charging Fees, or Initiating Legal Process or Any Action If a Transaction Is Not Finalized or If the Consumer Does Not Wish To Engage in a Transaction (i) Keeping Cash Down Payments or Trade-in Vehicles, Charging Fees, or Initiating Legal Process or Any Action If a Transaction Is Not Finalized or If the Consumer Does Not Wish To Engage in a Transaction (j) Whether or When a Dealer Will Pay Off Some or All of the Financing or Lease on a Consumer's Trade-in Vehicle (k) Whether Consumer Reviews or Ratings Are Unbiased, Independent, or Ordinary Consumer Reviews or Ratings of the Dealer or the Dealer's Products or Services (l) Whether the Dealer or Any of the Dealer's Personnel or Products or Services Is or Was Affiliated With, Endorsed or Approved by, or Otherwise Associated With the United States Government or Any Federal, State, or Local Government Agency, Unit, or Department, Including the United States Department of Defense or Its Military Departments (m) Whether Consumers Have Won a Prize or Sweepstakes (n) Whether, or Under What Circumstances, a Vehicle May Be Moved, Including Across State Lines or Out of the Country (o) Whether, or Under What Circumstances, a Vehicle May Be Repossessed (p) Any of the Required Disclosures Identified in This Part D. § 463.4: Disclosure Requirements 1. Overview 2. Paragraph-by-Paragraph Analysis of § 463.4 (a) Offering Price (b) Add-On List (c) Add-Ons Not Required (d) Total of Payments and Consideration for a Financed or Lease Transaction (e) Monthly Payments Comparison E. § 463.5: Dealer Charges for Add-Ons and Other Items 1. Overview 2. Paragraph-by-Paragraph Analysis of § 463.5 (a) Add-Ons That Provide No Benefit (b) Undisclosed or Unselected Add-Ons (c) Any Item Without Express, Informed Consent F. § 463.6: Recordkeeping G. § 463.7: Waiver Not Permitted H. § 463.8: Severability I. § 463.9: Relation to State Laws IV. Effective Date V. Paperwork Reduction Act A. Add-On List Disclosures B. Disclosures Relating to Cash Price Without Optional Add-Ons C. Prohibited Misrepresentations and Required Disclosures D. Recordkeeping E. Capital and Other Non-Labor Costs 1. Disclosures 2. Recordkeeping VI. Regulatory Flexibility Act A. Significant Impact Analysis 1. Comments on Significant Impact 2. Certification of the Final Rule (a) Industry Averages (b) Dealer Size Based on the Number of Employees B. Initial and Final Regulatory Flexibility Analysis 1. Comments on the Initial Regulatory Flexibility Analysis (a) Description of the Reasons Why Action by the Agency Is Being Considered (b) Succinct Statement of the Objectives of, and Legal Basis for, the Proposed Rule (c) Description of and, Where Feasible, Estimate of the Number of Small Entities to Which the Proposed Rule Will Apply (d) Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Proposed Rule (e) Duplicative, Overlapping, or Conflicting Federal Rules (f) Description of Any Significant Alternatives to the Proposed Rule Which Accomplish the Stated Objectives of Applicable Statutes and Which Minimize Any Significant Economic Impact of the Proposed Rule on Small Entities 2. Final Regulatory Flexibility Analysis (a) Statement of the Need for, and Objectives of, the Rule (b) Issues Raised by Comments, Including Comments by the Chief Counsel for Advocacy of the SBA, the Commission's Assessment and Response, and Any Changes Made as a Result (c) Description and Estimate of the Number of Small Entities to Which the Final Rule Will Apply or an Explanation of Why No Such Estimate Is Available (d) Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements (e) Description of the Steps the Commission Has Taken To Minimize the Significant Economic Impact on Small Entities Consistent With the Stated Objectives of Applicable Statutes VII. Final Regulatory Analysis Under Section 22 of the FTC Act A. Introduction B. Estimated Benefits of Final Rule 1. Consumer Time Savings When Shopping for Motor Vehicles 2. Reductions in Deadweight Loss 3. Framework 4. Estimation 5. Benefits Related to More Transparent Negotiation C. Estimated Costs of Final Rule 1. Prohibited Misrepresentations 2. Required Disclosure of Offering Price in Advertisements and in Response to Inquiry 3. Disclosure of Add-On List and Associated Prices 4. Required Disclosure of Total of Payments for Financing/Leasing Transactions 5. Prohibition on Charging for Add-Ons that Provide No Benefit 6. Requirement to Obtain Express, Informed Consent Before Any Charges 7. Recordkeeping D. Other Impacts of Final Rule E. Conclusion F. Appendix: Derivation of Deadweight Loss Reduction G. Appendix: Uncertainty Analysis VIII. Other Matters I. Background A. Statutory Authority The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was signed into law in 2010. 1 Section 1029 of the Dodd-Frank Act authorizes the FTC to prescribe rules with respect to unfair or deceptive acts or practices by motor vehicle dealers. 2 The FTC is authorized to do so under the FTC Act and in accordance with section 553 of the Administrative Procedure Act (“APA”). 3 The grant of APA rulemaking authority set forth in section 1029 of the Dodd-Frank Act became effective as of July 21, 2011—the designated “transfer date” established by the Treasury Department. 4 1 Public Law 111-203, 124 Stat. 1376 (2010). 2 12 U.S.C. 5519(d). See 12 U.S.C. 5519(f)(1) and (2) for definitions of the terms “motor vehicle” and “motor vehicle dealer” under section 1029 of the Dodd-Frank Act, respectively. 3 See 12 U.S.C. 5519(a) (discussing the authority over “motor vehicle dealer[s] 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(d) (“Notwithstanding section 57a of title 15, the Federal Trade Commission is authorized to prescribe rules under sections 45 and 57a(a)(1)(B) of title 15[ ] in accordance with section 553 of title 5, with respect to a person described in subsection (a).”); 5 U.S.C. 553. Because the Commission has authority to promulgate this Rule in accordance with the APA, it is not required to include a statement as to the prevalence of the acts or practices treated by the Rule under section 18(d) of the FTC Act. Compare 12 U.S.C. 5519(d) and (a) (providing the FTC with APA rulemaking authority for purposes of section 1029 of the Dodd-Frank Act), with 15 U.S.C. 57a(b)(3) (requiring a statement as to prevalence for certain rulemaking proceedings by the Commission under non-APA procedures), and 15 U.S.C. 57a(b)(1) (establishing that certain rulemaking proceedings by the Commission under non-APA procedures are subject to requirements in addition to those under the APA). 4 See 12 U.S.C. 5411(a). B. Commission Actions Following the Dodd-Frank Act and the Rulemaking Process Following enactment of the Dodd-Frank Act, the Commission published in the Federal Register a notice discussing its authority to prescribe rules with respect to unfair or deceptive acts or practices by motor vehicle dealers and announcing that it would be hosting a series of public roundtables to explore consumer protection issues pertaining to motor vehicle sales and leasing, including what consumer protection issues, if any, exist that could be addressed through a possible rulemaking. 5 The Commission sought participation from regulators, consumer advocates, industry participants, and other interested parties and ultimately held three such public roundtables. 6 5 76 FR 14014, 14015 (Mar. 15, 2011). 6 See Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Apr. 12, 2011), https://www.ftc.gov/news-events/events/2011/04/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Detroit, Michigan); Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Aug. 2, 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in San Antonio, Texas); Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Nov. 17, 2011), https://www.ftc.gov/news-events/events/2011/11/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Washington, District of Columbia). The Commission subsequently focused on enforcement and business guidance in the motor vehicle dealer marketplace. As discussed in SBP II.C, 7 however, certain unfair and deceptive acts or practices have persisted, despite more than a decade of enforcement and education. Accordingly, on June 23, 2022, the Commission announced a notice of proposed rulemaking (“NPRM”) addressing unfair or deceptive acts or practices by motor vehicle dealers. 8 That notice was published in the Federal Register on July 13, 2022. 9 The NPRM, among other things, proposed to (i) prohibit motor vehicle dealers from making certain misrepresentations, (ii) require accurate pricing disclosures, (iii) prohibit the sale of any add-on product or service that confers no benefit to the consumer, (iv) require express, informed consent for add-ons and other charges, and (v) impose certain recordkeeping requirements. The comment period for the NPRM closed on September 12, 2022. 7 As used herein, references to the “Statement of Basis and Purpose” or “SBP” refer to the portions of this document that precede the regulatory text of the Final Rule. References to the “Rule,” “Final Rule,” or “CARS Rule” refer to the text in part 463—Combating Auto Retail Scams (“CARS”) Trade Regulation Rule. Because the Final Rule is narrower than the proposed Motor Vehicle Dealers Trade Regulation Rule in the NPRM, the Commission has modified the Rule title to reflect the more limited scope. 8 See Press Release, Fed. Trade Comm'n, “FTC Proposes Rule to Ban Junk Fees, Bait-and-Switch Tactics Plaguing Car Buyers” (June 23, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-proposes-rule-ban-junk-fees-bait-switch-tactics-plaguing-car-buyers. 9 See Fed. Trade Comm'n, Notice of Proposed Rulemaking, Motor Vehicle Dealers Trade Regulation Rule, 87 FR 42012 (released June 23, 2022; published July 13, 2022) [hereinafter NPRM], https://www.govinfo.gov/content/pkg/FR-2022-07-13/pdf/2022-14214.pdf. In response to the NPRM and proposed rule, the Commission received more than 27,000 comments from stakeholders representing a wide range of viewpoints. 10 These stakeholders included numerous individual consumers who described deceptive practices during recent car purchases and many who discussed current or former military service and deceptive and predatory practices common near military installations. 11 Commenters also included dealerships and their employees, industry groups, consumer and community groups, and Federal and State lawmakers and law enforcement agencies. Many commenters, such as consumers, some dealers and dealer employees, consumer groups, and lawmakers and enforcers, were supportive of the proposed rule in whole or in part. Many of these commenters also urged the FTC to include additional protections for consumers and law-abiding businesses, while others, such as industry groups, dealers, and dealer employees, asked questions or criticized the proposal. 12 These comments and responses to comments are discussed primarily in the discussion of the Final Rule in SBP III. 10 The Commission received 27,349 comment submissions filed online in response to its NPRM. See Gen. Servs. Admin., Dkt. No. FTC-2022-0046, Proposed Rule, Motor Vehicle Dealers Trade Regulation Rule (July 13, 2022), https://www.regulations.gov/document/FTC-2022-0046-0001 (noting comments received). To facilitate public access, over 11,000 such comments have been posted publicly on Regulations.gov at https://www.regulations.gov/document/FTC-2022-0046-0001/comment (noting posted comments). As explained at Regulations.gov , agencies may choose to redact or withhold certain submissions (or portions thereof) such as those containing private or proprietary information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign. See Gen. Servs. Admin., Regulations.gov Frequently Asked Questions, Find Dockets, Documents, and Comments FAQs, “How are comments counted and posted to Regulations.gov? ,” https://www.regulations.gov/faq?anchor=downloadingdata (last visited Dec. 5, 2023). The Commission has considered all timely and responsive public comments it received in response to its NPRM. 11 See, e.g., Individual commenter, Doc. No. FTC-2022-0046-4648 (“As a young Marine stationed in a military town I was taken advantage of by a dealership when purchasing my first car. It set me back financially for years. I know of many young military people who purchased vehicle[ ]s and we[ ]re instantly so far upside down after leaving the dealership with thousands of dollars in add on junk charges . . . .”); Individual commenter, Doc. No. FTC-2022-0046-0542 (“As a former member of the Military, the amount of scams and horror stories I have heard regarding young service members buying cars is absurd. . . . Someone shouldn't have to do hours of research on how to buy a car so they don't get taken advantage of.”); Individual commenter, Doc. No. FTC-2022-0046-0637 (“As a small business owner and active duty military member I have played the role of both a buyer, toiling for hours to just reach fair deals on vehicles, as well as that of an advocate for my Sailors who have been preyed upon by local dealerships. Nowhere else in our society do so many average citizens have to mentally prepare for a battle over fair pricing and treatment for something that is realistically a modern necessity.”); Individual commenter, Doc. No. FTC-2022-0046-9840 (“I can't list the number of times I have either seen, or have stepped in a situation, where car dealers have either attempted to take, or have successfully taken, advantage of a young military member or their family by baiting and switching when it came to the price of a car, or stated that the price was one amount, only to be charged, and over-charged a higher amount. These dealers have even attempted to pull unethical tricks on me and my wife, even after they found out that I was a military member, a combat veteran, that was serving this great nation.”); Individual commenter, Doc. No. FTC-2022-0046-0845 (“Predatory practices like [bait-and-switch pricing] are common near military installations . . . .”). 12 Industry commenters claimed that many of the areas covered by the proposed rule are already addressed in industry guidance. The Commission notes that, although industry guidance can provide helpful information to dealers, dealers who choose not to follow such guidance, or who engage in deceptive or unfair practices, subject their customers to significant harm. The Rule addresses such practices, thus protecting consumers and law-abiding dealers. The Commission notes that it has undertaken careful review and consideration of each of the comments it received in response to its NPRM. The Commission has dedicated the majority of its section-by-section analysis to descriptions of, and responses to, comments or portions thereof that were critical of the Commission's proposal or that urged the Commission to adopt additional requirements. Thus, to ensure that this document also reflects the many comments in the public record from stakeholders who supported the proposal as is, the Commission has excerpted a number of such comments in portions of its SBP. II. Motor Vehicle Financing and Leasing A. Overview of the Motor Vehicle Marketplace For many consumers, buying or leasing a motor vehicle is essential, expensive, and time-consuming. 13 Americans rely on their vehicles for work, school, childcare, groceries, medical visits, and many other important tasks in their daily lives. 14 These vehicles have become increasingly costly: the average price of a new vehicle sold at a new car dealership in 2022 was more than $46,000, 15 while the average price of a used vehicle sold at such dealerships was more than $30,000. 16 By the second quarter of 2023, the average monthly payment for used cars reached $533, and the average monthly payment for new cars reached $741—both record highs. 17 Vehicles are now many consumers' largest expense—on a par with housing, child care and food, and accounting for 16% of the median annual household income before taxes. 18 In 2022 alone, Americans spent more than $720 billion on motor vehicles and vehicle parts. 19 13 Unless otherwise indicated, the terms “auto,” “automobile,” “car,” “motor vehicle,” and “vehicle,” as used in this SBP and the Commission's final regulatory analysis, refer to “Covered Motor Vehicle” as defined in this part. 14 During 2017 to 2022, an average of 91% of American workers who did not work from home drove to work. See U.S. Census Bureau, “American Community Survey: Means of Transportation to Work by Selected Characteristics, 2022: ACS 1-Year Estimates Subject Tables” (2023), https://data.census.gov/table?q=Commuting&tid=ACSST1Y2022.S0802 (reporting 110,245,368 workers 16 years and over who drove alone to work in a car, truck, or van, and 13,881,067 workers 16 years and over who drove by carpool to work in a car, truck or van, together accounting for 91% of the total of 136,196,004 workers 16 years and over who did not work from home); U.S. Census Bureau, “American Community Survey: Means of Transportation to Work by Selected Characteristics, 2021: 2017-2021 ACS 5-Year Estimates Subject Tables” (2022), https://data.census.gov/table?q=Commuting&tid=ACSST5Y2021.S0802 (reporting 113,724,271 workers 16 years and over who drove alone to work in a car, truck, or van, and 13,340,838 workers 16 years and over who drove by carpool to work in a car, truck or van, together accounting for 91% of the total of 140,223,271 workers 16 years and over who did not work from home). 15 Nat'l Auto. Dealers Ass'n, “NADA Data 2022” 7, https://www.nada.org/media/4695/download?inline (noting average retail selling price of $46,287 for new vehicles sold by dealerships in 2022). 16 Id. at 10 (noting average retail selling price of $30,736 for used vehicles sold by new-vehicle dealerships in 2022). 17 Lydia DePillis, “How the Costs of Car Ownership Add Up,” N.Y. Times (Oct. 6, 2023), https://www.nytimes.com/interactive/2023/10/07/business/car-ownership-costs.html (citing average monthly payment figures from TransUnion). 18 Id. (citing data from AAA and the U.S. Census Bureau). 19 Bureau of Econ. Analysis, “National Data: National Income and Product Accounts, Personal Consumption Expenditures by Major Type of Product” tbl. 2.3.5, https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI2NSJdXX0= (last revised July 27, 2023) (listing estimated annual expenditure rates of between $713.1 billion and $737.1 billion in 2022). Given these costs, many consumers who purchase a motor vehicle rely on financing to complete their purchases. According to public reports, 81% of new motor vehicle purchases, and nearly 35% of used vehicle purchases, are financed. 20 By the first quarter of 2023, Americans had more than 107 million outstanding auto financing accounts and owed more than $1.56 trillion thereon, 21 making auto finance the third-largest source of debt for U.S. consumers, and the second-largest for U.S. consumers ages 40 and over. 22 Servicemembers have an average of twice as much auto debt as civilians—particularly young servicemembers, who generally require vehicles for transportation while living on military bases. 23 By the age of 24, around 20 percent of young servicemembers have at least $20,000 in auto debt, which equates to nearly two-thirds of an enlisted soldier's typical base salary at that age. 24 20 Melinda Zabritski, Experian Info. Sols., Inc., “State of the Automotive Finance Market Q4 2020” 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf (on file with the Commission). 21 Fed. Rsrv. Bank of N.Y., “Quarterly Report on Household Debt and Credit, 2023: Q1” 3-4 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., “Data Underlying Report” on “Page 3 Data” and “Page 4 Data” tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing number of open “Auto Loan” accounts and total outstanding balance in such accounts). 22 Fed. Rsrv. Bank of N.Y., “Quarterly Report on Household Debt and Credit, 2023: Q1” 3, 21 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., “Data Underlying Report” on “Page 3 Data” and “Page 21 Data” tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing total “Auto Loan” debt balance compared to other product type categories). 23 See Consumer Fin. Prot. Bureau, “Financially Fit? Comparing the Credit Records of Young Servicemembers and Civilians” 27 (July 2020), https://files.consumerfinance.gov/f/documents/cfpb_financially-fit_credit-young-servicemembers-civilians_report_2020-07.pdf. 24 See Consumer Fin. Prot. Bureau, “Protecting Servicemembers from Costly Auto Loans and Wrongful Repossessions” (July 18, 2022), https://www.consumerfinance.gov/about-us/blog/protecting-servicemembers-from-costly-auto-loans-and-wrongful-repossessions/. In addition to the expense, the process of buying or leasing a vehicle is often time-consuming and arduous. It can take several hours or days to finalize a transaction, 25 on top of the hours it can take, particularly in rural areas, to drive to a dealership. 26 Consumers may need to take time off work or arrange childcare, and families with a single vehicle may be forced to delay other important appointments due to the length of the vehicle-buying or -leasing process. 25 Mary W. Sullivan, Matthew T. Jones & Carole L. Reynolds, Fed. Trade Comm'n, “The Auto Buyer Study: Lessons from In-Depth Consumer Interviews and Related Research” 15 (July 2020) [hereinafter Auto Buyer Study], https://www.ftc.gov/system/files/documents/reports/auto-buyer-study-lessons-depth-consumer-interviews-related-research/bcpreportsautobuyerstudy.pdf (noting that the purchase transactions in the FTC's qualitative study often took 5 hours or more to complete, with some extending over several days); Cf. Cox Auto., “2020 Cox Automotive Car Buyer Journey” 6 (2020) [hereinafter 2020 Cox Automotive Car Buyer Journey], https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf (reporting average consumer time spent shopping for a vehicle at 14 hours, 53 minutes); Cox Auto., “2022 Car Buyer Journey: Top Trends Edition” 6 (2023) [hereinafter 2022 Car Buyer Journey], https://www.coxautoinc.com/wp-content/uploads/2023/01/2022-Car-Buyer-Journey-Top-Trends.pdf (reporting average consumer time spent shopping for a vehicle at 14 hours, 39 minutes). 26 For example, consumers have complained about going to a dealership based on an offer that the dealer refuses to honor only after they have spent hours driving there and additional time on the lot. See, e.g., Complaint ¶¶ 23-26, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022) (alleging that many consumers drive hours to dealerships based on the advertised prices; that test-driving and selecting a vehicle, and negotiating the price and financing terms, is an often hours-long process; and that, after this time, dealers falsely told consumers that add-on products or packages were required to purchase or finance the vehicle, even though they were not included in the low prices advertised or disclosed to consumers who called to confirm prices). Most consumers—approximately 70%—finance vehicle purchases through a motor vehicle dealer, 27 using what is known as dealer-provided “indirect” financing. 28 This financing is typically offered through dealers' financing and insurance (“F&I”) offices, which may also offer leasing and add-on products or services. In the dealer-provided financing scenario, the dealer collects financial information about the consumer and forwards that information to prospective motor vehicle financing entities. These financing entities evaluate this information and, in the process, determine whether, and on what terms, to provide credit. 29 These terms include the “buy rate”: a risk-based finance charge that reflects the interest rate at which the entity will finance the deal. 30 Dealers often add a finance charge called a “dealer reserve” or “markup” to the buy rate. 31 Unlike the buy rate, the markup is not based on the underwriting risk or credit characteristics of the applicant, and dealers retain the markup as profit. 32 New vehicle dealers average a gross profit of about $2,444 per vehicle, 33 more than half of which comes from the dealers' F&I offices. Independent used vehicle dealers averaged a gross profit of more than $6,000 per vehicle, as of 2019. 34 While some used vehicle dealerships do not have a separate F&I office, more than half of such dealerships sell add-on products. 35 27 Unless otherwise indicated, the terms “dealer,” “dealership,” and “motor vehicle dealer” as used in this SBP and the Commission's final regulatory analysis refer to “ `Covered Motor Vehicle Dealer' or `Dealer' ” as defined in this part. 28 See Nat'l Auto. Dealers Ass'n, “Dealer-Assisted Financing Benefits Consumers,” https://www.nada.org/autofinance/[https://web.archive.org/web/20220416131718/https://www.nada.org/autofinance/] (Apr. 16, 2022) (noting that 7 out of 10 consumers finance through their dealership). This is also known as “dealer financing,” because consumers obtain financing through the dealer that partners with other entities in the financing process. 29 Dealers often originate the contract governing the extension of retail credit or retail leases and then sell, or otherwise assign, these contracts to unaffiliated third-party finance or leasing sources, including such third parties the dealer may have contacted in the course of arranging dealer-provided “indirect” financing. See Consumer Fin. Prot. Bureau, “Automobile Finance Examination Procedures” 3 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf. 30 See Nat'l Auto. Dealers Ass'n, Nat'l Ass'n of Minority Auto. Dealers & Am. Int'l Auto. Dealers Ass'n, “Fair Credit Compliance Policy & Program” 2 (2015), https://www.nada.org/media/4558/download?inline . (defining “buy rate” as “the rate at which the finance source will purchase the credit contract from the dealer”). 31 See, e.g., id. at 1 n.4 & accompanying text. 32 Id. (describing this as the amount dealers earn for arranging financing, measured as the difference between the consumer's annual percentage rate (“APR”) and the wholesale “buy rate” at which a finance source buys the finance contract from the dealer, and noting that finance sources typically permit dealers to retain the dealer participation). 33 Nat'l Auto. Dealers Ass'n, “Average Dealership Profile” 1 (2020), https://www.nada.org/media/4136/download?attachment[http://web.archive.org/web/20220623204158/https://www.nada.org/media/4136/download?attachment] (June 23, 2022). 34 Nat'l Indep. Auto. Dealers Ass'n, “NIADA Used Car Industry Report 2020” 21 (2020). 35 Id. at 8, 10. Six to eight percent of financed vehicle purchases use what is called “buy here, pay here” dealers. 36 In this scenario, consumers typically borrow from, and make their payments directly to, the dealership. 36 Melinda Zabritski, Experian Info. Sols., Inc., “State of the Automotive Finance Market Q2 2020” 8 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf [ http://web.archive.org/web/20201106002015/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf ] (Mar. 6, 2023). The remainder of financed vehicle transactions use what is commonly referred to as “direct” financing, provided by a credit union, bank, or other financing entity. 37 In this scenario, consumers typically receive an interest rate quote from the financing entity prior to arriving at a dealership to purchase a vehicle, and use the financing to pay for their chosen vehicle. 38 Dealerships do not profit on the financing portion of the vehicle sale transaction when a consumer arranges financing directly. 37 Consumer Fin. Prot. Bureau, “Automobile Finance Examination Procedures” 4 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf. 38 Consumer Fin. Prot. Bureau, “Consumer Voices on Automobile Financing” 5 (June 2016), https://files.consumerfinance.gov/f/documents/201606_cfpb_consumer-voices-on-automobile-financing.pdf. Finally, consumers may choose to lease a vehicle from a dealership rather than purchase one. In this scenario, consumers may drive a vehicle for a set period of time—typically around three years 39 —and for a certain maximum number of miles—typically 10,000-15,000 miles per year—in exchange for an upfront payment, a monthly payment, and fees before, during, and at the end of the lease, including for excess wear and usage over the mileage limit. 40 When consumers lease a vehicle, they do not own it, and they must return the vehicle when the lease expires, though they may have the option to purchase the vehicle at the end of the lease period. Nearly 27% of new vehicles are leased, as are just over 8% of used vehicles. 41 39 Melinda Zabritski, Experian Info. Sols., Inc., “State of the Automotive Finance Market Q4 2020” 26 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [ http://web.archive.org/web/20210311174922/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf ] (Mar. 6, 2023). 40 See Fed. Trade Comm'n, “Financing or Leasing a Car,” https://www.consumer.ftc.gov/articles/0056-financing-or-leasing-car (last visited Dec. 5, 2023) (“The annual mileage limit in most standard leases is 15,000 or less.”); Consumer Fin. Prot. Bureau, “What should I know about the differences between leasing and buying a vehicle?,” https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-the-differences-between-leasing-and-buying-a-vehicle-en-815/ (last visited Aug. 24, 2023) (“Most leases restrict your mileage to 10,000-15,000 miles per year.”). 41 Melinda Zabritski, Experian Info. Sols., Inc., “State of the Automotive Finance Market Q4 2020” 5 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [ https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf ] (Mar. 6, 2023). B. Deceptive and Unfair Practices in the Motor Vehicle Marketplace Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended (15 U.S.C. 45), authorizes the FTC to address deceptive or unfair acts or practices in or affecting commerce, including in the motor vehicle marketplace. An act or practice is deceptive if there is a representation, omission, or other practice that is likely to mislead consumers acting reasonably under the circumstances and is material to consumers—that is, it is likely to affect consumers' conduct or decisions with regard to a product or service. 42 Deceptive conduct can involve omission of material information, the disclosure of which is necessary to prevent the claim, practice, or sale from being misleading. 43 42 See Fed. Trade Comm'n, “FTC Policy Statement on Deception” 2, 5, 103 F.T.C. 174 (1984) [hereinafter FTC Policy Statement on Deception] ( appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 183 (1984)), https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf. 43 Id. An act or practice is considered unfair under section 5 of the FTC Act if: (1) it causes, or is likely to cause, substantial injury to consumers; (2) the injury is not reasonably avoidable by consumers; and (3) the injury is not outweighed by countervailing benefits to consumers or to competition. 44 44 15 U.S.C. 45(n). In each of the past four years, the FTC received more than 100,000 complaints regarding motor vehicle sales, financing, service and warranties, and rentals and leasing. 45 This industry is also consistently at or near the top of private sources of consumer complaints. 46 Many of these complaints concerned deceptive or unfair acts or practices affecting U.S. consumers. Complaints about motor vehicle transactions are regularly in the top ten complaint categories tracked by the FTC. 47 For military consumers as well, auto-related complaints are among the top 10 complaint categories outside of identity theft. 48 45 See, e.g., Fed. Trade Comm'n, “Consumer Sentinel Network Data Book 2022” app. B3 at 85 (Feb. 2023) [hereinafter Consumer Sentinel Network Data Book 2022], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN-Data-Book-2022.pdf (reporting complaints about new and used motor vehicle sales, financing, service & warranties, and rentals & leasing, collectively, of more than 100,000 in 2020, 2021, and 2022); Fed. Trade Comm'n, “Consumer Sentinel Network Data Book 2021” app. B3 at 85 (Feb. 2022) [hereinafter Consumer Sentinel Network Data Book 2021], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN%20Annual%20Data%20Book%202021%20Final%20PDF.pdf (reporting complaints about new and used motor vehicle sales, financing, service & warranties, and rentals & leasing, collectively, of more than 100,000 in 2019, 2020, and 2021). 46 According to commenters, complaints to the Better Business Bureau about new and used auto dealers, when combined, have been either the first or second highest regarding any industry in the U.S. for the past twenty years. See Comment of Nat'l Consumer L. Ctr. et al., Doc. No. FTC-2022-0046-7607 at ii; see also Better Bus. Bureau, “BBB Complaint and Inquiry Statistics,” https://www.bbb.org/all/bbb-complaint-statistics (last visited Dec. 5, 2023) (listing complaint statistics from 2010 through 2022, sorted by industry). In addition, for the past seven years annual surveys of State and local consumer protection agencies have reported that auto-related complaints were the top complaint received from consumers. See Comment of Nat'l Consumer L. Ctr. et al., Doc. No. FTC-2022-0046-7607 at 13; Consumer Fed'n of Am., “2022 Consumer Complaint Survey Report” 4-5 (May 2023), https://consumerfed.org/wp-content/uploads/2023/05/2022-Consumer-Complaint-Survey-Report.pdf (“For the seventh year in a row, auto sales, leases and repairs are the #1 complaint category. Consumers filed complaints about add-on products and services, bait and switch pricing, and mechanical condition issues.”). 47 See Consumer Sentinel Network Data Book 2021, supra note 45, at 8 (listing vehicle-related complaints as the seventh most common report category, outside of identity theft, in 2021); Consumer Sentinel Network Data Book 2022, supra note 45, at 8 (listing motor vehicle-related complaints as the fifth most common report category, outside of identity theft, in 2022). 48 See Consumer Sentinel Network Data Book 2021, supra note 45, at 18 (listing vehicle-related complaints as the eighth most common complaint category for military consumers, outside of identity theft categories, in 2021); Consumer Sentinel Network Data Book 2022, supra note 45, at 18 (listing vehicle-related complaints as the ninth most common complaint category for military consumers, outside of identity theft categories, in 2022). Moreover, law enforcement experience shows that complaints are just the tip of the iceberg. 49 The Commission's recent enforcement action against a large, multistate dealership group is illustrative of this point in the motor vehicle marketplace: in that matter, the Commission received 391 complaints—about add-ons and other issues—over a several-month period prior to filing a complaint against the thirteenth largest dealership group in the country by revenue as of 2020. 50 However, in a survey of the dealer's customers over the same time period, 83% of respondents—or at least 16,848 customers—indicated they were subject to the dealer's unlawful practices related to add-ons alone. 51 49 See, e.g., United States v. Brien, 617 F.2d 299, 308 (1st Cir. 1980); United States v. Offs. Known as 50 State Distrib. Co., 708 F.2d 1371, 1374-75 (9th Cir. 1983); Keith B. Anderson, Fed. Trade Comm'n, “Consumer Fraud in the United States: An FTC Survey” 80 (2004), https://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states-ftc-survey/040805confraudrpt.pdf (staff report noting consumers who reported they were victims of fraud complained to an official source only 8.4 percent of the time, filing complaints with the BBB in 3.5 percent of incidents and to a Federal agency, including the FTC, in only 1.4 percent of cases). 50 See Complaint, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022); see also WardsAuto, “WardsAuto 2020 Megadealer 100,” https://www.wardsauto.com/dealers/wardsauto-2020-megadealer-100-industry-force (last visited Dec. 5, 2023) (listing Napleton Automotive Group as the 13th-ranked dealership group by total revenue). 51 Complaint ¶ 27, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022) (alleging that defendants buried charges for add-ons in voluminous paperwork, making them difficult to detect); see Press Release, Fed. Trade Comm'n, “FTC Returns Additional $857,000 To Consumers Harmed by Napleton Auto's Junk Fees and Discriminatory Practices” (Nov. 20, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/11/ftc-returns-additional-857000-consumers-harmed-napleton-autos-junk-fees-discriminatory-practices. Similarly, in other contexts where companies were charged with making misrepresentations or engaging in misconduct regarding add-on products, information obtained after filing has shown widespread harm far beyond the initial consumer complaint volumes reported prior to filing. 52 52 For example, in a recent action involving deceptive pre-approval claims, the FTC had received roughly 30 complaints about the company's pre-approval conduct in the five-year period prior to announcing its action. But in the five months following announcement of the action, more than 900 additional consumers came forward with complaints about the conduct. See Press Release, Fed. Trade Comm'n, “FTC Announces Claims Process for Consumers Harmed by Credit Karma `Pre-Approved' Offers for Which They Were Denied” (Dec. 5, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-announces-claims-process-consumers-harmed-credit-karma-pre-approved-offers-which-they-were (“[W]ithin five months of that announcement, the agency received nearly 900 more such complaints”). As examined in greater detail in the paragraphs that follow, consumers in the motor vehicle marketplace are confronted with chronic deceptive or unfair practices, including bait-and-switch tactics and hidden charges. 53 53 While other issues exist in the motor vehicle sales, financing, and leasing space, including issues involving discrimination, financing application falsification, data privacy and security, and yo-yo financing, this Rule's core focus is on misrepresentations and add-on and pricing practices. 1. Bait-and-Switch Tactics Advertisements for motor vehicles are often consumers' first contact in the vehicle-buying or -leasing process. Dealers utilize a variety of means to reach consumers, including social media and online advertisements, television and radio commercials, and direct mail marketing. New vehicle dealers spend an average of more than $700 on advertising per vehicle sold 54 —more than two-thirds of which goes toward online advertising. 55 54 Nat'l Auto. Dealers Ass'n, “NADA Data 2022” 15, https://www.nada.org/media/4695/download?inline (listing average dealership advertising per new vehicle sold of $718 in 2022, and $602 in 2021). 55 Id. at 16 (listing 68.2% of estimated advertising expenditures by medium as internet expenditures). The FTC has brought many law enforcement actions involving motor vehicle dealers' deceptive advertising and other unlawful tactics. Such actions have charged dealers with, inter alia, making misrepresentations regarding the price of a vehicle, the availability of discounts and rebates, the monthly payment amount for a financed purchase or lease, the amount due at signing, and whether an offer pertains to a purchase or a lease. 56 Other such actions have charged dealers with misrepresentations regarding whether the dealer or consumer is responsible for paying off “negative equity,” i.e., the outstanding debt on a vehicle that is being “traded in” as part of another vehicle purchase. 57 And in other FTC actions, some dealers have lured potential buyers through financial incentives incidental to the purchase, such as deceptive promises of a valuable prize that is redeemable only by visiting the dealership. 58 56 See, e.g., Complaint, Timonium Chrysler, Inc., No. C-4429 (F.T.C. Jan. 28, 2014) (alleging dealership advertised internet prices and dealer discounts that were only available through rebates not applicable to the typical consumer); Complaint, Ganley Ford West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014) (alleging dealership advertised discounts on vehicle prices, but failed to disclose that discounts were only available on the most expensive models); Complaint, Progressive Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016) (alleging deceptive failure to disclose material conditions of obtaining the lease monthly payment in their online and print advertising); Complaint ¶¶ 38-46, Fed. Trade Comm'n v. Tate's Auto Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 2018) (alleging that company issued advertisements for attractive terms but concealed that the terms were only applicable to lease offers); Complaint ¶¶ 36-38, United States v. New World Auto Imports, Inc., No. 3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016) (alleging misrepresentation that terms were for financing instead of leasing); Complaint ¶¶ 85-87, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging that dealerships claimed consumers could finance the purchase of vehicles with attractive terms and buried disclosures indicating that such terms were applicable to leases only). 57 Complaint ¶¶ 82-84, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging misrepresentation that dealer would pay off a consumer's trade-in when in fact consumers were still responsible for outstanding debt on trade-in vehicles); Complaint ¶¶ 17-19, TXVT Ltd. P'ship, No. C-4508 (F.T.C. Feb. 12, 2015) (alleging misrepresentation in leasing advertising that the dealership would pay off the negative equity of a consumer's trade in vehicle, when in fact, it was merely rolled into the financed amount for the consumer's newly financed vehicle). 58 See, e.g., Complaint ¶¶ 12, 17-19, Traffic Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020); Complaint ¶¶ 4, 7-9, Fowlerville Ford, Inc., No. C-4433 (F.T.C. Feb. 20, 2014). Deceptive tactics can cause significant consumer harm and impede competition, competitively disadvantaging law-abiding dealers. When dealerships advertise prices, discounts, or other terms that are not actually available to typical consumers, consumers who select that dealership instead of others spend time visiting the dealership or otherwise interacting with the dealership under false pretenses. 2. Unlawful Practices Relating to Add-On Products or Services and Hidden Charges Another key consumer protection concern is the sale of add-on products or services in a deceptive or unfair manner. Add-ons in connection with the sale or financing of motor vehicles include extended warranties, service and maintenance plans, payment programs, guaranteed automobile or asset protection (“GAP”) agreements, emergency road service, VIN etching and other theft protection devices, and undercoating. Individual add-ons can cost consumers thousands of dollars and can significantly increase the overall cost to the consumer in the transaction. 59 Moreover, in the past two years, dealers have substantially increased prices for these add-ons, notwithstanding that such products or services largely are not constrained by supply. 60 59 See, e.g., Complaint ¶¶ 25, 27-28, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022). 60 See Ben Eisen, “Car Dealer Markups Helped Drive Inflation, Study Finds,” Wall St. J., Apr. 23, 2023, https://www.wsj.com/articles/car-dealer-markups-helped-drive-inflation-study-finds-7c1d5a2d; U.S. Bureau of Labor Statistics, “Automotive Dealerships 2019-2022: Dealer Markup Increases Drive New-Vehicle Consumer Inflation” (Apr. 2023), https://www.bls.gov/opub/mlr/2023/article/automotive-dealerships-markups.htm. A significant consumer protection concern is consumers paying for add-ons without knowing about, or expressly agreeing to, these products or services. 61 This type of payment packing has been a particular concern in the military community. 62 The protracted and paperwork-heavy vehicle-buying or -leasing process can make it difficult for consumers to spot add-on charges, particularly when advertised prices or payment terms do not mention add-ons. 63 If consumers are financing or leasing the vehicle, they undergo a separate financing process after selecting a vehicle, which can include wading through a thick stack of dense paperwork filled with fine print. 64 For example, according to an FTC law enforcement action, consumers visiting one large dealership group were required to complete a stack of paperwork that ran more than sixty pages and required more than a dozen signatures. 65 This paperwork can include hidden charges for add-on products or services, causing consumers to purchase those add-ons without knowing about or agreeing to them, or without knowing or agreeing to their costs or other key terms. 66 Unscrupulous dealers are able to slip the often considerable additional costs for these items past consumers unnoticed and into purchase contracts through a variety of means, including by not mentioning them at all, 67 or by focusing consumers' attention on other aspects of the complex transaction, such as monthly payments, which might increase only marginally with the addition of prorated add-on costs, or may even be made to decrease if the financing term is extended. 68 This type of conduct can target immigrants, communities of color, and servicemembers. 69 In other instances, dealers might wait until late in the transaction to mention add-ons, and then do so in a misleading manner. For example, participants in an FTC qualitative study on consumers' car-buying experiences cited situations where dealers waited until the financing stage to mention add-ons, after consumers believed they had agreed on terms, and even though many add-ons have nothing to do with financing and were not mentioned at all during the sales process or when prices were initially negotiated. 70 According to FTC enforcement actions, dealers also have represented that add-ons are required when in fact they are not, 71 have misrepresented the purported benefits of add-ons, and have failed to disclose material limitations. 72 61 See Nat'l Consumer L. Ctr., “Auto Add-ons Add Up: How Dealer Discretion Drives Excessive, Arbitrary, and Discriminatory Pricing” (Oct. 1, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf; Adam J. Levitin, “The Fast and the Usurious: Putting the Brakes on Auto Lending Abuses,” 108 Geo. L.J. 1257, 1265-66 (2020), https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf (discussing “loan packing” as the sale of add-on products that are falsely represented as being required in order to obtain financing); Complaint ¶¶ 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive and unauthorized add-on charges in consumers' transactions); Complaint ¶¶ 59-64, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging deceptive and unauthorized add-on charges in consumers' transactions); Complaint ¶¶ 6, 9, TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015) (alleging misrepresentations regarding prices for added features); see also Auto Buyer Study, supra note 25, at 14 (“Several participants who thought that they had not purchased add-ons, or that the add-ons were included at no additional charge, were surprised to learn, when going through the paperwork, that they had in fact paid extra for add-ons. This is consistent with consumers' experiencing fatigue during the buying process or confusion with a financially complex transaction, but would also be consistent with dealer misrepresentations.”). 62 Consumers for Auto Reliability and Safety, Comment Letter on Motor Vehicle Roundtables, Project No. P104811 at 2-3 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (citing a U.S. Department of Defense data call summary that found that the vast majority of military counselors have clients with auto financing problems and cited “loan packing” and yo-yo financing as the most frequent auto lending abuses affecting servicemembers). 63 Complaint ¶¶ 17-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Complaint ¶ 60, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016); Carole L. Reynolds & Stephanie E. Cox, Fed. Trade Comm'n, “Buckle Up: Navigating Auto Sales and Financing” (2020) [hereinafter Buckle Up], https://www.ftc.gov/reports/ buckle-navigating-auto-sales-financing. 64 See, e.g., Buckle Up, supra note 63, at 10-11 (noting the long, complex transaction process); Complaint ¶¶ 23-28, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022) (same). 65 Complaint ¶ 24, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see also Buckle Up, supra note 63, at 10-11. 66 Complaint ¶¶ 25, 27, 29-32, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see also Complaint ¶¶ 17-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Dale Irwin, Slough Connealy Irwin & Madden LLC, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00060 (Dec. 29, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0051 (consumer protection lawyer noting “payment packing” among problems “that cry out for scrutiny and regulation”); Michael Archer, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00041 at 3 (Aug. 6, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0014 (workshop panelist stating, “I have seen cases wherein the dealer uses financing to pack in extra costs or to wipe out trade-in value.”); Dawn Smith, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00027 (July 27, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0043 (“Confusing or misleading sales terms[.] Extra fees was [sic] added at the time of purchase and to this day I still do not understand what the fee was for; it made the payment higher.”); Carrie Ferraro, Legal Servs. of N.J., Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00061 (Dec. 29, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0059 (citing “[d]ealers engage[d] in packing” as an example of the common consumer complaints of car-sales-related fraud received by LSNJ's legal advice hotline); Rosemary Shahan, Consumers for Auto Reliability and Safety, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00069 at 3 (Jan. 31, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0069 (noting that “[m]any common auto scams do not generate complaints in proportion to how pervasive or costly the practices are, simply because the consumers generally remain unaware they have been scammed,” including as a result of “[l]oan packing”); Mary W. Sullivan, Matthew T. Jones & Carole L. Reynolds, Fed. Trade Comm'n, “The Auto Buyer Study: Lessons from In-Depth Consumer Interviews and Related Research,” Supplemental Appendix: Redacted Interview Transcripts at 525 (2020) [hereinafter Auto Buyer Study: Appendix], https://www.ftc.gov/system/files/documents/reports/buckle-navigating-auto-sales-financing/bcpstaffreportautobuyerstudysuppappendix.pdf (Study participant 169810: consumer had “additional items” charges on contract that consumer could not identify); id. at 730, 740-42 (Study participant 188329: dealer did not tell consumer about GAP or service contract but consumer was charged $599 and $1,950 for those add-ons, respectively); Press Release, N.Y. State Att'y Gen., “A.G. Schneiderman Announces Nearly $14 Million Settlement with NYC and Westchester Auto Dealerships for Deceptive Practices that Resulted in Inflated Car Prices” (June 17, 2015), https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-nearly-14-million-settlement-nyc-and-westchester-auto (“This settlement is part of the [New York] attorney general's wider initiative to end the practice of `jamming,' unlawfully charging consumers for hidden purchases by car dealerships.”). 67 Under the Truth in Lending Act (“TILA”) and its implementing Regulation Z, required add-on products or services must be factored into the APR and the finance charge disclosed during the transaction. See 15 U.S.C. 1605, 1606, 1638; 12 CFR 226.4, 226.18(b), (d), (e), and 226.22. It is legally impermissible for dealers to include charges for such products in a consumer's contract without disclosing them. See, e.g., Complaint ¶¶ 57-60, Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 1:03-CV-2648 (N.D. Ga. Sept. 4, 2003) (alleging violations for failure to include the cost of required add-on products in the finance charge and annual percentage rate disclosed to consumers). 68 See, e.g., Buckle Up, supra note 63, at 6; Fed. Trade Comm'n, Military Consumer Financial Workshop, Panel 1, Tr. 19:25-41 (July 19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles,” Public Roundtable, Session 2, Tr. at 40-41 (Aug. 2 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (noting that optional products and services are often already included in the monthly payment prices advertised or quoted); Christopher Kukla, Ctr. for Responsible Lending, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00071 at 10 (Feb. 1, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0068 (discussing how dealers conceal packing by expressing an increase in price in terms of monthly payment); Att'ys General of 31 States & DC, Comment Letter on Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, Project No. P104811, Submission No. 558507-00112 at 5 (Apr. 13, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0124 (discussing the “age-old auto salesperson's trick” of quoting monthly payment prices without disclosing that the quote includes the cost of optional items that the customer has not yet agreed to purchase). 69 See, e.g., Complaint ¶¶ 9, 26, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (charging defendants with discriminating on the basis of race, color, and national origin by charging higher interest rates and inflated fees); Press Release, N.Y. State Att'y Gen., “Attorney General James Delivers Restitution to New Yorkers Cheated by Auto Dealership” (Nov. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-delivers-restitution-new-yorkers-cheated-auto-dealership (dealership targeted Chinese speakers for unlawful payment packing or “jamming”); Military Consumer Financial Workshop, Tr. 19:21 (July 19, 2017), https://www.ftc.gov/news-events/events/2017/07/military-consumer-workshop (panelist discussing servicemembers experiencing payment packing); see also Fed. Trade Comm'n, “Staff Perspective: A Closer Look at the Military Consumer Financial Workshop” 2-3 (Feb. 2018), https://www.ftc.gov/system/files/documents/reports/closer-look-military-consumer-financial-workshop-federal-trade-commission-staff-perspective/military_consumer_workshop_-_staff_perspective_2-2-18.pdf (explaining the unique situation of servicemembers whose steady paychecks make them attractive customers for dealers, while having no or minimal credit history, meaning they qualify for less advantageous credit terms and higher interest rate financing). 70 See, e.g., Buckle Up, supra note 63, at 6 (observing that the introduction of “add-ons during financing discussions caused several participants' total sale price to balloon from the cash price”); id. at 9 (observing that, for most consumers in the study, “add-ons did not come up until the financing process, if at all, after a long car-buying process and at a time when the consumer often felt pressure to close the deal”); id. (noting that most study participants' contracts included add-ons charges, but that many “were unclear what those add-ons included, and sometimes did not realize they had purchased any add-ons at all”); id. at 7 (explaining situations where the consumer reached the financing office after negotiating with the sales staff and were then told that the agreed upon price was not compatible with key financing terms—for example, a promised rebate or discount could not be combined with an advertised interest rate). 71 Complaint ¶¶ 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive and unauthorized add-on charges in consumers' transactions); Complaint ¶¶ 59-64, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging deceptive and unauthorized add-on charges in consumers' transactions); Complaint ¶¶ 6, 9, TT of Longwood, No. C-4531 (F.T.C. July 2, 2015) (alleging misrepresentations regarding prices for added features); see also Auto Buyer Study, supra note 25, at 14. 72 Complaint ¶¶ 4-14, Nat'l Payment Network, Inc., No. C-4521 (F.T.C. May 4, 2015) (alleging failure to disclose fees associated with financing program; misleading savings claims in advertisements); Complaint ¶¶ 4-13, Matt Blatt Inc., No. C-4532 (F.T.C. July 2, 2015) (alleging failure to disclose fees associated with financing program; misleading savings claims); Buckle Up, supra note 63, at 10 (noting that some Auto Buyer Study participants did not fully understand material aspects of extended warranties or service plans they purchased and “were surprised to discover during the interview that their plans had unexpected limitations” or that “they had to pay out-of-pocket for repairs or services that were not covered”; for example, one “consumer purchased a `Lifetime' maintenance plan, only to discover later that he received a one-year plan that covered periodic oil changes”). Cf. Consent Order ¶¶ 10-16, Santander Consumer USA, Inc., CFPB No. 2018-BCFP-0008 (Nov. 20, 2018) (finding that defendant sold GAP product allegedly providing “full coverage” to consumers with loan-to-value ratios (“LTVs”) above 125%, when in fact coverage was limited to 125% of LTV). Indeed, as previously noted, in a recent FTC enforcement action, the Commission cited a survey finding that 83% of consumers from the named dealers were charged for add-on products or services that they did not authorize or as a result of deceptive claims. 73 73 Complaint ¶ 27, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022). One participant in an FTC qualitative study of consumers' car-buying experiences summed up these issues during an interview after having purchased a vehicle. 74 The consumer purchased a $2,000 service contract that the dealer falsely said was free, and a $900 GAP agreement that the dealer falsely said was mandatory. The consumer only learned about these purchases during the study interview. This consumer remarked: 74 The study is described in the Commission's reports: Auto Buyer Study, supra note 25, and Buckle Up, supra note 63. Some industry commenters critiqued the FTC's reliance on this qualitative study. The Commission notes that the study provides helpful qualitative insight from consumer interviews regarding their recent motor vehicle purchases and is one of the many sources the Commission has considered, including consumer complaints, enforcement actions, outreach and dialogue with stakeholders and consumer groups, among others, as described in this SBP and in the NPRM. I feel I've been taken advantage of, to be honest with you. Even though I thought that I was getting a great deal with the interest rate, but I know [sic] see that they're also very sneaky about putting stuff on your paperwork. They only let you skim through the paperwork that you have to sign and they just kind of tell you what it is. This is this, this is that, this is this, and then you just sign it away. You're so tired, you're so worn down, you don't want to be there no more. You just want to get it done and over with. They take advantage of that. Yes, they still play this friendly card, you know, thank you for your business card kind of thing. Like I said, they never lose. They never lose. 75 75 Auto Buyer Study: Appendix, supra note 66, at 130 (Study participant 152288); see also id. at 202-03 (Study participant 180267: dealership included a charge for GAP in the final paperwork but not in retail sales contract); id. at 296 (Study participant 146748: consumer learned during interview with FTC that consumer purchased GAP: “maybe they're just throwing that in there without telling you”). Similarly, in response to the Commission's notice of proposed rulemaking, thousands of commenters described issues they faced when purchasing, financing, or leasing a vehicle. Many comments the Commission received in support of the NPRM were from self-identified military consumers and dealership employees. Examples of supportive comments include the following: • As a young Marine stationed in a military town I was taken advantage of by a dealership when purchasing my first car. It set me back financially for years. I know of many young military people who purchased vehicle[]s and we[]re instantly so far upside down after leaving the dealership with thousands of dollars in add on junk charges . . . . Please make it more difficult for dishonest dealers like these to financially burden young Americans and Americans of any age for that matter. 76 76 Individual commenter, Doc. No. FTC-2022-0046-4648. • Imagine going to a restaurant franchise and order[ing] a burger and fries for $10 and the franchise employees say[,] `Sorry that will be $25 dollars, there is a $10 restaurant adjustment price due to market conditions and $5 for us to place and document your order.' You would walk away without hesitation because that would [be] absolutely ridiculous. Yet, dealerships are allowed to do exactly that. . . . IT IS TIME TO CHANGE AND PROTECT CONSUMERS[.] 77 77 Individual commenter, Doc. No. FTC-2022-0046-0016. • As in many other areas, it is the vulnerable in our society who are probably most affected by such deceptive practices. . . . Sadly, it is often these very people who desperately need a dependable, affordable car for transportation to work, school, shopping, or medical care. To entice, pressure, or trick people into buying a car that is more than they can afford sets them up for financial failure, not only in possibly having a needed car repossessed, but in long-term damage to their credit. . . . In closing, I would be extremely happy to see rules such as those described above enacted, and don't think these could come a day too soon. It's a step in the right direction for the protection of the consumer. 78 78 Individual commenter, Doc. No. FTC-2022-0046-1216. • None of us working here at the dealership in sales benefit from [unfair and deceptive practices]. We cringe as much as every customer and have to show up to work every[ ]day and hope we are not forced to screw someone with these BS products. . . . I would hope when [t]he regulators are making their decisions, they understand the positive implications this would have for dealership employees both financially and mentally. 79 79 Individual commenter, Doc. No. FTC-2022-0046-3615. • Generally, I'm not a person in favor of government regulation. However, as a potential customer and cash buyer, I feel there is certainly a need to bring car dealers back into check. I'm just looking for a more honest and transparent process. I don't want to be taken advantage of. I certainly don't want my family members or [s]oldiers to be taken advantage of. Therefore, I feel it is in the best interest of future customers to support this regulation. 80 80 Individual commenter, Doc. No. FTC-2022-0046-7366. • I cannot stress enough my support for these new rules. Currently, dealerships across the US, including the one I work for, have made the car buying process needlessly confusing, expensive, and frustrating by engaging in false advertising and hidden add-on products. 81 81 Individual commenter, Doc. No. FTC-2022-0046-3693. • I can tell you after many years of car buying I have NEVER walked out of a dealership feeling good. Even worse, I've never purchased a car feeling like I fully understood what I was getting. . . . Looking forward to seeing the change happen SOON! 82 82 Individual commenter, Doc. No. FTC-2022-0046-3678. • When I buy a gallon of milk from the store, the price is written next to the milk. When I go pay, I pay the price advertised next to the milk. Would it be OK if I go up to pay and that gallon of milk had anywhere between 1% and 1,200% markup depending on the day, what you look like, what you drove to the store in, if you're a man or a woman? 83 83 Individual commenter, Doc. No. FTC-2022-0046-1479. • We ended up having to drive 3 hours to the [vehicle we] wanted. Upon arriving to pick[ ]up the car we were told there was a [$]4,300 increase over MSRP. We were told if we didn't take it they had someone else waiting to purchase it. We needed the car and didn't have time to hunt down another one so ended up purchasing it. Very disappointed in the long and awful process. 84 84 Individual commenter, Doc. No. FTC-2022-0046-1878. • The worst is dealing with car dealers. You never know what the real price is on a vehicle until you spend a few hours with them. Mandatory add[-] on[ ]s, market availability surcharges, doc fees that vary from dealer to dealer. . . . Then dealing with the finance manager who tr[ie]s to sell you everything you don't[ ]need. They high pressure the consumer on purchasing extend[ed] warranties. There needs [to be] some sort of policing [of] these unscrupulous car dealers to protect the buyers. 85 85 Individual commenter, Doc. No. FTC-2022-0046-0825. • This is a good start to making car purchasing a better experience. . . . I remember looking at a Lexus and being told by the dealership, the only one in the state, that [S]cotchguard and undercoating were mandatory and they refused to sell any vehicles without them. There were two Acura dealerships in town and one of them included `free' lifetime oil changes that I didn't learn about until negotiating the price and had already spent two hours in negotiations. All of these services/price adjustments were not disclosed at the start of the negotiation and were only revealed either in the manager's office or when the purchase agreement was presented to me by the salesperson. After spending time on the test drive and negotiating the price, it felt that these last minute price adjustments were being revealed that late in the process so that I wouldn't leave. 86 86 Individual commenter, Doc. No. FTC-2022-0046-4833. • Please enact and enforce these regulations to protect vulnerable consumers from predatory business practices enjoyed by dealers. Our family experienced such practices when trying to purchase a vehicle in early 2022. It was only after five hours at the dealership that we discovered the dealer had added on a $3,000 market adjustment and $3,100 in other add-ons (nitrogen-filled tires, LoJack, paint protection) to MSRP. This raised the price by about $6,000 and caused us to use extra PTO over that week to find a new vehicle at a price within our budget. Greater transparency in the car-buying process is desperately needed to protect vulnerable consumers—who usually lack any bargaining power—against power dealer networks and their special interest groups. . . . 87 87 Individual commenter, Doc. No. FTC-2022-0046-1690. C. Law Enforcement and Other Responses The Commission has taken action to protect consumers from deceptive and unfair acts or practices in the motor vehicle marketplace. As noted in the NPRM, the Commission has brought more than 50 auto law enforcement actions; 88 led two law enforcement sweeps, including one that involved 181 State enforcement actions; 89 published two reports on a qualitative study of consumer experiences while purchasing motor vehicles; and held workshops with various stakeholders to discuss the motor vehicle marketplace. 90 88 Complaint, Fed. Trade Comm'n v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737 (W.D. Wis. Oct. 24, 2023); Complaint, Fed. Trade Comm'n v. Passport Auto. Grp., Inc., No. 8:22-cv-02670-GLS (D. Md. Oct. 18, 2022); Complaint, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); Complaint, Traffic Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020); Complaint, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Complaint, Federal-Mogul Motorparts LLC, No. C-4717 (F.T.C. May 12, 2020); Complaint, LightYear Dealer Techs., LLC, No. C-4687 (F.T.C. Sept. 3, 2019); Complaint, Fed. Trade Comm'n v. Passport Imports, Inc., No. 8:18-cv-03118 (D. Md. Oct. 10, 2018); Complaint, Fed. Trade Comm'n v. Tate's Auto Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 2018); Complaint, Cowboy AG, LLC, No. C-4639 (F.T.C. Jan. 4, 2018); Complaint, Fed. Trade Comm'n v. Norm Reeves, Inc., No. 8:17-cv-01942 (C.D. Cal. Nov. 3, 2017); Complaint, Asbury Auto. Grp., Inc., No. C-4606 (F.T.C. Mar. 22, 2017); Complaint, CarMax, Inc., No. C-4605 (F.T.C. Mar. 22, 2017); Complaint, West-Herr Auto. Grp., Inc., No. C-4607 (F.T.C. Mar. 22, 2017); Complaint, Fed. Trade Comm'n v. Volkswagen Grp. of Am., Inc., No. 3:16-cv-01534 (N.D. Cal. Jan. 31, 2017); Complaint, Fed. Trade Comm'n v. Uber Techs., Inc., No. 3:17-cv-00261 (N.D. Cal. Jan. 19, 2017); Complaint, Gen. Motors LLC, No. C-4596 (F.T.C. Dec. 8, 2016); Complaint, Jim Koons Mgmt. Co., No. C-4598 (F.T.C. Dec. 8, 2016); Complaint, Lithia Motors, Inc., No. C-4597 (F.T.C. Dec. 8, 2016); Complaint, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sep. 29, 2016); Complaint, United States v. New World Auto Imports, Inc., No. 3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016); Complaint, Progressive Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016); Complaint, BMW of N. Am., LLC, No. C-4555 (F.T.C. Oct. 21, 2015); Complaint, United States v. Tricolor Auto Acceptance, LLC, No. 3:15-cv-3002 (N.D. Tex. Sept. 15, 2015); Complaint, JS Autoworld, Inc., No. C-4535 (F.T.C. Aug. 13, 2015); Complaint, TC Dealership, L.P., No. C-4536 (F.T.C. Aug. 13, 2015); Complaint, Matt Blatt Inc., No. C-4532 (F.T.C. July 2, 2015); Complaint, TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015); Complaint, Fin. Select, Inc., No. C-4528 (F.T.C. June 2, 2015); Complaint, First Am. Title Lending of Ga., LLC, No. C-4529 (F.T.C. June 2, 2015); Complaint, City Nissan Inc., No. C-4524 (F.T.C. May 4, 2015); Complaint, Jim Burke Auto., Inc., No. C-4523 (F.T.C. May 4, 2015); Complaint, Nat'l Payment Network, Inc., No. C-4521 (F.T.C. May 4, 2015); Complaint, TXVT Ltd. P'ship, No. C-4508 (F.T.C. Feb. 12, 2015); Complaint, Fed. Trade Comm'n v. Regency Fin. Servs., LLC, No. 1:15-cv-20270-DPG (S.D. Fla. Jan. 26, 2015); Complaint, United States v. Billion Auto, Inc., No. 5:14-cv-04118-MWB (N.D. Iowa Dec. 11, 2014); Complaint, Fed. Trade Comm'n v. Ramey Motors, Inc., No. 1:14-cv-29603 (S.D. W. Va. Dec. 11, 2014); Complaint, Fed. Trade Comm'n v. Consumer Portfolio Servs., Inc., No. 14-cv-00819 (C.D. Cal. May 28, 2014); Complaint, Nissan N. Am., Inc., No. C-4454 (F.T.C. May 1, 2014); Complaint, TBWA Worldwide, Inc., No. C-4455 (F.T.C. May 1, 2014); Complaint, Bill Robertson & Sons, Inc., No. C-4451 (F.T.C. Apr. 11, 2014); Complaint, Paramount Kia of Hickory, LLC, No. C-4450 (F.T.C. Apr. 11, 2014); Complaint, Fed. Trade Comm'n v. Abernathy Motor Co., No. 3:14-cv-00063-BRW (E.D. Ark. Mar. 12, 2014); Complaint, Fowlerville Ford, Inc., No. C-4433 (F.T.C. Feb. 20, 2014); Complaint, Infiniti of Clarendon Hills, Inc., No. C-4438 (F.T.C. Feb. 20, 2014); Complaint, Luis Alfonso Sierra, No. C-4434 (F.T.C. Feb. 20, 2014); Complaint, Mohammad Sabha, No. C-4435 (F.T.C. Feb. 20, 2014); Complaint, Norm Reeves, Inc., No. C-4436 (F.T.C. Feb. 20, 2014); Complaint, Ganley Ford West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014); Complaint, Timonium Chrysler, Inc., No. C-4429 (F.T.C. Jan. 28, 2014); Complaint, Courtesy Auto Grp., Inc., No. 9359 (F.T.C. Jan. 7, 2014); Complaint, Franklin's Budget Car Sales, Inc., No. C-4371 (F.T.C. Oct. 3, 2012); Complaint, Fed. Trade Comm'n v. Matthew J. Loewen, No. 2:12-cv-01207-MJP (W.D. Wash. July 13, 2012); Complaint, Key Hyundai of Manchester, LLC, No. C-4358 (F.T.C. May 4, 2012); Complaint, Billion Auto, Inc., No. C-4356 (F.T.C. May 1, 2012); Complaint, Frank Myers AutoMaxx, LLC, No. C-4353 (F.T.C. Apr. 19, 2012); Complaint, Ramey Motors, Inc., No. C-4354 (F.T.C. Apr. 19, 2012); Complaint, Fed. Trade Comm'n v. Hope for Car Owners, LLC, No. 2:12-cv-00778-GEB-EFB (E.D. Cal. Mar. 27, 2012); Complaint, Fed. Trade Comm'n v. NAFSO VLM, Inc., No. 2:12-cv-00781-KJM-EFB (E.D. Cal. Mar. 27, 2012); Complaint, Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 1:03-CV-2648 (N.D. Ga. Sept. 4, 2003); Complaint, Pacifico Ardmore, Inc., No. C-3920 (F.T.C. Feb. 7, 2000). 89 Operation Steer Clear and Operation Ruse Control, brought with State law enforcement partners around the nation and Canada, encompassed 252 enforcement actions. See Press Release, Fed. Trade Comm'n, “Multiple Law Enforcement Partners Announce Crackdown on Deception, Fraud in Auto Sales, Financing and Leasing” (Mar. 26, 2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown. 90 For example, the FTC has held public workshops: (1) in conjunction with the National Highway Traffic Safety Administration to examine the consumer privacy and security issues posed by automated and connected motor vehicles, see Fed. Trade Comm'n, “Connected Cars: Privacy, Security Issues Related to Connected, Automated Vehicles” (June 28, 2017), https://www.ftc.gov/news-events/events-calendar/2017/06/connected-cars-privacy-security-issues-related-connected; (2) to explore competition and related issues in the U.S. motor vehicle distribution system including how consumers and businesses may be affected by State regulations and emerging trends in the industry, see Fed. Trade Comm'n, “Auto Distribution: Current Issues & Future Trends” (Jan. 19, 2016), https://www.ftc.gov/news-events/events-calendar/2016/01/auto-distribution-current-issues-future-trends; (3) on military consumer financial issues, including automobile purchases, financing, and leasing, see Fed. Trade Comm'n, “Military Consumer Workshop” (July 19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; and (4) through a series of three roundtables on numerous issues in selling, financing, and leasing automobiles, see Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Apr. 12, 2011), https://www.ftc.gov/news-events/events-calendar/2011/04/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Aug. 2, 2011), https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, “The Road Ahead: Selling, Financing & Leasing Motor Vehicles” (Nov. 17, 2011), https://www.ftc.gov/news-events/events-calendar/2011/11/road-ahead-selling-financing-leasing-motor-vehicles; see also Consumers for Auto Reliability and Safety, Comment Letter on Motor Vehicle Roundtables, Project No. P104811, at 6 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (stating that the Director of the Navy-Marine Corps Relief Society in San Diego indicated before the California Assembly Committee on Banking and Finance that “the number one issue they are confronted with is used car dealers who are taking advantage of military personnel”). These events, and others, have included speakers representing consumers, dealers, regulators, and other industry stakeholders. As discussed in the NPRM, the Commission's law enforcement partners have also brought actions addressing unfair, abusive, and deceptive practices in the motor vehicle industry. For example, the Consumer Financial Protection Bureau (“CFPB”) has taken action against third-party motor vehicle financing entities in matters that raise similar, and sometimes identical, claims of deceptive and unfair acts or practices as have been at issue in FTC enforcement actions. 91 91 The CFPB has brought at least 23 enforcement actions involving motor vehicles, financing, or add-on products or services. See Consent Order ¶¶ 3, 13-57, Toyota Motor Credit Corp., CFPB No. 2023-CFPB-0015 (Nov. 20, 2023) (finding auto lender engaged in unfair or abusive acts or practices by making it unreasonably difficult for consumers to cancel unwanted add-ons; failing to ensure consumers received refunds of payments they had made for certain add-ons that had become void and worthless; and failing to provide refunds owed to consumers who canceled their vehicle service agreements); Complaint ¶¶ 75-104, CFPB v. USASF Servicing, LLC, No. 1:23-cv-03433-VMC (N.D. Ga. Aug. 2, 2023) (alleging auto loan servicer illegally disabled and repossessed consumers' vehicles, wrongfully double-billed consumers, misapplied payments, and failed to ensure refunds of unearned GAP premiums to which consumers were entitled); Consent Order ¶¶ 7-33, TMX Finance LLC, CFPB No. 2023-CFPB-0001 (Feb. 23, 2023) (finding auto lender understated and inaccurately disclosed the finance charge and annual percentage rate on loans and unfairly charged borrowers for a product that provided no benefit); Complaint ¶¶ 33-135, 171-226, CFPB v. Credit Acceptance Corp., No. 1:23-cv-00038 (S.D.N.Y. Jan. 4, 2023) (alleging indirect auto lender misrepresented key terms of loans provided to subprime and deep-subprime consumers and substantially assisted dealers in the deceptive sale of add-on products); Consent Order ¶¶ 7-22, Wells Fargo Bank, N.A., CFPB No. 2022-CFPB-0011 (Dec. 20, 2022) (finding bank incorrectly applied borrowers' auto loan payments, erroneously assessed fees and interest, wrongly repossessed borrowers' vehicles, and failed to ensure borrowers received refunds of unearned GAP fees at early payoff); Consent Order ¶¶ 4-55, Hyundai Capital America, CFPB No. 2022-CFPB-0005 (July 26, 2022) (finding auto finance company furnished inaccurate information about consumers to credit reporting agencies); Consent Order ¶¶ 4-14, 3rd Generation, Inc., CFPB No. 2021-CFPB-0003 (May 21, 2021) (finding subprime auto loan servicer charged interest on late payments of fees without the knowledge or consent of consumers); Consent Order ¶¶ 8-50, Santander Consumer USA Inc., CFPB No. 2020-BCFP-0027 (Dec. 22, 2020) (finding auto finance company provided inaccurate records to credit reporting agencies); Consent Order ¶¶ 11-52, Nissan Motor Acceptance Corp., CFPB No. 2020-BCFP-0017 (Oct. 13, 2020) (finding auto finance company misrepresented financing extension agreements, repossessions, and limitations to consumer bankruptcy protections); Consent Order ¶¶ 8-22, Lobel Fin. Corp., CFPB No. 2020-BCFP-0016 (Sept. 21, 2020) (finding auto-loan servicer unfairly charged delinquent consumers add-on charges in the form of Loss Damage Waiver premiums); Consent Order ¶¶ 6-30, Santander Consumer USA Inc., CFPB No. 2018-BCFP-0008 (Nov. 20, 2018) (finding auto finance company sold GAP to consumers with LTV over 125%, misrepresenting that such consumers would be fully covered with total loss); Consent Order ¶¶ 27-39, Wells Fargo Bank, N.A., CFPB No. 2018-BCFP-0001 (Apr. 20, 2018) (finding bank imposed duplicative or unnecessary forced-placed auto loan insurance on consumers); Consent Order ¶¶ 12-23, Toyota Motor Credit Corp., CFPB No. 2016-CFPB-0002 (Feb. 2, 2016) (finding auto finance company engaged in discriminatory pricing markup for motor vehicle financing, without regard to creditworthiness); Consent Order ¶¶ 73-75, Y King S Corp., CFPB No. 2016-CFPB-0001 (Jan. 21, 2016) (finding used car dealer failed to disclose mandatory add-ons as financing charges); Consent Order ¶¶ 12-51, Interstate Auto Grp., Inc., CFPB No. 2015-CFPB-0032 (Dec. 17, 2015) (finding dealership and financing company reported information they knew or had reasonable cause to believe was inaccurate to credit reporting entities, harming consumer credit); Consent Order ¶¶ 7-90, Westlake Servs., LLC, CFPB No. 2015-CFPB-0026 (Sept. 30, 2015) (finding indirect auto financing entity used illegal debt collection tactics); Consent Order ¶¶ 8-23, Fifth Third Bank, CFPB No. 2015-CFPB-0024 (Sept. 28, 2015) (finding discrimination against loan applicants in credit applications based on characteristics such as race and national origin); Consent Order ¶¶ 9-24, Am. Honda Fin. Corp., CFPB No. 2015-CFPB-0014 (July 14, 2015) (same); Consent Order ¶¶ 4-60, DriveTime Auto. Grp., Inc., CFPB No. 2014-CFPB-0017 (Nov. 19, 2014) (finding buy-here-pay-here dealership made harassing debt collection calls and provided inaccurate credit information to credit reporting agencies); Consent Order ¶¶ 4-37, First Investors Fin. Servs. Grp., Inc., CFPB No. 2014-CFPB-0012 (Aug. 20, 2014) (finding auto financing company provided inaccurate records to credit reporting agencies); Consent Order ¶¶ 7-27, Ally Fin. Inc., CFPB No. 2013-CFPB-0010 (Dec. 20, 2013) (finding auto lender engaged in discriminatory pricing); Consent Order ¶¶ 14-29, U.S. Bank Nat'l Ass'n, CFPB No. 2013-CFPB-0004 (June 26, 2013) (finding bank failed to properly disclose all the fees charged to participants in the companies' Military Installment Loans and Educational Services auto loans program, and misrepresented the true cost and coverage of add-on products financed along with the auto loans); Consent Order ¶¶ 10-22, Dealers' Fin. Servs., LLC, CFPB No. 2013-CFPB-0004 (June 26, 2013) (finding financing company made deceptive statements regarding the cost of add-on products and the scope of coverage of the vehicle service contract). In addition, States have engaged in enforcement actions alleging similar dealer misconduct in the motor vehicle dealer marketplace, and have implemented legislative and regulatory measures to address corresponding consumer protection issues. With regard to law enforcement, State regulators and Attorneys General have participated in law enforcement sweeps with the FTC, and have filed hundreds of actions alleging unlawful conduct by motor vehicle dealerships across the country. 92 Furthermore, with regard to legislative and regulatory efforts, at least four States have enacted consumer protection measures relating to pricing or add-ons by motor vehicle dealers. 93 For example, to “ensure that dealers do not add in hidden or undisclosed costs after the price for a vehicle has been advertised,” Oregon promulgated a rule that requires dealerships to state an “offering price” that is the actual offer and amount the consumer can pay to own the vehicle, excluding only taxes and other specific items. 94 California and Wisconsin have similarly enacted laws that make it unlawful for dealerships to advertise a total price without including additional costs to the purchaser outside the mandatory tax, title, and registration fees. 95 Other States, such as Indiana, have enacted codes that prohibit the sale of add-ons in certain circumstances. 96 92 Operation Steer Clear and Operation Ruse Control, brought with State law enforcement partners around the nation and Canada, encompassed 252 enforcement actions. See Press Release, Fed. Trade Comm'n, “Multiple Law Enforcement Partners Announce Crackdown on Deception, Fraud in Auto Sales, Financing and Leasing” (Mar. 26, 2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown. Separately, the California Attorney General's office sued a dealership chain under State consumer protection laws for deceiving consumers about add-on product charges and misrepresenting consumers' income on credit applications; the alleged practices specifically targeted low-income consumers with subprime credit. Complaint ¶¶ 37-86, People v. Paul Blanco's Good Car Co. Auto Grp., No. RG-19036081 (Cal. Super. Ct. Sept. 23, 2019). 93 See, e.g., Cal. Veh. Code 11713.1(b), (c); Or. Admin. R. 137-020-0020(3)(c); Wis. Admin. Code Trans. 139.03(3); Ind. Code 24-4.5-3-202. 94 Or. Admin. R. 137-020-0020(3)(c); Official Commentary, Or. Admin. R. 137-020-0020(3)(c). 95 Cal. Veh. Code 11713.1(b), (c); Wis. Admin. Code Trans. 139.03(3). 96 Ind. Code 24-4.5-3-202(3)(e)(ix) (prohibiting the sale of any GAP coverage when the LTV is less than 80%); Cal. Civ. Code 2982.12(a)(5)(B) (prohibiting the sale of any GAP waiver in three scenarios, including when the amount financed for the vehicle exceeds the amount covered by the GAP waiver). The Commission and its law enforcement partners also regularly provide business guidance and consumer education regarding the motor vehicle marketplace. The Commission has compiled its motor vehicle business guidance into a portal on its website, with links to guidance documents, frequently asked questions, and legal resources. 97 Likewise, the Commission provides a web page for consumers to learn more about buying, financing, and leasing motor vehicles. 98 Several States have published similar such guidance manuals for motor vehicle dealers, 99 while others have provided online consumer education resources. 100 97 See Fed. Trade Comm'n, Business Guidance, “Automobiles,” https://www.ftc.gov/business-guidance/industry/automobiles (last visited Dec. 5, 2023). 98 See Fed. Trade Comm'n, “Buying and Owning a Car,” https://consumer.ftc.gov/shopping-and-donating/buying-and-owning-car (last visited Dec. 5, 2023). 99 See, e.g., Ill. Sec'y of State Police, Dealer Handbook (Apr. 2022), https://www.ilsos.gov/publications/pdf_publications/sos_dop66.pdf; Wis. DOT—Div. of Motor Vehicles, Motor Vehicle Salesperson Manual—2020, https://wisconsindot.gov/Documents/dmv/shared/salesmanual-20.pdf; Enf't Div. of the Tex. Dep't of Motor Vehicles, Motor Vehicle Dealer Manual (2017), https://www.txdmv.gov/sites/default/files/body-files/Motor_Vehicle_Dealer_Manual.pdf. 100 See, e.g., Cal. Dept. of Just., “Buying and Maintaining a Car,” https://oag.ca.gov/consumers/general/cars (last visited Dec. 5, 2023); Fla. Highway Safety & Motor Vehicles, “Buying from a Licensed Dealer,” https://www.flhsmv.gov/safety-center/consumer-education/buying-vehicle-florida/buying-licensed-dealer (last visited Dec. 5, 2023); Or. Dep't of Just., “Buying a Vehicle,” https://www.doj.state.or.us/consumer-protection/motor-vehicles/buying-a-vehicle/ (last visited Dec. 5, 2023). While some commenters stated that existing Federal and State efforts are sufficient, recent Commission and partner actions indicate that misconduct has persisted despite prior law enforcement and other efforts, and despite the NPRM's detailed description of chronic problems relating to bait-and-switch tactics and hidden add-on and other charges. For example, in a recent enforcement action, filed after publication of the NPRM, the Commission charged several auto dealer locations in an auto dealership group with misrepresenting the price of vehicles. According to the complaint, the dealers advertised one price to lure consumers to their dealerships, then charged them hundreds to thousands of dollars more than the advertised price by tacking on bogus extra fees for inspection, reconditioning, preparation, and certification. 101 The action also addressed the practice of dealers charging Black and Latino consumers these fees more often and in higher amounts. 102 101 Complaint ¶ 17, Fed. Trade Comm'n v. Passport Auto. Grp., Inc., No. 8:22-cv-2670 (D. Md. Oct. 18, 2022). 102 Id. ¶ 18. Recent actions outside the auto marketplace, even in transactions that may not be as complex and time consuming as motor vehicle transactions, further illustrate unfair and deceptive practices related to advertising, add-ons, and hidden charges. In one such action, the court noted “the realities of the disparate bargaining power” between the corporate defendant and its customers, adding that customers “might have believed the [add-on] fees were mandatory,” and “might not have had the time” to negotiate or complain about them. Fed. Trade Comm'n v. FleetCor Techs., Inc., 1:19-cv-5727, 2022 WL 3350066, at *13 (N.D. Ga. Aug. 9, 2022) (granting the Commission's motion to exclude the defendant's expert testimony); see also Fed. Trade Comm'n v. FleetCor Techs., Inc., 620 F. Supp. 3d 1268, 1337 (N.D. Ga. 2022) (finding on summary judgment that (1) defendants did not tell consumers about fees at sign-up; (2) disclosures about fees in contractual documents were inadequate; and (3) defendants failed to get consent to add-on charges); id. at 1334 (concluding that defendants had “charged a slew of fees that: were never discoverable to customers [and] were obscured by undecipherable language”); Complaint ¶¶ 41-43, Fed. Trade Comm'n v. Harris Originals of NY, Inc., No. 2:22-cv-4260 (E.D.N.Y. July 20, 2022) (alleging that a jewelry company charged military consumers for add-on products without their consent or under false pretenses); Complaint ¶¶ 61-73, Fed. Trade Comm'n v. Benefytt Techs., Inc., No. 8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging illegal add-on charges by healthcare companies); Complaint ¶¶ 1-4, Fed. Trade Comm'n v. First Am. Payment Sys., LP, No. 4:22-cv-654 (E.D. Tex. July 29, 2022) (alleging that a payment processing company misrepresented the terms and costs of its services, resulting in unexpected and unauthorized fees); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Trade Regulation Rule on Unfair or Deceptive Fees, 88 FR 77420, 77435-37 (released Oct. 11, 2023; published Nov. 9, 2023), https://www.govinfo.gov/content/pkg/FR-2023-11-09/pdf/2023-24234.pdf. Multiple actions by partners since publication of the Commission's NPRM have involved auto add-ons. The Commission and the State of Wisconsin alleged that a dealership group, its current and former owners, and its general manager deceived consumers by tacking on hundreds or even thousands of dollars for add-ons without those consumers' authorization or by leading the consumers to believe the add-ons were mandatory, and doing so disproportionately more frequently with American Indian customers. 103 The CFPB and the New York State Office of the Attorney General alleged that a subprime auto lender knew or recklessly disregarded that dealers were tricking borrowers into purchasing add-on products without their knowledge or consent and had incentivized such behavior. 104 In addition, the Commonwealth of Massachusetts has brought two recent cases involving unfair add-on pricing practices. 105 In one such case, Massachusetts emphasized the dynamics of auto transactions that frequently lead to deceptive and unfair practices, particularly with respect to add-ons, noting that add-on products “are often sprung on consumers in the final steps of completing a transaction” after “multiple rounds of negotiation on the price of a car and/or car financing.” 106 103 Complaint ¶¶ 3-5, 11-18, 33-43, 48-51, Fed. Trade Comm'n v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737 (W.D. Wis. Oct. 24, 2023). 104 Complaint ¶¶ 128-30, CFPB v. Credit Acceptance Corp., No. 1:23-cv-38 (S.D.N.Y. Jan. 4, 2023). 105 Complaint ¶ 3, Massachusetts v. Jaffarian's Serv., Inc., No. 2277-cv-881 (Mass. Super. Ct. Sept. 15, 2022); Assurance of Discontinuance ¶¶ 7-9, In re Hometown Auto Framingham, Inc., No. 2384-cv-116 (Mass. Super. Ct. Jan. 17, 2023). 106 Complaint ¶ 5, Massachusetts v. Jaffarian's Serv., Inc., No. 2277-cv-881 (Mass. Super. Ct. Jan. 17, 2023). Efforts to combat deceptive and unfair practices in the motor vehicle industry since the NPRM have gone beyond enforcement actions. The CFPB announced that it uncovered several unlawful practices through supervisory examinations, including auto loan servicers charging for add-ons that provide no benefit to the consumer 107 and failing to ensure consumers received refunds for add-on products that no longer offered any benefits. 108 In addition, the State of California enacted new legislation that regulates a particular type of add-on product—GAP agreements. 109 A press release introducing the legislation cited concerns about unfair practices in the sale of GAP agreements, stating that this add-on has little value and is often targeted at consumers with lower incomes and subprime credit. 110 California's law requires several disclosures related to GAP agreements, including disclosures pertaining to their financed cost and informing consumers that such products are optional. 111 The law also prohibits the sale of GAP agreements that will not actually cover consumers' debt. 112 107 Consumer Fin. Prot. Bureau, “Supervisory Highlights: Issue 24, Summer 2021” 3-4 (June 2021), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf (finding servicers added and maintained unnecessary collateral protection insurance (CPI) when consumers had adequate insurance and thus the CPI provided no benefit to the consumers, and also when consumers' vehicles had been repossessed even though no actual insurance protection was provided after repossession). 108 Consumer Fin. Prot. Bureau, “Supervisory Highlights: Issue 28, Fall 2022” 4-5 (Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf (finding consumers paid off their vehicle financing early but servicers failed to ensure consumers received refunds for unearned fees related to add-on products which no longer offered any possible benefit to consumers after payoff). 109 Cal. Civ. Code 2982.12. 110 Press Release, Off. of the Att'y Gen. of Cal., “Attorney General Bonta and Assemblymember Maienschein Announce Legislation to Strengthen Protections for Car Buyers” (Feb. 16, 2022), https://oag.ca.gov/news/press-releases/attorney-general-bonta-and-assemblymember-maienschein-announce-legislation. 111 Cal. Civ. Code 2982.12. 112 Id. Despite the array of actions by the Commission and its partners, unfairness and deception continue in the motor vehicle marketplace, including (1) deceptive or unfair sales and advertising tactics and (2) hidden charges, particularly with respect to add-on products or services. To address the harm these issues inflict on consumers and on law-abiding dealers, the Final Rule, in general: • Prohibits dealers from making misrepresentations regarding material information, including about the cost of the vehicle, the financing terms, and the availability of rebates or discounts; • Requires dealers to disclose the offering price of the vehicle—its full cash price, provided that dealers may exclude required government charges; that optional add-ons are not required; the total of payments for the vehicle when making a representation about monthly payment; and that a discussed lower monthly payment will increase the total amount the consumer will pay, if true; • Prohibits dealers from charging for add-on products or services that provide no benefit to the consumer; and • Requires dealers to obtain express, informed consent from the consumer for any charge. As discussed in the section-by section analysis in SBP III and in response to comments, the Commission is declining to finalize certain provisions proposed in the NPRM, including the provision that dealers must disclose a list of prices for all optional add-on products or services, and the provision that dealers must obtain certain signed declinations from consumers prior to charging for optional add-on products or services. The Commission also is finalizing the defined terms “Covered Motor Vehicle” and “Covered Motor Vehicle Dealer” to reflect edits to narrow the scope of these definitions compared to the scope of the terms “Motor Vehicle” and “Motor Vehicle Dealer” in the NPRM. III. Section-by-Section Analysis The following discussion provides a section-by-section analysis that states the provisions proposed in the NPRM, and discusses the comments received, the Commission's responses to comments, and the provisions adopted in the Final Rule. 113 113 Regarding the thousands of comments received, the Commission notes that many commenters raised similar concerns or addressed overlapping issues. To avoid repetition, the Commission has endeavored to respond to issues raised in similar comments together. Responses provided in any given section apply equally to comments addressing the same subject in the context of other sections. Moreover, throughout the SBP, the Commission discusses justifications for the Final Rule that are informed by its careful consideration of all comments received, even where that discussion is not linked to a particular comment. A. § 463.1: Authority Section 463.1 states that the Final Rule is promulgated pursuant to section 1029 of the Dodd-Frank Act, and that it is an unfair or deceptive act or practice within the meaning of section 5(a)(1) of the FTC Act to violate, directly or indirectly, any provision of the Final Rule, including the recordkeeping requirements, which are necessary to prevent such unfair or deceptive acts or practices and to enforce this Rule. 114 The prohibition against violating any applicable provision “directly or indirectly” applies to each section of part 463. As discussed in SBP I.A, section 1029 authorizes the FTC to prescribe rules under Sections 5 and 18(a)(1)(B) of the FTC Act with respect to motor vehicle dealers predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. 115 The Final Rule defines with specificity certain unfair or deceptive acts or practices; the Final Rule provisions are also “prescribed for the purpose of preventing such acts or practices.” 116 114 The proposed authority provision in the NPRM omitted the second reference to “unfair” acts or practices with regard to the proposed recordkeeping requirements; the Final Rule consistently refers to both “unfair” and “deceptive” acts or practices together. 115 One industry group argued that the proposed rule violated the APA because it did not comply with the FTC's rule requiring publication of an Advance Notice of Proposed Rulemaking (“ANPR”), 16 CFR 1.10. Section 1.10, however, like the rest of subpart B of part 1 of the Commission's Rules of Practice, applies only to “proceedings for the promulgation of rules as provided in section 18(a)(1)(B) of the Federal Trade Commission Act.” 16 CFR 1.7. The ANPR requirement in section 1.10 implements section 18(b)(2) of the FTC Act, which requires an ANPR when the Commission promulgates rules under the procedures set forth in that section. In this case, the FTC is acting under statutory authority under section 1029(d) of the Dodd-Frank Act, see NPRM at 42031, which authorizes the Commission to promulgate rules using the APA's informal notice-and-comment procedure, see 5 U.S.C. 553, notwithstanding the additional procedural requirements set forth in section 18. Accordingly, this rulemaking is governed by subpart C of part 1 of the Commission's Rules of Practice, which “sets forth procedures for the promulgation of rules under authority other than section 18(a)(1)(B) of the FTC Act.” 16 CFR 1.21. Neither subpart C nor the APA requires publication of an ANPR. This is consistent with Commission practice in prior notices to issue or amend regulations, including with the Made in USA Labeling Rule, the Children's Online Privacy Protection Act Rule, and the Telemarketing Sales Rule. See, e.g., Fed. Trade Comm'n, Notice of Proposed Rulemaking, Made in USA Labeling Rule, 85 FR 43162 (July 16, 2020), https://www.govinfo.gov/content/pkg/FR-2020-07-16/pdf/2020-13902.pdf (issuing original notice of proposed rulemaking that was not preceded by an advance notice of proposed rulemaking); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Children's Online Privacy Protection Rule, 64 FR 22750 (Apr. 27, 1999), https://www.govinfo.gov/content/pkg/FR-1999-04-27/pdf/99-10250.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 60 FR 8313 (Feb. 14, 1995), https://www.govinfo.gov/content/pkg/FR-1995-02-14/pdf/95-3537.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 78 FR 41200 (July 19, 2013), https://www.govinfo.gov/content/pkg/FR-2013-07-09/pdf/2013-12886.pdf (issuing notice of proposed rulemaking for rule amendment that was not preceded by an advance notice of proposed rulemaking); Fed. Trade Comm'n, Proposed Rule, Children's Online Privacy Protection Rule, 76 FR 59804 (Sept. 27, 2011), https://www.govinfo.gov/content/pkg/FR-2011-09-27/pdf/2011-24314.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 74 FR 41988 (Aug. 19, 2009), https://www.govinfo.gov/content/pkg/FR-2009-08-19/pdf/E9-19749.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Children's Online Privacy Protection Rule, 70 FR 2580 (Jan. 14, 2005), https://www.govinfo.gov/content/pkg/FR-2005-01-14/pdf/05-877.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 69 FR 67287 (Nov. 17, 2004), https://www.govinfo.gov/content/pkg/FR-2004-11-17/pdf/04-25470.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 69 FR 7330 (Feb. 13, 2004), https://www.govinfo.gov/content/pkg/FR-2004-02-13/pdf/04-3287.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 67 FR 4492 (Jan. 30, 2002), https://www.govinfo.gov/content/pkg/FR-2002-01-30/pdf/02-1998.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, Children's Online Privacy Protection Rule, 66 FR 54963 (Oct. 31, 2001), https://www.govinfo.gov/content/pkg/FR-2001-10-31/pdf/01-27390.pdf (same). This is also true of regulation amendments pursuant to the authority under which this Final Rule is promulgated—that which Congress granted to the Commission under section 1029 of the Dodd-Frank Act, 15 U.S.C. 5519, pertaining to motor vehicle dealers. See, e.g., Fed. Trade Comm'n, Notice of Proposed Rulemaking, Used Motor Vehicle Trade Regulation Rule, 77 FR 74746, 74748 (Dec. 17, 2012), https://www.govinfo.gov/content/pkg/FR-2012-12-17/pdf/2012-29920.pdf (“Because the Dodd-Frank Act authorized the Commission to use APA procedures for notice and public comment in issuing or amending rules with respect to motor vehicle dealers, the FTC will not use the procedures set forth in Section 18 of the FTC Act, 15 U.S.C. 57a, with respect to these proposed revisions to the Used Car Rule and the Used Car Buyers Guide. Accordingly, the Commission is publishing this Notice of Proposed Rulemaking pursuant to Section 553 of the APA.”); see also Fed. Trade Comm'n, Notice of Proposed Rulemaking, Privacy of Consumer Financial Information Rule Under the Gramm-Leach-Bliley Act (“Privacy Rule”), 84 FR 13150 (Apr. 4, 2019), https://www.govinfo.gov/content/pkg/FR-2019-04-04/pdf/2019-06039.pdf (issuing notice of proposed rulemaking for rule amendment that was not preceded by an advance notice of proposed rulemaking). This same commenter argued the FTC had not complied with the “Principles of Regulation” enumerated in section 1(b) of Executive Order 12866. See Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-0046-8368 at 34-36 & n.123; E.O. 12866 3(b) (defining “Agency” to mean an authority of the United States “other than those considered to be independent regulatory agencies”). This provision of the Executive Order does not apply to independent agencies such as the FTC. Regardless, the Commission did take into account the principles set forth in section 1(b), as is evident throughout the NPRM. See, e.g., NPRM at 42015-17 (identifying problems in the marketplace); id. at 42028-42031 (soliciting comments on alternative approaches); id. at 42036-42044 (assessing costs and benefits). The same commenter also argued that the Commission's denial of its request to extend the comment period prejudiced the commenter's ability to collect and provide data pertaining to the proposed rule and was inconsistent with the Commission's grant of extensions in other rulemakings. As described in its letter, the Commission also received requests opposing an extension of the comment period. See Letter, Fed. Trade Comm'n, “Duration of the Public Comment Period in Matter No. P204800” (Aug. 23, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Matter%20No.%20204800%20-%20Letter%20re%20Extension%20for%20publication.pdf. In the letter, the Commission noted its ongoing engagement with stakeholders on issues relating to the sale, financing, and lease of motor vehicles, since before its 2011 Federal Register notice inviting stakeholder feedback on these issues and continuing since that time. See Fed. Trade Comm'n, Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles, 76 FR 14,014 (Mar. 15, 2011), https://www.federalregister.gov/documents/2011/03/15/2011-5873/public-roundtables-protecting-consumers-in-the-sale-and-leasing-of-motor-vehicles. The Commission determined that a sixty-day comment period, along with an additional twenty days following the public announcement and release of the NPRM and prior to its publication in the Federal Register , provided meaningful opportunity to comment. See also Steven J. Balla, “Public Commenting on Federal Agency Regulations: Research on Current Practices and Recommendations to the Administrative Conference of the United States” App. A (2011), https://www.acus.gov/sites/default/files/documents/Consolidated-Reports-%2B-Memoranda.pdf (reporting data from a pool of 703 comment periods associated with actions by dozens of Federal agencies, and finding that the average duration of comment periods for proposed agency actions was 38.7 days, and 45.1 days for actions that are economically significant). 116 15 U.S.C. 57a(a)(1)(B) (the Commission “may include requirements prescribed for the purpose of preventing” unfair or deceptive acts or practices). B. § 463.2: Definitions 1. Overview The proposed rule included definitions for the following terms: “Add-on” or “Add-on Product(s) or Service(s)”; “Add-on List”; “Cash Price without Optional Add-ons”; “Clearly and Conspicuously”; “Dealer” or “Motor Vehicle Dealer”; “Express, Informed Consent”; “GAP Agreement”; “Government Charges”; “Material” or “Materially”; “Motor Vehicle”; and “Offering Price.” In the definition-by-definition analysis in SBP III.B.2, the Commission discusses each definition proposed in the NPRM, relevant comments that are not otherwise addressed in the discussion of the corresponding substantive provisions of the Final Rule, and the definition the Commission is finalizing. 2. Definition-by-Definition Analysis (a) Add-On or Add-On Product(s) or Service(s) The proposed rule defined “Add-on” or “Add-on Product(s) or Service(s)” as “any product(s) or service(s) not provided to the consumer or installed on the vehicle by the motor vehicle manufacturer and for which the Motor Vehicle Dealer, directly or indirectly, charges a consumer in connection with a vehicle sale, lease, or financing transaction.” This term appeared in the following definitions and substantive provisions of the rule proposal: the definitions of “Add-on List” and “Cash Price without Optional Add-ons”; the Prohibited Misrepresentations provision at proposed § 463.3(b); the add-on list disclosure provision at proposed § 463.4(b); the requirement to disclose that add-ons are not required at proposed § 463.4(c); the prohibition against charging for add-ons that provide the consumer no benefit at proposed § 463.5(a); and the proposed provision relating to undisclosed or unselected add-ons at § 463.5(b). As discussed in the following paragraphs, in response to stakeholder comments, the Commission declines to finalize certain of these provisions; in the Final Rule, this term appears in paragraph (a) of the Prohibited Misrepresentations section (§ 463.3); the Disclosure Requirements provision in paragraph (c) of § 463.4; and the provision in § 463.5(a) titled “Dealer Charges for Add-ons and Other Items” and subtitled “Add-ons that provide no benefit.” For the following reasons, the Commission adopts the definition of “Add-on” or “Add-on Product(s) or Service(s)” largely as proposed, with conforming modifications to reflect changes to the defined terms “`Covered Motor Vehicle' or `Vehicle'” and “`Covered Motor Vehicle Dealer' or “Dealer'” as described in more detail in the discussion of § 463.2(e) and (f), in SBP III.B.2(e) and (f). The Commission received several comments relating to the scope of its proposed definition for “Add-on” or “Add-on Product(s) or Service(s).” Industry association and other commenters recommended that the Commission broaden the definition to include manufacturer-provided products or services, expressing concern that exclusion of such products or services would put other companies that provide such items at a competitive disadvantage. Products or services provided by manufacturers, however, are already covered by several provisions of the Final Rule. Under the substantive provisions the Commission is finalizing, dealers are prohibited from making misrepresentations regarding material information, including about the “costs or terms of purchasing, financing, or leasing a Vehicle” (§ 463.3(a)); must disclose the vehicle's true “Offering Price,” which includes any amounts dealers charge for items already installed or provided by the manufacturer (§§ 463.4(a) and 463.2(k)); and are required to obtain “Express, Informed Consent” for charges for any item (§§ 463.5(c) and 463.2(g)). The additional substantive add-on-specific provisions 117 address harms associated with products or services not provided to the consumer or installed on the vehicle by the motor vehicle manufacturer. Commenters did not provide evidence that the proposed provisions covering manufacturer-provided products or services would be insufficient to address consumer harm. Accordingly, the Commission has determined not to include manufacturer-provided products or services within this defined term. The Commission will continue to monitor this issue to determine whether additional action is warranted. 117 §§ 463.3(b), 463.4(c), 463.5(a). One individual commenter expressed concern that, under the Commission's proposed definition, dealers could raise the price of a vehicle by advertising additional products or services, such as “free lifetime benefits” with the vehicle, and that dealers could mislead consumers by charging more for the vehicle based on a supposedly “free” add-on. 118 The Commission notes that the Rule the Commission is finalizing contains several provisions relating to this concern. For example, dealers are prohibited from making misrepresentations under § 463.3, including misrepresentations regarding “ costs, limitation, benefit, or any other aspect” of add-ons. 119 Furthermore, dealers are required to disclose a vehicle's offering price, which must include charges for required add-ons; this disclosure will allow consumers to know the true price of the vehicle and comparison shop before selecting and visiting a particular dealership. 120 118 Individual commenter, Doc. No. FTC-2022-0046-7445 at 10-11. 119 § 463.3(b) (emphasis added). 120 See §§ 463.2(k) (defining Offering Price), 463.4(a) (requiring disclosure of Offering Price); see also § 463.3(p) (prohibiting misrepresentations regarding the disclosures required by the Final Rule). Several dealership association commenters expressed concern that the proposed definition was too broad, contending that it might apply to hundreds of items and include fees, such as a processing or document fee, that a dealer charges a consumer. As discussed in SBP III.B.2(b), III.D.2(b), and III.E.2(b), upon careful review of comments, including comments regarding the breadth of this requirement, the Commission has determined not to finalize the provision that would have required listing all optional add-ons—the “Add-on List” definition and the associated requirement that dealers disclose such a list—as well as proposed § 463.5(b) relating to undisclosed or unselected add-ons. 121 The remaining substantive provisions that use the term “Add-ons” prohibit misrepresentations (§ 463.3(b)); require dealers to disclose, if true, that add-ons are not required (§ 463.4(c)); and prohibit charges for add-ons that provide the consumer no benefit (§ 463.5(a)). The law already prohibits misrepresentations, regardless of the product or service at issue; dealers that offer consumers additional products or services are already required to ask consumers if they want such products, rather than suggesting that such products or services are mandatory, when they are not; and any hardship associated with refraining from charging for products or services that provide consumers no benefits are outweighed by the harms to consumers and competition from permitting this practice, as explained in the analysis of § 463.5(a). 121 See NPRM at 42044, 42046 (proposed §§ 46 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2023-27997. Public record. Not legal advice.