# 77 FR 74746: Used Motor Vehicle Trade Regulation Rule

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2012-29920

## Section

- **Citation:** 77 FR 74746
- **Heading:** Used Motor Vehicle Trade Regulation Rule
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 77 / 77 FR 74746

## Text

FEDERAL TRADE COMMISSION 16 CFR Part 455 Used Motor Vehicle Trade Regulation Rule AGENCY:
Federal Trade Commission (“FTC” or “Commission”).

ACTION:
Notice of proposed rulemaking; request for public comments.

SUMMARY:
Except as specifically described below, the FTC has completed its regulatory review of its Used Motor Vehicle Trade Regulation Rule (“Used Car Rule” or “Rule”) as part of the FTC's systematic review of all current Commission regulations and guides. The Commission has decided to retain the Rule and, in a separate Federal Register document, to amend it by changing the Spanish translation of the Buyers Guide. In addition, the Commission also has decided to issue a notice of proposed rulemaking (“NPR”) soliciting comments on proposed changes to the Rule. In this NPR, the Commission addresses the comments received during its review and invites public comment on the following four proposed changes to the Buyers Guide: adding boxes to the back of the Buyers Guide where dealers would have the option to indicate manufacturers' and other third-party warranties; adding a statement to the Buyers Guide encouraging consumers to seek vehicle history information and directing consumers to an FTC Web site for more information about vehicle histories; adding catalytic converters and airbags to the List of Systems on the back of the Buyers Guide; and adding a statement in Spanish to the English Buyers Guide directing consumers who cannot read the Buyers Guide in English to ask for a copy of it in Spanish.

DATES:
Written comments relating to the Used Car Rule must be received on or before February 11, 2013.

ADDRESSES:
Interested parties are invited to submit written comments electronically or in paper form. For important information concerning the comments you file, please review the SUPPLEMENTARY INFORMATION section below
d the Buyers Guide in English to ask for a copy of it in Spanish.

DATES:
Written comments relating to the Used Car Rule must be received on or before February 11, 2013.

ADDRESSES:
Interested parties are invited to submit written comments electronically or in paper form. For important information concerning the comments you file, please review the SUPPLEMENTARY INFORMATION section below. Comments in electronic form should be filed at the following electronic address: https://ftcpublic.commentworks.com/ftc/usedcarrulenprm by following the instructions on the web-based form. Comments in paper form should be mailed or delivered to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex T), 600 Pennsylvania Avenue NW., Washington, DC 20580, in the manner detailed in the SUPPLEMENTARY INFORMATION section below.
FOR FURTHER INFORMATION CONTACT:
John C. Hallerud, (312) 960-5634, Attorney, Midwest Region, Federal Trade Commission, 55 West Monroe Street, Suite 1825, Chicago, IL 60603.

SUPPLEMENTARY INFORMATION:
Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “Used Car Rule Regulatory Review, Project No. P087604” to facilitate the organization of comments. Please note that your comment—including your name and your state—will be placed on the public record of this proceeding, including on the publicly accessible FTC Web site, at http://www.ftc.gov/os/publiccomments.shtm.
Because comments will be made public, they should not include any sensitive personal information, such as any individual's Social Security Number; date of birth; driver's license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information
e personal information, such as any individual's Social Security Number; date of birth; driver's license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, comments should not include “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential” as provided in § 6(f) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing matter for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c). 1
1 The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).
Because paper mail addressed to the FTC is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/usedcarrulenprm and following the instructions on the web-based form. To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the weblink https://ftcpublic.commentworks.com/ftc/usedcarrulenprm. If this Notice appears at http://www.regulations.gov/#!home;tab=search, you may also file an electronic comment through that Web site. The Commission will consider all comments that regulations.gov forwards to it
eb-based form. To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the weblink https://ftcpublic.commentworks.com/ftc/usedcarrulenprm. If this Notice appears at http://www.regulations.gov/#!home;tab=search, you may also file an electronic comment through that Web site. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC Web site at http://www.ftc.gov to read the Notice and the news release describing it.
A comment filed in paper form should include the “Used Car Rule Regulatory Review, Project No. P087604” reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex T), 600 Pennsylvania Avenue NW. Washington, DC 20580. The FTC requests that any comment filed in paper form be sent by courier or overnight service, if possible, to avoid security related delays.
The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Comments on the proposed disclosure amendments, which are subject to review under the Paperwork Reduction Act, 44 U.S.C. 3501-3521, additionally should be submitted to the Office of Management and Budget (“OMB”). If sent by U.S
the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Comments on the proposed disclosure amendments, which are subject to review under the Paperwork Reduction Act, 44 U.S.C. 3501-3521, additionally should be submitted to the Office of Management and Budget (“OMB”). If sent by U.S. mail, they should be addressed to Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for the Federal Trade Commission, New Executive Office Building, Docket Library, Room 10102, 725 17th Street NW., Washington, DC 20503. Comments sent to OMB by U.S. mail, however, are subject to delays due to heightened security precautions. Thus, comments instead should be sent by facsimile to: (202) 395-5167.
Table of Contents
I. Overview of the Used Car Rule II. Rulemaking Procedures III. Summary of Comments IV. Analysis of Comments and Regulatory Alternatives Under Further Review V. Regulatory Review VI. Communications to Commissioners and Commissioner Advisors by Outside Parties VII. Paperwork Reduction Act VIII. Regulatory Analysis IX. Regulatory Flexibility Act X. Invitation To Comment I. Overview of the Used Car Rule
A. The Rule
In 1975, Congress passed the Magnuson-Moss Warranty-Federal Trade Commission Improvements Act (“Magnuson-Moss Act”), which required the Commission to initiate a rulemaking in connection with used car warranties using both the authority granted by the Magnuson-Moss Act and the rulemaking procedures set forth in § 18 of the FTC Act, 15 U.S.C. 57a. 2 Pursuant to this authority, the Commission issued its final Used Car Rule, which became effective on May 9, 1985, to create a remedy for oral misrepresentations and unfair omissions of material facts by used car dealers concerning warranty coverage, such as untrue and unenforceable promises about dealers' responsibilities and willingness to make repairs after sale
of the FTC Act, 15 U.S.C. 57a. 2 Pursuant to this authority, the Commission issued its final Used Car Rule, which became effective on May 9, 1985, to create a remedy for oral misrepresentations and unfair omissions of material facts by used car dealers concerning warranty coverage, such as untrue and unenforceable promises about dealers' responsibilities and willingness to make repairs after sale. To accomplish that goal, the Rule provides a uniform method for disclosing warranty information on a window sticker called the “Buyers Guide” that dealers are required to display on used cars offered for sale to consumers.
2 15 U.S.C. 2309(b). This provision requires that the Commission “initiate * * * a rulemaking proceeding dealing with warranties and warranty practices in connection with the sale of used motor vehicles.” Trade Regulation Rule Concerning Used Motor Vehicles, Statement of Basis and Purpose and Regulatory Analysis (“SBP”), 49 FR 45692, 45703 (Nov. 19, 1984).
The Rule requires used car dealers to disclose on the Buyers Guide whether they are offering a used car for sale with a dealer's warranty and, if so, the basic terms and conditions of the offered warranty, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty. The Rule also requires dealers to disclose that a used car is offered for sale without a warranty by checking a box marked “AS IS—NO WARRANTY” on the Buyers Guide. An “as is” sale voids implied warranties that arise under state law, such as an implied warranty of merchantability (which may mean, among other things, that goods are fit for the purposes for which such goods are ordinarily used). The Rule specifies an alternative version of the Buyers Guide for use in states that do not permit “as is” sales
g a box marked “AS IS—NO WARRANTY” on the Buyers Guide. An “as is” sale voids implied warranties that arise under state law, such as an implied warranty of merchantability (which may mean, among other things, that goods are fit for the purposes for which such goods are ordinarily used). The Rule specifies an alternative version of the Buyers Guide for use in states that do not permit “as is” sales.
The Rule also requires certain other disclosures, including: a recommendation that consumers ask the dealer if a pre-purchase inspection is permitted; a warning against reliance on spoken promises and a recommendation to have all promises confirmed in writing; and a list of fourteen major systems of an automobile and the major defects that may occur in these systems. The Rule provides that the Buyers Guide disclosures are incorporated by reference into the sales contract and govern in the event of an inconsistency between the Buyers Guide and the sales contract.
The Rule attempts to protect consumers from potential post-purchase problems in several ways. First, the Buyers Guide may prompt consumers to have a car inspected before purchase. Second, the Buyers Guide requires dealers to provide consumers with warranty information so that they can shop for a car with a warranty that protects them in the event that the car subsequently has mechanical problems. Third, the Buyers Guide warns consumers not to rely on spoken promises and to get any assurances about a car from the dealer in writing.
In addition, the Rule requires that dealers use Spanish language versions of the Buyers Guide and make Spanish contract disclosures related to the Buyers Guide when conducting used car sales in Spanish. 3 In practice and as recommended by staff, 4 dealers who conduct substantial numbers of sales in Spanish should display both English and Spanish Buyers Guides to ensure that Spanish-speaking customers receive the required Spanish disclosures.
3 16 CFR 455.5
ge versions of the Buyers Guide and make Spanish contract disclosures related to the Buyers Guide when conducting used car sales in Spanish. 3 In practice and as recommended by staff, 4 dealers who conduct substantial numbers of sales in Spanish should display both English and Spanish Buyers Guides to ensure that Spanish-speaking customers receive the required Spanish disclosures.
3 16 CFR 455.5. The Spanish language requirement was part of the Rule as promulgated in 1984. SBP, 49 FR at 45728.
4 Staff Compliance Guidelines, Used Motor Vehicle Trade Regulation Rule (“Staff Compliance Guidelines”), 53 FR 17658, 17667 (May 17, 1988) (Illustration 3.10). The Staff Compliance Guidelines are available at http://www.ftc.gov/bcp/guides/usedcar-comply.pdf.
The Commission last reviewed and amended the Used Car Rule in 1995. 5 Specifically, the Commission amended the Rule by: (1) Adopting several minor grammatical changes to the Spanish language version of the Buyers Guide; (2) permitting dealers to display a Buyers Guide in any location on a used vehicle so long as the Buyers Guide is displayed conspicuously and prominently and with both sides of it readily readable; and (3) allowing dealers to obtain a consumer's signature on the Buyers Guide to acknowledge receipt if accompanied by a disclosure that the buyer is acknowledging receipt at the close of the sale.
5 60 FR 62195 (Dec. 5, 1995). The history of the Used Car Rule is summarized in the SBP. 49 FR at 45692-95.
As discussed in Section III below, the Commission initiated a review of the Rule in 2008. 6 The Commission is publishing this NPR based upon that Regulatory Review and its consideration of the comments received during the review.
6 73 FR 42285 (July 21, 2008) (“Regulatory Review Notice”).
B. Rulemaking History
The Rule promulgated by the Commission in 1984 has a long and complicated rulemaking history. The Rule grew out of an investigation begun by FTC staff in 1973
Rule in 2008. 6 The Commission is publishing this NPR based upon that Regulatory Review and its consideration of the comments received during the review.
6 73 FR 42285 (July 21, 2008) (“Regulatory Review Notice”).
B. Rulemaking History
The Rule promulgated by the Commission in 1984 has a long and complicated rulemaking history. The Rule grew out of an investigation begun by FTC staff in 1973. That investigation eventually led to a staff recommendation for the adoption of a trade regulation rule that would have required mandatory inspections by dealers, disclosure of defects, and mandatory warranties on parts that were found to be without defects. 7 In 1975, in the midst of the staff investigation, the Magnuson-Moss Act became effective, which required the Commission to initiate this rulemaking using certain procedures as set forth in § 18 of the FTC Act, 15 U.S.C. 57a. 8 The Magnuson-Moss Act explicitly prohibits the Commission from mandating warranties. 9
7 SBP, 49 FR at 45692-95.
8 These procedural requirements include issuing an advance notice of proposed rulemaking, providing an opportunity for an informal hearing, and submitting the advance notice of proposed rulemaking to the Committee on Commerce, Science, and Transportation of the United States Senate and the Committee on Energy and Commerce of the United States House of Representatives. 15 U.S.C. 57a.
9 15 U.S.C. 2302(b)(2) (“Nothing in this chapter * * * shall be deemed to authorize the Commission * * * to require that a consumer product or any of its components be warranted.”); SBP, 49 FR at 45718.
The Commission published an initial staff report in December 1975 and issued an initial notice of proposed rulemaking in January 1976. The notice contained a proposed rule requiring a window sticker that disclosed warranty terms, warranty disclaimers, prior use of the vehicle, mileage, prior repairs, and dealer identification information. The proposed rule also specified a disclaimer for “as is” contracts
ission published an initial staff report in December 1975 and issued an initial notice of proposed rulemaking in January 1976. The notice contained a proposed rule requiring a window sticker that disclosed warranty terms, warranty disclaimers, prior use of the vehicle, mileage, prior repairs, and dealer identification information. The proposed rule also specified a disclaimer for “as is” contracts. 10 The Commission issued a second notice asking for public comment on whether dealers should be required to disclose known defects and whether a vehicle had been inspected for defects. After receiving comments and conducting hearings in six cities, the staff recommended a revised rule that 11
10 SBP, 49 FR at 45693.
11 Id.
The Commission itself met and heard oral presentations from selected rulemaking participants concerning the proposed rule 12 and, without making a final determination, rejected staff's recommendation for mandatory inspections, and directed staff to analyze an optional inspection approach. The staff then recommended optional inspections, and, in May 1980, the Commission tentatively adopted an optional inspection rule. 13 The Commission also directed staff to delete a requirement that dealers provide an estimated cost of repair for systems marked “NOT OK” and a disclosure relating to vehicles that an insurer had declared to be a “total loss.” 14
12 The selected participants included several organizations that have also commented during the current rule review, including the National Automobile Dealers Association, National Independent Automobile Dealers Association, and National Consumer Law Center. Id. at 45694 n.19.
13 Id. at 45694.
14 Id.
In August 1981, the Commission adopted a final rule that did not include the optional inspection provision. Instead, the Commission decided to require that dealers disclose on a window sticker warranty information and major defects known to the dealer
Association, National Independent Automobile Dealers Association, and National Consumer Law Center. Id. at 45694 n.19.
13 Id. at 45694.
14 Id.
In August 1981, the Commission adopted a final rule that did not include the optional inspection provision. Instead, the Commission decided to require that dealers disclose on a window sticker warranty information and major defects known to the dealer.
In May 1982, both houses of Congress vetoed the 1981 Rule, under the authority of the FTC Improvements Act of 1980. Several consumer groups then brought suit against the FTC, the U.S. Senate, and the U.S. House of Representatives to block the veto, arguing that the legislative veto was unconstitutional. 15 In 1983, the Supreme Court held that the legislative veto that invalidated the 1981 Rule was unconstitutional. 16
15 Consumers Union of the U.S., Inc., and Public Citizen, Inc., were plaintiffs in the underlying suit. Consumers Union of the U.S., Inc. v. FTC, 691 F.2d 575 (DC Cir. 1982), aff'd sub nom., Process Gas Consumers Group v. Consumers Energy Ass'n of America, 463 U.S. 1216 (1983).
16 Process Gas Consumers Group, 463 U.S. 1216.
Prior to the Congressional veto, several parties had sought review of the 1981 Rule in the Second Circuit. 17 This review was stayed following the legislative veto and reinstated after the Supreme Court's reversal of the veto. In 1983, the Commission decided that the Rule would become effective six months after the Second Circuit's entry of a judgment that disposed of the reinstated petitions for review, and, on the same date, also decided to reexamine the 1981 Rule. The parties filed a motion with the Second Circuit seeking leave to make additional submissions and written presentations to the Commission. Pursuant to that motion and the Commission's own decision to reexamine the 1981 Rule, the Commission and the parties agreed to a remand to the Commission from the Second Circuit
tions for review, and, on the same date, also decided to reexamine the 1981 Rule. The parties filed a motion with the Second Circuit seeking leave to make additional submissions and written presentations to the Commission. Pursuant to that motion and the Commission's own decision to reexamine the 1981 Rule, the Commission and the parties agreed to a remand to the Commission from the Second Circuit. The remand order required the Commission to reopen the record, particularly with respect to sections of the 1981 Rule dealing with the disclosure of known defects, and to provide notice and an opportunity to submit comments and rebuttal comments. Other than the remand, the Second Circuit retained jurisdiction over the Rule.
17 SBP, 49 FR at 45694 ( citing Miller Motor Car Corp. v. FTC, No. 81-4144 (2d Cir. 1981)).
In 1984, the Commission adopted a final rule that superseded the 1981 Rule. The Commission eliminated the known defects provision, among others, in the final 1984 Rule. 18 The 1984 Rule was not challenged further in the Second Circuit or elsewhere. The 1984 Rule became effective in 1985 and applies throughout the United States, except Wisconsin and Maine. 19
18 See id. at 45694-95.
19 The Rule provides that the Commission will exempt a state from the Rule's coverage upon application by an appropriate state agency if the Commission determines that the state has a requirement that affords equal or greater protections to consumers than the Rule. The exemption shall last as long as the state administers and enforces its requirement effectively. 16 CFR 455.6.
The Commission granted Wisconsin an exemption pursuant to 455.6 in 1986. 51 FR 20936 (June 9, 1986). The Commission granted Maine an exemption in 1988. 53 FR 16390 (May 9, 1988).
During the Commission's last regulatory review of the Rule in 1995, a number of the proposals raised during the original rulemaking, or similar proposals, were again considered and rejected by the Commission
FR 455.6.
The Commission granted Wisconsin an exemption pursuant to 455.6 in 1986. 51 FR 20936 (June 9, 1986). The Commission granted Maine an exemption in 1988. 53 FR 16390 (May 9, 1988).
During the Commission's last regulatory review of the Rule in 1995, a number of the proposals raised during the original rulemaking, or similar proposals, were again considered and rejected by the Commission. For example, in 1995, the Commission rejected requiring dealers to disclose known defects, 20 requiring dealers to keep copies of the Buyers Guides, 21 and expanding the Rule to encompass private used car sales. 22 The Commission decided to retain the Rule, with minor amendments, and since then the Rule has remained unchanged.
20 60 FR at 62196-97.
21 Id. at 62197.
22 Id. at 62197-98.
II. Rulemaking Procedures
Pursuant to the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the FTC is authorized to prescribe rules under Section 553 of the Administrative Procedure Act (“APA”) 23 with respect to unfair or deceptive acts or practices by motor vehicle dealers. 24 Under the Dodd-Frank Act, the FTC's APA rulemaking authority became effective as of July 21, 2011, the designated “transfer date” established by the Treasury Department. 25
23 5 U.S.C. 553.
24 Public Law 111-203, Title X, § 1029(d); 12 U.S.C. 5519(d). The term “motor vehicle dealer” refers to “any person or resident in the United States, or any territory of the United States, who—(A) is licensed by a State, a territory of the United States, or the District of Columbia to engage in the sale of motor vehicles; and (B) takes title to, holds an ownership in, or takes physical custody of motor vehicles.” 12 U.S.C. 5519(f)(2).
25 See 75 FR 57252 (Sept. 20, 2010); Dodd-Frank Act § 1029A
to “any person or resident in the United States, or any territory of the United States, who—(A) is licensed by a State, a territory of the United States, or the District of Columbia to engage in the sale of motor vehicles; and (B) takes title to, holds an ownership in, or takes physical custody of motor vehicles.” 12 U.S.C. 5519(f)(2).
25 See 75 FR 57252 (Sept. 20, 2010); Dodd-Frank Act § 1029A.
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.
III. Summary of Comments
The Commission received comments addressing the three categories of specific questions expressly asked by the Regulatory Review Notice: 26 comments concerning the Spanish translation of the Buyers Guide and whether a bilingual Buyers Guide would be feasible and beneficial; 27 comments concerning the utility of the List of Systems and defects on the reverse side of the Buyers Guide; and comments concerning whether the Buyers Guide could better disclose manufacturer and other third-party warranties. In addition, many commenters again raised issues as to whether the Rule should or should not be expanded to broaden the types of information that dealers are required to disclose on the Buyers Guide, such as information concerning an individual vehicle's prior use, title history, and mechanical condition.
26 73 FR 42285, supra note 6.
27 Along with this NPR, the FTC is also publishing a final rule revising the Spanish translation of the Buyers Guide
ether the Rule should or should not be expanded to broaden the types of information that dealers are required to disclose on the Buyers Guide, such as information concerning an individual vehicle's prior use, title history, and mechanical condition.
26 73 FR 42285, supra note 6.
27 Along with this NPR, the FTC is also publishing a final rule revising the Spanish translation of the Buyers Guide. In issuing this final rule, the FTC concluded that it would continue to require translations of the Buyers Guide only into Spanish rather than into multiple languages as some commenters proposed. Spanish is the second most commonly spoken language in the United States after English.
The Commission received twenty-five comments from twenty-one 28 The commenters include: an automobile auction firm, 29 an automotive repair firm, 30 an online seller of used cars, 31 automobile dealers, 32 individual consumers, 33 a consumer protection attorney, 34 a group of consumer advocacy organizations, 35 national automobile dealers' associations, 36 state automobile dealers' associations, 37 suppliers of dealer forms, 38 county consumer protection agencies, 39 the National Association of Attorneys General, 40 the International Association of Lemon Law Administrators, 41 and the Wisconsin Department of Transportation. 42
28 Comments were submitted in response to the Regulatory Review Notice from: Allain-Geisel (“Allain-Geisel”); Anderson, David (Folsom Lake Dodge) (“Anderson”); Broward County, Florida, Permitting, Licensing and Consumer Protection Division (“Broward County”); Campbell, James (Carlabels.com) (“Carlabels”); CarMax Auto Superstores, Inc. (“CarMax”); Copart, Inc. (“Copart”); Dealer Specialties (“Dealer Specialties”); Hillig, Rebecca for Hillig Auto Center (“Hillig”); Howard County Office of Consumer Affairs (“Howard County”); Oregon Vehicle Dealer Association (“Ore
County, Florida, Permitting, Licensing and Consumer Protection Division (“Broward County”); Campbell, James (Carlabels.com) (“Carlabels”); CarMax Auto Superstores, Inc. (“CarMax”); Copart, Inc. (“Copart”); Dealer Specialties (“Dealer Specialties”); Hillig, Rebecca for Hillig Auto Center (“Hillig”); Howard County Office of Consumer Affairs (“Howard County”); Oregon Vehicle Dealer Association (“Ore. Vehicle Dealer Ass'n”); Minnesota Automobile Dealers Association (“MADA”); National Association of Attorneys General (“NAAG”) (appending and incorporating comment from International Association of Lemon Law Administrators (“IALLA”) (Att. A.)); National Automobile Dealers Association (“NADA”); Consumers for Auto Safety and Reliability, et al. (collectively referred to here as “CARS,” see note 35); National Independent Automobile Dealers Association (“NIADA”); Barbara Sachau (“Sachau”); Stephen Swann (“Swann”); Wholesale Forms, Inc. (“Wholesale Forms”); and Wisconsin Department of Transportation (“WI DOT”). These comments are available online at http://www.ftc.gov/os/comments/usedcarrule/index.shtm.
Comments from Downey Brand LLP (“Downey Brand”) and NAAG submitted during the reopened comment period are available at:
http://www.ftc.gov/os/comments/usedcarrulereopen/index.shtm.
29 Copart.
30 Hillig.
31 Downey Brand.
32 Anderson; CarMax.
33 Allan-Geisel; Sachau.
34 Swann.
35 The comment from the consumer advocacy groups collectively referred to as “CARS” is a joint letter from the National Consumer Law Center, Consumer Action, Consumers for Auto Reliability and Safety (“CARS”), Consumer Federation of America (“CFA”); Consumer Federation of California (“CFC”), National Consumer Law Center (“NCLC”) (on behalf of its low income clients); U.S. Public Interest Research Group (“PIRG”); and Watsonville Law Center (“WLC”). CARS signed the comment on behalf of the other members of the group.
36 NIADA and NADA. On March 17, 2009, NIADA and NADA submitted supplemental comments
), Consumer Federation of America (“CFA”); Consumer Federation of California (“CFC”), National Consumer Law Center (“NCLC”) (on behalf of its low income clients); U.S. Public Interest Research Group (“PIRG”); and Watsonville Law Center (“WLC”). CARS signed the comment on behalf of the other members of the group.
36 NIADA and NADA. On March 17, 2009, NIADA and NADA submitted supplemental comments. NIADA's comments are identified respectively as NIADA1 and NIADA2. NADA's comments are similarly identified as NADA1 and NADA2.
37 Ore. Vehicle Dealer Ass'n; MADA.
38 Carlabels; Dealer Specialties; Wholesale Forms.
39 Broward County; Howard County. Howard County joins the CARS comment.
40 NAAG. Forty-two attorneys general signed onto the NAAG comment. On June 15, 2009, during the reopened comment period, NAAG submitted a second comment responding to NADA and NIADA. NAAG=s comments submitted during the initial comment period are identified as NAAG1, and its second comment is identified as NAAG2.
41 IALLA. IALLA=s comment is appended to NAAG1.
42 WI DOT.
Although not specifically raised in the Regulatory Review Notice, a number of comments address whether dealers should be required to provide consumers with vehicle history information, including title history, damage history, prior use, and whether a vehicle ever was a lemon law buyback. A group of consumer advocacy organizations recommended mandatory dealer inspections and that dealers be required to disclose known defects. 43 This group also proposed that the Rule require dealers to disclose state title record information, and, in particular, information that is now being made available through the National Motor Vehicle Title Information System (“NMVTIS”), a Department of Justice system that provides consumers with automobile information to prevent the sale of stolen and unsafe vehicles. 44
43 CARS at 17-18.
44 NMVTIS was created pursuant to the Anti-Car Theft Act of 1992, 49 U.S.C. 30501-05. NMVTIS Final Rule, 74 FR 5740 (Jan. 30, 2009)
tion that is now being made available through the National Motor Vehicle Title Information System (“NMVTIS”), a Department of Justice system that provides consumers with automobile information to prevent the sale of stolen and unsafe vehicles. 44
43 CARS at 17-18.
44 NMVTIS was created pursuant to the Anti-Car Theft Act of 1992, 49 U.S.C. 30501-05. NMVTIS Final Rule, 74 FR 5740 (Jan. 30, 2009). NMVTIS provides consumers with vehicle history information such as title issue date, latest odometer data, any theft history data, any brand assigned to a vehicle and date applied, and any salvage history. National Motor Vehicle Title Information System Frequently Asked Questions, http://www.nmvtis.gov/nmvtis_faq.html#info. For a more extensive discussion of NMVTIS, see infra Part III.B.1.
Industry commenters opposed these proposals to expand the Rule to require the display of vehicle history and title information. They expressed concern that dealers would have difficulties complying with a federal standard in light of the large variation in state regulation of vehicle titles. Industry commenters also raised concerns about the costs that dealers would face in attempting to comply with Buyers Guide disclosures of title information and with the increased risk of liability that dealers could face if they are required by the Rule to make such disclosures.
Commenters also discussed the specific issues raised in the Regulatory Review Notice: whether to permit a bilingual Buyers Guide and to change the Spanish translation; whether to retain the List of Systems; and whether to modify the Rule to address disclosures of manufacturers' and other third-party warranties. On all but one of these issues, the various commenters often expressed differing views, as described and analyzed below. The only commenter to discuss the proposed Spanish translation changes supported the changes.
None of the commenters provided studies or other empirical evidence in support of the positions taken.
IV
to address disclosures of manufacturers' and other third-party warranties. On all but one of these issues, the various commenters often expressed differing views, as described and analyzed below. The only commenter to discuss the proposed Spanish translation changes supported the changes.
None of the commenters provided studies or other empirical evidence in support of the positions taken.
IV. Analysis of Comments and Regulatory Alternatives Under Further Consideration
The Commission is considering several revisions to the Buyers Guide based upon its review of the comments received in response to the Regulatory Review Notice. The Commission has determined to retain the Rule and is seeking comments on the following potential revisions to the Rule: (1) Revising the Buyers Guide to provide additional boxes where dealers would have the option to indicate manufacturers' and third-party warranties; (2) adding a statement to the Buyers Guide encouraging consumers to seek vehicle history information and directing consumers to an FTC Web site for more information about vehicle histories and sources for that information; 45 (3) retaining the List of Systems and adding catalytic converters and airbags to it; and (4) adding a statement in Spanish to the English Buyers Guide directing consumers who cannot read the Buyers Guide in English to ask for a copy of it in Spanish.
45 The Web site would be created if the Commission amends the Rule and adopts such a Buyers Guide statement. The Commission also is exploring, and invites comments on, additional ways that this information could be made available to consumers for whom Internet access may not be readily available.
A
ecting consumers who cannot read the Buyers Guide in English to ask for a copy of it in Spanish.
45 The Web site would be created if the Commission amends the Rule and adopts such a Buyers Guide statement. The Commission also is exploring, and invites comments on, additional ways that this information could be made available to consumers for whom Internet access may not be readily available.
A. Proposed Revisions to Buyers Guide Warranty Disclosures
The Regulatory Review Notice asked a series of questions seeking comments about possible changes to the Buyers Guide intended to enhance the disclosure of warranties, such as unexpired manufacturers' warranties, certified used car warranties, and other third-party warranty products (Questions III.B(4)-(8)). The Commission proposes revising the Buyers Guide as described in this NPR to improve the way in which dealers can indicate whether a manufacturer's or other third-party warranty applies. 46 The Commission invites comments on its proposal.
46 In the proposed rule appearing at the end of this NPR, the Commission also proposes corresponding changes to ' 455.2 Consumer sales-window form, which discusses the Buyers Guide.
The Regulatory Review Notice included a proposed Buyers Guide containing boxes where dealers could indicate whether a vehicle was covered by third-party warranties other than warranties from the dealer. To
1. Current Buyers Guide Warranty Disclosures
The Buyers Guide's primary purpose is to create a readily understandable disclosure of the warranty coverage offered by a used car dealer
uide.
The Regulatory Review Notice included a proposed Buyers Guide containing boxes where dealers could indicate whether a vehicle was covered by third-party warranties other than warranties from the dealer. To
1. Current Buyers Guide Warranty Disclosures
The Buyers Guide's primary purpose is to create a readily understandable disclosure of the warranty coverage offered by a used car dealer. Currently, the Buyers Guide has two large boxes where dealers can indicate whether they offer a warranty on a used car or offer it without a warranty, i.e., “as is:”
EP17DE12.001
The Rule currently provides for an alternative Buyers Guide in states that prohibit dealers from waiving implied warranties by selling vehicles “as is.” EP17DE12.002
Beneath these large boxes is a space where dealers are instructed to provide details of the warranty coverage they offer by identifying the “Systems Covered” and the “Duration” of coverage for each system. Dealers are required to indicate the warranties that they offer by checking the appropriate large warranty box and completing the Systems Covered/Duration section. The Rule does not require dealers to identify any other applicable warranties, such as unexpired manufacturers' warranties, that are the responsibility of third parties. The Rule also does not provide any mechanism comparable to the large boxes to identify these warranties.
Instead, the Rule permits (but does not require) dealers to indicate the applicability of an unexpired manufacturer's warranty by adding the following statement in the Systems Covered/Duration section:
MANUFACTURER'S WARRANTY STILL APPLIES. The manufacturer's original warranty has not expired on the vehicle. Consult the manufacturer's warranty booklet for details as to warranty coverage, service location, etc. 47
47 16 CFR 455.2(b)(2)(v). The SBP does not discuss the optional unexpired manufacturer's warranty statement
y adding the following statement in the Systems Covered/Duration section:
MANUFACTURER'S WARRANTY STILL APPLIES. The manufacturer's original warranty has not expired on the vehicle. Consult the manufacturer's warranty booklet for details as to warranty coverage, service location, etc. 47
47 16 CFR 455.2(b)(2)(v). The SBP does not discuss the optional unexpired manufacturer's warranty statement.
When a vehicle is still covered by an unexpired manufacturer's warranty but is not warranted by the dealer, the Staff Compliance Guidelines advise that dealers may add an optional statement that: “[t]he dealership assumes no responsibility for any repairs, regardless of any oral statements about the vehicle. All warranty coverages comes from the unexpired manufacturer's warranty.” 48 48 53 FR at 17663 (1988).
2. Proposal for Disclosing Third-Party Warranties on Buyers Guide
The Regulatory Review Notice contained a proposed Buyers Guide that included additional boxes, comparable to those now used to identify dealer warranties, where dealers could easily identify third-party warranties, such as unexpired manufacturers' warranties. The Regulatory Review Notice version of the Guide included the boxes for third-party warranty information on the front of the Guide. After reviewing the comments, the Commission is seeking public comment on a modified Buyers Guide format that differs slightly from the version included in the Regulatory Review Notice.
Specifically, the Commission proposes a revised Buyers Guide that contains some minor wording changes designed to increase readability
ded the boxes for third-party warranty information on the front of the Guide. After reviewing the comments, the Commission is seeking public comment on a modified Buyers Guide format that differs slightly from the version included in the Regulatory Review Notice.
Specifically, the Commission proposes a revised Buyers Guide that contains some minor wording changes designed to increase readability. More important, the proposed revised Buyer Guide places the additional boxes for 49
49 The Buyers Guide currently states, “SEE THE BACK OF THIS FORM for important additional information, including a list of some major defects that may occur in used motor vehicles.”
The Commission seeks comments on the following proposed revised Buyers Guide: In states that do not permit “as is” sales, the face of the Buyers Guide would appear as:
BILLING CODE 6750-01-P EP17DE12.003
EP17DE12.004
BILLING CODE 6750-01-C The back of the Buyers Guides in both cases would appear as:
Both NADA and NIADA generally favored revising the Buyers Guide by adding boxes that dealers could check to disclose third-party warranties. 50 No commenters raised significant objections to the proposed additional boxes. 51 The comments, however, also raise questions about how to make the disclosures clearer and about how dealers would complete the revised Buyers Guide included in the Regulatory Review Notice, including (1) whether dealers can check multiple boxes in the “Non-Dealer Warranty” section; (2) what dealers should do when they cannot determine if a manufacturer's warranty applies; (3) what dealers should do when only portions of a manufacturer's warranty apply; and (4) how to treat warranties from third parties other than manufacturers.
50 The proposed revised Buyers Guide in this NPR may address some of the questions raised by NADA and NIADA about how to complete the Buyers Guide proposed in the Regulatory Review Notice. See NADA1 at 6-10; NIADA1 at 8-11
arranty applies; (3) what dealers should do when only portions of a manufacturer's warranty apply; and (4) how to treat warranties from third parties other than manufacturers.
50 The proposed revised Buyers Guide in this NPR may address some of the questions raised by NADA and NIADA about how to complete the Buyers Guide proposed in the Regulatory Review Notice. See NADA1 at 6-10; NIADA1 at 8-11. The Commission will reexamine those comments in light of the comments it receives concerning the proposed revised Buyers Guide.
51 One commenter, Wholesale Forms, thought that using the terms “dealer warranty” and “manufacturer's warranty” in the same document could confuse consumers. Wholesale Forms at 5-6. That commenter and others also voiced concerns that any changes to the Buyers Guide should be carefully considered because of the costs that would be imposed on dealers to change to a new form after more than twenty-five years of using the same Buyers Guide.
Several commenters addressed the statement in the version of the Buyers Guide in the Regulatory Review Notice that directs consumers to “[c]onsult the warranty booklet for details as to warranty coverage, expiration, service location, etc.” 52 Some consumer advocacy groups argued that dealers should be required to provide warranty booklets to consumers for these third-party warranties. Industry groups, on the other hand, explained that dealers often do not have such warranty booklets, do not receive them from trade-in customers, and cannot obtain them from manufacturers. Moreover, dealer groups commented that many manufacturers do not provide booklets and, therefore, dealers cannot possibly comply with a requirement that they provide the books.
52 This statement was set forth in the “Non-Dealer Warranties” section, below the “other used car warranty applies” box. The proposed revised Buyers Guide in this NPR uses the term “vehicle” in place of “car” to recognize that the Rule applies to vehicles, such as light duty pickup trucks, in addition to cars
erefore, dealers cannot possibly comply with a requirement that they provide the books.
52 This statement was set forth in the “Non-Dealer Warranties” section, below the “other used car warranty applies” box. The proposed revised Buyers Guide in this NPR uses the term “vehicle” in place of “car” to recognize that the Rule applies to vehicles, such as light duty pickup trucks, in addition to cars.
Considering the comments as a whole, the Commission is proposing to modify 53 Therefore, the proposed revised Buyers Guide advises: “Ask the dealer for a copy of the warranty, and for any documents that explain warranty coverage, exclusions, and the dealer's repair obligations.” The current Buyers Guide already contains a similar statement with respect to dealer warranties. 54 The proposed revised Buyers Guide is not intended to provide full details about any non-dealer warranty and would simply alert consumers to obtain additional information for details about the warranty coverage.
53 Certified used car programs began appearing in the mid-1990s. The programs vary, but typically a manufacturer attaches a new warranty to vehicles that have been returned to a dealer from a lease or a trade-in if they are “certified” by its franchised dealer to meet certain mechanical, age, and mileage requirements. Some dealerships offer their own warranties on used cars that are “certified” to meet certain mechanical, age, and mileage requirements. See Certified Used Cars—The Wave of the Future, Edmunds.com, Inc., http://www.edmunds.com/car-buying/certified-used-cars-the-wave-of-the-future.html
ade-in if they are “certified” by its franchised dealer to meet certain mechanical, age, and mileage requirements. Some dealerships offer their own warranties on used cars that are “certified” to meet certain mechanical, age, and mileage requirements. See Certified Used Cars—The Wave of the Future, Edmunds.com, Inc., http://www.edmunds.com/car-buying/certified-used-cars-the-wave-of-the-future.html.
54 Adjacent to the full or limited warranty boxes above the Systems Covered/Duration section of the Buyers Guide, the Buyers Guide states, “[a]sk the dealer for a copy of the warranty document for a full explanation of warranty coverage, exclusions, and the dealer's repair obligations.”
The Commission proposes removing a box from the Buyers Guide proposed in the Regulatory Review Notice that would have stated:
“NO INFORMATION PROVIDED. The dealer provides no information about other warranties that may apply.”
Industry groups questioned when to check this box, including whether dealers should check the box when they have reason to believe, but are not certain, that a manufacturer's warranty applies. 55 In addition to confusing dealers about when to check the box, the “NO INFORMATION” box also could confuse consumers into believing that third-party warranty coverage applies, although the dealer has not determined that it does. Moreover, the box is not actually needed because dealers could indicate that they offer no information about third-party warranties simply by leaving the boxes associated with third-party non-dealer warranties blank. The Commission believes that these points are well taken and, therefore, the proposed revised Buyers Guide included in this NPR does not contain the “NO INFORMATION” box. 55 NADA1 at 10.
3. Disclosure of Unexpired Manufacturers' Warranties
The Regulatory Review Notice asked for comments on the Rule's current system for disclosing unexpired manufacturers' warranties, which permits, but does not require, dealers to indicate that an unexpired manufacturer's warranty applies
oposed revised Buyers Guide included in this NPR does not contain the “NO INFORMATION” box. 55 NADA1 at 10.
3. Disclosure of Unexpired Manufacturers' Warranties
The Regulatory Review Notice asked for comments on the Rule's current system for disclosing unexpired manufacturers' warranties, which permits, but does not require, dealers to indicate that an unexpired manufacturer's warranty applies. Some commenters suggested that the Rule should require dealers to disclose unexpired manufacturers' warranties, but industry commenters opposed such a requirement.
Consumer protection authorities and a consumer advocacy group commented that dealers should be required to disclose any manufacturers' warranties and whether a manufacturer's warranty has been terminated because of a salvage title or other vehicle history. 56 The comments differ in the amount of information that each would require dealers to disclose, but all assume that dealers have, or can readily determine, whether a manufacturer's warranty applies to an individual vehicle.
56 NAAG1 at 8 (also urges that Buyers Guide list past history indicating salvage, damage, or manufacturer buyback); id. at 10; CARS at 19; Broward County at 2-3, 10-11.
Industry groups opposed mandatory disclosure of manufacturers' warranties, noting that dealers often cannot determine readily whether a manufacturer's warranty applies. 57 The association of franchised new car dealers (NADA) commented that franchised dealers may not have access to warranty information from manufacturers other than the ones for which they have a franchise. 58 NADA also commented that trade-in customers may not provide dealers with sufficient information to determine if a manufacturer's warranty still applies because coverage can be denied for so many reasons in addition to expiration of the warranty term, such as damage, poor maintenance, differing terms for separate vehicle systems, and non-transferability
the ones for which they have a franchise. 58 NADA also commented that trade-in customers may not provide dealers with sufficient information to determine if a manufacturer's warranty still applies because coverage can be denied for so many reasons in addition to expiration of the warranty term, such as damage, poor maintenance, differing terms for separate vehicle systems, and non-transferability. 59 An automobile auction firm commented that a mandatory disclosure requirement could expose dealers to potential liability for a manufacturer's warranty because the Buyers Guide is incorporated into the final contract of sale. 60
57 NADA1 at 4-6; NIADA1 at 8; Ore. Vehicle Dealer Ass'n at 2.
58 NADA1 at 5.
59 Id.
60 Copart.
The Rule does not now require dealers to disclose warranties, such as manufacturers' warranties, for which the dealers are not responsible, and the comments do not present compelling reasons to expand the Rule's current scope. Industry groups noted that dealers do not necessarily have, and cannot easily acquire, the warranty information that the consumer advocacy groups assume they possess. Consequently, dealers may not always be able to provide consumers with accurate information and may be unable to comply with a mandatory disclosure provision. 61 Therefore, the Commission does not propose making mandatory the optional disclosure of unexpired manufacturers' warranties.
61 NADA proposed permitting dealers to state on the Buyers Guide that an unexpired manufacturer's new car warranty may apply and, because of the uncertainty in confirming coverage, simultaneously stating that “[t]he dealer makes no representation regarding any non-dealer warranty or other coverage.” NADA1 at 6. A consumer protection attorney, however, commented that dealers sometimes check the Buyers Guide's Warranty box and add statements such as “balance of factory warranty, if any, may apply” to suggest falsely that a vehicle is covered by an unexpired manufacturer's warranty. Swann at 1
tating that “[t]he dealer makes no representation regarding any non-dealer warranty or other coverage.” NADA1 at 6. A consumer protection attorney, however, commented that dealers sometimes check the Buyers Guide's Warranty box and add statements such as “balance of factory warranty, if any, may apply” to suggest falsely that a vehicle is covered by an unexpired manufacturer's warranty. Swann at 1. The Rule necessarily requires dealers to determine whether a manufacturer's warranty applies before stating so because it permits, but does not require, dealers to state that a manufacturer's warranty applies 455.2(b)(2)(v), when such a warranty applies. In light of the potential for deception when dealers suggest coverage that the dealer has not confirmed, no change concerning the disclosure of unexpired manufacturers' warranties is proposed in this NPR.
B. Proposals on Vehicle History and Condition
As in the earlier proceedings involving this Rule, many commenters urged that the Buyers Guide provide a variety of information on the history of the vehicle and let consumers know whether the car has problems at the time of sale. As noted above, many of these proposals were previously considered and rejected, in part because the information is already provided in a different form, dealers do not necessarily themselves have reliable information for making disclosures, and it is not clear that, overall, placing some of this information on a buyers guide would actually aid consumer purchase decisions.
The Rule as it currently stands attempts to address some of the concerns consumers might have about post-sale problems. The Buyers Guide makes it easier for consumers to shop for and choose a warranty that would provide protection in the event of mechanical problems. It alerts
Since the Rule was promulgated, however, there have been significant changes in the types of vehicle history available to those buying used cars—both for dealers purchasing cars for resale and for consumers who are shopping for one
roblems. The Buyers Guide makes it easier for consumers to shop for and choose a warranty that would provide protection in the event of mechanical problems. It alerts
Since the Rule was promulgated, however, there have been significant changes in the types of vehicle history available to those buying used cars—both for dealers purchasing cars for resale and for consumers who are shopping for one. State automobile title information is being combined into a database where it can be searched through DOJ's NMVITIS. In addition, firms such as CARFAX and AutoCheck provide individualized vehicle history reports which include not only the information in a NMVITIS report but also may include a wealth of information about prior wrecks, odometer readings, and even maintenance history. Although these reports are not necessarily perfect, they do provide far more useful information than was available previously.
The Commission is proposing a Buyers Guide accompanying this NPR that contains a statement advising consumers to obtain vehicle history information. This statement would be combined with the Buyers Guides' existing recommendation that consumers obtain an independent inspection before purchase. The statement directs consumers to an FTC Web site that the Commission would create where consumers could obtain information about vehicle history reports and sources for those reports. The FTC site could also provide other useful information for consumers who are shopping for a used car.
Dealers would not be required to obtain vehicle histories or to display specific vehicle history information on the proposed revised Buyers Guide. The Buyers Guide would continue to recommend to consumers that they protect themselves by obtaining an independent inspection before making a purchase.
1. Availability of Vehicle History Information
Since the Rule's promulgation in 1984, a variety of public and private sources offering information about the history of individual vehicles have become available
the proposed revised Buyers Guide. The Buyers Guide would continue to recommend to consumers that they protect themselves by obtaining an independent inspection before making a purchase.
1. Availability of Vehicle History Information
Since the Rule's promulgation in 1984, a variety of public and private sources offering information about the history of individual vehicles have become available. When the Rule was adopted, vehicle history information was available primarily from prior owners of used cars or from state car titling agencies like a state department of motor vehicles (“DMV”). For cars titled in several states, that information sometimes was difficult both for consumers and dealers to obtain. Today consumers can obtain useful title information from NMVITIS, and commercial services offer that in combination with vehicle history information from a variety of sources.
Car titles usually are issued by state DMVs, and the titles typically show the legal owner of the vehicle and other identifying information. The amount of information in a car title varies widely from state to state. Some states issue car titles that include “brands,” the descriptive labels assigned by state titling agencies to describe the current or past condition of a vehicle, such as “junk,” “salvage,” or “flood.” 62 The brands that states use on their car titles differ in important ways from state to state. The definitions of those brands also vary from state to state so that, for example, a brand of “junk” in one state may mean something different in another state. At the time of the original rulemaking, state DMVs may have been the only source, other than prior owners, of vehicle history information.
62 See NMVTIS Final Rule, 74 FR 5740 n.1 (Jan. 30, 2009).
One source for vehicle history information that has become available since the Rule was promulgated is NMVTIS. The Department of Justice began its implementation of NMVTIS in January 2009
ther state. At the time of the original rulemaking, state DMVs may have been the only source, other than prior owners, of vehicle history information.
62 See NMVTIS Final Rule, 74 FR 5740 n.1 (Jan. 30, 2009).
One source for vehicle history information that has become available since the Rule was promulgated is NMVTIS. The Department of Justice began its implementation of NMVTIS in January 2009. 63 NMVTIS is a federal system designed to enable nationwide access to title information submitted by state titling agencies. NMVTIS includes odometer readings from state titling data and brands that state titling agencies assign to vehicles. NMVTIS does not create federal uniform definitions for brands or require that state DMVs assign brands in issuing car titles. Consumers may purchase some forms of NMVTIS reports for fewer than five dollars. 64 However, not all states fully participate in NMVTIS, and the program is still being developed.
63 Id. at 5740.
64 See information concerning approved NMVTIS data providers at: www.nmvtis.gov/nmvtis_vehiclehistory.html.
In addition, state title information, combined with other information about individual vehicles, can be obtained from commercial sources such as CARFAX and AutoCheck, among others. CARFAX obtains data for its reports from state titling agencies, insurers, repair facilities, automobile auctions, salvage facilities, and fleet rental firms. AutoCheck competes with CARFAX and obtains information from similar sources. 65
65 See, e.g., CARFAX v. AutoCheck, https://www.autocheck.com/consumers/content/carfax-autocheck-compare.do.
Vehicle history reports available from CARFAX and AutoCheck may often include information on prior ownership, usage, odometer readings, damage, and repair history, among other things. Consumers can use the vehicle identification number (“VIN”) for a particular vehicle to purchase a report on that vehicle from these commercial sources
w.autocheck.com/consumers/content/carfax-autocheck-compare.do.
Vehicle history reports available from CARFAX and AutoCheck may often include information on prior ownership, usage, odometer readings, damage, and repair history, among other things. Consumers can use the vehicle identification number (“VIN”) for a particular vehicle to purchase a report on that vehicle from these commercial sources. Both CARFAX and AutoCheck also offer consumers the option of paying a flat fee to receive reports on as many individual vehicles as the consumer wishes during a designated time frame. Some dealers also have chosen to distribute commercial vehicle history reports to their customers for free.
2. Comments Received on Disclosure of Title Information
The Commission received many comments suggesting that vehicle title information be disclosed on the Buyers Guide. Comments from NAAG, CARS, WI DOT, and an individual consumer favored requiring dealers to disclose prior title status information on the Buyers Guide. 66 The comments assume that dealers have this information or could easily obtain it. For example, WI DOT noted that dealers usually have a copy of the title or direct access to state DMV databases in relation to their state-imposed duty to process title applications on behalf of buyers. 67 The commenters who favored including vehicle history information generally recommended requiring dealers to obtain the information and to report that information on the Buyers Guide.
66 NAAG1 at 1-10; CARS at 19-21; WI DOT at 2-3; Allan-Geisel.
67 WI DOT at 2.
CARS proposed a separate warning label stating that a vehicle is listed in NMVTIS as “salvage, junk, or otherwise totaled by an insurer or sold at auction.” 68 An individual consumer commented that the Buyers Guide should disclose whether the vehicle was recently sold at an auction. 69
68 CARS at 19-21.
69 Allan-Geisel
G1 at 1-10; CARS at 19-21; WI DOT at 2-3; Allan-Geisel.
67 WI DOT at 2.
CARS proposed a separate warning label stating that a vehicle is listed in NMVTIS as “salvage, junk, or otherwise totaled by an insurer or sold at auction.” 68 An individual consumer commented that the Buyers Guide should disclose whether the vehicle was recently sold at an auction. 69
68 CARS at 19-21.
69 Allan-Geisel.
Industry groups stated that better information about title brands would benefit them as well as consumers but, for a variety of reasons, suggested that it is impracticable to require disclosure of this information on the Buyers Guide. First, these groups contended that dealers often do not themselves have accurate information about titles or vehicle histories. They noted that consumers trading in a car may well not have the title itself, either because it is held by a financing company or a consumer has simply lost it. They stated
Industry groups also contended that even if dealers do have a title, it may not provide an accurate history of the vehicle because the title may have been “washed.” 70 Removing or “washing” brands from a title—generating a “clean title”—is accomplished by transporting a vehicle with a branded title in one state to a state that does not check either with the state that issued the previous title (or with all states that may have previously issued titles on that vehicle) to determine if the vehicle has any existing brands not shown on the current paper title. 71 Indeed, NADA's examples of how states treat brands from other states differently, and how a brand or other negative title information reported in one state may not be carried over in a different state, 72 highlight the regulatory conditions that make title washing possible.
70 NADA2 at 7.
71 See 74 FR at 5741.
72 NADA2 at 5
cle has any existing brands not shown on the current paper title. 71 Indeed, NADA's examples of how states treat brands from other states differently, and how a brand or other negative title information reported in one state may not be carried over in a different state, 72 highlight the regulatory conditions that make title washing possible.
70 NADA2 at 7.
71 See 74 FR at 5741.
72 NADA2 at 5.
Dealers offered strong support for NMVTIS—which is designed in part to prevent or defeat title “washing” by providing a national “brand carry forward” function—but contend that it is not fully functioning. NMVTIS retains and makes available to users of the system all reported brands applied to a vehicle so that transporting the vehicle from one state to another will not “wash” the brand. Once a vehicle is branded by a state motor vehicle titling agency, that brand becomes a permanent part of the vehicle's NMVTIS record. NMVTIS also is intended to prevent criminal title washing, in which a salvage or destroyed vehicle is used to generate a clean paper title that is subsequently attached to a stolen vehicle “cloned” to the destroyed vehicle.
NADA raised concerns about NMVTIS's completeness and pointed out that NMVITIS had complete information from only thirteen states (as of March 17, 2009, the date of NADA's comment). 73 Since then, NMVITIS is now receiving data from forty states. 74 Thus, while still in development, NMVITIS already provides a great deal of useful information.
73 NADA2 at 6.
74 See National Motor Vehicle Title System: For States, www.nmvtis.gov/nmvtis_states.html.
A second concern offered by dealer groups is that, even if consumers know the brand appearing on a car title, they may not understand the significance of that brand because title brands vary dramatically from state to state. In fact, a particular brand in one state may have a different meaning in another. 75 NADA noted, for example, that the term “salvage” has different legal meanings in Arkansas, Connecticut, Colorado and Montana
groups is that, even if consumers know the brand appearing on a car title, they may not understand the significance of that brand because title brands vary dramatically from state to state. In fact, a particular brand in one state may have a different meaning in another. 75 NADA noted, for example, that the term “salvage” has different legal meanings in Arkansas, Connecticut, Colorado and Montana. 76
75 NADA2 at 4-5.
76 Id. at 5.
Third, dealers are concerned about their potential legal liability if they are made the “guarantors” of information that they could be required to disclose on a Buyers Guide. NIADA noted that “the types of damage, repair and history issues noted [on forms required by state law] are considered material facts affecting a consumer transaction, such that the information must be disclosed under [each state's Unfair and Deceptive Acts and Practices Act] statute.” 77 It added that many disclosures are already required or otherwise dealt with by other laws and administrative regulations. According to NIADA, radical changes as to what information is required to be displayed on what forms and the time when disclosures must be made would expose dealers to significant legal costs by making them the “guarantors of information over which they have no control.” 78
77 NIADA2 at 2.
78 Id.
NIADA stated that dealers are concerned that they may be liable if they put out of date or incomplete information on Buyers Guides that they obtain from vehicle history reports or other databases. NIADA noted that information in vehicle history reports is only as good as the data that goes into them. In addition, NIADA stated that there is a lag time before information is included in vehicle history reports. NIADA opined that, even if dealers complete a Buyers Guide with current information, they would have to consistently recheck and update that information
tory reports or other databases. NIADA noted that information in vehicle history reports is only as good as the data that goes into them. In addition, NIADA stated that there is a lag time before information is included in vehicle history reports. NIADA opined that, even if dealers complete a Buyers Guide with current information, they would have to consistently recheck and update that information. Industry groups noted that such disclosures may duplicate existing legal requirements, and that dealers might be subject to legal action if the information they report later turns out to be inaccurate or incomplete.
3. Analysis of Vehicle History Disclosure Comments
Both consumer and industry commenters agreed that consumers benefit from better information about the history of vehicles. In addition, dealers themselves often purchase cars, either at auction or as trade-ins, and thus also have a real use for better information. However, it is not practicable to include all available vehicle history information on a Buyers Guide. Complete vehicle histories may be several pages long.
Thus the question is whether some subset of that information, particularly from titles, should be provided on the Buyers Guide. Because title records, especially brands, vary considerably from state to state, there may be a risk that consumers could be confused or misled by these terms. Moreover, providing a partial vehicle history on the Buyers Guide also could discourage consumers from seeking more complete vehicle history information.
In addition, industry groups raised a concern about dealers' potential liability for reporting information that they do not control. Vehicle history information is available from multiple sources, and that information could be inaccurate, untimely, or incomplete. Dealers face potential legal risks for reporting third-party information that turns out to be deficient
e vehicle history information.
In addition, industry groups raised a concern about dealers' potential liability for reporting information that they do not control. Vehicle history information is available from multiple sources, and that information could be inaccurate, untimely, or incomplete. Dealers face potential legal risks for reporting third-party information that turns out to be deficient.
Thus, while commenters agreed that consumers could benefit from additional information, even if it has potential deficiencies, the Commission believes that requiring dealers to place potentially misleading partial or deficient information on the Buyers Guide would not necessarily benefit consumers. Instead, the Commission believes that consumers should be alerted to the existence of this information and encouraged to obtain and to evaluate it themselves—while combining that knowledge with an independent inspection of the vehicle.
4. Proposed Buyers Guide Vehicle History Statement
Having considered all of these comments, and to facilitate consumer access to vehicle history information, the Commission proposes adding the following statement to the Buyers Guide that would encourage consumers to obtain vehicle history reports and that would direct consumers to an FTC Web site, to be created by the Commission, where consumers could learn details about vehicle history information and sources, including NMVTIS, for that information:
Before you buy this used vehicle:
1. Get information about its history.
Visit the Federal Trade Commission at ftc.gov/usedcars. You will need the vehicle identification number (VIN), shown above, to make the best use of the resources on this site.
2. Ask the dealer if your mechanic can inspect the vehicle on or off the lot
ry information and sources, including NMVTIS, for that information:
Before you buy this used vehicle:
1. Get information about its history.
Visit the Federal Trade Commission at ftc.gov/usedcars. You will need the vehicle identification number (VIN), shown above, to make the best use of the resources on this site.
2. Ask the dealer if your mechanic can inspect the vehicle on or off the lot.
The proposed statement would further two principal purposes of the Rule: (1) Providing consumers with important pre-sale information about a vehicle In much the same way that the current Buyers Guide encourages consumers to ask the dealer about an independent inspection, the proposed vehicle history statement would encourage consumers to obtain information about a particular vehicle's history from independent sources. Both the proposed vehicle history statement and the existing independent inspection statement direct consumers to independent sources of information about the mechanical condition of vehicles that are not controlled by the selling dealer. Under this proposal, dealers would not be required to obtain vehicle history reports or to provide those reports to consumers in conjunction with the Buyers Guide, thereby alleviating concerns that a dealer could be held responsible for shortcomings in vehicle history information that is controlled by others.
5. Other Mechanical Condition and Vehicle History Disclosures Recommended by Some Comments
In addition to recommending that the Buyers Guide include vehicle history information from NMVTIS and other sources, some commenters also recommended expanding the Rule to require disclosure of prior damage, prior use history (such as whether a vehicle was a taxi, rental, police car, etc.), and manufacturer buyback or “lemon law” status. These, or similar proposals, were extensively argued, carefully considered, and ultimately rejected by the Commission during the original rulemaking. Many were raised again and rejected during the 1995 Rule review
anding the Rule to require disclosure of prior damage, prior use history (such as whether a vehicle was a taxi, rental, police car, etc.), and manufacturer buyback or “lemon law” status. These, or similar proposals, were extensively argued, carefully considered, and ultimately rejected by the Commission during the original rulemaking. Many were raised again and rejected during the 1995 Rule review. The current comments do not provide sufficient new evidence or point to any change in circumstances that compel the Commission to reach a different conclusion during this review of the Rule. Moreover, the Commission's proposal to revise the Buyers Guide—by adding a recommendation that consumers obtain a vehicle history report, in addition to an independent inspection, before purchasing a used car—should serve to provide consumers with the means to obtain important information about the mechanical condition of individual vehicles. The Commission continues to believe that consumers can obtain more reliable information about the mechanical condition of a used vehicle from independent sources than they can from relying on dealers. 79 Accordingly, for these and the additional reasons discussed below, the Commission declines to reverse its long-held position on these issues in this NPR.
79 See, e.g., SBP, 49 FR at 45716 (rejecting a known defects disclosure requirement in part because “[i]t gives the wrong signal to consumers by encouraging them to focus their attention on dealer-controlled information about a car's mechanical condition”).
a. Disclosure of Prior Vehicle Damage
The Commission declines to propose amending the Rule to require dealers to disclose prior damage history, as several commenters recommended. 80 Several commenters who broadly favored disclosure of vehicle title history stressed the particular importance of disclosing damage history. For example, NAAG urged that the Buyers Guide should require dealers to disclose past damage, including title history showing such damage
es to propose amending the Rule to require dealers to disclose prior damage history, as several commenters recommended. 80 Several commenters who broadly favored disclosure of vehicle title history stressed the particular importance of disclosing damage history. For example, NAAG urged that the Buyers Guide should require dealers to disclose past damage, including title history showing such damage. 81 Similarly, CARS recommended a warning label for used vehicles with salvage title histories. 82 NAAG and CARS also recommended that the Buyers Guide disclose if a manufacturer's warranty has been terminated because of salvage or other title history. 83
80 NAAG1 at 2-5, 7-9; CARS at 18-21; WI DOT at 2-3; Allan-Geisel.
81 NAAG commented that the Buyers Guide should disclose “[P]ast title history indicating prior salvage, damage or manufacturer buyback.” NAAG1 at 7-8.
82 The proposed warning label would apply to vehicles listed as “salvage, junk, or otherwise totaled by an insurer or sold at auction” in NMVTIS. CARS at 20-21, 30.
The Rule does not apply to vehicles “sold only for scrap or parts (title documents surrendered to the State and a salvage certificate issued).” 16 CFR 455.1(d)(2).
83 NAAG1 at 7-8; CARS at 19-21.
NIADA opposed a Rule requirement to disclose damage history, for the same reasons that it opposed a requirement that dealers disclose title history: (1) Lack of reliable information, and (2) potential liability for third-party vehicle history statements. 84 As with title history disclosures, NIADA recommended a “safe harbor” from liability should dealers be required to disclose damage history. 85
84 NIADA2 at 1-3.
85 Id. at 2-3.
The Commission did not directly address a damage history disclosure requirement during the 1984 rulemaking. In 1979, however, it had adopted a staff recommendation to drop a proposed provision requiring the disclosure of any repair work performed by the dealer
recommended a “safe harbor” from liability should dealers be required to disclose damage history. 85
84 NIADA2 at 1-3.
85 Id. at 2-3.
The Commission did not directly address a damage history disclosure requirement during the 1984 rulemaking. In 1979, however, it had adopted a staff recommendation to drop a proposed provision requiring the disclosure of any repair work performed by the dealer. 86 The Commission agreed with staff's conclusion that the record did not show that prior repairs are “reliable indicators of current mechanical condition” and that requiring disclosure of repair history would reduce a dealer's incentive to make necessary repairs. 87 Like repair history, damage history would not be an indicator of current mechanical condition and forced disclosure of it could reduce dealer incentives to ascertain damage and repair it.
86 SBP, 49 FR at 45720-21.
87 Id.
For reasons similar to those outlined above in discussing vehicle history information generally, the Commission does not propose mandatory disclosure by dealers of the prior damage history of individual vehicles. Nevertheless, prior damage information may be available to consumers if it is reported in title documents or vehicle history reports. The vehicle history statement on the proposed revised Buyers Guide encourages consumers to seek out and to obtain these reports.
b. Disclosure of Prior Use
The Commission declines to propose the prior use disclosure urged by three commenters 88 because such a requirement was rejected by the Commission in 1979 and the comments do not provide sufficient new evidence for the Commission to revisit that conclusion. In any event, prior use information may be available to consumers in a NMVTIS report or a commercial vehicle history report.
88 CARS at 20; NAAG1 at 16-17; WI DOT at 2
propose the prior use disclosure urged by three commenters 88 because such a requirement was rejected by the Commission in 1979 and the comments do not provide sufficient new evidence for the Commission to revisit that conclusion. In any event, prior use information may be available to consumers in a NMVTIS report or a commercial vehicle history report.
88 CARS at 20; NAAG1 at 16-17; WI DOT at 2.
In 1979, the Commission rejected a staff recommendation that the Buyers Guide disclose prior use because the record did not demonstrate either that consumers were injured by the lack of such a disclosure or that prior use was an accurate indicator of a vehicle's mechanical condition. 89 Commenters did not present new evidence about the possible benefits of a prior use disclosure on the Buyers Guide. To the extent that individual consumers are interested in prior use information, however, they may be able to obtain it from a NMVTIS report or a commercial vehicle history report. The Commission thus declines to alter its long-held view on this issue.
89 SBP, 49 FR at 45720.
c. Disclosure of “Manufacturer Buyback” or “Lemon Law” Status
The Commission does not propose requiring that dealers disclose a vehicle's “lemon law” (also called “manufacturer buyback” or “repurchase”) status on the Buyers Guide. All fifty states have some form of “lemon law” that requires manufacturers to repurchase new cars that fail to conform to express 90 Accordingly, the Commission believes that a manufacturer repurchase in a vehicle's history should be treated in the same way as other aspects of vehicle history discussed above. The proposed revised Buyers Guide would recommend that consumers obtain a vehicle history report that may include information on whether an individual vehicle is a manufacturer repurchase. However, the proposed Rule would not affirmatively require that dealers obtain this information and disclose it on the Buyers Guide. 91
90 See NADA2, Exhibit A (chart: “Brand/Vehicle Status-Reference”)
above. The proposed revised Buyers Guide would recommend that consumers obtain a vehicle history report that may include information on whether an individual vehicle is a manufacturer repurchase. However, the proposed Rule would not affirmatively require that dealers obtain this information and disclose it on the Buyers Guide. 91
90 See NADA2, Exhibit A (chart: “Brand/Vehicle Status-Reference”).
91 Notably, in 1996, the Commission held a public forum on issues related to lemon law buybacks. Participants in that forum included manufacturers, dealer associations, state and local consumer protection agencies, and consumer groups. No lemon law disclosure proposal resulted from that forum. Information about the proceedings, including a transcript, is available at http://www.ftc.gov/bcp/lemon/.
State lemon laws typically require manufacturers to repurchase and, if necessary, to repair new vehicles that fail to meet warranty standards because of alleged defects. Once repurchased and repaired, the vehicles are then often offered for sale as used cars. 92 Laws in some states require that the manufacturer warrant the repair of the vehicle's nonconformity for a designated period of time or a designated number of miles. According to the IALLA, fifteen states require manufacturers to issue warranties to the first retail buyer of a vehicle after the vehicle's repurchase pursuant to a state lemon law. 93 IALLA further reports that several manufacturers offer limited warranties on repurchased lemon law vehicles, even if not required to do so by state law. 94 Several commenters recommended that the Commission require dealers to disclose on the Buyers Guide that a vehicle had been repurchased by a manufacturer and to provide information about warranty coverage associated with the repurchase. 95
92 The number of cars repurchased pursuant to state lemon laws and resold by manufacturers is unknown
vehicles, even if not required to do so by state law. 94 Several commenters recommended that the Commission require dealers to disclose on the Buyers Guide that a vehicle had been repurchased by a manufacturer and to provide information about warranty coverage associated with the repurchase. 95
92 The number of cars repurchased pursuant to state lemon laws and resold by manufacturers is unknown. Accurate estimates are difficult to make for many reasons including the fact that manufacturers also repurchase cars for reasons that may be unrelated to defects, such as “goodwill” programs designed to enhance customer relations.
In 1995, CARS, citing NAAG figures, stated that 50,000 vehicles were repurchased annually under lemon laws. See Request for Comments Concerning Disclosures in the Resale of Vehicles Repurchased Due to Warranty Defects, 84 FR 19067, Petition for Investigation of “Lemon Law” Motor Vehicle Resale Practices (Nov. 8, 1995), 84 FR 19069, at 19070 (Apr. 30, 1996). That figure would amount to about 0.56% of the more than 8.6 million new cars sold that year. Research and Innovative Technology Administration [“RITA”] Bureau of Transportation Statistics, U.S. Dept. of Transportation, http://www.bts.gov/publications/national_transportation_statistics/html/table_01_16.html.
Industry sources contacted by staff in preparing this NPR estimated that only 0.2% of used vehicles sold by used car dealers are manufacturer repurchases.
93 Arkansas, California, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Minnesota, North Dakota, Ohio, Pennsylvania, South Carolina, Texas, and Washington require the manufacturer to warrant the repair of the nonconformity to the first subsequent retail buyer for a period of at least one year or 12,000 miles, whichever occurs first. NAAG1, Att. A (IALLA comment).
94 For example, several manufacturers issue separate one year/12,000 mile limited warranties on their reacquired vehicles regardless of where the vehicle is resold. Id.
95 CARS at 20; IALLA (NAAG1, Att
facturer to warrant the repair of the nonconformity to the first subsequent retail buyer for a period of at least one year or 12,000 miles, whichever occurs first. NAAG1, Att. A (IALLA comment).
94 For example, several manufacturers issue separate one year/12,000 mile limited warranties on their reacquired vehicles regardless of where the vehicle is resold. Id.
95 CARS at 20; IALLA (NAAG1, Att. A); NAAG1 at 3, 8-9.
Commenters advocating the disclosure of manufacturer repurchase status typically do so in the context of a broader recommendation that the Commission model a revised Buyers Guide on Wisconsin's Buyers Guide, which requires dealers to check boxes to disclose various types of vehicle history and “title brands,” including boxes for prior use and brands like “rebuilt salvage” or “manufacturer buyback.” 96 As discussed above, the Commission declines to propose the type of check box disclosures for vehicle history and title brands that are used on the Wisconsin Buyers Guide, and instead proposes that a statement be added to the Buyers Guide recommending that consumers obtain vehicle history reports. None of the commenters has provided persuasive reasons for treating manufacturer repurchase status differently from other aspects of a vehicle's history.
96 NAAG1, Att. B.
Moreover, given the extensive state laws and regulations on this topic, a Buyers Guide disclosure that a vehicle is a manufacturer repurchase appears to be unnecessary and duplicative. State laws already require dealers to disclose to the first retail purchaser after the repurchase that a vehicle has been repurchased by a manufacturer under state law. According to the IALLA, all fifty states have some form of lemon law, and forty-one states require a disclosure that a vehicle is a manufacturer repurchase to the first retail purchaser
se appears to be unnecessary and duplicative. State laws already require dealers to disclose to the first retail purchaser after the repurchase that a vehicle has been repurchased by a manufacturer under state law. According to the IALLA, all fifty states have some form of lemon law, and forty-one states require a disclosure that a vehicle is a manufacturer repurchase to the first retail purchaser. 97 Even in those states in which statutes or associated regulations do not expressly require a manufacturer repurchase disclosure, the failure to disclose the vehicle's repurchase status could violate the state's unfair and deceptive practices statute. In most states, then, dealers are already required to disclose that an individual vehicle is a manufacturer repurchase at least to the first retail purchaser. Therefore, with respect to the first retail purchaser at least, an additional disclosure on the Buyers Guide would merely duplicate existing requirements. The Commission is unaware of any evidence suggesting that these existing state disclosure requirements have been inadequate or that an apparently duplicative federal disclosure is necessary.
97 NAAG1, Att. A (IALLA comment).
Disclosures of manufacturer repurchase status may be more problematic with respect to vehicles resold after the first retail sale. It is not clear that dealers who sell these vehicles necessarily would know or be able to determine readily whether any such vehicle is a manufacturer repurchase. Although IALLA reports that all fifty states have some form of lemon law, titles in fewer than half of those states carry brands such as “buyback” or “lemon.” 98 As a result, depending on the applicable state's law, dealers may not always be able to determine from a vehicle's title or NMVTIS report whether a vehicle is a manufacturer repurchase, and the availability of that information from other sources is unclear
orts that all fifty states have some form of lemon law, titles in fewer than half of those states carry brands such as “buyback” or “lemon.” 98 As a result, depending on the applicable state's law, dealers may not always be able to determine from a vehicle's title or NMVTIS report whether a vehicle is a manufacturer repurchase, and the availability of that information from other sources is unclear. Dealers who know that a vehicle is a manufacturer repurchase, however, are likely to disclose that information because the failure to do so could expose the dealer to liability for violating state unfair and deceptive practices statutes. Under these circumstances, the Commission sees no reason to treat manufacturer repurchase differently from other aspects of vehicle history such as, for example, salvage, flood, or prior use. Rather than requiring dealers to attempt to obtain, to report, and essentially to be responsible for the accuracy of a disclosure on the Buyers Guide that a vehicle is a manufacturer repurchase, the Commission proposes a statement on the Buyers Guide recommending that consumers obtain vehicle history information, which may reveal whether
98 IALLA; See NADA2, Exhibit A (chart: “Brand/Vehicle Status-Reference” listing states that carry lemon law brands).
In terms of specific warranty coverage that applies because of state lemon law, dealers who have knowledge of this warranty coverage may disclose information about it on the current Buyers Guide by using a statement similar to the one permitted for disclosing an unexpired manufacturer's warranty. 99 The proposed revised Buyers Guide in this NPR would make that disclosure easier because it includes boxes where dealers would be able to indicate whether a manufacturer's original or used car warranty applies. Dealers could check the “Manufacturer's Used Vehicle Warranty Applies” box when a vehicle is covered by a manufacturer's lemon law warranty
isclosing an unexpired manufacturer's warranty. 99 The proposed revised Buyers Guide in this NPR would make that disclosure easier because it includes boxes where dealers would be able to indicate whether a manufacturer's original or used car warranty applies. Dealers could check the “Manufacturer's Used Vehicle Warranty Applies” box when a vehicle is covered by a manufacturer's lemon law warranty. When that or any of the other non-dealer warranty boxes is checked, the proposed revised Buyers Guide advises: “Ask the dealer for a copy of the warranty document and an explanation of warranty coverage, exclusions, and repair obligations.” Consumers who follow this advice are then likely to learn the terms of the coverage and that it results from the vehicle's status as a manufacturer buyback or repurchased lemon.
99 As noted elsewhere, see note 41 and accompanying text, the Rule currently provides that unexpired manufacturers' warranties may be identified by adding the following statement to the Buyers Guide: “MANUFACTURER'S WARRANTY STILL APPLIES. The manufacturer's original warranty has not expired on the vehicle. Consult the manufacturer's warranty booklet for details as to warranty coverage, service location, etc.” Dealers could use similar language and state that a “MANUFACTURER'S LEMON LAW WARRANTY APPLIES.”
6. Disclosure of Known Defects
Some comments urge that the Commission require that dealers disclose on the Buyers Guide whether the vehicle has defects. The Commission declines to alter its previous decisions on a “known defects” disclosure requirement. The Commission carefully considered such a requirement in the original rulemaking and ultimately rejected it in 1984. 100 The issue was raised and rejected again in the 1995 Rule review
ments urge that the Commission require that dealers disclose on the Buyers Guide whether the vehicle has defects. The Commission declines to alter its previous decisions on a “known defects” disclosure requirement. The Commission carefully considered such a requirement in the original rulemaking and ultimately rejected it in 1984. 100 The issue was raised and rejected again in the 1995 Rule review. 101 Although consumer groups like CARS again have advocated for a known defects disclosure requirement, NAAG did not, acknowledging in its comment the controversy that this proposal engendered in the original rulemaking and declining to “reincarnat[e] that long ago debate.” 102 As explained below, the commenters seeking a known defects disclosure rule have not provided any new information about its benefits that would cause the Commission to change its long-held view. The Commission believes that the recommendations on the Buyers Guide that consumers obtain a vehicle history report and inspection from independent sources are likely to provide consumers with more reliable information about the mechanical condition of a used car than a requirement that dealers disclose known defects.
100 See SBP, 49 FR at 45694-95, 45711-18.
101 60 FR at 62197.
102 CARS at 18-19; NAAG1 at 7.
When a known defects disclosure requirement was raised in connection with the 1995 Rule review, the Commission explained that it had carefully considered such a requirement in the original rulemaking but had then decided that the requirement would “not provide used car buyers with a reliable source of information concerning a car's mechanical condition and that the provision would be exceedingly difficult to enforce.” 103 The Commission instead decided in 1984, and reaffirmed in 1995, that the Buyers Guide's “warranty and `As-Is' disclosures—along with the warnings about spoken promises and the pre-purchase inspection notice—are effective remedies for the deceptive practices occurring in the used car industry.” 104 The new proposed notice tha
on and that the provision would be exceedingly difficult to enforce.” 103 The Commission instead decided in 1984, and reaffirmed in 1995, that the Buyers Guide's “warranty and `As-Is' disclosures—along with the warnings about spoken promises and the pre-purchase inspection notice—are effective remedies for the deceptive practices occurring in the used car industry.” 104 The new proposed notice that consumers obtain vehicle history information would serve to supplement the Rule's existing disclosures, providing consumers with another independent source for particularized information about the mechanical condition of a used vehicle.
103 60 FR at 62196-97 (quoting SBP, 49 FR at 45712).
104 Id. at 62197.
As in 1995, those advocating a known defects disclosure requirement have not pointed to any new studies showing that such a requirement would “provide substantial information benefits in practice.” 105 In the original rulemaking, the Commission discussed two studies, neither of which established that a known defects disclosure requirement had achieved beneficial results in practice.
105 Id.
The first such study, known as the “Wisconsin Study,” produced inconclusive results after comparing the experiences of consumers in three states with different inspection and defect disclosure rules: Wisconsin (which required, and continues to require, mandatory inspections and disclosure of known defects), Iowa (which at the time required mandatory safety inspections, but not disclosure of known defects), and Minnesota (which had neither). 106 Although the Wisconsin Study suggested that the Wisconsin disclosure law had resulted in a slight increase in consumer knowledge of defects at the time of sale, other data were inconclusive about the law's benefits. For example, the study showed that more consumers in Minnesota, which had no defect disclosure requirement, reported an awareness of defects than did consumers in Wisconsin
ither). 106 Although the Wisconsin Study suggested that the Wisconsin disclosure law had resulted in a slight increase in consumer knowledge of defects at the time of sale, other data were inconclusive about the law's benefits. For example, the study showed that more consumers in Minnesota, which had no defect disclosure requirement, reported an awareness of defects than did consumers in Wisconsin. Moreover, the study failed to show that Wisconsin's disclosure requirement made it more likely that consumers would receive the information they felt they needed about the mechanical condition of a used vehicle. 107 Indeed, the study “revealed that 51% of Wisconsin consumers still ultimately experienced repair problems not identified at the time of purchase.” 108 From this somewhat contradictory data, the Commission concluded that the results of the Wisconsin Study tended “to indicate that the Wisconsin defect disclosure requirement did not have a strong effect on consumers' knowledge of defects.” 109
106 SBP, 49 FR at 45713-15.
107 The study showed only a minor decrease in the percentage of Wisconsin consumers who reported that dealers failed to provide important information about a vehicle's mechanical condition and virtually no change in the percentage of Wisconsin consumers reporting that dealers provided inaccurate mechanical defect information after the Wisconsin disclosure law became effective. SBP, 49 FR at 45714.
108 60 FR at 62197; SBP, 49 FR at 45712.
109 SBP, 49 FR at 45714.
A second study discussed in the original rulemaking, which compared results from Wisconsin with the rest of the country (the “Baseline Survey”), also did not demonstrate that Wisconsin's experience with a known defects disclosure requirement had produced beneficial results
disclosure law became effective. SBP, 49 FR at 45714.
108 60 FR at 62197; SBP, 49 FR at 45712.
109 SBP, 49 FR at 45714.
A second study discussed in the original rulemaking, which compared results from Wisconsin with the rest of the country (the “Baseline Survey”), also did not demonstrate that Wisconsin's experience with a known defects disclosure requirement had produced beneficial results. The Baseline Survey suggested that Wisconsin's defect disclosure requirement had not increased the amount of information that consumers receive about the mechanical condition of a used car, had not improved consumers' ability to predict future repair costs, and had not reduced the need for post-sale repairs. 110 The Commission concluded that, taken as a whole, the Baseline Survey data “suggest that the expected beneficial effects of a defect disclosure requirement were not achieved in Wisconsin.” 111
110 Id. at 45715.
111 Id. at 45714.
The inconclusive nature of these earlier studies and the absence of any new empirical data establishing the benefits of a known defects disclosure
In addition to the lack of empirical data supporting a known defects disclosure requirement, the Commission also is concerned that such a requirement would be inconsistent with the overall goal of decreasing consumers' reliance on dealer-controlled information when making a used car purchase decision. The Commission concluded in the original rulemaking, for instance, that the requirement would send “the wrong signal to consumers by encouraging them to focus their attention on dealer-controlled information about a car's mechanical condition.” 112 By contrast, the Commission explained, “the warranty disclosure requirements, the warning about spoken promises and the pre-purchase inspection notice encourage consumers to avoid reliance on dealer-controlled information about a car's mechanical condition.” 113 If dealers were required by the Rule to disclose known defects, there likely would be a tendency for consumers to rely completely on t
12 By contrast, the Commission explained, “the warranty disclosure requirements, the warning about spoken promises and the pre-purchase inspection notice encourage consumers to avoid reliance on dealer-controlled information about a car's mechanical condition.” 113 If dealers were required by the Rule to disclose known defects, there likely would be a tendency for consumers to rely completely on the dealer for information about the mechanical condition of a used car and to ignore the Buyers Guide's important advice that they seek an inspection and vehicle history information from independent sources. 114 The Commission believes that consumers are likely to obtain more reliable information about the mechanical condition of particular vehicles from an independent inspection and vehicle history report than from the dealer's required disclosure of known defects.
112 Id. at 45716.
113 Id.
114 Id.
In addition, as discussed in the original rulemaking, consumers might assume incorrectly that a dealer's failure to disclose any defects pursuant to a mandatory disclosure requirement means that no defects actually exist. 115 Of course, no disclosure requirement could ever insure that all defects would be discovered and disclosed to potential purchasers. Particular defects might go undisclosed for a variety of reasons, including an intentional decision by the dealer not to inspect for defects in the first place, a good faith failure to discover a particular defect during an inspection, or an intentional concealment of defects that in fact were discovered
could ever insure that all defects would be discovered and disclosed to potential purchasers. Particular defects might go undisclosed for a variety of reasons, including an intentional decision by the dealer not to inspect for defects in the first place, a good faith failure to discover a particular defect during an inspection, or an intentional concealment of defects that in fact were discovered. As explained in the original rulemaking, a disclosure on the Buyers Guide “that the dealer is not aware of any defects in a car provides no information about the actual existence of an undiscovered or latent defect” but may cause consumers to conclude mistakenly “that the dealer's lack of knowledge about defects means that no defects exist.” 116 The consumer's confusion could even be used by dealers to blunt the impact of an “as-is” warranty disclosure—that is, dealers could tell consumers that the “as-is” disclosure is irrelevant because the vehicle has no known defects. 117
115 Id. at 45715-16.
116 Id. at 45716.
117 Id.
Finally, as the Commission noted in the original rulemaking, a known defects disclosure requirement may actually serve to lessen the likelihood that dealers would carefully inspect their used vehicles:
Disclosing “known defects” calls attention to the car's problems but does not reward the dealer's integrity for revealing those problems. Thus, a dealer who regularly inspects and honestly discloses all “known defects” may be put at a competitive disadvantage relative to dealers who do not inspect. This factor may then have the unintended and perverse effect of discouraging, rather than encouraging, inspections and disclosure of defects. 118
118 Id. at 45713.
For all of these reasons, the Commission again declines to impose a requirement as part of the Buyers Guide that dealers disclose known defects.
7. Dealer Inspections
Similarly, the Commission also declines to propose a dealer inspection requirement, as urged by several commenters
effect of discouraging, rather than encouraging, inspections and disclosure of defects. 118
118 Id. at 45713.
For all of these reasons, the Commission again declines to impose a requirement as part of the Buyers Guide that dealers disclose known defects.
7. Dealer Inspections
Similarly, the Commission also declines to propose a dealer inspection requirement, as urged by several commenters. 119 The comments advocating an inspection requirement do not offer any new evidence that the Commission did not previously consider in rejecting mandatory inspections.
119 CARS at 17-18; Sachau; Hillig.
In originally promulgating the Rule, the Commission declined to impose an inspection requirement and noted that some of the reasons for rejecting the known defects disclosure provision applied “with equal force” to mandatory inspections. 120 The Commission explained that mandatory inspections would tend to encourage reliance by consumers on the dealer's inspection and thus discourage consumers from seeking independent inspections and warranty protections. 121 The Commission also noted that the Baseline Survey discussed above had shown that Wisconsin's mandatory inspection rule “ha[d] not achieved significant beneficial effects.” 122 The Commission was concerned, in short, that “a mandatory inspection rule has the potential to do more harm than good because it encourages reliance on dealer inspections and, as a consequence, discourages consumers from seeking more reliable information.” 123
120 SBP, 49 FR at 45718.
121 Id. at 45719.
122 Id.
123 Id.
The reasons behind the Commission's 1984 decision to reject an inspection requirement are still applicable today. The Commission would add only that reliance on a mandatory inspection also could cause consumers to forego seeking vehicle history information
quence, discourages consumers from seeking more reliable information.” 123
120 SBP, 49 FR at 45718.
121 Id. at 45719.
122 Id.
123 Id.
The reasons behind the Commission's 1984 decision to reject an inspection requirement are still applicable today. The Commission would add only that reliance on a mandatory inspection also could cause consumers to forego seeking vehicle history information. As previously noted, the Commission believes that obtaining these vehicle history reports and an independent inspection provide consumers with the most reliable information on the mechanical condition of a used vehicle.
C. List of Systems and Defects
1. Summary of Comments
The Regulatory Review Notice requested comments on whether the List of Systems should be retained or modified. The List of Systems has not been updated since 1984 despite changes in automotive technology. The Commission received several comments recommending retention and several recommending deletion.
Two commenters, NAAG and the Oregon Vehicle Dealer Ass'n, stated that the List of Systems should be deleted. 124 NAAG noted that the List of Systems is of little value when compared with important information, such as past history of the vehicle, that it argued should be disclosed. 125 The Oregon Vehicle Dealer Ass'n observed that “[n]obody looks at” the List of Systems. 126
124 NAAG1 at 10; Ore. Vehicle Dealer Ass'n.
125 NAAG1 at 10.
126 Ore. Vehicle Dealer Ass'n.
On the other hand, NIADA recommended retaining the List and opined that “the list provides useful information to a customer who might, otherwise, have no or limited knowledge of the mechanical systems in a motor vehicle.” 127 According to NIADA, if the customer takes the vehicle to a mechanic for inspection, the information in the List of Systems may make possible a more understandable exchange between the mechanic and the customer prior to the customer electing to purchase a vehicle. 128 NIADA added that “Retaining the list is useful but not critical
limited knowledge of the mechanical systems in a motor vehicle.” 127 According to NIADA, if the customer takes the vehicle to a mechanic for inspection, the information in the List of Systems may make possible a more understandable exchange between the mechanic and the customer prior to the customer electing to purchase a vehicle. 128 NIADA added that “Retaining the list is useful but not critical. For example, if space is needed to achieve other goals for revising the 129
127 NIADA1 at 6.
128 Id.
129 Id.
Wholesale Forms also supported retaining the List of Systems for similar reasons. Wholesale Forms commented that the List of Systems conveys information to uneducated buyers who may not know much about cars. 130
130 Wholesale Forms at 4-5.
Broward County commented that boxes should be added next to each item on the List of Systems where dealers could indicate which are covered by any warranty, along with a duration column where dealers would be instructed to indicate the duration of warranty coverage for each system. Broward County further proposed that the front of the Buyers Guide direct the consumer to the reverse side of the Buyers Guide to obtain details about warranty coverage over individual systems. 131
131 Broward County at 3-4, 16.
2. Retention of List of Systems
The Commission proposes retaining the List of Systems and revising it by adding catalytic converters, as a component of the exhaust system, and airbags. The proposed revised Buyers Guide in this NPR decreases the type size of the List of Systems to free space for boxes where dealers can indicate the applicability of manufacturers' and other third-party warranties, as described in Part IIIC. In making this proposal, the Commission recognizes the limitations of the value of the List of Systems described by some commenters as well as the benefits of the List of Systems that would be lost by deleting it altogether
size of the List of Systems to free space for boxes where dealers can indicate the applicability of manufacturers' and other third-party warranties, as described in Part IIIC. In making this proposal, the Commission recognizes the limitations of the value of the List of Systems described by some commenters as well as the benefits of the List of Systems that would be lost by deleting it altogether.
Adding boxes to the items on the list where dealers could disclose details of their own warranty coverage, as Broward County suggested, is not necessary because that information already can be provided by using the Systems Covered/Duration section of the Buyers Guide.
The Commission does not believe that deleting the List of Systems entirely, as some commenters recommend, would benefit consumers. The List of Systems arose out of the Commission's consideration of prior proposed versions of the Rule, including a version in 1980 that would have required dealers to disclose known defects in what were identified as the fourteen major systems of a vehicle. 132 The Commission rejected the known defects requirement but retained the List of Systems when the Rule was adopted. The Commission concluded, for example, that the List of Systems would help address misrepresentations about the mechanical condition of vehicles that dealers may make on a system-by-system basis by providing consumers with a framework to evaluate the extent of the warranty coverage that must be indicated in the warranties section of the Buyers Guide. 133 The Commission also concluded that the List of Systems would help consumers compare warranties on different cars or from different dealers and identify mechanical and safety systems that consumers may wish to have inspected by third parties. 134 The Commission believes that retaining the List of Systems is appropriate for the reasons articulated during the original rulemaking.
132 See SBP, 49 FR at 45711-12
on also concluded that the List of Systems would help consumers compare warranties on different cars or from different dealers and identify mechanical and safety systems that consumers may wish to have inspected by third parties. 134 The Commission believes that retaining the List of Systems is appropriate for the reasons articulated during the original rulemaking.
132 See SBP, 49 FR at 45711-12. The 1980 proposed rule would have required dealers to check off each system as “OK,” “Not OK,” or “We Don't Know.” Sale of Used Motor Vehicles; Disclosure and Other Regulations, 45 FR 52750 (Aug. 7, 1980) (Summary).
133 See 49 FR at 45706.
134 See id.
3. Adding Catalytic Converters and Airbags to the List of Systems
The Commission is proposing to add catalytic converters and airbags to the List of Systems. Both are required on vehicles operated in the United States, and the Commission believes that consumers would likely want to evaluate the warranty coverage and to consider an inspection of these components.
a. Catalytic Converters
Catalytic converters can be expensive and are targets for theft. Catalytic converters have been mandated for all U.S. vehicles since 1975. Catalytic converters remove hydrocarbons from a vehicle's exhaust by converting the hydrocarbons into water and carbon dioxide. Precious metals such as platinum, palladium, rhodium, or gold are used as the catalyst for the chemical reaction that results in the conversion. The use of these metals makes catalytic converters relatively expensive to replace and a target for thieves. 135 Catalytic converters may fail for a variety of reasons, including road damage or premature wear caused by, for example, faulty welds or uncombusted fuel reaching the converter. The failure of a catalytic converter could cause a vehicle to fail a state emissions test required for licensing.
135 Replacement converters can cost over $1,000
latively expensive to replace and a target for thieves. 135 Catalytic converters may fail for a variety of reasons, including road damage or premature wear caused by, for example, faulty welds or uncombusted fuel reaching the converter. The failure of a catalytic converter could cause a vehicle to fail a state emissions test required for licensing.
135 Replacement converters can cost over $1,000. Thieves can sell the converters to metal recyclers for $20 to $200 and the metal recyclers in turn can extract the precious metal for as much as $6,000 per ounce. Not surprisingly, the incidence of catalytic converter theft increases as metal prices rise. See Edmunds.com, Inc., In Under Two Minutes: Catalytic Converter Theft, Edmunds.com, Inc., http://www.edmunds.com/auto-insurance/in-under-two-minutes-catalytic-converter-theft.html.
In light of the universal use of catalytic converters in U.S. vehicle exhaust systems and the expense associated with replacing them, the Commission proposes amending the Rule to add catalytic converters to the List of Systems in the Buyers Guide as a component of the exhaust system.
b. Airbags
The Commission proposes adding airbags to the List of Systems. Airbags became a standard component of motor vehicles after the Rule's 1984 issuance. In 1984, the federal government mandated passive restraint systems for all vehicles manufactured after 1989. Manufacturers could comply with the mandate by installing systems such as airbags or automatic seat belts. Dual driver and front passenger airbags were not mandated until 1997. 136
136 Airbags are a passive restraint system that supplement seatbelt restraints. Manufacturers originally conceived of the airbag as a replacement for the seat belt, but eventually it became a supplement to the seat belt. Passive restraint systems (automatic seat belts, airbags, or some combination) are mandated for vehicles built after September 1989. 49 CFR 571.208, S4.1.4.1
ted until 1997. 136
136 Airbags are a passive restraint system that supplement seatbelt restraints. Manufacturers originally conceived of the airbag as a replacement for the seat belt, but eventually it became a supplement to the seat belt. Passive restraint systems (automatic seat belts, airbags, or some combination) are mandated for vehicles built after September 1989. 49 CFR 571.208, S4.1.4.1. Dual front driver and passenger airbags are mandated for all passenger vehicles manufactured after September 1, 1997. 49 CFR 571.208, S4.1.5.3.
Although the Commission did not receive comments recommending that airbags be added to the List of Systems, it did receive comments about the failure of airbags in used cars and the need to require disclosures about their functionality. 137 Therefore, the Commission proposes to amend the Rule by adding airbags to the List of Systems because of their widespread use and obvious importance to vehicle safety. The Commission invites comments on this proposal.
137 For example, CARS cited to missing, previously deployed, and nonfunctioning airbags. CARS at 7-8.
D. Spanish Buyers Guides
The Rule requires that dealers display Spanish language Buyers Guides when they conduct sales in Spanish. The current Staff Compliance Guidelines recommend that dealers who conduct sales in both English and Spanish display each version of the Buyers Guide. 138 The Regulatory Review Notice specifically asked whether a single bilingual Buyers Guide was desirable and feasible, and sought design proposals for a bilingual Buyers Guide (Question III.B(1)). The Notice did not include a draft bilingual Buyers Guide.
138 Staff Compliance Guidelines, 53 FR at 17664.
After reviewing the comments, the Commission proposes to retain separate English and Spanish versions of the
The Commission received only one proposed bilingual Buyers Guide. 139 This proposed Buyers Guide compresses the contents of the Buyers Guide to fit both an English and a Spanish version on a single page (front and back)
al Buyers Guide.
138 Staff Compliance Guidelines, 53 FR at 17664.
After reviewing the comments, the Commission proposes to retain separate English and Spanish versions of the
The Commission received only one proposed bilingual Buyers Guide. 139 This proposed Buyers Guide compresses the contents of the Buyers Guide to fit both an English and a Spanish version on a single page (front and back). The proposal does not appear to follow the Rule's specific type styles, sizes, and format requirements. Displaying both a Spanish and English Buyers Guide side by side on a single sheet of paper arguably may be permitted by the Rule, but such a bilingual guide would require extremely large, oversized paper to comply with the Rule's type style, size, and format requirements, 140 which are intended to ensure the clarity and readability of the Buyers Guide.
139 Carlabels.
140 The Rule provides that “[t]he capitalization, punctuation, and wording of all items, headings, and text on the form must be exactly as required by this Rule. The entire form must be printed in 100% black ink on a white stock no smaller than 11 inches high by 7 1/4 inches wide in the type styles, sizes and format indicated.” 16 CFR 455.2(a)(2).
Three commenting dealers, two trade associations, and a supplier of forms generally supported an optional bilingual Buyers Guide to generate potential cost savings for dealers. 141 NIADA qualified its support for

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2012-29920. Check the current official text before relying on it. Not legal advice.