Following the Federal Trade Commission’s proposal for sweeping new regulations on auto dealer price advertising and F&I product disclosure, a client of Hudson Cook partner Jean Noonan asked, “All of this wasn’t it already illegal?”
Yes and no, said Noonan and other compliance experts who explored the rationale and timing of the proposed regulations in interviews with Automotive News.
The FTC can already take action if dealers violate the federal prohibition on unfair or deceptive acts or practices, according to Shannon Robertson, executive director of the Association of Finance and Insurance Professionals. But that involves the agency going to court and proving the behavior was indeed unfair or misleading, he said.
“There’s a whole process there,” Robertson said.
But if a particular behavior is specifically defined as illegal per se in a regulation, it’s easier for the government to make its case, according to Robertson.
“It’s hard-coded in there,” he said. “‘You can’t do it. We caught you doing it. Here’s your fine.’
The FTC allows a maximum civil penalty of $46,517 per violation.
The FTC can also target dealers for misleading advertisements using the Truth in Lending Act and its associated Rule Z. But Robertson said the proposed settlement goes beyond that point and captures deceptive behavior that the Truth in Lending Act would miss.
“It would expand those advertising rules,” he said.
FTC commissioners said the proposed rule would allow their agency to pursue civil penalties and consumer remedies after the Supreme Court in 2021 said the agency’s means to do so were inadequate. A unanimous court held in AMG Capital Management v. FTC that the commission could not seek monetary relief alongside seeking an injunction in federal court. The Supreme Court said the agency must follow the administrative procedures and then seek the civil penalty.
“This was a blow to the FTC’s enforcement program,” said Noonan, who formerly led the FTC’s regulation and enforcement of financial practices.
Without a business regulation rule, the FTC could only order a company to discontinue a particular practice. It couldn’t get more aggressive until the company committed a second violation, effectively making the first instance “free,” she said.
The FTC also uses a more streamlined rulemaking process. Noonan said the format adopted here allows the FTC to implement a new rule in a year to a year and a half, compared to an average of five years for other FTC rules.
Ignite Consulting Partners compliance attorney Randy Henrick said he felt a year and a half was “pretty quick” and estimated the agency would need two or two and a half years.
“They’ll get a lot of feedback,” he said.
The agency will soon open a 60-day window for public comment on the proposal, No. P204800.
National Automobile Dealers Association spokesman Jared Allen said Thursday (June 30) that the organization plans to seek an extension to the 60-day comment period,
“It is imperative that regulators conduct appropriate, thorough and evidence-based analyzes before proposing rules that would have such drastic ramifications on consumers and market participants, especially small businesses,” the president said Thursday. of NADA, Mike Stanton, in a statement.
Two of the commissioners who voted 4-1 in favor of the regulations were appointed by former Republican President Donald Trump – Democrat Rebecca Slaughter and Republican Noah Phillips. The other two are Democrats appointed by President Joe Biden. But Henrick predicted that the FTC would still seek to pass something ahead of what could be a different presidential administration in 2025.
“It’s a practical deadline,” Henrick said.