Petition to FTC on unfair auto sales practices

U.S. PIRG joined the National Association of Consumer Advocates, the Consumer Federation of America, the Center for Responsible Lending, Consumers for Auto Reliability and Safety and the National Consumer Law Center, on behalf of its low-income clients, in a petition to ask the FTC to promulgate a rule requiring that a credit contract between a consumer and an auto dealer constitutes the final terms of a car sale. Excerpt from the petition, which can be downloaded from this page.

“Under this proposal, the terms of the signed retail credit contract (also known as the retail installment sales contract-RISC) between the buyer and commercial seller of a car are treated as final, and would include a requirement that the consumer was fully approved for the credit terms in the contract before the signing, and that the credit terms in the contract remain effective whether or not the contract is or will be assigned to a third party. As discussed below, many sellers represent to car buyers that the sales transactions are complete with knowledge that the sales may actually be incomplete, causing costly additional negotiations and damage to buyers. The requested regulatory revisions would provide guidance to the auto retail sales industry with a bright line rule and bring clarity to help ensure that car buyers receive accurate, non-conflicting information regarding the final terms of the transaction.”

“The FTC has no formal regulation establishing an auto dealer’s responsibilities regarding the finality of a car purchase. It has exclusive jurisdiction over car dealers that first extend credit to car buyers and then assign financing to third-party lenders. It is specifically authorized to issue a rule to curb unfair and deceptive practices relating to the sale, servicing, and leasing of motor vehicles.”

“Under this proposal, dealers would be required to include specific language in the credit contract that would protect both buyers and sellers, and ensure that all parties to a contract that sets forth the credit terms of a car sale can reasonably rely on the finality of those terms.”