The Federal Trade Commission recently announced that it will hold its first roundtable addressing motor vehicle dealers in Detroit on April 12, 2011. Typically, the FTC uses roundtables to gather information and to begin identifying potential areas for FTC action. For this reason, it is important that there be robust participation by the industry.
The FTC, which expects to conduct three to five roundtables around the country, seeks participation from the full complement of interested parties: motor vehicle dealers, manufacturers, lenders, consumers, and consumer groups.
Although motor vehicle dealers will be the focus of the roundtables, banks and other companies that purchase motor vehicle installment sales contracts from motor vehicle dealers (assignees) also need to pay attention. Under the FTC’s Holder in Due Course Rule, all claims and defenses that buyers can assert against sellers can be asserted against assignees.
Automobile dealers were relieved when the Dodd-Frank Wall Street Reform and Consumer Protection Act exempted dealers who assign finance contracts from the regulatory and supervisory jurisdiction of the new Consumer Financial Protection Bureau. However, the trade-off for this exemption was to give the FTC the power to adopt rules under Section 5 of the FTC Act using Administrative Procedures Act (APA) procedures. This is significant because rulemaking using the APA is much more streamlined and efficient than preexisting FTC rulemaking procedures, which for many years have effectively precluded the FTC from adopting new regulations.
For the roundtables, the FTC has requested “data and empirical evidence” on a broad range of topics, including a number that may well become the subject of new federal regulation: (1) “spot delivery” and “yo-yo financing”; (2) discretionary credit pricing; (3) financing disclosure practices generally; (4) sales of “add-on” financial products, such as guaranteed automobile protection (GAP) contracts and extended warranties; and (5) privacy concerns implicated by use of GPS devices in automobiles. Motor vehicle dealers and assignees should consider undertaking compliance reviews to determine the nature of their practices and whether modifications might be in order, even in advance of FTC rulemaking.