42012 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

1 In this proposed rulemaking, ‘‘auto,’’ 

‘‘automobile,’’ ‘‘car,’’ ‘‘motor vehicle,’’ and 

‘‘vehicle’’ refer to motor vehicles as defined in 

Section 1029 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘Dodd-Frank Act’’), 

15 U.S.C. 5519(f)(1). 

2U.S. Census Bureau, American Community 

Survey: Means of Transportation to Work by 

Selected Characteristics, 2020, https://

data.census.gov/cedsci/table?q=S0802&

tid=ACSST5Y2020.S0802 (last visited Apr. 25, 

2022) (listing 4.2% of population as having ‘‘[n]o 

vehicle available’’ in 2020); compare U.S. Census 

Bureau, American Community Survey: Selected 

Housing Characteristics, 2020, https://

data.census.gov/cedsci/table?q=vehicle&tid= 

ACSDP5Y2020.DP04 (last visited Apr. 25, 2022) 

(listing 8.5% of households as having ‘‘no vehicles 

available’’). 

3U.S. Census Bureau, American Community 

Survey: Means of Transportation to Work by 

Selected Characteristics, 2020, https://

data.census.gov/cedsci/table?q=

S0802&tid=ACSST5Y2020.S0802 (last visited Apr. 

25, 2022) (including those who commute in a car, 

truck, or van, either alone or by carpool). 

4Fed. Trade Comm’n, Buying a New Car, https:// 

www.consumer.ftc.gov/articles/0209-buying-newcar (last visited Apr. 25, 2022); see also Am. Auto. 

Ass’n., Average Annual Cost of New Vehicle 

Ownership, https://www.aaa.com/autorepair/ 

articles/average-annual-cost-of-new-vehicleownership (last visited Apr. 25, 2022) (‘‘After a 

home purchase, buying a vehicle is usually a 

consumer’s second biggest expense.’’); Bureau of 

Lab. Stats., Consumer Expenditures: Multiyear 

Tables (2013–2020) at 2, https://www.bls.gov/cex/ 

tables/calendar-year/mean/cu-all-multi-year-2013- 

2020.pdf (noting average annual home ownership 

expenditures of $7,473 and average annual vehicle 

purchase expenditures of $4,523 per consumer in 

2020). 

5Nat’l Auto. Dealers Ass’n, NADA Data 2021 at 

7, https://www.nada.org/media/4695/download?

inline (noting average retail selling price of $42,379 

for new vehicles sold by dealerships in 2021). 

6 Id. at 10 (noting average retail selling price of 

$26,709 for used vehicles sold by new vehicle 

dealerships in 2021). 

7Bureau of Econ. Analysis, National Data: 

National Income and Product Accounts, Personal 

Consumption Expenditures by Major Type of 

Product at Table 2.3.5, https://apps.bea.gov/iTable/ 

iTable.cfm?reqid=19&step=2#reqid=19&step=2&

isuri=1&1921=survey (last visited Apr. 25, 2022). 

8Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q4 2020 at 

5, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-quarterly-trends/v2-2020-q4- 

state-automotive-market.pdf. 

9Fed. Rsrv. Bank of N.Y., Quarterly Report on 

Household Debt and Credit, 2021: Q4 at 3–4 (Feb. 

2022), https://www.newyorkfed.org/medialibrary/ 

interactives/householdcredit/data/pdf/HHDC_

2021Q4.pdf; Fed. Rsrv. Bank of N.Y., Data 

underlying report at ‘‘Page 3 Data’’ and ‘‘Page 4 

Data’’ tabs, https://www.newyorkfed.org/ 

medialibrary/interactives/householdcredit/data/xls/ 

hhd_c_report_2021q4.xlsx (last visited Apr. 25, 

2022) (number of open auto loan accounts and total 

balance outstanding). 

10Fed. Rsrv. Bank of N.Y., Data underlying report 

at ‘‘Page 21 Data’’ tab, https://www.newyorkfed.org/ 

medialibrary/interactives/householdcredit/data/xls/ 

hhd_c_report_2021q4.xlsx (last visited Apr. 25, 

2022). 

11Mary W. Sullivan, Matthew T. Jones & Carole 

L. Reynolds, Fed. Trade Comm’n, The Auto Buyer 

Study: Lessons from In-Depth Consumer Interviews 

and Related Research 15 (2020) [hereinafter Auto 

Buyer Study], https://www.ftc.gov/system/files/ 

documents/reports/auto-buyer-study-lessons-depthconsumer-interviews-related-research/ 

bcpreportsautobuyerstudy.pdf (noting the purchase 

transactions in the FTC’s qualitative study often 

took 5 hours or more to complete, with some 

extending over several days); Cf. Cox Automotive, 

2020 Cox Automotive Car Buyer Journey 6 (2020), 

available at https://b2b.autotrader.com/app/ 

uploads/2020-Car-Buyer-Journey-Study.pdf 

(reporting average consumer time spent shopping 

for a vehicle at 14 hours, 53 minutes, including 4 

hours, 49 minutes visiting dealerships/sellers). 

12For example, consumers have complained 

when they go to a dealership based on an offer that 

the dealer refuses to honor once they have spent 

hours driving there and have then spent additional 

time on the lot. See, e.g., Complaint, FTC & Illinois 

v. N. Am. Auto. Servs., Inc., No. 1:22–cv–0169 at 

¶¶ 23–26 (N.D. Ill. Mar. 31, 2022) (alleging many 

consumers drive hours to dealerships based on the 

advertised prices; test-driving and selecting a 

vehicle, and negotiating the price and financing 

terms, is an often hours-long process; and, after this 

FEDERAL TRADE COMMISSION 

16 CFR Part 463 

RIN 3084–AB72 

Motor Vehicle Dealers Trade 

Regulation Rule 

AGENCY: Federal Trade Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Trade 

Commission (‘‘FTC’’ or ‘‘Commission’’) 

seeks comment on this notice of 

proposed rulemaking (‘‘NPRM’’) related 

to the sale, financing, and leasing of 

motor vehicles by motor vehicle dealers. 

The proposed rule would prohibit motor 

vehicle dealers from making certain 

misrepresentations in the course of 

selling, leasing, or arranging financing 

for motor vehicles, require accurate 

pricing disclosures in dealers’ 

advertising and sales discussions, 

require dealers to obtain consumers’ 

express, informed consent for charges, 

prohibit the sale of any add-on product 

or service that confers no benefit to the 

consumer, and require dealers to keep 

records of advertisements and customer 

transactions. This NPRM invites written 

comments on all issues raised herein 

and seeks answers to the specific 

questions set forth in Section VIII of this 

document. 

DATES: Comments must be received on 

or before September 12, 2022. 

ADDRESSES: Interested parties may file a 

comment online or on paper by 

following the instructions in the 

Request for Comment part of the 

SUPPLEMENTARY INFORMATION section 

below. Write ‘‘Motor Vehicle Dealers 

Trade Regulation Rule—Rulemaking, 

No. P204800’’ on your comment, and 

file it online at https://

www.regulations.gov, by following the 

instructions on the web-based form. If 

you prefer to file your comment on 

paper, mail your comment to the 

following address: Federal Trade 

Commission, Office of the Secretary, 

600 Pennsylvania Avenue NW, Suite 

CC–5610 (Annex C), Washington, DC 

20580. 

FOR FURTHER INFORMATION CONTACT: 

Daniel Dwyer or Sanya Shahrasbi, 

Division of Financial Practices, Bureau 

of Consumer Protection, Federal Trade 

Commission, 202–326–2957 (Dwyer), 

202–326–2709 (Shahrasbi), ddwyer@

ftc.gov, sshahrasbi@ftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Buying or leasing a motor vehicle is, 

for many consumers, both essential and 

expensive.1 Millions of Americans 

depend on vehicles for daily living, 

with recent data showing that over 95% 

of American households own at least 

one motor vehicle,2 and nearly 84% of 

Americans drive to work as of 2020.3

Americans rely on their vehicles for 

work, school, childcare, groceries, 

medical visits, and many other 

important tasks in their daily lives. This 

necessity does not come cheap: a new 

vehicle is the second-most expensive 

purchase many consumers make, falling 

only behind purchasing a home.4 For 

purchases at new car dealerships, the 

average new vehicle now sells for more 

than $42,000,5 and the average used 

vehicle sells for more than $26,000.6 All 

told, Americans spent more than $2.8 

trillion dollars on motor vehicles and 

vehicle parts in 2021.7

Given how expensive it can be to buy 

a vehicle, many consumers rely on 

financing to complete their purchases. 

Indeed, according to public reports, 

81% of new motor vehicle purchases, 

and nearly 35% of used vehicle 

purchases, are financed.8 The motor 

vehicle financing market is the thirdlargest consumer credit market in the 

United States, after mortgages and 

student loans. By the end of 2021, 

Americans had more than 111 million 

outstanding auto loans, and owed more 

than $1.46 trillion thereon.9 Motor 

vehicle financing is the third-largest 

source of debt for U.S. consumers under 

the age of 50, and the second-largest 

source of debt for those 50 and older.10

Buying or leasing a vehicle is not only 

an expensive endeavor, but the 

transaction itself is time-consuming and 

arduous. Consumers who purchase 

vehicles at a dealership may spend five 

hours or more—or even days—doing 

so.11 And that does not include the time 

spent visiting dealerships when 

consumers do not make purchases, or 

the hours it can take to travel to the 

dealerships themselves.12 Consumers 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42013 

time, dealers falsely told consumers add-on 

products or packages were required to purchase or 

finance the vehicle, even though they were not 

included in the low prices advertised or disclosed 

to consumers who called to confirm prices). 

13These laws include the FTC Act, 15 U.S.C. 41– 

58; the Truth in Lending Act, 15 U.S.C. 1601–1667f, 

and its implementing Regulation Z, 12 CFR parts 

226 and 1026; the Consumer Leasing Act, 15 U.S.C. 

1667–1667f and its implementing Regulation M, 12 

CFR parts 213 and 1013; and the Used Car Rule, 16 

CFR part 445. 

14See generally Fed. Trade Comm’n, The Auto 

Marketplace, https://www.ftc.gov/news-events/ 

media-resources/consumer-finance/automarketplace. 

15See, e.g., Carole L. Reynolds & Stephanie E. 

Cox, Fed. Trade Comm’n, Buckle Up: Navigating 

Auto Sales and Financing (2020), https://

www.ftc.gov/reports/buckle-navigating-auto-salesfinancing [hereinafter Buckle Up]; Auto Buyer 

Study, supra note 11. 

16For example, the FTC has held public 

workshops: (1) in conjunction with the National 

Highway Traffic Safety Administration, to examine 

the consumer privacy and security issues posed by 

automated and connected motor vehicles, see 

Connected Cars: Privacy, Security Issues Related to 

Connected, Automated Vehicles (June 28, 2017), 

https://www.ftc.gov/news-events/events-calendar/ 

2017/06/connected-cars-privacy-security-issuesrelated-connected; (2) to explore competition and 

related issues in the U.S. motor vehicle distribution 

system including how consumers and businesses 

may be affected by state regulations and emerging 

trends in the industry, Auto Distribution: Current 

Issues & Future Trends (Jan. 19, 2016), https://

www.ftc.gov/news-events/events-calendar/2016/01/ 

auto-distribution-current-issues-future-trends; (3) 

on military consumer financial issues including 

automobile purchases, financing, and leasing, 

Military Consumer Financial Workshop (July 2017), 

https://www.ftc.gov/news-events/events-calendar/ 

military-consumer-workshop; and (4) through a 

series of three roundtables on numerous issues in 

selling, financing, and leasing automobiles, The 

Road Ahead: Selling Financing, and Leasing Motor 

Vehicles (Feb. 2011, Aug. 2011, and Nov. 2011), 

https://www.ftc.gov/news-events/events-calendar/ 

2011/11/road-ahead-selling-financing-leasingmotor-vehicles, https://www.ftc.gov/news-events/ 

events-calendar/2011/08/road-ahead-sellingfinancing-leasing-motor-vehicles, https://

www.ftc.gov/news-events/events-calendar/2011/04/ 

road-ahead-selling-financing-leasing-motorvehicles; see also Consumers for Auto Reliability 

and Safety, Comment Letter on Motor Vehicle 

Roundtables, Project No. P104811 at 6 (Apr. 1, 

2012), https://www.ftc.gov/sites/default/files/ 

documents/public_comments/public-roundtablesprotecting-consumers-sale-and-leasing-motorvehicles-project-no.p104811-00108/00108- 

82875.pdf (stating that Director of the Navy-Marine 

Corps Relief Society in San Diego indicated before 

the California Assembly Committee on Banking and 

Finance ‘‘the number one issue they are confronted 

with is used car dealers who are taking advantage 

of military personnel.’’). These events, and others, 

have included speakers representing consumers, 

dealers, regulators, and other industry stakeholders. 

17See, e.g., Fed. Trade Comm’n, The Auto 

Marketplace, https://www.ftc.gov/news-events/ 

media-resources/consumer-finance/automarketplace; see also Nat’l Auto. Dealers Ass’n, 

Understanding Vehicle Financing,https://

www.nada.org/WorkArea/DownloadAsset.aspx?id=

21474839119 (prepared cooperatively by Am. Fin. 

Servs. Ass’n Educ. Found., Fed. Trade Comm’n & 

Nat’l Auto. Dealers Ass’n). Industry groups also 

play an important role in educating their members 

on how to comply with the law, including by 

issuing guidance in specific areas. See, e.g., Nat’l 

Auto. Dealers Ass’n, Am. Int’l Auto. Dealers Ass’n 

& Nat’l Ass’n of Minority Auto. Dealers, Voluntary 

Protection Products: A Model Dealership Policy 

(2019), https://www.nada.org/regulatorycompliance/voluntary-protection-products-modeldealership-policy. 

18Public Law 111–203 (2010). 

19See supra note 1. 

20 12 U.S.C. 5519. 

21Under Section 19(a)(1) of the FTC Act, the 

Commission may sue in federal district court ‘‘any 

person, partnership, or corporation’’ that ‘‘violates 

any rule under [the FTC Act] respecting unfair or 

deceptive acts or practices.’’ 15 U.S.C. 57b(a)(1). 

Where such liability is found, under Section 19(b) 

a court may ‘‘grant such relief as [it] finds necessary 

to redress injury . . . resulting from the rule 

violation,’’ including the ‘‘rescission or reformation 

of contracts, the refund of money or return of 

property, [or] the payment of damages.’’ Id. 57b(b). 

22U.S. Census Bureau, All Sectors: County 

Business Patterns, including ZIP Code Business 

Patterns, by Legal Form of Organization and 

Employment Size Class for the U.S., States, and 

Selected Geographies: 2019, https://

data.census.gov/cedsci/ 

table?q=CBP2019.CB1900CBP&

n=44111%3A44112&tid=CBP2019.

CB1900CBP&hidePreview=true&

nkd=EMPSZES∼001,LFO∼001 (listing 21,427 

establishments for ‘‘new car dealers,’’ NAICS code 

44111). 

23Edmunds, Automotive Industry Trends | 2020 

at 2, https://static.ed.edmunds-media.com/ 

unversioned/img/industry-center/insights/2020- 

automotive-trends.pdf. 

24Nat’l Auto. Dealers Ass’n, NADA Data 2021 at 

7, https://www.nada.org/media/4695/ 

download?inline. New vehicle dealerships are also 

a significant source of used vehicles, having sold 

between 13.7 million and 14.9 million such 

vehicles per year over the past three years. Id. at 

10 (graph of used-vehicle sales by new-vehicle 

dealerships, by year). 

25 Id. at 15 (listing average dealership advertising 

per new vehicle sold of $602). 

may need to take time off work and 

arrange daycare or take young children 

to the dealership, and the process can be 

especially taxing for one-vehicle 

families who also need their vehicle for 

commuting and day-to-day tasks like 

buying groceries and attending medical 

appointments. 

The Commission, the nation’s 

consumer protection agency, is charged 

with enforcing key laws and regulations 

applicable to the motor vehicle 

marketplace, including sales, financing, 

and leasing.13 The FTC protects 

consumers in motor vehicle transactions 

through law enforcement actions, 

rulemaking, consumer education, and 

business guidance, aided by 

information-gathering efforts such as 

agency roundtables and industry 

research. In the past ten years, the FTC 

has brought more than 50 motor vehiclerelated enforcement actions, including 

matters involving misleading motor 

vehicle advertising, financing 

paperwork falsification, ‘‘yo-yo’’ 

financing, deceptive and unfair add-on 

fees, discrimination, and privacy and 

data security issues.14 At the same time, 

the FTC has conducted a qualitative 

study of consumer experiences 15 and 

hosted public events to engage in a 

dialogue with consumer and dealer 

groups and other stakeholders, gather 

information, spotlight misleading 

practices, and raise awareness of issues 

that can affect consumers in this space, 

including consumers who are 

servicemembers.16 The FTC also has 

posted many educational materials to 

assist consumers and dealers on motor 

vehicle market issues, and we have 

worked collaboratively with industry 

groups to do the same.17

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘DoddFrank Act’’) was signed into law in 

2010.18 Section 1029 of the Dodd-Frank 

Act authorizes the FTC to prescribe 

rules with respect to unfair or deceptive 

acts or practices by motor vehicle 

dealers,19 and to do so pursuant to the 

Commission’s authority under the FTC 

Act and in accordance with the 

Administrative Procedure Act 

(‘‘APA’’).20 Although it has engaged in 

law enforcement, the Commission’s 

relatively small size and limited 

resources make it challenging to 

investigate and act upon the tens of 

thousands of complaints regarding 

dealerships. As discussed below, many 

of the problems observed in the motor 

vehicle marketplace persist in the face 

of repeated federal and state 

enforcement actions, suggesting the 

need for additional measures to deter 

deceptive and unfair practices. In 

addition, a rule prohibiting unfair or 

deceptive acts or practices in the motor 

vehicle marketplace would allow the 

FTC to seek redress for harmed 

consumers and obtain other forms of 

monetary relief in cases involving FTC 

Act violations.21 Further, law-abiding 

dealers suffer when other dealers gain 

business through deceptive or unfair 

means. For all these reasons, the 

Commission believes it is appropriate to 

utilize its rulemaking authority to issue 

a rule to address unfair or deceptive acts 

or practices in the motor vehicle 

marketplace. 

I. Overview of Vehicle Dealers and 

Motor Vehicle Financing 

A. New and Used Motor Vehicle 

Dealerships 

There are more than 21,000 new 

motor vehicle dealerships across the 

country.22 Collectively, these 

dealerships sold more than 17 million 

new vehicles per year in each of the past 

three years,23 averaging more than 800 

new vehicle sales per dealership per 

year.24 New- vehicle dealers spend an 

average of more than $600 on 

advertising per vehicle sold 25—more 


jspears on DSK121TN23PROD with PROPOSALS3
42014 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

26 Id. at 16 (listing 63.6% of estimated advertising 

expenditures by medium as internet expenditures). 

27Nat’l Auto. Dealers Ass’n, Average Dealership 

Profile 1 (2020), https://www.nada.org/media/4136/ 

download?attachment. 

28 Id. (listing an average 6.3% gross as a 

percentage of the vehicle’s selling price, and a 3.2% 

average F&I gross as a percentage of new-vehicle 

dept. sales). While many dealers have seen 

increased profits during the pandemic, to the extent 

some dealers may be profiting through 

unscrupulous practices, the proposed rule would 

help honest dealers compete on a level playing 

field. See Nora Eckert & Mike Colias, Ford and GM 

Warn Dealers to Stop Charging So Much for New 

Cars, Wall St. J. (Feb. 9, 2022), https://

www.wsj.com/articles/ford-gm-warn-dealerscharge-above-sticker-price-and-face-repercussions11644323580 (discussing how many dealers have 

increased markups, including by requiring 

consumers to accept added fees and warranty 

protection as part of the asking price). Conditioning 

a vehicle sale or lease on the purchase of an addon product or service is contrary to industry 

guidance. See Nat’l Auto. Dealers Ass’n et al., 

Voluntary Protection Products: A Model Dealership 

Policy 4 (2019), https://www.nada.org/regulatorycompliance/voluntary-protection-products-modeldealership-policy (stating dealerships should 

‘‘prominently display to customers a poster stating 

that [add-on products and services] offered by the 

dealership are optional and are not required to 

purchase or lease a vehicle or obtain warranty 

coverage, financing, financing on particular terms, 

or any other product or service offered by the 

dealership.’’). 

29U.S. Census Bureau, All Sectors: County 

Business Patterns, including ZIP Code Business 

Patterns, by Legal Form of Organization and 

Employment Size Class for the U.S., States, and 

Selected Geographies: 2019, https://

data.census.gov/cedsci/ 

table?q=CBP2019.CB1900CBP&

n=44111%3A44112&tid=CBP2019.

CB1900CBP&hidePreview=true&nkd=

EMPSZES∼001,LFO∼001 (listing 25,098 

establishments for ‘‘used car dealers,’’ NAICS code 

44112). 

30 In 2020, 52.2% of used motor vehicle sales 

were by new car dealerships, while 47.8% were by 

independent used vehicle dealerships. Melinda 

Zabritski, Experian Info. Sol’s, Inc., State of the 

Automotive Finance Market Q4 2020 at 32, https:// 

www.experian.com/content/dam/marketing/na/ 

automotive/quarterly-webinars/credit-trends/2020- 

quarterly-trends/v2-2020-q4-state-automotivemarket.pdf. 

31Nat’l Auto. Dealers Ass’n, NADA Data 2021: 

Midyear Report 10, https://www.nada.org/media/ 

4694/download?inline. 

32Nat’l Auto. Dealers Ass’n, Average Dealership 

Profile 1 (2020), https://www.nada.org/media/4136/ 

download?attachment (listing an average 6.3% 

gross as a percentage of the vehicle’s selling price, 

and a 3.2% average F&I gross as a percentage of 

new-vehicle dept. sales). 

33Nat’l Indep. Auto. Dealers Ass’n, NIADA Used 

Car Industry Report 2020 at 21 (2020). 

34 Id. at 8, 10. 

35 In some regions, ‘‘lease here, pay here’’ 

dealerships may provide leases to consumers 

through similar programs. 

36Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q4 2020 at 

19, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-quarterly-trends/v2-2020-q4- 

state-automotive-market.pdf (more than 72% of 

new vehicle financing in MI is for leases; the 

Northeast ranges from 43% in VT to 66% in NY; 

other states range from 45% (OH) to less than 4% 

(AR)). 

37See Nat’l Auto. Dealers Ass’n, Dealer-Assisted 

Financing Benefits Consumers, https://

www.nada.org/autofinance/ (last visited Apr. 25, 

2022) (noting 7 out of 10 consumers finance 

through their dealership). This is also known as 

‘‘dealer financing,’’ because consumers obtain 

financing through the dealer that partners with 

other entities in the financing process. 

38 Dealers often may originate the financing and 

then sell the financing agreements to third-parties. 

39Lesley Fair, FTC says Bronx Honda 

discriminated against African-American and 

Hispanic consumers, Fed. Trade Comm’n Business 

Blog (May 27, 2020), https://www.ftc.gov/businessguidance/blog/2020/05/ftc-says-bronx-hondadiscriminated-against-african-american-hispanicconsumers. 40See, e.g., Nat’l Auto. Dealers Ass’n, Nat’l Ass’n 

of Minority Auto. Dealers & Am. Int’l Auto. Dealers 

Ass’n, Fair Credit Compliance Policy & Program 1, 

n.4 & accompanying text, https://www.nada.org/ 

media/4558/download?inline. 

41 Id. (describing this as the amount dealers earn 

for arranging financing, measured as the difference 

between the consumer’s APR and the wholesale 

‘‘buy rate’’ at which a finance source buys the 

finance contract from the dealer, and noting finance 

sources typically permit dealers to retain the dealer 

participation). 

42Consumer Fin. Prot. Bureau, Automobile 

Finance Examination Procedures 4 (Aug. 2019), 

https://files.consumerfinance.gov/f/documents/ 

201908_cfpb_automobile-finance-examinationprocedures.pdf. 

43Consumer Fin. Prot. Bureau, Consumer Voices 

on Automobile Financing 5 (June 2016), https://

files.consumerfinance.gov/f/documents/201606_

cfpb_consumer-voices-on-automobile-financing.pdf. 

44See Consumer Fin. Prot. Bureau, Automobile 

Finance Examination Procedures 4 (Aug. 2019), 

https://files.consumerfinance.gov/f/documents/ 

201908_cfpb_automobile-finance-examinationprocedures.pdf. (‘‘While most Buy-Here, Pay-Here 

(BHPH) dealers are independently owned entities 

that serve as the primary lender and servicer, some 

larger BHPH dealers sell or assign their contracts to 

an affiliated BHPH finance company once the 

contract has been consummated with the 

consumer.’’) 

45As of 2017, interest rates at ‘‘buy here, pay 

here’’ dealerships averaged around 20%. Nat’l 

Indep. Auto Dealers Ass’n, NIADA Used Car 

Industry Report 2019 at 14. In contrast, the average 

financing rate for used vehicles across the industry 

was 8.43% in the fourth quarter of 2020. Melinda 

Zabritski, Experian Info. Sol’s, Inc., State of the 

Automotive Finance Market Q4 2020 at 38, https:// 

www.experian.com/content/dam/marketing/na/ 

automotive/quarterly-webinars/credit-trends/2020- 

quarterly-trends/v2-2020-q4-state-automotivemarket.pdf. 

than half of which goes toward online 

advertising.26 According to industry 

sources, these dealers averaged a gross 

profit of about $2,444 per vehicle.27

More than half of this profit came from 

the dealers’ financing and insurance, or 

‘‘F&I’’, offices, which sell consumers 

financing and leasing, as well as add-on 

products and services such as vehicle 

service contracts.28

There are more than 25,000 used 

motor vehicle dealerships across the 

country,29 and used vehicle sales are 

nearly evenly split between new and 

used car dealerships.30 Used vehicles 

sold by new-vehicle dealerships cost 

$24,542 on average.31 These vehicles 

brought in an average gross profit of 

about $2,675 per vehicle, more than a 

third of which came from the F&I 

office.32 Independent used vehicle 

dealerships sold an average of 684 

vehicles per dealership in 2019, with an 

average gross profit of more than $6,000 

per vehicle.33 While some independent 

used vehicle dealerships do not have a 

separate F&I office, more than half of 

them sell add-on products.34

B. Motor Vehicle Financing and Leasing 

Overview 

Consumers can finance the purchase 

or use of a vehicle in several ways. 

Those interested in purchasing a vehicle 

generally use either indirect financing 

or direct financing. Others—particularly 

those with thin or damaged credit— 

work with a so-called ‘‘buy here, pay 

here’’ dealership for financing, typically 

without the involvement of an outside 

financing entity.35 Finally, some 

consumers opt to lease a vehicle rather 

than purchase it.36

Approximately 70 percent of 

consumers use dealer-provided indirect 

financing at the dealership.37 In this 

scenario, the dealership collects 

financial information on the consumer 

and forwards that information to 

prospective financing entities. These 

financing entities, who work with the 

dealer, evaluate that information and in 

the process determine whether, and on 

what terms, to provide credit.38 These 

terms include the ‘‘buy rate,’’ a riskbased finance charge that reflects the 

interest rate at which the entity will 

finance the deal.39 Dealers often add a 

finance charge called a ‘‘dealer reserve’’ 

or ‘‘markup’’ to the buy rate.40 Unlike 

the buy rate, the markup is not based on 

the underwriting risk or credit 

characteristics of the applicant.41

Alternatively, those who use direct 

financing apply for and obtain financing 

directly from a credit union, bank, or 

other financing entity.42 These 

consumers typically receive an interest 

rate quote from the entity prior to 

arriving at a dealership to purchase a 

vehicle. Then, once these consumers 

agree to purchase a vehicle, they can use 

the financing from the entity to pay for 

the vehicle.43 Dealerships do not profit 

on the financing portion of the 

transaction when a consumer arranges 

financing directly. 

‘‘Buy here, pay here’’ dealers typically 

finance their motor vehicle sales inhouse rather than routinely assigning 

their financing to unaffiliated parties.44

That means consumers borrow from and 

make their payments directly to the 

dealership. Interest rates for this 

financing are usually much higher than 

for direct or indirect financing,45 and 

consumers default on this financing at 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42015 

46For example, approximately 37.5% of ‘‘buy 

here, pay here’’ consumers defaulted in 2019. Nat’l 

Indep. Auto. Dealers Ass’n, NIADA Used Car 

Industry Report 2020 at 13. The overall motor 

vehicle debt default rate was 4.94% in 2019. Zhu 

Wang, Fed. Rsrv. Bank of Richmond, Coronavirus 

and Auto Lending: A Market Outlook (Apr. 16, 

2020), https://www.richmondfed.org/-/media/ 

RichmondFedOrg/research/economists/bios/pdfs/ 

wang_covid19_paper.pdf. 

47Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q2 2020 at 

8, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-q2-safm-final.pdf. 

48Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q4 2020 at 

26, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-quarterly-trends/v2-2020-q4- 

state-automotive-market.pdf. 

49See Fed. Trade Comm’n, Financing or Leasing 

a Car, https://www.consumer.ftc.gov/articles/0056- 

financing-or-leasing-car (last visited Apr. 25, 2022) 

(‘‘The mileage limit in most standard leases is 

typically 15,000 or fewer per year’’); Consumer Fin. 

Prot. Bureau, What should I know about the 

differences between leasing and buying a vehicle?, 

https://www.consumerfinance.gov/ask-cfpb/whatshould-i-know-about-the-differences-betweenleasing-and-buying-a-vehicle-en-815/ (last visited 

Apr. 25, 2022) (‘‘Most leases include mileage 

restrictions of 10,000–15,000 miles per year.’’). 

50Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q4 2020 at 

5, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-quarterly-trends/v2-2020-q4- 

state-automotive-market.pdf. 

51Auto Buyer Study, supra note 11, at 15 (finding 

the process of completing a vehicle purchase often 

took five hours or more, and sometimes several 

days); Cf. Cox Automotive, 2020 Cox Automotive 

Car Buyer Journey 5–6 (2020), available at https:// 

b2b.autotrader.com/app/uploads/2020-Car-BuyerJourney-Study.pdf (noting, on average, consumers 

spend 89 day in the market and 14 hours, 53 

minutes shopping for a vehicle). 

52See, e.g., Fed. Trade Comm’n, Consumer 

Sentinel Network Data Book 2021 at 7–8 & app. B3 

at 85 (Feb. 2022), https://www.ftc.gov/system/files/ 

ftc_gov/pdf/CSN%20Annual%20Data%20

Book%202021%20Final%20PDF.pdf (listing motor 

vehicle-related complaints as the eighth most 

common report category in 2021, and reporting 

complaints about new and used motor vehicle sales, 

financing, service & warranties, and rentals & 

leasing, collectively, of more than 100,000 in 2019, 

2020, and 2021). 

53See Fed. Trade Comm’n, FTC Policy Statement 

on Deception 2, 5, 103 F.T.C. 174 (1984) (appended 

to Cliffdale Assocs., Inc., 103 F.T.C. 110, 183 

(1984)), https://www.ftc.gov/system/files/ 

documents/public_statements/410531/ 

831014deceptionstmt.pdf. 

54 Id. 

55 In re Sears, Roebuck & Co., 95 F.T.C. 406, 517 

n.9 (1980) (citing Regina Corp. v. FTC, 322 F.2d 

765, 768 (3d Cir. 1963). 

56 15 U.S.C. 45(n). 

57While other issues exist in the motor vehicle 

sales, financing, and leasing space, including issues 

involving discrimination, financing application 

falsification, data privacy and security, and yo-yo 

financing, this proposal’s core focus is on 

misrepresentations and add-on and pricing 

practices. 

58See Complaint, In re Timonium Chrysler, Inc., 

No. C–4429 (F.T.C. Jan. 28, 2014) (alleging 

dealership advertised internet prices and dealer 

discounts but failed to disclose consumer would 

have to qualify for multiple rebates not generally 

available to them); Complaint, In re Ganley Ford 

West, Inc., No. C–4428 (F.T.C. Jan. 28, 2014) 

(alleging dealership advertised discounts on vehicle 

prices, but failed to disclose discounts were only 

available on the most expensive models); 

Complaint, In re Progressive Chevrolet Co., No. C– 

4578 (F.T.C. June 13, 2016) (alleging deceptive 

failure to disclose material conditions of obtaining 

the lease monthly payment in their online and print 

advertising). 

59See Complaint, FTC v. Tate’s Auto Ctr. of 

Winslow, Inc., No. 3:18–cv–08176–DJH at ¶¶ 38–46 

(D. Ariz. July 31, 2018) (alleging company issued 

advertisements for attractive terms but concealed 

that the terms were only applicable to lease offers); 

Complaint, United States v. New World Auto 

Imports, Inc. No. 3:16–cv–02401–K at ¶¶ 36–38 

(N.D. Tex. Aug. 18, 2016) (alleging 

misrepresentation that terms were for financing 

instead of leasing); Complaint, FTC v. Universal 

City Nissan, Inc., No. 2:16–cv–07239 at ¶¶ 85–87 

(C.D. Cal. Sept. 29, 2016) (alleging dealerships 

claimed consumers could finance the purchase of 

vehicles with attractive terms and buried 

disclosures indicating such terms were applicable 

to leases only). 

60Universal City Nissan, No. 2:16–cv–07239 at 

¶¶ 82–84 (C.D. Cal. Sept. 29, 2016) (alleging 

misrepresentation that dealer would pay off 

consumer’s trade-in when in fact consumers were 

still responsible for outstanding debt on trade-in 

vehicles); Complaint, In re TXVT Ltd. P’ship, No. 

C–4508 at ¶¶ 17–19 (F.T.C. Feb. 12, 2015) (alleging 

failure to disclose in leasing advertising that the 

dealership would pay off the negative equity of 

consumers’ trade in vehicle, when in fact, it was 

merely rolled into the financed amount for the 

consumer’s newly financed vehicle). 

a high rate.46 The dealer often performs 

its own collections and repossession 

operations when consumers fall behind. 

‘‘Buy here, pay here’’ accounts for 6–8% 

of financing to purchase a vehicle.47

Leasing involves arranging to drive a 

vehicle for a set period of time— 

typically around three years 48—and for 

a certain maximum number of miles— 

typically 10–15,000 miles per year—in 

exchange for an upfront payment, a 

monthly payment, and fees before, 

during, and at the end of the lease, 

including for excess wear and usage 

over the mileage limit.49 When 

consumers lease a vehicle, they do not 

own it, and they must return the vehicle 

when the lease expires, though they 

may have the option to purchase the 

vehicle at the end of the lease period. 

Nearly 27% of new vehicles are leased, 

as are just over 8% of used vehicles.50

II. Deception and Unfairness in the 

Motor Vehicle Marketplace 

For many consumers, buying or 

leasing a vehicle is a difficult and timeconsuming experience. The process of 

shopping for a vehicle, conducting test 

drives, providing financing information, 

and completing stacks of paperwork at 

a dealership can take many hours or 

even days,51 and can involve unfair or 

deceptive practices. The FTC received 

more than 100,000 complaints in each 

of the past three years regarding new 

and used motor vehicle sales, financing, 

service & warranties, and rentals & 

leasing, and complaints about motor 

vehicle transactions are regularly in the 

top ten complaint categories tracked by 

the agency.52

The FTC uses its authority under 

Section 5 to stop deceptive and unfair 

acts or practices in the motor vehicle 

marketplace. A representation, 

omission, or practice is deceptive if it is 

likely to mislead consumers acting 

reasonably under the circumstances and 

is material to consumers—that is, it 

would likely affect the consumer’s 

conduct or decisions with regard to a 

product or service.53 Some deception 

cases involve omission of material 

information, the disclosure of which is 

necessary to prevent the claim, practice, 

or sale from being misleading.54

Deceptive information distorts the 

marketplace and thus, these false and 

misleading statements are unlawful 

regardless of an intent to deceive.55

A practice is considered unfair under 

Section 5 if: (1) it causes, or is likely to 

cause, substantial injury; (2) the injury 

is not reasonably avoidable by 

consumers; and, (3) the injury is not 

outweighed by benefits to consumers or 

competition.56

Chronic problems confronting 

consumers in the sales, financing, and 

leasing process include advertising 

misrepresentations and unlawful 

practices related to add-ons and 

deceptive pricing.57

A. Advertising Misrepresentations 

Advertisements for motor vehicles are 

often consumers’ first contact in the 

vehicle-buying or leasing process. 

Dealers utilize a variety of means to 

reach consumers, including television 

and radio commercials, social media 

and online advertisements, and direct 

mail marketing. 

The FTC has brought many cases 

concerning misrepresentations 

regarding key pricing aspects of a 

vehicle purchase, including the price of 

the vehicle, the availability of discounts 

and rebates, the monthly payment 

amount for a financed purchase or lease, 

or the amount due at signing.58 Other 

misrepresentations regarding financial 

terms that have been the subject of FTC 

complaints have included whether an 

offer pertains to a purchase or a lease 59

and whether the dealer or consumer is 

responsible for paying off ‘‘negative 

equity,’’ i.e., the outstanding debt on a 

vehicle that is being traded in as part of 

another vehicle purchase.60 And 

according to other FTC actions, some 

dealers have lured potential buyers 

through financial incentives incidental 


jspears on DSK121TN23PROD with PROPOSALS3
42016 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

61See, e.g., Complaint, FTC v. Traffic Jam Events, 

LLC, No. 9395 at ¶¶ 12, 17–19 (F.T.C. Aug. 7, 2020); 

Complaint, In re Fowlerville Ford, Inc., No. C–4433 

at ¶¶ 4, 7–9 (F.T.C. Feb. 20, 2014). 

62See Nat’l Consumer Law Ctr., Auto Add-ons 

Add Up: How Dealer Discretion Drives Excessive, 

Inconsistent, and Discriminatory Pricing (Oct. 11, 

2017), https://www.nclc.org/images/pdf/car_sales/ 

report-auto-add-on.pdf; Consumers for Auto 

Reliability and Safety, Comment Letter on Motor 

Vehicle Roundtables, Project No. P104811 at 2–3 

(Apr. 1, 2012), https://www.ftc.gov/sites/default/ 

files/documents/public_comments/publicroundtables-protecting-consumers-sale-and-leasingmotor-vehicles-project-no.p104811-00108/00108- 

82875.pdf (citing a U.S. Department of Defense data 

call summary that found the vast majority of 

military counselors have clients with auto financing 

problems and cited loan packing and yo-yo 

financing as the most frequent auto lending abuses 

affecting servicemembers); Adam J. Levitin, The 

Fast and the Usurious: Putting the Brakes on Auto 

Lending Abuses, 108 Geo. L.J. 1257, 1265–66 (2020), 

https://www.law.georgetown.edu/georgetown-lawjournal/wp-content/uploads/sites/26/2020/05/ 

Levitin_The-Fast-and-the-Usurious-Putting-theBrakes-on-Auto-Lending-Abuses.pdf (discussing 

‘‘loan packing’’ as the sale of add-on products 

falsely represented as being required in order to 

obtain financing.); Complaint, FTC v. Liberty 

Chevrolet, Inc., No. 1:20–cv–03945 at ¶¶ 12–19 

(S.D.N.Y. May 21, 2020) (alleging deceptive and 

unauthorized add-on charges in consumers’ 

transactions); Universal City Nissan, No. 2:16–cv– 

07329 at ¶¶ 59–64 (C.D. Cal. Sept. 29, 2016) 

(alleging deceptive and unauthorized add-on 

charges in consumers’ transactions); Complaint, In 

re TT of Longwood, Inc., No. C–4531 at ¶¶ 6, 9 

(F.T.C. July 2, 2015) (alleging misrepresentations 

regarding prices for added features); see also Auto 

Buyer Study, supra note 11, at 14 (‘‘Several 

participants who thought that they had not 

purchased add-ons, or that the add-ons were 

included at no additional charge, were surprised to 

learn, when going through the paperwork, that they 

had in fact paid extra for add-ons. This is consistent 

with consumers’ experiencing fatigue during the 

buying process or confusion with a financially 

complex transaction, but would also be consistent 

with dealer misrepresentations.’’). 

63 Liberty Chevrolet No. 1:20–cv–03945 (S.D.N.Y. 

May 21, 2020); Universal City Nissan, No. 2:16–cv– 

07329 (C.D. Cal. Sept. 29, 2016). 

64See, e.g., Buckle Up, supra note 15, at 10–11 

(noting the long, complex transaction process); N. 

Am. Auto. Servs., No. 1:22–cv–0169 at ¶¶ 23–28 

(N.D. Ill. Mar. 31, 2022) (same). 

65N. Am. Auto. Servs., No. 1:22–cv–0169 at ¶ 24 

(N.D. Ill. Mar. 31, 2022); see also Buckle Up, supra 

note 15, at 10–11. 

66 Liberty Chevrolet, No. 1:20–cv–03945 at ¶¶ 17– 

19 (S.D.N.Y. May 21, 2020); The Road Ahead: 

Selling, Financing & Leasing Motor Vehicles, 

https://www.ftc.gov/news-events/events-calendar/ 

2011/08/road-ahead-selling-financing-leasingmotor-vehicles; Dale Irwin, Slough Connealy Irwin 

& Madden LLC, Comment Letter on Public 

Roundtables: Protecting Consumers in the Sale and 

Leasing of Motor Vehicles, Project No. P104811, 

Submission No. 558507–00060 (Dec. 29, 2011), 

available at https://www.regulations.gov/docket/ 

FTC-2022-0036 (consumer protection lawyer noting 

‘‘payment packing’’ among problems ‘‘that cry out 

for scrutiny and regulation); Michael Archer, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00041 (Aug. 6, 2011), available at https:// 

www.regulations.gov/docket/FTC-2022-0036 

(workshop panelist stating ‘‘I have seen cases 

wherein the dealer uses financing to pack in extra 

costs or to wipe out trade-in value.’’); Comment 

Letter on Public Roundtables: Protecting Consumers 

in the Sale and Leasing of Motor Vehicles, Project 

No. P104811, Submission No. 558507–00027 (July 

27, 2011), available at https://www.regulations.gov/ 

docket/FTC-2022-0036 (‘‘Confusing or misleading 

sales terms Extra fees was added at the time of 

purchase and to this day I still do not understand 

what the fee was for, it made the payment higher.’’); 

Carrie Ferraro, Legal Servs. of N.J, Comment Letter 

on Public Roundtables: Protecting Consumers in the 

Sale and Leasing of Motor Vehicles, Project No. 

P104811, Submission No. 558507–00061 (Dec. 29, 

2011), available at https://www.regulations.gov/ 

docket/FTC-2022-0036 (citing dealers ‘‘engage[d] in 

packing’’ as a common consumer complaint 

received by LSNJ’s legal advice hotline); Rosemary 

Shahan, Consumers for Auto Reliability and Safety, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00069 (Jan. 31, 2012), available at https:// 

www.regulations.gov/docket/FTC-2022-0036 (noting 

‘‘[m]any common auto scams do not generate 

complaints in proportion to how pervasive or costly 

the practices are, simply because the consumers 

generally remain unaware they have been 

scammed,’’ including as a result of ‘‘Loan 

packing’’); Mary W. Sullivan, Matthew T. Jones & 

Carole L. Reynolds, Fed. Trade Comm’n, The Auto 

Buyer Study: Lessons from In-Depth Consumer 

Interviews and Related Research, Supplemental 

Appendix: Redacted Interview Transcripts (2020) 

[hereinafter Auto Buyer Study: Appendix], https:// 

www.ftc.gov/system/files/documents/reports/ 

buckle-navigating-auto-sales-financing/ 

bcpstaffreportautobuyerstudysuppappendix.pdf 

(Study participant 169810 at 525 (consumer had 

‘‘additional items’’ charges on contract that 

consumer could not identify); Study participant 

188329 at 730, 740–42 (dealer did not tell consumer 

about GAP insurance or service contract but 

consumer was charged $599 and $1950 for those 

add-ons, respectively)); Press Release, N.Y. State 

Att’y Gen., A.G. Schneiderman Announces Nearly 

$14 Million Settlement With NYC And Westchester 

Auto Dealerships For Deceptive Practices That 

Resulted In Inflated Car Prices (June 17, 2015), 

https://ag.ny.gov/press-release/2015/agschneiderman-announces-nearly-14-millionsettlement-nyc-and-westchester-auto (‘‘This 

settlement is part of the [New York] Attorney 

General’s wider initiative to end the practice of 

‘‘jamming,’’ or unlawfully charging consumers for 

hidden purchases by car dealerships.’’). 67Under the Truth in Lending Act (‘‘TILA’’) and 

its implementing Regulation Z, required add-on 

products and services must be factored into the 

APR and the finance charge disclosed during the 

transaction. See Sections 106, 107, and 128 of the 

TILA (15 U.S.C. 1605, 1606 and 1638) and §§ 226.4, 

226.18(b), (d), and (e), and 226.22 of Regulation Z 

(12 CFR 226.4, 226.18(b), (d) and (e), and 226.22). 

It is legally impermissible for dealers to include 

charges for such products into a consumer’s 

contract without disclosing them under TILA. See, 

e.g., Complaint, FTC v. Stewart Fin. Co. Holdings, 

Inc., No. 103CV–2648 at ¶¶ 57–60 (N.D. Ga. Sept. 

4, 2003) (alleging violations for failure to include 

the cost of required add-on products in the finance 

charge and annual percentage rate disclosed to 

consumers). 

68See, e.g., Buckle Up, supra note 15, at 6; 

Military Consumer Financial Workshop (July 19, 

2017), https://www.ftc.gov/news-events/eventscalendar/military-consumer-workshop; The Road 

Ahead: Selling, Financing & Leasing Motor 

Vehicles, Fed. Trade Comm’n (Aug. 2011) (Public 

Roundtables) (Session 2 transcript at 40–41) (noting 

optional products and services are often already 

included in the monthly payment prices advertised 

or quoted); Christopher Kukla, Ctr. for Responsible 

Lending, Comment Letter on Public Roundtables: 

Protecting Consumers in the Sale and Leasing of 

Motor Vehicles, Project No. P104811, Submission 

No. 558507–00071 (Feb. 2, 2012), available at 

to the purchase, such the promise of a 

valuable prize.61

Misleading advertisements can cause 

significant consumer harm, and reduce 

competition amongst law-abiding 

dealers. When dealerships advertise 

prices, discounts, or other terms that are 

not actually available to typical 

consumers, those consumers end up 

selecting that dealership instead of 

others and spending time visiting it and 

transacting with it under false pretenses. 

B. Unlawful Practices Relating to AddOns and Deceptive Pricing 

Another key consumer protection 

concern is the sale of ‘‘add-on’’ products 

and services in a deceptive or unfair 

manner. Commonly offered add-ons 

include extended warranties, service 

and maintenance plans, payment 

programs, guaranteed automobile or 

asset protection (‘‘GAP’’ or ‘‘GAP 

insurance’’), emergency road service, 

VIN etching and other theft protection 

devices, and undercoating. Individual 

add-ons can cost consumers thousands 

of dollars and can significantly increase 

the overall cost to the consumer in the 

transaction. 

A significant consumer protection 

concern is consumers paying for addons without knowing about or expressly 

agreeing to them.62 The protracted and 

paperwork-heavy vehicle-buying 

process can make it difficult for 

consumers to spot add-on charges, 

particularly when advertised prices do 

not mention add-ons.63 If consumers are 

financing the vehicle, they then undergo 

a separate financing process, which can 

include wading through a thick stack of 

dense paperwork filled with fine 

print.64 For example, according to an 

FTC complaint, consumers were 

required to complete a stack of 

paperwork that ran more than sixty 

pages and required more than a dozen 

signatures.65 This paperwork can 

include hidden charges for add-on 

products and services, causing 

consumers to purchase those add-ons 

without knowing about or agreeing to 

them, or without knowing or agreeing to 

their costs, or other key terms.66

Unscrupulous dealers are able to slip 

these additional costs past consumers 

unnoticed and into purchase contracts 

through a variety of means, including by 

not mentioning them at all,67 or by 

focusing consumers’ attention on other 

aspects of the complex transaction, such 

as monthly payments, which might 

increase only marginally with the 

addition of prorated add-on costs or 

even be made to decrease if the 

financing term is stretched out, while in 

fact these added costs can be 

considerable in aggregate.68 Dealers 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42017 

https://www.regulations.gov/docket/FTC-2022-0036 

(discussing how dealers conceal loan packing by 

expressing an increase in price in terms of monthly 

payment); Att’ys General of 31 States & DC, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00112 at 5 (Apr. 13, 2012), available at 

https://www.regulations.gov/docket/FTC-2022-0036 

(discussing the ‘‘age-old auto salesperson’s trick’’ of 

quoting monthly payment prices without disclosing 

the quote includes the cost of optional items the 

customer has not yet agreed to purchase). 

69 Liberty Chevrolet, No. 1:20–cv–03945 at ¶¶ 9, 

26 (S.D.N.Y. May 21, 2020); Press Release, N.Y. 

State Att’y Gen., Attorney General James Delivers 

Restitution to New Yorkers Cheated by Auto 

Dealership (Nov. 17, 2020), https://ag.ny.gov/pressrelease/2020/attorney-general-james-deliversrestitution-new-yorkers-cheated-auto-dealership 

(dealership targeted Chinese-speakers for unlawful 

payment packing); Military Consumer Financial 

Workshop (July 19, 2017), https://www.ftc.gov/ 

news-events/events-calendar/military-consumerworkshop (panelist discussing servicemembers 

experiencing payment packing at 19:21); see also 

Fed. Trade Comm’n, Staff Perspective: A Closer 

Look at the Military Consumer Financial Workshop 

2–3 (Feb. 2018), https://www.ftc.gov/system/files/ 

documents/reports/closer-look-military-consumerfinancial-workshop-federal-trade-commission-staffperspective/military_consumer_workshop_-_staff_

perspective_2-2-18.pdf (explaining the unique 

situation of servicemembers as having steady 

paychecks that make them attractive customers for 

dealers, while having no or minimal credit history 

means they qualify for less advantageous credit 

terms and higher interest rate financing). 

70See, e.g., Buckle Up, supra note 15, at 6 

(observing that the introduction of ‘‘add-ons during 

financing discussions caused several participants’ 

total sale price to balloon from the cash price’’) & 

id. at 9 (observing for most consumers in the study, 

‘‘add-ons did not come up until the financing 

process, if at all, after a long car-buying process and 

at a time when the consumer often felt pressure to 

close the deal’’) & id. at 8–9 (noting most study 

participants’ contracts included add-ons charges, 

but many ‘‘were unclear what those add-ons 

included, and sometimes did not realize they had 

purchased any add-ons at all’’) & id. at 7 (explaining 

situations where the consumer reached the 

financing office after negotiating with the sales staff, 

and were then told the agreed upon price was not 

compatible with key financing terms—for example, 

a promised rebate or discount could not be 

combined with an advertised interest rate); Liberty 

Chevrolet, No. 1:20–cv–03945 at ¶ 17 (S.D.N.Y. May 

21, 2020). 

71 Liberty Chevrolet, No. 1:20-cv-03945 at ¶¶ 12– 

19 (S.D.N.Y. May 21, 2020) (alleging deceptive and 

unauthorized add-on charges in consumers’ 

transactions); Universal City Nissan, No. 2:16–cv– 

07329 at ¶¶ 59–64 (C.D. Cal. Sept. 29, 2016) 

(deceptive and unauthorized add-on charges in 

consumers’ transactions); TT of Longwood, No. C– 

4531 at ¶¶ 6, 9 (F.T.C. July 2, 2015) 

(misrepresentations regarding prices for added 

features); see also Auto Buyer Study, supra note 11, 

at 14 (‘‘Several participants who thought that they 

had not purchased add-ons, or that the add-ons 

were included at no additional charge, were 

surprised to learn, when going through the 

paperwork, that they had in fact paid extra for addons. This is consistent with consumers’ 

experiencing fatigue during the buying process or 

confusion with a financially complex transaction, 

but would also be consistent with dealer 

misrepresentations.’’). 

72Complaint, Nat’l Payment Network, Inc., No. 

C–4521 at ¶¶ 4–14 (F.T.C. May 4, 2015) (alleging 

failure to disclose fees associated with financing 

program; misleading savings claims in 

advertisements); Complaint, Matt Blatt, Inc., No. C– 

4532 at ¶¶ 4–13 (F.T.C. May 4, 2015) (alleging 

failure to disclose fees associated with financing 

program; misleading savings claims); Buckle Up, 

supra note 15, at 10 (noting some Auto Buyer Study 

participants did not fully understanding material 

aspects of extended warranties or service plans they 

purchased and ‘‘were surprised to discover during 

the interview that their plans had unexpected 

limitations’’ or ‘‘they had to pay out-of-pocket for 

repairs or services that were not covered’’; for 

example, one ‘‘consumer purchased a ‘Lifetime’ 

maintenance plan, only to discover later that he 

received a one-year plan that covered periodic oil 

changes’’). Cf. Consent Order, Santander Consumer 

USA, Inc., CFPB No. 2018–BCFP–0008 at ¶¶ 10–16 

(Nov. 20, 2018) (finding defendant sold GAP 

product allegedly providing ‘‘full coverage’’ to 

consumers with loan-to-value ratios (‘‘LTVs’’) above 

125%, when in fact coverage is limited to 125% of 

LTV). 

73N. Am. Auto. Servs., No. 1:22–cv–0169 at ¶ 27 

(N.D. Ill. Mar. 31, 2022); WardsAuto, WardsAuto 

2020 Megadealer 100, https://www.wardsauto.com/ 

dealers/wardsauto-2020-megadealer-100-industryforce (last visited Apr. 25, 2022) (listing Napleton 

Automotive Group at the 13th-ranked dealership 

group by total revenue). 

74Auto Buyer Study: Appendix, supra note 66 

(Study participant 152288 at 130; see also Study 

participant 180267 at 202 (dealership included a 

charge for GAP insurance in the final paperwork 

but not in retail sales contract); Study participant 

146748 at 296 (consumer learned during interview 

with FTC that consumer purchased GAP insurance: 

‘‘maybe they’re just throwing that in there without 

telling you.’’)). 

75Fed. Trade Comm’n, Enforcement Cases Tagged 

with Automobiles, https://www.ftc.gov/legallibrary/browse/cases-proceedings?sort_by=field_

date&items_per_page=20&search=&field_

competition_topics=All&field_consumer_

protection_topics=All&field_federal_

court=All&field_industry=1382&field_case_

status=All&field_enforcement_type=All&search_

matter_number=&search_civil_action_

number=&start_date=&end_date= (last visited Apr. 

25, 2022); Press Release, Fed. Trade Comm’n, FTC 

Announces Sweep Against 10 Auto Dealers (Jan. 9, 

2014), https://www.ftc.gov/news-events/pressreleases/2014/01/ftc-announces-sweep-against-10- 

auto-dealers; Press Release, Fed. Trade Comm’n, 

Multiple Law Enforcement Partners Announce 

Crackdown on Deception, Fraud in Auto Sales, 

Financing and Leasing (Mar. 26, 2015), https://

www.ftc.gov/news-events/press-releases/2015/03/ 

ftc-multiple-law-enforcement-partners-announcecrackdown. 

76Buckle Up, supra note 15; Auto Buyer Study, 

supra note 11. 

engaging in this type of conduct have 

targeted immigrants, communities of 

color, and servicemembers.69

In other instances, dealers might wait 

until late in the transaction to mention 

add-ons, and then do so in a misleading 

manner. For example, according to an 

FTC study, there were situations where 

dealers waited until the financing stage 

to mention add-ons, after consumers 

believed they had agreed on terms, and 

even though many add-ons have 

nothing to do with financing and were 

not mentioned at all during the sales 

process or when prices were initially 

negotiated.70 According to FTC 

enforcement actions, dealers also have 

represented that add-ons are required 

when in fact they are not,71 have 

misrepresented the purported benefits 

of add-ons, and have failed to disclose 

material limitations.72

Indeed, in a recent enforcement 

proceeding brought by the FTC, the 

agency cited a survey finding that 83% 

of consumers from ten dealership 

locations within the same motor vehicle 

dealership group—the thirteenth largest 

dealership group in the country in 2020, 

as ranked by total revenue—were 

charged for add-on products or services 

that they did not authorize or as a result 

of deceptive claims that they were 

required to purchase them.73

One participant in an FTC qualitative 

study of consumers’ car buying 

experiences summed up these issues 

during an interview after having 

purchased a vehicle. The consumer 

purchased a $2,000 service contract that 

the dealer falsely said was free, and a 

$900 GAP insurance contract that the 

dealer falsely said was mandatory, and 

learned about these purchases during 

the study interview. This consumer 

remarked: 

I feel I’ve been taken advantage of, to 

be honest with you. Even though I 

thought that I was getting a great deal 

with the interest rate, but I now see that 

they’re also very sneaky about putting 

stuff on your paperwork. They only let 

you skim through the paperwork that 

you have to sign and they just kind of 

tell you what it is. This is this, this is 

that, this is this, and then you just sign 

it away. You’re so tired, you’re so worn 

down, you don’t want to be there no 

more. You just want to get it done and 

over with. They take advantage of that. 

Yes, they still play this friendly card, 

you know, thank you for your business 

card kind of thing. Like I said, they 

never lose. They never lose.74

III. Law Enforcement Actions and 

Other Responses 

To address these types of unfair and 

deceptive practices in the motor vehicle 

industry, the Commission has brought 

enforcement actions and engaged in 

other efforts. In the last ten years, the 

Commission has brought more than fifty 

law enforcement actions and led two 

law enforcement sweeps to protect 

consumers in the motor vehicle 

marketplace, including one that 

involved 181 state enforcement 

actions.75

To complement its law enforcement 

efforts, the FTC’s Bureau of Consumer 

Protection and the Bureau of Economics 

recently published two reports on the 

results of a qualitative study on 

consumer experiences while purchasing 

a motor vehicle.76 The study found that 

many participating consumers were left 

in the dark about key terms. Consumers 


jspears on DSK121TN23PROD with PROPOSALS3
42018 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

77Buckle Up, supra note 15, at 5–7. 

78Buckle Up, supra note 15, at 9. 

79See The Road Ahead: Selling Financing, and 

Leasing Motor Vehicles, Transcript: Session 2, 

Washington DC (Nov. 2011), pp. 19–23. 

80The FTC hosted three roundtable events 

requesting public comments to gather information 

about possible consumer protection issues that may 

arise in the sale, financing, and leasing of motor 

vehicles. These events took place from April to 

November 2011 in Detroit, Austin, and Washington 

DC. The Road Ahead: Selling Financing, and 

Leasing Motor Vehicles (Apr. 2011, Aug. 2011, and 

Nov. 2011), https://www.ftc.gov/news-events/ 

events-calendar/2011/08/road-ahead-sellingfinancing-leasing-motor-vehicles. 

81See Comment Letters on Public Roundtables: 

Protecting Consumers in the Sale and Leasing of 

Motor Vehicles, Project No. P104811, Submission 

Nos. 558507–00015, 558507–00026, 558507–00046, 

558507–00051, 558507–00094, 558507–00099, 

available at https://www.regulations.gov/docket/ 

FTC-2022-0036; Consumers for Auto Reliability and 

Safety, Comment Letter on Public Roundtables: 

Protecting Consumers in the Sale and Leasing of 

Motor Vehicles, Project No. P104811 at 5 (Apr. 1, 

2012), https://www.ftc.gov/sites/default/files/ 

documents/public_comments/public-roundtablesprotecting-consumers-sale-and-leasing-motorvehicles-project-no.p104811-00108/00108- 

82875.pdf (noting military command has gone as far 

as banning servicemembers from conducting 

business from certain auto dealerships because of 

‘‘abusive auto sales and financing practices.’’). 

82The Consumer Financial Protection Bureau has 

brought at least 16 enforcement actions involving 

motor vehicles, financing, or add-on products and 

services. See Santander Consumer USA Inc., No. 

2020–BCFP–0027 at ¶¶ 8–50 (Dec. 22, 2020) 

(finding auto finance company provided inaccurate 

records to credit reporting agencies); Nissan Motor 

Acceptance Corp., No. 2020–BCFP–0017 at ¶¶ 46– 

52 (Oct. 13, 2020) (finding auto finance company 

misrepresented financing extension agreements, 

repossessions, and limitations to consumer 

bankruptcy protections); Lobel Fin. Corp., No. 

2020–BCFP–0016 at ¶¶ 8–22 (Sept. 21, 2020) 

(finding auto-loan servicer charged consumers 

unfair add-on charges in the form of Loss Damage 

Waiver premiums); Santander Consumer USA Inc., 

No. 2018–BCFP–0008 at ¶¶ 6–30 (Nov. 20, 2018) 

(finding auto finance company sold GAP to 

consumers with LTV over 125%, misrepresenting 

such consumers would be fully covered with total 

loss); Wells Fargo Bank, N.A., No. 2018–BCFP–0001 

at ¶¶ 27–39 (Apr. 20, 2018) (finding bank imposed 

duplicative or unnecessary forced-placed auto loan 

insurance on consumers); Toyota Motor Credit 

Corp., No. 2016–CFPB–0002 at ¶¶ 12–23 (Feb. 2, 

2016) (finding auto finance company engaged in 

discriminatory pricing markup for motor vehicle 

financing, without regard to credit worthiness); Y 

King S. Corp., No. 2016–CFPB–0001 at ¶¶ 73–75 

(Jan. 21, 2016) (finding used car dealer failed to 

disclose mandatory add-ons as financing charge); 

Interstate Auto Grp., Inc. & Universal Acceptance 

Corp., No. 2015–CFPB–0032 at ¶¶ 12–51 (Dec. 17, 

2015) (finding dealership and financing company 

reported information they knew or had reasonable 

cause to believe was inaccurate to credit reporting 

entities, harming consumer credit); Westlake Servs., 

LLC, No. 2015–CFPB–0026 at ¶¶ 7–90 (Sept. 30, 

2015) (finding indirect auto financing entity used 

illegal debt collection tactics); Fifth Third Bank, No. 

2015–CFPB–0024 at ¶¶ 8–23 (Sept. 28, 2015) 

(finding discrimination against loan applicants in 

credit applications based on characteristics such as 

race and national origin); Am. Honda Fin. Corp., 

No. 2015–CFPB–0014 ¶¶ at 9–24 (Jul. 14, 2015) 

(same); DriveTime Auto Grp., Inc., No. 2014–CFPB– 

0017 at ¶¶ 4–60 (Nov. 19 2014) (finding buy-herepay-here dealership made harassing debt collection 

calls and provided inaccurate credit information to 

credit reporting agencies); First Investor Fin. Servs. 

Grp., Inc., No. 2014–CFPB–0012 at ¶¶ 4–37 (Aug. 

20, 2014) (finding auto financing company provided 

inaccurate records to credit reporting agencies); Ally 

Fin. Inc., No. 2013–CFPB–0010 at ¶¶ 7–27 (Dec. 20, 

2013) (finding auto lender charged discriminatory 

pricing to African-American, Hispanic, and Asian 

and Pacific Islander borrowers); U.S. Bank Nat’l 

Ass’n, No. 2013–CFPB–0004 at ¶¶ 14–28 (June 26, 

2013) (finding bank failed to properly disclose all 

the fees charged to participants in the companies’ 

Military Installment Loans and Educational 

Services auto loans program, and misrepresented 

the true cost and coverage of add-on products 

financed along with the auto loans); Dealers’ Fin. 

Servs., LLC, No. 2013–CFPB–0004 at ¶¶ 10–22 (June 

2013) (finding financing company made deceptive 

statements regarding the cost of add-on products 

and the scope of coverage of the Vehicle Service 

Contract). 

83Operation Steer Clear and Operation Ruse 

Control brought with state law enforcement 

partners around the nation and Canada, 

encompassed over 246 enforcement actions. Press 

Release, Fed. Trade Comm’n, Multiple Law 

Enforcement Partners Announce Crackdown on 

Deception, Fraud in Auto Sales, Financing and 

Leasing (Mar. 26 2015), https://www.ftc.gov/newsevents/press-releases/2015/03/ftc-multiple-lawenforcement-partners-announce-crackdown. 

84For example, in a recent action, California 

Attorney General’s office sued a dealership chain 

under state consumer protection laws for deceiving 

consumers about add-on product charges and 

misrepresenting consumers’ income on credit 

applications; the alleged practices specifically 

targeted low-income consumers with subprime 

credit. People of the State of California v. Paul 

Blanco’s Good Car Co. Auto Grp., No. RG19036081 

(Alameda County Super. Ct. Sept. 2019). 

85See, e.g., Cal. Veh. Code sec. 11713.1(b)–(c); Or. 

Admin. R. 137–020–0020(3)(c); Wis. Admin. Code. 

Trans 139.03(3). 

86Or. Admin. R. 137–020–0020(3)(c); Official 

Commentary, Or. Admin. R. 137–020–0020(3)(c). 

87Cal. Veh. Code sec. 11713.1(b)–(c); Wis. 

Admin. Code. Trans 139.03(3). 

88 Ind. Code sec. 24–4.5–3–202 (3)(e)(ix) (2018) 

(prohibiting the sale of any GAP program when the 

LTV <80%). 

recalled dealers renegotiating vehicle 

prices at different stages of the 

transaction and being confused about 

the price of the vehicle.77 Despite the 

lengthy transaction, many study 

participants felt review of the final 

documents was rushed and were 

surprised to learn of additional add-on 

charges in their contracts.78

These are long-standing issues.79 In 

2011, the agency reached out to 

consumers through three motor vehicle 

roundtable events, reviewing over 100 

comments from industry 

representatives, consumer advocates, 

and state enforcement agencies, among 

others who attended.80 Through these 

events and comments, consumers 

expressed confusion regarding aspects 

of the financing process and commented 

that they were surprised when they 

reached the dealership that the price 

advertised was not available to them.81

The Commission’s law enforcement 

partners have also brought actions 

addressing unfair and deceptive 

practices in the motor vehicle industry. 

For example, the Consumer Financial 

Protection Bureau has taken action 

against third-party motor vehicle 

financing entities in matters that raise 

similar, and sometimes identical, claims 

of deceptive and unfair practices as 

were at issue in FTC cases.82

States have also taken measures to 

address consumer protection issues in 

the motor vehicle industry. In addition 

to participating in law enforcement 

sweeps with the FTC,83 state regulators 

and Attorneys General have 

independently filed more than 200 

actions alleging deceptive and unlawful 

conduct by motor vehicle dealerships 

across the country.84

Some states have also taken legislative 

or regulatory action.85 For example, to 

‘‘ensure that dealers do not add in 

hidden or undisclosed costs after the 

price for a vehicle has been advertised,’’ 

Oregon promulgated a rule that requires 

dealerships to state an ‘‘offering price’’ 

which is the actual offer and amount the 

consumer can pay to own the vehicle, 

excluding only taxes, license, 

registration costs, environmental fees, 

and a document processing fee.86

California and Wisconsin have similarly 

enacted codes that make it unlawful for 

dealerships to advertise a total price 

without including additional costs to 

the purchaser outside the mandatory 

tax, title, and registration fees.87 Other 

states, like Indiana, have enacted codes 

that prohibit the sale of add-ons in 

certain circumstances.88

IV. Section-by-Section Analysis 

Based on its enforcement and other 

experience, the Commission proposes 

specific legal restrictions to address 

deceptive and unfair conduct by motor 

vehicle dealers. Thus, the Commission 

is proposing a rule requiring dealers, 

whether acting directly or indirectly, to 

refrain from misrepresentations, provide 

for material disclosures at key points in 

the transaction, refrain from the sale of 

deceptive or unfair add-on products, 

and require retention of dealers’ 

advertisements and consumer 

transaction documents. 

While the proposed rule is an 

important step in the effort to prevent 

harm to consumers in the motor vehicle 

marketplace, a comprehensive approach 

is needed to address the important 

consumer protections at issue. 

Therefore, in addition to this 

rulemaking initiative, the Commission 

intends to continue law enforcement, as 

well as its consumer education and 

other efforts, to ensure that consumers 

can make informed decisions about 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42019 

89See supra note 53 (citing FTC Policy Statement 

on Deception). 

90As noted above, ‘‘material’’—as used in the 

proposed rule and throughout this Notice of 

Proposed rulemaking—means likely to affect the 

consumer’s conduct or decisions with regard to a 

product or service. See supra note 53 (citing FTC 

Policy Statement on Deception); In re Sanctuary 

Belize Litig., 482 F. Supp. 3d 373, 397 (D. Md. 2020) 

(‘‘Representations with respect to . . . [a product’s] 

cost are also presumptively material.’’) (citing In re 

Thompson Med. Co., Inc., 104 F.T.C. 648 (1984)); 

see also FTC v. Crescent Pub. Grp., Inc., 129 F. 

Supp. 2d 311, 321 (S.D.N.Y. 2001). 

91See, e.g., Matthew Jones, Bruce Kobayashi & 

Jason O’Connor, Economics at the FTC: Non-Price 

Merger Effects and Deceptive Automobile Ads 12– 

26 (2018), also published at 53 Rev. Indust. Org. 

593 (2018), https://www.ftc.gov/system/files/ 

documents/reports/economics-ftc-non-pricemerger-effects-deceptive-automobile-ads/1812-berio.pdf (developing and discussing a model for 

quantifying the consumer injury from deceptive 

motor vehicle ads, in which injury occurs because 

such ads persuade consumers ‘‘to spend time and 

effort to visit the dealership, when they might 

otherwise have pursued a legitimate offer 

elsewhere’’). 

92See, e.g., Liberty Chevrolet, No. 1:20–cv–03945 

at ¶¶ 10–11 (S.D.N.Y. May 21, 2020) (alleging false 

ads stating a certain price but charging consumers 

higher prices); Tate’s Auto Ctr., No. 3:18–cv– 

08176–DJH at ¶¶ 38–46 (D. Ariz. July 31, 2018) 

(alleging false ads touting attractive terms but 

concealing (i) ads were for lease offers only and 

required substantial initial payment, (ii) discounts 

were subject to material limitations, or (iii) other 

legally required disclosures); Complaint, In re 

Cowboy AG, LLC, No. C–4639 at ¶¶ 7–16 (F.T.C. Jan. 

4, 2018) (alleging false ads touting attractive terms, 

but concealing substantial down payments, offers 

were for leases and not purchases, material 

eligibility restrictions, and other legally required 

disclosures); Universal City Nissan, No. 2:16–cv– 

07329 (C.D. Cal. Sept. 29, 2016) (alleging 

misrepresentation of lease, credit, or purchase 

terms; lease terms were for purchases; add-ons were 

authorized, free, or required; and the finality of 

financing transactions or consequences when 

financing falls through. Failing to disclose TILA/ 

CLA trigger terms); Complaint, In re Jim Burke 

Automotive, Inc., No. C–4523 at ¶¶ 6–14 (F.T.C. 

May 4, 2015) (alleging misrepresentations regarding 

vehicle purchase price and promising prices and 

discounts not generally available to consumers); 

Complaint, In re City Nissan, Inc., No. C–4524 at 

¶¶ 8–10, 12 (F.T.C. May 4, 2015) (alleging 

misrepresentations regarding lease and finance 

terms); TT of Longwood, No. C–4531 at ¶¶ 6–12 

(F.T.C. July 2, 2015) (alleging misrepresentations 

regarding vehicle purchase price and prices for 

added features, promising prices and discounts not 

generally available to consumers, and 

misrepresentations regarding finance and lease 

terms); Complaint, In re Courtesy Auto Grp., Inc., 

No. 9359 at ¶¶ 5–7 (F.T.C. Jan. 7, 2014) (alleging 

misrepresentation regarding lease terms); 

Complaint, In re New World Auto Imports, Inc., No. 

C–4437 at ¶¶ 8–11 (F.T.C. Feb. 20, 2014) (alleging 

misrepresentations regarding monthly finance 

payments and lease terms); Complaint, In re Ramey 

Motors, Inc., No. C–4354 at ¶¶ 4–5 (F.T.C. Apr. 19, 

2012) (alleging false ads promising to pay off 

consumers’ existing motor vehicle debt and failing 

to disclose legally required financing terms); 

Complaint, In re Billion Auto, Inc., No. C–4356 at 

¶¶ 4–6 (F.T.C. May 1, 2012) (alleging false ads 

promising to pay off consumers’ existing motor 

vehicle debt and failing to disclose legally required 

financing and leasing terms.); see also Buckle Up, 

supra note 15, at 5 (noting ‘‘[a]dvertisements with 

misleading financing terms (as well as those with 

deceptive price and discount offers) remain a 

concern, and stating ‘‘[d]ealers should make only 

accurate and non-misleading advertising claims to 

consumers, advertise terms that are actually 

available, and clearly and conspicuously disclose 

material qualifications or limitations on any 

advertised deal’’); Auto Buyer Study, supra note 11, 

at 14 (noting, in a 2016 study by the Consumer 

Financial Protection Bureau, ‘‘consumers reported 

that lenders insisted that the purchase of add-ons 

were necessary for the financing to be approved’’). 

purchasing, financing, and leasing 

motor vehicles. The Commission also 

intends to continue its constructive 

engagement with consumer and dealer 

groups and other stakeholders. 

The Commission invites written 

comments on the proposed rule, and, in 

particular, answers to the specific 

questions set forth below. 

A. Section 463.1: Authority 

Proposed § 463.1 identifies the 

statutory authority under which the 

Commission proposes to promulgate 

this Rule to prevent unfair or deceptive 

acts or practices in connection with the 

sale, lease, or financing of motor 

vehicles. 

B. Section 463.2: Definitions 

Proposed § 463.2 contains definitions 

for the following terms: ‘‘Add-on’’ or 

‘‘Add-on Product(s) or Service(s),’’ 

‘‘Add-on List,’’ ‘‘Cash Price without 

Optional Add-ons,’’ ‘‘Clearly and 

Conspicuously,’’ ‘‘Dealer’’ or ‘‘Motor 

Vehicle Dealer,’’ ‘‘Express, Informed 

Consent,’’ ‘‘GAP Agreement,’’ 

‘‘Government Charges,’’ ‘‘Material’’ or 

‘‘Materially,’’ ‘‘Motor Vehicle,’’ and 

‘‘Offering Price.’’ Each of these terms is 

used in the proposed rule. 

C. Section 463.3: Prohibited 

Misrepresentations 

Section 463.3 of the proposed rule 

would prohibit motor vehicle dealers 

from making certain misrepresentations, 

to address the deceptive practices 

surrounding motor vehicle transactions 

discussed above and emerging from the 

landscape of enforcement actions, 

workshops, industry and consumer 

studies, and consumer interviews and 

complaints. As discussed in Section III 

above, a representation, omission, or 

practice is deceptive if it is likely to 

mislead consumers acting reasonably 

under the circumstances and is material 

to consumers.89

This section seeks to prohibit 

deceptive representations to consumers, 

clarify dealers’ obligations under the 

law, and ensure that motor vehicle 

dealers compete on a level playing field. 

The prohibited misrepresentations in 

this section of the proposed rule are 

material because they are likely to affect 

a consumer’s choices, such as whether 

to visit a particular dealership or enter 

into a transaction.90 These 

misrepresentations also harm 

consumers and divert business from 

reputable dealerships that provide 

truthful advertising to consumers. 

Consumers who select and travel to 

dealerships based on an advertised 

offer, only to learn late in the process (if 

at all) that the advertised offer does not 

apply, have often spent hours trying to 

purchase a car. Even if they notice and 

successfully resist later-added fees, or 

leave after learning that advertised 

discounts and rebates do not apply to 

them, misleading advertisements cause 

them to waste hours driving to and 

visiting the dealership.91 For many 

consumers, however, walking away is 

not a realistic option—for example, 

restarting the hours-long process at 

another dealership might mean having 

to take an additional day off work, and 

for those who cannot afford a second 

car, finding other means of 

transportation to travel to another 

dealership. Thus, even if they somehow 

learn that they are paying more than 

what was advertised, consumers might 

just sign the deal rather than start the 

entire process anew. In other instances, 

as discussed below, consumers learn 

that they did not receive the offer as 

represented only after they enter into 

the contract and end up spending 

hundreds or even thousands of dollars 

more than they were led to believe. 

Section 463.3(a) of the proposed rule 

would prohibit misrepresentations 

concerning ‘‘[t]he costs or terms of 

purchasing, financing, or leasing a 

vehicle.’’ This provision would bar 

deceptive practices surrounding, among 

other things, the total cost, price for 

added features, other charges, terms and 

finality of financing, and availability of 

discounts.92 The cost or price of a 

vehicle is material—it is likely to affect 

a consumer’s conduct, including 

whether to purchase a particular vehicle 

at a particular dealership. 

Section 463.3(b) of the proposed rule 

would prohibit misrepresentations 

concerning any ‘‘costs, limitation, 

benefit, or any other Material aspect of 

an Add-on Product or Service.’’ As 

discussed above, add-ons are a 

particularly problematic area in auto 

sales and financing. The cost and 

coverage of an add-on is likely to affect 

a consumer’s conduct, including the 

consumer’s decision to purchase the 

product or service. 

Section 463.3(c) of the proposed rule 

would prohibit misrepresentations 

regarding ‘‘[w]hether the terms are, or 

transaction is, for financing or a lease.’’ 

If a dealer advertises vehicles for low 

monthly payments or other terms that 


jspears on DSK121TN23PROD with PROPOSALS3
42020 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

93See Tate’s Auto Ctr., No. 3:18–cv–08176–DJH at 

¶¶ 38–39 (D. Ariz. July 31, 2018) (alleging false ads 

touting attractive terms but concealing ads were for 

lease offers only); Complaint, In re TC Dealership, 

L.P., No. C–4536 at ¶¶ 10, 13 (F.T.C. Aug. 13, 2015) 

(same); Cowboy AG, LLC, No. C–4639 at ¶¶ 9–12 

(F.T.C. Jan. 4, 2018) (same); New World Auto 

Imports, No. 3:16–cv–02401–K at ¶¶ 36–38 (N.D. 

Tex. Aug. 18, 2016) (alleging misrepresentation that 

terms were for financing instead of leasing); 

Universal City Nissan, No. 2:16–cv–07329 at ¶¶ 28– 

37, 44 (C.D. Cal. Sept. 29, 2016) (alleging 

advertisements with key terms that were not 

generally available). 

94See Tate’s Auto Ctr., No. 3:18–cv–08176–DJH, 

¶¶ 41–43 (D. Ariz. July 31, 2018) (alleging false ads 

touting attractive terms and discounts but 

concealing material limitations); Complaint, In re JS 

Autoworld, Inc., No. C–4535 at ¶¶ 8–9 (F.T.C. Aug. 

13, 2015) (alleging false ads touting prices but 

concealing discounts with material eligibility 

limitations); TC Dealership, L.P., No. C–4536 at 

¶¶ 7–9 (F.T.C. Aug. 13, 2015) (alleging false ads 

touting attractive prices but concealing discounts 

were subject to material eligibility limitations and 

trade-in requirement); TXVT Ltd. P’ship, No. C– 

4508 at ¶ 14 (F.T.C. Feb. 12, 2015) (alleging false 

ads failed to disclose that it would match 

consumers’ income tax refunds only up to $1,000); 

Timonium Chrysler, No. C–4429 at ¶¶ 4–5 (F.T.C. 

Jan. 28, 2014) (alleging false ads touting pricing and 

discounts but concealing material qualifications 

and restrictions); TT of Longwood, No. C–4531 at 

¶¶ 6, 9 (F.T.C. July 2, 2015) (alleging promises of 

prices and discounts not generally available to 

consumers); Jim Burke Automotive, No. C–4523 at 

¶¶ 6–13 (F.T.C. May 4, 2015) (alleging promises of 

prices and discounts not generally available to 

consumers); see also Auto Buyer Study, supra note 

11, at 8 (‘‘A number of [study] participants were 

attracted by promotional offers in ads that they did 

not qualify for, but did not realize that they did not 

qualify until they got to the dealer. Some did not 

learn that they did not qualify until they got to the 

financing stage of the transaction.’’). 

95 Ganley Ford West, No. C–4428 at ¶ 5 (F.T.C. 

Jan. 28, 2014) (alleging false ads touting price 

discount but concealing offer was limited to certain 

high-end models). 

96For example, one consumer had reached a 

three-year financing agreement with the dealership 

salesman over the phone, which would include a 

$4,300 rebate to reduce their purchase price, only 

to walk into the dealership and be told at the 

financing office the rebates were only offered with 

seven-year financing agreements. Auto Buyer Study, 

supra note 11, at Supp. Appx 90–91. 

97 Liberty Chevrolet, No. 1:20–cv–03945 at ¶¶ 10– 

11 (S.D.N.Y. May 21, 2020) (alleging false ads 

stating a certain price but then charging consumers 

higher prices than advertised); Tate’s Auto Ctr., No. 

3:18–cv–08176–DJH at ¶¶ 41–43 (D. Ariz. July 31, 

2018) (alleging false ads touting attractive terms but 

concealing discounts were subject to material 

limitations); Complaint, Cowboy AG, No. C–4639 at 

¶¶ 7–14 (F.T.C. Jan. 4, 2018) (alleging false ads 

touting attractive terms but concealing material 

eligibility restrictions and certain advertised 

vehicles not available for sale); Complaint, FTC v. 

Norm Reeves, Inc., No. 8:17–cv–01942 at ¶¶ 28–30 

(C.D. Cal. Nov. 3, 2017) (alleging deceptive 

representations regarding monthly payments being 

available to consumers while concealing credit 

restrictions); New World Auto Imports, No. 3:16– 

cv–02401–K at ¶¶ 36–38 (N.D. Tex. Aug. 18, 2016) 

(alleging deceptive representations regarding 

monthly and down payments being available to 

consumers with repossessions or foreclosures and 

concealing restrictions making the offer available 

only to consumers with good credit); Progressive 

Chevrolet Co., No. C–4578 at ¶¶ 5–7 (F.T.C. June 13, 

2016) (alleging ads touting attractive terms but 

failure to disclose high credit score requirement); JS 

Autoworld, No. C–4535 at ¶¶ 8–9 (F.T.C. Aug. 13, 

2015) (alleging false ads touting attractive prices but 

concealing discounts with material eligibility 

limitations); Complaint, TC Dealership, No. C–4536 

at ¶¶ 7–9 (F.T.C. Aug. 13, 2015) (alleging false ads 

touting attractive price but concealing discounts 

were subject to material eligibility limitations and 

trade-in requirement); Complaint, FTC v. Ramey 

Motors, Inc., No. 1:14–cv–29603, ¶¶ 21–23 (S.D.W. 

Va. Dec. 11, 2014) (alleging false ads touting 

attractive terms but concealing substantial down 

payments or trade-in requirements); Timonium 

Chrysler., No. C–4429 at ¶¶ 4–5 (F.T.C. Jan. 28, 

2014) (alleging false ads touting pricing and 

discounts but concealing material qualifications 

and restrictions); Ganley Ford West, No. C–4428 at 

¶ 5 (F.T.C. Jan. 28, 2014) (alleging false ads touting 

price discount but concealing offer was limited to 

certain high-end models); Complaint, United States 

v. Billion Auto, Inc., No. 5:14–cv–04118–MWB, 

¶¶ 38–40 (N.D. Iowa 2014) (alleging false ads 

touting attractive terms but concealing material 

eligibility limitations and significant extra costs); 

see also Adam J. Levitin, The Fast and the 

Usurious: Putting the Brakes on Auto Lending 

Abuses, 108 Geo. L.J. 1257, 1282 (2020), https://

www.law.georgetown.edu/georgetown-law-journal/ 

wp-content/uploads/sites/26/2020/05/Levitin_TheFast-and-the-Usurious-Putting-the-Brakes-on-AutoLending-Abuses.pdf (discussing dealership tactic of 

advertising one vehicle and then claiming it has 

been sold to upsell consumer to a different vehicle). 

98Tate’s Auto Ctr., No. 3:18–cv–08176–DJH, 

¶¶ 18–21, 25 (D. Ariz. July 31, 2018) (alleging 

dealership falsified consumers’ monthly income 

and down payments on financing applications and 

financing contracts); People of the State of 

California v. Paul Blanco’s Good Car Co. Auto Grp., 

Case No. RG19036081 (Sept. 2019). 99Universal City Nissan, No. 2:16–cv–07329 at 

¶¶ 67–72 (C.D. Cal. Sept. 29, 2016); State ex rel. 

apply in financing offers, but the offer 

is actually for a lease only, that conduct 

misleads consumers.93 These 

representations are likely to affect 

consumers’ conduct, including by 

causing consumers to enter into a 

monetary transaction for a product they 

do not want (borrowing instead of 

owning), or, if the true circumstances 

are revealed prior to consummation of 

the transaction, to waste time traveling 

to the dealership and potentially 

spending hours on the sales floor and 

financing office. 

Section 463.3(d) of the proposed rule 

would prohibit misrepresentations 

concerning ‘‘[t]he availability of any 

rebates or discounts that are factored 

into the advertised price but not 

available to all consumers.’’ When 

dealers advertise rebates and discounts, 

or offer prices that factor in such rebates 

and discounts, but in fact those rebates 

and discounts are not available to the 

typical consumer, but only a select set 

of customers, such conduct induces the 

consumer to select and transact with the 

dealer under false pretenses.94 In other 

instances, the advertised rebates and 

discounts might apply only to the most 

expensive versions of the make and 

model.95 Consumers may learn they do 

not qualify for these advertised rebates 

or discounts, if at all, only after they 

spend time traveling to the dealership or 

at the end of the financing stage.96

Section 463.3(e) and (f) of the 

proposed rule would prohibit 

misrepresentations surrounding ‘‘[t]he 

availability of vehicles at an advertised 

price’’ and representations that a 

consumer has been or will be 

‘‘preapproved or guaranteed for any 

product, service, or term.’’ This 

provision would prohibit dealers from 

first touting low prices or other 

attractive terms for specific vehicles and 

inducing consumers to spend time 

traveling to the dealership and pursuing 

the offer, but then claiming, among 

other things, that the advertised vehicle 

is no longer available, no longer 

available at the advertised price, or that 

the financing offer is only available to 

those with high credit scores.97 To the 

extent that dealers are advertising 

prices, preapprovals, guaranteed rates, 

or other terms for military consumers, 

but then charging the same prices to 

other consumers or otherwise failing to 

honor the deal, the proposed rule would 

cover such conduct as well. This 

information is material because it is 

likely to affect consumers’ conduct, 

including whether to spend time 

traveling to a particular dealership and 

pursuing a specific offer on a specific 

car. 

Section 463.3(g) of the proposed rule 

would prohibit dealers from 

misrepresenting ‘‘[a]ny Material 

information on or about a consumer’s 

application for financing.’’ Material 

misrepresentations on or about a 

consumer’s financing application 

include instances in which dealers 

submit income information that is 

different from what consumers have 

stated that they earn, or alter the down 

payment amount from what the 

consumer has actually provided.98

Section 463.3(h) and (i) of the 

proposed rule would prohibit dealers 

from misrepresenting ‘‘[w]hen the 

transaction is final or binding on all 

parties’’ and making misrepresentations 

about ‘‘[k]eeping cash down payments 

or trade-in vehicles, charging fees, or 

initiating legal process or any action if 

a transaction is not finalized or if the 

consumer does not wish to engage in a 

transaction.’’ These provisions are 

intended to curb yo-yo financing, which 

occurs when a dealer obtains a 

consumer’s agreement to a deal that has 

not been finalized, allows the consumer 

to drive the vehicle off the lot, and then 

directs the consumer to return and 

engages in unlawful tactics, such as 

failing to give back a consumer’s tradein vehicle, while refusing to honor the 

deal or pressuring the consumer into 

entering a new deal.99 Yo-yo financing 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42021 

Dewine v. Dads Car Lot Inc., No. 13CV4036, 2014 

Ohio Misc. LEXIS 10987, at *4 (Ct. Com. Pl. June 

6, 2014) (finding defendant violated state consumer 

sales protection act by including ‘‘spot delivery’’ 

document that allowed defendant to keep ‘‘all funds 

on deposit’’); Att’ys General of 31 States & DC, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00112 at 4 (Apr. 13, 2012), available at 

https://www.regulations.gov/docket/FTC-2022-0036 

(recommending, among other rules aimed at 

deterring yo-yo sales, FTC adopt rules that would 

require dealers to disclose the consumer’s ‘‘right to 

walk away’’ if financing is rejected and, in the 

context of spot delivery, to disclose financing has 

not been finalized as well as the responsibilities 

and potential consequences for consumers); Legal 

Aid Justice Ctr., Comment Letter on Public 

Roundtables: Protecting Consumers in the Sale and 

Leasing of Motor Vehicles, Project No. P104811, 

Submission No. 558507–00066 (Jan. 30, 2012) 

available at https://www.regulations.gov/docket/ 

FTC-2022-0036 (explaining that in a yo-yo sale the 

dealer misrepresents to the consumer credit has 

been finalized, when in fact the dealer treats the 

sale as contingent, retaining the ability call off or 

seize the vehicle later; a ‘‘yo-yo case can result in 

substantial distress to the person who has been 

tricked’’; and ‘‘the harm to the marketplace occurs 

when the consumer believes a credit sale has been 

completed and stops shopping for a car on credit’’); 

Nat’l Consumer Law Ctr., In Harm’s Way—At 

Home: Consumer Scams and the Direct Targeting of 

America’s Military and Veterans 41 (May 2003), 

https://www.nclc.org/images/pdf/special_projects/ 

military/report-scams-facing-military.pdf (listing 

‘‘spot delivery’’ or ‘‘yo-yo sales’’ among scams 

commonly aimed at military members). 

100See, e.g., Delvin Davis, Ctr. for Responsible 

Lending, Deal or No Deal: How Yo-Yo Scams Rig 

the Game against Car Buyers, submitted as an 

attachment to Comment #558507–00104 on Public 

Roundtables: Protecting Consumers in the Sale and 

Leasing of Motor Vehicles, Project No. P104811 at 

1, 5–6 (Apr. 2, 2012), https://www.ftc.gov/sites/ 

default/files/documents/public_comments/publicroundtables-protecting-consumers-sale-and-leasingmotor-vehicles-project-no.p104811-00104/00104- 

82860.pdf. 

101See Alaska Stat. secs. 45.25.500, 45.25.610(c) 

(prohibiting dealers from transferring title to a 

trade-in vehicle or performing any repairs/ 

reconditioning before completing sales transaction, 

and requiring specific disclosures to consumers 

regarding spot delivery); Ariz. Rev. Stat. sec. 44– 

1371 (prohibiting sale of trade-in before financing 

is finalized); Ark. Code. Ann. sec. 23–112–316 

(prohibiting dealers from depositing money from 

consumer or selling a trade-in before financing is 

finalized and permitting consumer to cancel 

purchase if dealer changes any terms or consumer 

does not obtaining the financing agreed upon); 

Colo. Rev. Stat. sec. 6–1–708 (prohibiting spot 

delivery tactics and requiring dealers to return any 

collateral or down payment if financing is not 

approved and the consumer is required to return 

the vehicle); Nev. Rev. Stat. sec. 482.554(2)(a) 

(protecting against misrepresentations surrounding 

spot delivery); N.H. Rev. Stat. Ann. sec. 361–A:10– 

b (requiring dealers to return trade-in, deposit, and 

fees, if financing is not approved); Or. Rev. Stat. sec. 

646A.090 (requiring dealers to return trade-in 

vehicle if financing is not approved). 

102Universal City Nissan, No. 2:16–cv–07329 at 

¶¶ 28–34, 54–55 (C.D. Cal. Sept. 29, 2016) (alleging 

failure to disclose remaining amount due on tradein would be added to the consumer’s new financing 

or lease balance); Ramey Motors, No. C–4354 at ¶ 4 

(F.T.C. Apr. 19, 2012) (alleging false ads promising 

to pay off consumers’ existing motor vehicle debt); 

Billion Auto, No. C–4356 at ¶ 4 (F.T.C. May 1, 2012) 

(alleging false ads promising to pay off consumers’ 

existing motor vehicle debt); TXVT Ltd. P’ship, No. 

C–4508 at ¶¶ 7–11 (F.T.C. Feb. 12, 2015) (alleging 

false ads that consumers could exit existing debt or 

leases for $1); Complaint, In re Frank Myers 

Automaxx, LLC, No. C–4353 at ¶ 4 (F.T.C. Apr. 19, 

2012) (alleging false ads promising to pay off 

consumers’ existing motor vehicle debt and leases); 

Key Hyundai of Manchester, No. C–4358 at ¶ 6 

(F.T.C. May 4, 2012) (alleging false ads promising 

to pay off consumers’ existing motor vehicle debt 

and leases); see also Auto Buyer Study, supra note 

11, at 13 (noting a participant was ‘‘surprised’’ to 

learn during the study interview the dealer had 

rolled negative equity into her new financing). 

103See Universal City Nissan, No. 2:16–cv–07329 

at ¶¶ 73–78 (C.D. Cal. Sept. 29, 2016) (alleging 

posting by dealership of positive, five-star reviews 

on third-party websites that falsely purport to be 

objective or independent); Complaint, FTC v. 

Passport Imports, Inc., No. 8:18–cv–03118 at ¶ 20 

(D. Md. Oct. 10, 2018) (alleging Defendants misled 

consumers by mailing notices that were similar to 

and had the same color scheme as notices 

manufacturers are required by the US Department 

of Transportation’s NHTSA to use when sending 

information about recalls); Complaint, United 

States v. Sunkey Publ’g, Inc., No. 3:18–cv–01444 at 

¶¶ 14–112 (N.D. Ala. Sept. 6, 2018) (alleging 

deceptive educational marketing and lead 

generation that targeted potential military recruits 

and used a series of false representations of military 

affiliation and endorsement to induce recruits to 

submit their information and agree to future 

contacts). 

104See Fowlerville Ford, No. C–4433 at ¶ 4 (F.T.C. 

Feb. 20, 2014) (alleging misrepresentation that 

consumers have won a prize that can be collected 

at a dealership). 

is often made possible because a dealer 

misleads consumers, directly or by 

omission, about whether their financing 

is final, and subsequently applies 

pressure when revealing that the 

financing is not final, including by 

threatening to retain the consumer’s 

cash down payment or trade-in vehicle 

unless the consumer agrees to a new 

financing contract.100 These tactics 

affect consumer conduct, including 

whether to enter into a new deal with 

less beneficial terms for the consumer. 

Several states have enacted statutes to 

protect consumers against this 

practice.101

Section 463.3(j) of the proposed rule 

would prohibit misrepresentations 

regarding ‘‘[w]hether or when a Motor 

Vehicle Dealer will pay off some or all 

of the financing or lease on a 

consumer’s trade-in vehicle.’’ This 

provision would prohibit dealers from 

misrepresenting to consumers trading in 

a vehicle when the consumer owes more 

than the vehicle is worth, that the dealer 

will pay off that negative balance or 

negative equity when the consumer 

purchases a new vehicle. If the dealer 

does not pay off the negative balance 

but rather includes it in the new amount 

to be financed for the vehicle to be 

purchased, this sleight of hand (often 

buried in the financing paperwork) 

requires the consumer, not the dealer, to 

pay off the previous financing as 

promised.102 This provision would also 

prohibit dealers that are going out of 

business from representing that they 

will pay off liens if they do not, in fact, 

pay off the liens, and prohibit them 

from failing to pay off liens in a timely 

manner. This information is material 

because information about the amount 

the consumer is actually paying or will 

end up owing is likely to affect the 

consumer’s decision to visit a particular 

dealership and purchase a particular 

vehicle. 

Section 463.3(k) of the proposed rule 

would prohibit misrepresentations that 

consumer reviews or ratings are 

unbiased, independent, or from 

ordinary consumers, and § 463.3(l) of 

the proposed rule would similarly 

prohibit misrepresentations that ‘‘the 

Dealer or any of its personnel or 

products or services is or was affiliated 

with, endorsed or approved by, or 

otherwise associated with the United 

States government or any Federal, State, 

or local government agency, unit, or 

department, including the United States 

Department of Defense or its Military 

Departments.’’ The FTC has combatted 

such misrepresentations in enforcement 

actions.103 Claims that products and 

services are endorsed by other impartial 

consumers or the government are 

material to consumers’ decision-making 

because a consumer is more likely to 

visit a dealership and select a vehicle 

that has been approved by an impartial 

consumer or a government entity. 

Section 463.3(m) of the proposed rule 

would prohibit misrepresentations that 

‘‘consumers have won a prize or 

sweepstakes.’’ 104 Like the other 

provisions in § 463.3, these claims are 

material and harm consumers by 

inducing a consumer to choose and 

transact with a particular dealership 

under false pretenses. 

Section 463.3(n) of the proposed rule 

would prohibit misrepresentations 

regarding ‘‘[w]hether, or under what 

circumstances, a vehicle may be moved, 

including across state lines or out of the 

country.’’ This provision would prevent 

dealers from making misrepresentations 

about any liens or other restrictions that 

prevent or hinder consumers’ ability to 

move the vehicle beyond certain 

boundaries. The manner in which a 

consumer can move a vehicle is likely 

to affect the consumer’s decision to 

purchase a vehicle, including decisions 

of military consumers who may 

frequently need to move. 

Section 463.3(o) of the proposed rule 

would prohibit misrepresentations 

regarding ‘‘[w]hether, or under what 

circumstances, a vehicle may be 

repossessed.’’ This provision would 

prevent dealers from making 


jspears on DSK121TN23PROD with PROPOSALS3
42022 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

105 50 U.S.C. 3952. 

106See, e.g., Buckle Up, supra note 15, at 5 

(noting consumer confusion about how the vehicle 

price they were offered was determined and 

consumers did not understand they could negotiate 

price); id. at 9 (observing add-on products and 

services, which typically increase a vehicle’s 

purchase price, were ‘‘the single greatest area of 

confusion’’ in the study); Att’ys General of 31 States 

& DC, Comment Letter on Public Roundtables: 

Protecting Consumers in the Sale and Leasing of 

Motor Vehicles, Project No. P104811, Submission 

No. 558507–00112 at 5 (Apr. 13, 2012), available at 

https://www.regulations.gov/docket/FTC-2022- 

0036. 

107 In a similar vein, a number of states have 

enacted laws that require any advertised or quoted 

vehicle price to include any non-governmental fees 

charged by the dealer. See, e.g., Or. Admin R. 137– 

020–0020(3)(c) (requiring any price stated in an ad 

or in a price quotation to be the offering price, 

excluding only taxes, license, and other specified 

fees); Cal. Veh. Code sec. 11713.1(b)–(c) (making it 

a violation of the regulation to advertise the total 

price of a vehicle without including all costs to 

purchaser at the time of the sale, except taxes, 

registration, and other specified charges); Wis. 

Admin. Code Trans. 139.03(3) (requiring an 

advertised price include ‘‘all charges that shall be 

paid by the purchaser to acquire ownership of the 

vehicle with the exception of sales tax, title and 

registration fees’’); Oh. Admin. Code 109:4–3– 

16(B)(21) (prohibiting advertising ‘‘any price for a 

motor vehicle unless such price includes all costs 

to the consumer except tax, title and registration 

fees, and a documentary service charge’’); see also 

Ga. Dept. of Law Consumer Prot. Div., Auto 

Advertising & Sales Practices Enforcement Policies, 

11 (‘‘Advertised prices must state the actual total 

purchase price of the vehicle, excluding only 

government fees . . . . Any advertisement which 

lists a price ‘plus’ some additional amount will be 

considered to be deceptive.’’), https://

consumer.georgia.gov/business-services/autoadvertising-and-sales-practices-enforcementpolicies; accord N.Y.C. Admin Code sec. 20– 

271(b)(1) (used vehicles must display the total 

selling price, inclusive of all dealer fees but 

exclusive of government charges); cf. Att’ys General 

of 31 States & DC, Comment Letter on Public 

Roundtables: Protecting Consumers in the Sale and 

Leasing of Motor Vehicles, Project No. P104811, 

Submission No. 558507–00112 at 5 (Apr. 13, 2012), 

available at https://www.regulations.gov/docket/ 

FTC-2022-0036 (recommending the FTC adopt a 

rule requiring all advertised prices and price quotes 

for motor vehicles include all required nongovernmental fees). 

108See, e.g., Sanctuary Belize Litig., 482 F. Supp. 

3d at 397 (‘‘Representations with respect to . . . [a 

product’s] cost are also presumptively material.’’) 

(citing Thompson Med. Co., 104 F.T.C. 648); see 

also Crescent Pub. Grp., 129 F. Supp. 2d at 321. 

109See, e.g., Tate’s Auto Ctr., No. 3:18–cv–08176– 

DJH at ¶¶ 41–43 (D. Ariz. July 31, 2018) (alleging 

defendants failed to adequately disclose advertised 

discount incentives were available to select 

consumers only); Progressive Chevrolet Co., No. C– 

4578 at ¶¶ 5–7 (F.T.C. June 13, 2016) (alleging 

respondents failed to disclose or disclose 

adequately that typical consumers cannot qualify 

for advertised terms); TT of Longwood, No. C–4531 

at ¶¶ 16–17 (F.T.C. July 2, 2015) (alleging 

respondent advertised discounts and prices but 

failed to adequately disclose various qualifications 

and restrictions that made incentives or prices 

unavailable to consumers generally); JS Autoworld, 

No. C–4535 at ¶¶ 8–9 (F.T.C. Aug. 13, 2015) 

(alleging prominently advertised price is not 

generally available to consumers); TC Dealership, 

L.P., No. C–4536 at ¶¶ 7–9 (F.T.C. Aug. 13, 2015) 

(same); Timonium Chrysler, No. C–4429 at ¶¶ 4–5 

(F.T.C. Jan. 28, 2014) (alleging advertised prices and 

discounts but failed to disclose consumer would 

have to qualify for multiple rebates not generally 

available to them); Ganley Ford West, No. C–4428 

at ¶¶ 4–5 (F.T.C. Jan. 28, 2014) (alleging advertised 

price discounts applied only to more expensive 

versions of vehicles featured in the ad). 

110See, e.g., Liberty Chevrolet, No. 1:20–cv–3945 

(S.D.N.Y. May 21, 2020) (alleging defendants 

advertised vehicles for sale at a specific price that 

failed to include additional fees dealer later tacked 

onto the price, resulting in higher sales prices than 

advertised); see also Press Release, State of Alaska, 

Dep’t of Law State Settles Consumer Protection 

Case with Lithia Auto Dealers (Dec. 1, 2006), http:// 

www.law.alaska.gov/press/releases/2006/120106- 

Lithia.html (announcing settlement with 

dealerships for charging ‘‘doc prep fees ’’ not 

included in the advertised price of the vehicle, and 

noting such fees are ‘‘nothing more than dealer 

profit’’ and ‘‘consumers often confuse’’ them with 

governmental fees). 

111 Indeed, an entity that induces the first contact 

through false or misleading representation is liable 

under the FTC Act, regardless if the buyer later 

becomes fully informed. See, e.g., Resort Car Rental 

Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 1975); 

FTC v. Gill, 71 F. Supp. 2d 1030, 1046 (C.D. Cal. 

1999) (same), aff’d, 265 F.3d 944 (9th Cir. 2001). 

misrepresentations that they may 

repossess a vehicle, when they cannot. 

For example, the Servicemembers Civil 

Relief Act prohibits repossession of 

vehicles during a servicemember’s 

period of military service without a 

court order as long as the 

servicemember either placed a deposit 

for the vehicle, or made at least one 

installment payment on the contract 

before entering military service.105

Thus, this provision would prevent 

dealers from representing that they 

could repossess military consumers’ 

vehicles under these circumstances. 

Information about when a vehicle may 

be repossessed is likely to affect a 

consumer’s conduct, including the 

consumer’s conduct regarding which 

payments to prioritize while serving our 

country. 

Section 463.3(p) of the proposed rule 

would prohibit misrepresentations of 

‘‘[a]ny of the required disclosures 

identified in this part,’’ including but 

not limited to representations that limit 

or contradict the required disclosures. 

This prohibition against 

misrepresentations complements the 

disclosure requirements in the proposed 

rule. 

D. § 463.4: Disclosure Requirements 

Section 463.4 of the proposed rule 

would require key disclosures by 

dealers. The proposed rule would 

require that such disclosures be made in 

a clear and conspicuous manner, but 

would not prescribe the form that such 

disclosures must take. 

Proposed § 463.4(a) through (e) would 

require disclosures regarding pricing 

and certain financing information. 

Providing consumers with accurate and 

timely pricing and financing 

information is critical, especially in the 

context of motor vehicle sales and 

leasing, where such information has 

proved singularly confusing to 

consumers.106 Such confusion is 

heightened when, as discussed above, 

advertisements list vehicle prices that 

are lower than that at which the dealer 

will sell or lease the vehicle, including 

because of incremental charges and fees 

added to an hours-long transaction as it 

develops. 

Misleading and false price and 

financing information hinder 

consumers’ ability to comparison shop, 

an essential element to a competitive 

market. If buyers can see and compare 

the actual prices and costs for the same 

or similar goods offered by different 

sellers, buyers can choose to visit the 

seller that offers the terms most 

important to them, instead of wasting 

time and expense exploring offers based 

on deceptive information. When price 

or cost information in the market are 

distorted, consumers are unable to 

effectively differentiate between sellers, 

and sellers trying to deal honestly with 

consumers are put at competitive 

disadvantage. 

Proposed § 463.4(a) would require a 

motor vehicle dealer to disclose the true 

‘‘Offering Price’’ of a vehicle in 

advertisements that reference specific 

vehicles or price or financing terms. 

Under the proposed rule, the ‘‘Offering 

Price’’ of a vehicle means ‘‘the full cash 

price for which a dealer will sell or 

finance the motor vehicle to any 

consumer,’’ excluding only required 

government charges.’’ 107

This provision would prohibit 

deceptive and unfair practices with 

respect to price and add-ons. Price is 

one of the most material pieces of 

information for a consumer in making 

an informed purchasing decision.108 Yet 

it is difficult for consumers to uncover 

the actual price for which a dealer will 

sell an advertised vehicle until visiting 

the dealership and spending hours on 

the lot. Sometimes dealers will tout 

prices based on dealer discounts, 

rebates, or other price reductions when 

such benefits are in fact subject to 

hidden or undisclosed restrictions that 

render them unavailable to typical 

customers.109 Other times, dealers hide 

or omit additional dealer charges, such 

as for document preparation fees, 

amounting to several hundred 

dollars.110 It is deceptive for dealers to 

advertise a price without disclosing 

material limitations or additional 

charges required by the dealer that are 

fixed and thus can be readily included 

in the price at the outset.111


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42023 

112See, e.g., Liberty Chevrolet, No. 1:20–cv–03945 

at ¶¶ 12–19 (S.D.N.Y. May 21, 2020) (alleging 

defendants falsely told consumers they were 

required to pay excess fees and taxes, and in other 

instances added such costs to the total price 

without consumers’ knowledge or consent); 

Universal City Nissan, No. 2:16–cv–07329 at ¶¶ 59– 

64 (C.D. Cal. Sept. 29, 2016) (alleging defendants 

engaged in deceptive and unfair practices relating 

to add-on products, including charging consumers 

for add-ons the consumer rejected or did not 

consent to purchase); see also Buckle Up, supra 

note 15, at 6 (summarizing the frustrating and timeconsuming experience of some consumers who 

negotiated what they thought was an agreed-upon 

price with a dealership’s sales staff, only to face 

further rounds of negotiating with the dealer’s 

financing office and the introduction of adds-on 

that caused the price to balloon), https://

www.ftc.gov/reports/buckle-navigating-auto-salesfinancing; Matthew Jones, Bruce Kobayashi & Jason 

O’Connor, Economics at the FTC: Non-Price Merger 

Effects and Deceptive Automobile Ads 12 (2018), 

also published at 53 Rev. Indust. Org. 593 (2018), 

https://www.ftc.gov/system/files/documents/ 

reports/economics-ftc-non-price-merger-effectsdeceptive-automobile-ads/1812-be-rio.pdf 

(discussing the injurious effects of deceptive ads 

about motor vehicle sales and financing, including 

the time and effort spent by consumers visiting the 

dealership, when they might have otherwise 

pursued a legitimate offer elsewhere). 

113The FTC has long considered the deceptive or 

unfair effects of ‘‘drip pricing’’—the colloquial term 

for the pricing practice that proposed § 463.4(a) 

aims to curb—whereby firms advertise only part of 

a product’s price and reveal other mandatory 

charges later in the buying process. In 2012, the 

FTC convened a workshop on drip pricing at which 

then-Chairman Leibowitz discussed the practice’s 

potential to harm consumers by ‘‘causing them to 

pay too much and to waste time searching’’ goods 

and services with deceptively low prices. That same 

year, the FTC sent letters to numerous hotels 

warning against the practice of excluding 

mandatory ‘‘resort fees’’ from quoted room rates and 

urging them to make total quoted prices inclusive 

of all unavoidable costs. See Mary W. Sullivan, 

Economic Analysis of Hotel Resort Fees, Fed. Trade. 

Comm’n (Jan. 2017) (concluding hotels could 

eliminate the potential harm and cost to consumers 

caused by price dripping by disclosing any 

mandatory fees upfront in the quoted price). Almost 

a decade later, complaints about mandatory fee 

disclosures persist. During a recent workshop to 

examine digital ‘‘dark patterns,’’ participants 

identified drip pricing as a leading issue in online 

pricing, with some suggesting the FTC implement 

a rule banning hidden fees and drip pricing. https:// 

www.ftc.gov/news-events/events-calendar/bringingdark-patterns-light-ftc-workshop. See Fed. Trade 

Comm’n, Staff Perspective: ‘‘That’s the Ticket’’ 

Workshop (May 2020) (noting a preference for 

regulating drip pricing in the context of online 

advertising and sale of event tickets), https://

www.ftc.gov/system/files/documents/reports/thatsticket-workshop-staff-perspective/staffperspective_

tickets_final-508.pdf. One model for all-in, upfront 

pricing are DOT’s rules requiring airlines to include 

all mandatory fees in ticket display prices. Under 

these rules, whenever a carrier advertises a price for 

air transportation, that price must be the full price 

customers will have to pay. See 14 CFR part 399 

(implementing 49 U.S.C. 41712). Regardless of the 

market, whether air travel, hotels, or motor 

vehicles, the empirical evidence suggests price 

transparency leads to more informed consumers, 

lower and more uniform prices, and more 

competition among sellers. See, e.g., D. Andrew 

Austin & Jane G. Gravelle, Cong. Rsch. Serv., CRS 

Report for Congress: Does Price Transparency 

Improve Market Efficiency? Implications of 

Empirical Evidence in Other Markets for the Health 

Sector (July 24, 2007), https://fas.org/sgp/crs/ 

secrecy/RL34101.pdf. 

114See generally Fed. Trade Comm’n, The Road 

Ahead: Selling, Financing & Leasing Motor Vehicles 

(Aug. 2011) (Public Roundtables) (Session 2 

transcript) (discussing that each month tens of 

millions of consumers seek out vehicle information 

on edmunds.com, but also discussing the reliability 

(or lack thereof) of such information available 

online), https://www.ftc.gov/system/files/ 

documents/public_events/52654/080211_ftc_

sess2.pdf. 

115To the extent any add-on charges are required 

by a dealership, and thus not optional, such charges 

would have to be disclosed in the Offering Price, 

pursuant to proposed § 463.4(a) et al. 

116See FTC v. Five Star Auto Club, 97 F. Supp. 

2d 502, 528 (S.D.N.Y. 2000) (‘‘at the very least, it 

would have been reasonable for consumers to have 

assumed that the promised rewards were achieved 

by the typical Five Star participant’’); Universal City 

Nissan, No. 2:16–cv–07239 (C.D. Cal. Sept. 29, 

2016) (alleging unlawful deception where a dealer’s 

ads list prominent terms not generally available to 

consumers, including where those terms are subject 

to various qualifications or restrictions); Progressive 

Chevrolet Co., No. C–4578 (F.T.C. June 13, 2016) 

(alleging advertised offer was deceptive because the 

typical consumer would not qualify for the offer). 

117Working in tandem, proposed § 463.4(b)(1) 

and (b)(2) would mean that dealers who engage in 

advertising and charge for optional add-ons must 

have a website, online service, or other mobile 

application by which to disclose an Add-on List. 

118See Nat’l Auto. Dealers Ass’n et al., Voluntary 

Protection Products: A Model Dealership Policy 11 

(2019), https://www.nada.org/regulatorycompliance/voluntary-protection-products-modeldealership-policy (stating add-on products and 

services should be presented ‘‘in a standard, simple 

menu format that, at a minimum, prominently 

discloses: . . . 7. the price of—and monthly 

payment for—each Product . . . .’’) 

119See, e.g., Stipulated Order, FTC v. Universal 

City Nissan, et al., No. 2:16–cv–07239 at Art. III 

(C.D. Cal. Mar. 22, 2017); Stipulated Order, FTC & 

Illinois v. N. Am. Auto. Servs., Inc., No. 1:22–cv– 

0169 at Art. II (N.D. Ill. Mar. 31, 2022). 

These practices are also unfair 

because they are likely to cause 

substantial injury: Consumers lose time 

when they pursue offers that are not 

actually available, and they may end up 

paying more for a vehicle than they 

expected, either because unexpected 

charges are not adequately disclosed 

until late in the transaction, or are never 

disclosed at all.112 By requiring 

disclosure of the true Offering Price 

upfront, § 463.4(a) aims to curb this 

deceptive and unfair conduct, while 

producing the corollary benefit of 

increasing price competition among 

dealers, who would be able to compete 

on truthful, standard terms.113

Specifically, § 463.4(a) would require 

disclosure of the Offering Price when 

dealers advertise a specific vehicle for 

sale as well as when any monetary 

amount or financing term is advertised. 

This provision would further require 

that, upon receipt of a consumer inquiry 

about a specific vehicle or price or 

financing term for any vehicle, the 

dealer must disclose the Offering Price 

of that vehicle, and that if any part of 

such an inquiry or response is made in 

writing, the Offering Price must be 

disclosed in writing as well. This 

provision would require dealers to 

provide accurate information to 

consumers, including those beginning 

their vehicle-shopping process 

online 114 and those selecting a 

dealership based on price. Inaccurate 

price information is likely to cause 

substantial injury for consumers who 

waste time traveling to the dealership in 

pursuit of an offer that does not exist, 

and for consumers who never learn that 

unexpected charges have been added to 

their dense paperwork during the hourslong vehicle buying and financing 

process. 

Section 463.4(b) would require 

dealers to provide consumers with 

information about optional add-on 

charges to help curb deceptive and 

unfair practices. As discussed in Part 

III.B above, misrepresenting that addons are required or charging for add-ons 

without consumers’ Express, Informed 

Consent are significant consumer 

protection concerns. Section 463.4(b) 

would require disclosure on any 

website, online service, or mobile 

application on which vehicles are 

offered for sale, of a list of all optional 

add-ons and the price of each add-on 

(‘‘Add-on List’’).115 The Add-on List 

would have to include all optional addon products for which the dealer 

charges consumers (and their respective 

prices). If the price of the add-on varies 

based on the specifics of the transaction, 

the Add-on List would have to include 

the range the typical consumer will 

pay.116 Due to space constraints, dealer 

advertisements presented not online but 

in another format—such as in print, 

radio, or television—would not be 

required to include the Add-on List. 

Instead, pursuant to § 463.4(b)(2), those 

advertisements would be required to 

disclose the website, online service, or 

mobile application where consumers 

can access a copy of the Add-on List.117

This proposed provision is consistent 

with industry guidance 118 and would 

help ensure that dealers that follow 

such guidance will not be competitively 

disadvantaged relative to those that do 

not. 

For optional add-on products and 

services, proposed § 463.4(c) would 

require dealers to disclose that the 

optional add-on product or service is 

not required and that a consumer can 

purchase or lease the vehicle without 

the add-on. This disclosure would curb 

the deceptive practice of misleading 

consumers into thinking an add-on is 

required when it is not.119 As with 

proposed § 463.4(b), this proposed 

provision is consistent with industry 


jspears on DSK121TN23PROD with PROPOSALS3
42024 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

120See Nat’l Auto. Dealers Ass’n et al., Voluntary 

Protection Products: A Model Dealership Policy 4 

(2019), https://www.nada.org/regulatorycompliance/voluntary-protection-products-modeldealership-policy (stating dealerships should 

‘‘prominently display to customers a poster stating 

that [add-on products and services] offered by the 

dealership are optional and are not required to 

purchase or lease a vehicle or obtain warranty 

coverage, financing, financing on particular terms, 

or any other product or service offered by the 

dealership.’’) 

121Buckle Up, supra note 15, at 7. 

122Consumer Fin. Prot. Bureau, Quarterly 

Consumer Credit Trends: Growth In Longer-Term 

Auto Loans 7–8 (Nov. 2017), https://

files.consumerfinance.gov/f/documents/cfpb_

consumer-credit-trends_longer-term-auto-loans_

2017Q2.pdf; see also Zhengfeng Guo et al., Off. of 

the Comptroller of the Currency, A Puzzle in the 

Relation Between Risk and Pricing of Long-Term 

Auto Loans 2, 4–5, 20 (June 2020), https://

www.occ.gov/publications-and-resources/ 

publications/economics/working-papers-bankingperf-reg/pub-econ-working-paper-puzzle-long-termauto-loans.pdf (finding motor vehicle financing 

with six-plus-year terms have higher default rates 

than shorter-term financing during each year of 

their lifetimes, after controlling for borrower and 

loan-level risk factors). 

123The cost disparities resulting from monthly 

payment fixation can be even greater because 

financing entities tend to charge higher interest 

rates for longer terms. See Nat’l Credit Union 

Admin., Credit Union and Bank Rates 2021 Q1 

(Mar. 26, 2021), https://www.ncua.gov/analysis/ 

cuso-economic-data/credit-union-bank-rates/creditunion-and-bank-rates-2021-q1 (listing national 

average rates for new motor vehicle and used motor 

vehicle financing by term). In the example above, 

the alternate deal presented to the consumer may 

be for the same $25,000 purchase price and same 

$5,000 down payment, but with a longer repayment 

term of 84 months and a higher 12% APR. With this 

alternative, the new monthly payment of $353 is 

still considerably lower than the $425 monthly 

payment first offered, but it will in fact result in the 

consumer paying in $4,161 additional interest over 

the course of the extended period, and owing a 

balance of $7,500 to trade in the vehicle on the 

same 60-month timeline as the first offer. 

124See Auto Buyer Study, supra note 11, at 14 

(‘‘the dealer can extend the maturity of the 

financing to reduce the effect of the add-on on the 

monthly payment, obscuring the total cost of the 

add-on’’); Auto Buyer Study: Appendix, supra note 

66 (Study participant 457481 at 229, 233 

(dealership pitching add-ons at the end of the 

negotiation, and in terms of consumer’s monthly 

price); Study participant 437175 at 701 (dealership 

pitching add-ons in terms of monthly price)); see 

also Liberty Chevrolet, No. 1:20–cv–03945 at ¶¶ 12– 

19 (S.D.N.Y. May 21, 2020) (alleging dealership 

included deceptive and unauthorized add-on 

charges in consumers’ transactions); Ramey Motors, 

No. 1:14–cv–29603 at ¶¶ 21–28 (S.D. W. Va. Dec. 

11, 2014) (alleging dealer emphasized attractive 

terms such as low monthly payments but concealed 

substantial cash down payments or trade-in 

requirements); Billion Auto, No. 5:14–cv–04118– 

MWB at ¶¶ 38–46 (N.D. Iowa Dec. 11, 2014) 

(alleging dealer touted attractive terms such as low 

monthly payments but concealed significant extra 

costs). 

125See, e.g., Norm Reeves, No. 8:17–cv–01942 at 

¶¶ 28–30 (C.D. Cal. Nov. 3, 2017) (alleging 

deceptive representations regarding monthly 

payments); Universal City Nissan, No. 2:16–cv– 

07329 at ¶¶ 30–33 (C.D. Cal. Sept. 29, 2016) 

(alleging misrepresentations regarding monthly 

payments). 

126See, e.g., New World Auto Imports, No. C– 

4437 at ¶¶ 8–11 (F.T.C. Feb. 20, 2014) (alleging 

misrepresentation regarding monthly finance 

payments); New World Auto Imports, No. 3:16–cv– 

02401–K at ¶¶ 36–38 (N.D. Tex. Aug. 18, 2016) 

(alleging deceptive representations regarding 

monthly payments); see also Melissa Harper, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00007 (Apr. 2, 2011), available at https:// 

www.regulations.gov/docket/FTC-2022-0036 

(stating consumer paid monthly payments for 4 

years, told she still owed money on the car when 

originally told it would be paid off in this time 

period). 

127See, e.g., Complaint, In re Paramount Kia of 

Hickory, LLC, No. C–4450 at ¶¶ 5–6 (F.T.C. Apr. 11, 

2014) (alleging misrepresentation regarding 

monthly payment amount); Complaint, In re Nissan 

of South Atlanta, LLC, No. C–4435 at ¶ 5 (F.T.C. 

Feb. 28, 2014) (alleging misrepresentation of 

monthly payment amount); Universal City Nissan, 

No. 2:16–cv–07329 at ¶¶ 30–34 (C.D. Cal. Sept. 29, 

2016) (alleging advertised $38 monthly payment 

only applied for the first 6 months; offer in fact 

required $179.62 per month for the remaining 30 

months). 

guidance 120 and would avoid 

competitive disadvantage to those 

dealerships that follow such guidance. 

Section 463.4(d) would require 

dealers to disclose the total of payments 

when quoting monthly payment 

amounts to a prospective buyer or 

lessee. Specifically, § 463.4(d) would 

prohibit motor vehicle dealers from 

making any representation about a 

monthly payment for any vehicle 

without disclosing the total amount the 

consumer will pay to purchase or lease 

the vehicle at that monthly payment 

amount after making all monthly 

payments; if that total amount assumes 

consideration provided by the consumer 

(e.g., a cash down payment or a tradein), those amounts must also be 

disclosed. 

Section 463.4(e) would complement 

the preceding provision by requiring 

dealers, when they compare different 

monthly payment options with 

consumers, to inform consumers that a 

lower monthly payment will increase 

the total amount the consumer will pay, 

if true. These provisions are intended to 

prohibit dealers from using claims 

regarding monthly payment amounts to 

falsely imply savings or parity between 

different offers where reduced monthly 

payments increase the total vehicle cost 

due to an increased payment term, and 

potentially an increased annual 

percentage rate (‘‘APR’’) as well. 

Additionally, when a consumer pays for 

his or her vehicle over a longer period 

of time, there is an increased likelihood 

that the consumer will continue to owe 

money even after he is no longer driving 

the vehicle. This results in negative 

equity when the consumer needs or 

wants to purchase another vehicle, 

because a vehicle’s value tends to 

decline faster than the amount owed.121

Longer motor vehicle financing terms 

also have higher rates of default, 

potentially posing greater risks to both 

borrowers and financing companies.122

Take, for example, a borrower who 

finances the purchase of a $25,000 

vehicle with a $5,000 down payment 

and a 10% APR. With a five-year (60- 

month) term, her monthly payment will 

be $425. If the consumer balks at that 

monthly payment, the dealer could 

quote her a lower monthly payment of 

$332. If, however, the down payment 

and APR stay the same, that would 

result in a seven-year (84-month) term. 

Although the second offer might appear 

to be less costly, it will result in the 

consumer paying $2,394 more in 

interest over the course of the longer 

financing term. The second offer would 

also obligate the buyer to make 

payments for two additional years; if 

she needed to shop for a new vehicle 

after 60 months, she would still owe an 

outstanding balance of $7,195 on the 

first vehicle.123

As discussed further below, singular 

focus on monthly payments can also 

make consumers susceptible to 

unwanted, undisclosed, or even 

fictitious add-on charges and fees, 

because consumers may not notice 

relatively small add-on charges secreted 

within a monthly payment (e.g., $15). 

Such hidden charges can cost a 

consumer more than a thousand dollars 

over the course of an auto financing or 

lease term.124

Further, when dealers advertise 

deceptively low monthly payments that 

amount to a fraction of the total cost of 

the vehicle, consumers may end up 

owing a large balloon payment in 

addition to the advertised monthly 

payment amount, either at signing 125 or 

after finishing their monthly 

payments,126 or may be required to pay 

a much higher monthly payment once 

the artificially low ‘‘teaser rate’’ 

expires.127

The Commission anticipates that the 

proposed rule’s requirement that dealers 

must disclose the total cost of a vehicle 

when quoting monthly payment 

amounts to a prospective buyer will 

help prospective buyers make more 

informed purchasing decisions and curb 

these deceptive and unfair practices. 

Similarly, by requiring that dealers 

disclose that a lower monthly payment 

amount will increase the vehicle’s total 

cost, when true, consumers will be able 

to gauge how much a given financing or 

lease offer will ultimately cost in order 

to compare different offers. This will 

help to decrease the likelihood that a 

consumer will be deceived about the 

comparative cost of a financing or lease 

offer, and help prevent dealers from 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42025 

128See 12 CFR 1026.24(d) (Regulation Z triggering 

terms provision); 12 CFR 213.7 (Regulation M 

triggering terms provision). These rules require that 

when an advertisement for a financed purchase or 

a lease mention a specific triggering term—for 

example, a monthly payment amount—that those 

advertisements also disclose other specified terms, 

including the number, amount, and timing of 

payments. 

129See Auto Buyer Study, supra note 11, at 11. 

130Att’ys General of 31 States & DC, Comment 

Letter on Public Roundtables: Protecting Consumers 

in the Sale and Leasing of Motor Vehicles, Project 

No. P104811, Submission No. 558507–00112 at 5 

(Apr. 13, 2012), available at https://

www.regulations.gov/docket/FTC-2022-0036 

(describing the addition of documentary fees that 

‘‘often come as complete surprises to consumers, 

and are not disclosed until well after the dealer and 

consumer agree on a sales price for the vehicle.’’); 

Auto Buyer Study, supra note 11, at 13–14, (offering 

add-ons after a vehicle price is negotiated is a form 

of drip pricing, which can result in higher prices 

to consumers by reducing the likelihood consumers 

will search for alternative suppliers). 

131See Liberty Chevrolet, No. 1:20–cv–03945 at 

¶¶ 17–18 (S.D.N.Y. May 21, 2020) (alleging dealer 

inflated vehicle prices and charged consumers 

double for sales tax or other fees, and often 

consumers did not notice the bait and switch from 

an earlier price document to the final sales price 

contained in ‘‘a stack of complex, highly technical 

documents presented at the close of a long 

financing process after an already lengthy process 

of selecting car and negotiating over its price.’’); 

Universal City Nissan, No. 2:16-cv-07329 at ¶¶ 60, 

91–93 (C.D. Cal. Sept. 29, 2016) (alleging dealer 

rushed consumers through signing process, and 

often consumers were unaware of add-on products 

included in the paperwork); see also Buckle Up, 

supra note 15, at 10–11. As part of the FTC’s study 

of dozens of motor vehicle buyers who recently 

purchased a vehicle, many consumers reported they 

were unable to review the paperwork 

consummating the purchase transaction. The 

consumers reported several reasons, including that 

the long transaction left them exhausted, the dealer 

rushed them through the signing process, and they 

were overwhelmed or thought it would take them 

a few hours or days to read all of the fine print in 

the paperwork. These factors likely contributed to 

many consumers lacking awareness of critical 

financing terms. 

132See Auto Buyer Study, supra note 11, at 13. 

133See Buckle Up, supra note 15, at 6. Some 

study participants found ‘‘after negotiating what 

they thought was an agreed-upon price for a vehicle 

with sales personnel, they faced negotiating again 

during the dealer’s financing process, which they 

found frustrating and time-consuming.’’ In addition, 

‘‘introduction of add-ons during financing 

discussions caused several participants’ total sale 

price to balloon from the cash price.’’ Accordingly, 

the staff report recommends ‘‘discussing the ‘outthe-door’ price of the vehicle (the total price, before 

financing, including taxes and fees) before 

discussing financing could help avoid confusion.’’ 

134See Adrienne Roberts, Add-On Services 

Emerge as Car Dealers’ Profit Generator, Wall Street 

Journal, Apr. 7, 2019, https://www.wsj.com/articles/ 

add-on-services-emerge-as-car-dealers-profitgenerator-11554634800; Edmunds, Where Does the 

Car Dealer Make Money, June 13, 2019, https://

www.edmunds.com/car-buying/where-does-the-cardealer-make-money.html. As of August 2021, 

approximately 94% of new vehicles and 86% of 

used vehicle sales involved dealerships’ finance 

and insurance office, which offers products and 

services such as GAP insurance, alarm systems and 

extended warranties. Nat’l Auto. Dealers Ass’n, 

Average Dealership Profile at 1 (Aug. 2021), https:// 

www.nada.org/media/4129/download?inline. 

135See, e.g., Individual consumer complaint, filed 

Mar. 27, 2021 (‘‘I bought this warranty February 

2nd with insistence from the dealer. They advertise 

false coverage, most of the things they supposedly 

covered come with limitations and exclusions in 

which you are ultimately not covered at all. The[re 

a]re is so many exclusions it’s ridiculous, there is 

a total of A–Z of letters with each one stating 

various parts that are not covered, I will only 

mention one since there is an absurd amount. Letter 

B states, ‘repair or replacement of any covered 

component when it has been determined that the 

condition existed prior to purchase of this 

agreement.’ Lovely, so if you bought your vehicle 

used, you are not covered. Their contract is 

misleading, you’re promised coverage but then they 

find loopholes and you are left with no coverage.’’); 

Individual consumer complaint, filed Aug. 29, 2019 

(‘‘Federal Trade Commission, I believe I have been 

treated unfairly as a consumer in the state of Iowa 

. . . . I was aggressively sold GAP insurance while 

purchasing a vehicle . . . . The [ ] dealership made 

a lot of promises when selling the GAP insurance 

which I have documentation for, but then failed to 

honor those promises once I needed the GAP 

insurance after a no fault deer collision . . . The 

[ ] dealership aggressively sold me GAP insurance 

as ‘an add-on car insurance coverage that would 

cover the ‘gap’ between the amount owed on the car 

and the car’s actual cash value in the event of an 

accident or collision. I was told my primary 

insurance company . . . would only cover the cash 

value, I would pay my $500 deductible, and [the 

dealership]’s GAP would cover the remaining 

amount owed to pay the lien holder down to a zero 

balance . . . . Instead of getting the peace of mind 

they sold by adding GAP insurance, [the dealership] 

left me to cover the remaining balance of $998.62 

after I pay the $500 insurance deductible.’’); 

Individual consumer complaint, filed June 23, 2021 

(‘‘The dealership also sold an aftermarket warranty. 

24 hours after taking delivery, I had the vehicle 

inspected and was informed of $6,000 in repairs 

. . . . Once the warranty company checked the 

vehicle, they informed me that the warranty was 

void due to intake and tubing modifications. 

Therefor[e], the dealership sold a warranty for a 

vehicle that could not be warrantied by the 

company’’); Individual consumer complaint, filed 

May 12, 2021 (‘‘I purchased a 2011 Chevy Malibu 

from a dealer and with the purchase, also 

purchased a 5 year, 100,000 mile power train 

warranty. I have had the car for 39 months and have 

driven about 35,000 miles since purchase. The car 

has had a couple issues and the warranty has never 

covered ANY repair costs at any time. 2 weeks ago, 

an item in the engine broke and now is not 

functioning at all. The mechanic reached out to [the 

extended warranty provider] and was told nothing 

will be covered. I called and asked and got told that 

covered items would be covered along with labor. 

We continue to get the run around with me being 

told one thing and the mechanic another. This 

warranty has been nothing more than a waste of 

time, money, and is now in my mind a scam to get 

money from unsuspecting customers.’’). 

136See Nat’l Auto. Dealers Ass’n et al., Voluntary 

Protection Products: A Model Dealership Policy 5 

Continued 

including optional add-on products or 

services without the consumer’s 

Express, Informed Consent. These 

proposed provisions do not conflict 

with ‘‘triggering term’’ requirements 

under other federal rules, including 

Regulation Z (of the Truth in Lending 

Act) and Regulation M (of the Consumer 

Leasing Act).128

Taken together, provisions 463.4(a) 

through (e) are intended to curb 

deceptive and unfair conduct related to 

pricing and add-ons. As discussed 

above, consumers are presented with a 

high volume of dense information 

during the long and complex motor 

vehicle buying or leasing experience. In 

some cases, prospective buyers receive 

conflicting information or are not 

provided key information, or fully 

informed about applicable charges. 

These practices harm consumers who 

may incur time and expense during the 

vehicle-shopping process or incur 

unexpected costs when dealers tout 

artificially low costs and other 

incentives in advertising and during 

negotiations, only revealing that those 

deals are not available late in the buying 

process, if at all. For example, 

participants in the FTC’s qualitative 

Auto Buyer Study encountered 

situations where dealers settled on a 

price with them on the sales floor, but 

later a financing representative revoked 

the agreed upon price, claiming that it 

could not be honored.129

Dealer control over the flow and 

timing of information enables them to 

add charges or change contract terms 

late in the purchase or lease process.130

In some instances, after consumers have 

spent hours traveling to the dealership 

and then on the lot (perhaps after 

already having spent hours comparing 

prices and features online), dealers 

present a large pile of paperwork and 

give consumers little time to review it. 

As a result, consumers are unaware that 

charges have been added or promised 

discounts or benefits have been 

removed.131 In other instances, 

consumers learn about additional 

charges or changes to their terms after 

they have invested substantial time and 

energy in the buying or leasing 

process.132 Requiring that consumers 

receive clear pricing disclosures early in 

the process will curb situations where 

consumers face unexpected charges at 

the end of the vehicle-buying 

process.133

E. § 463.5: Dealer Charges for Add-Ons 

and Other Items 

Section 463.5 of the proposed rule 

would prohibit charging for add-on 

products that provide no benefit to the 

consumer and would prohibit charging 

consumers without Express, Informed 

Consent. Add-on products and services 

are commonly offered by dealers in 

conjunction with vehicle financing or 

leasing, and these products and services 

make up a significant share of dealers’ 

profits.134 In some cases, dealers appear 

to charge for add-on products or 

services under circumstances in which 

the consumer could never benefit from 

that product or service.135 However, 

charging for non-beneficial products is 

inconsistent with industry guidance,136


jspears on DSK121TN23PROD with PROPOSALS3
42026 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

(2019), https://www.nada.org/regulatorycompliance/voluntary-protection-products-modeldealership-policy (explaining that when 

determining which voluntary protection products to 

offer to customers, ‘‘the dealership should have 

confidence in the value that the product offers to 

customers’’, including that it should ‘‘understand 

whether its coverage is already provided by another 

product being purchased by the customer,’’ and 

stating ‘‘[i]t is essential customers have a clearly 

defined path to receiving such benefits.’’). 

137 GAP products cover the difference, or ‘‘gap,’’ 

between the amount the consumer owes on the 

motor vehicle financing and the amount received 

from the vehicle insurer in the event of a total loss. 

A gap is more likely when the loan-to-value (LTV) 

ratio is high, since the outstanding balance owed by 

the consumer at the time of a total loss is more 

likely to exceed the insurance proceeds; conversely, 

with a low LTV, the insurance payout for a totaled 

vehicle will likely cover the consumers’ 

outstanding debt, rendering GAP unnecessary. See 

Consumer Fin. Prot. Bureau, Supervisory 

Highlights, Issue 19—Summer 2019 at 4, https://

files.consumerfinance.gov/f/documents/cfpb_

supervisory-highlights_issue-19_092019.pdf 

(describing as unlawful the sale of ‘‘a GAP product 

to consumers whose low LTV meant that they 

would not benefit from the product’’). 

138The Road Ahead: Selling, Financing & Leasing 

Motor Vehicles, a Roundtable, Panel 2: 

Misrepresentations and Other Consumer Protection 

Issues in Motor Vehicle Leasing, comment of 

panelist Tom Domonoske, transcript at 19–21 (Nov. 

17, 2011), https://www.ftc.gov/sites/default/files/ 

documents/public_events/road-ahead-3rdroundtable-november-17th/dc_sess2.pdf; Dale 

Irwin, Slough Connealy Irwin & Madden LLC, 

Comment Letter on Public Roundtables: Protecting 

Consumers in the Sale and Leasing of Motor 

Vehicles, Project No. P104811, Submission No. 

558507–00060 (Dec. 29, 2011), available at https:// 

www.regulations.gov/document/FTC-2011-0027- 

0001 (‘‘fraudulent sale of duplicative extended 

warranty coverage on new cars’’); FSP and Assocs., 

LLC, Comment Letter on Public Roundtables: 

Protecting Consumers in the Sale and Leasing of 

Motor Vehicles, Project No. P104811, Submission 

No. 558507–00094 (Mar. 19, 2012), available at 

https://www.regulations.gov/docket/FTC-2022-0036 

(one of ‘‘the most insidious elements of car dealer 

financing is . . . insurance [add-ons] they load into 

every contract,’’ which in ‘‘most cases the purchaser 

has no idea it is there’’ and ‘‘adds to the overall 

interest and vehicle cost and usually provides no 

benefit to the purchaser’’); Consent Order, 

Consumer Fin. Prot. Bureau v. Wells Fargo Bank, 

N.A., No. 2018–BCFP–0001 at ¶¶ 27–39 (Apr. 20, 

2018) (finding force-placing duplicative or 

unnecessary collateral-protection insurance on 

hundreds of thousands of borrowers’ vehicles); 

StewartFin. Co. Holdings, No. 103CV–2648 at ¶¶ 28, 

45–48 (N.D. Ga. Sept. 4, 2003) (‘‘On numerous 

occasions, Stewart Finance has sold Car Club to 

borrowers who do not own cars or do not have 

driver’s licenses and thus, would not benefit from 

the product’’); cf. Nat’l Payment Network, No. C– 

4521 at ¶¶ 4–14 (F.T.C. May 4, 2015) (alleging 

provider of third-party vehicle repayment service 

failed to disclose fees associated with financing 

program often exceed consumers’ savings from 

using the program); Matt Blatt, No. C–4532 at ¶¶ 4– 

13 (F.T.C. May 4, 2015) (alleging dealership failed 

to disclose fees associated with third-party vehicle 

repayment service often exceeded consumers’ 

savings from using the program). 

139See, e.g., Ind. Code sec. 24–4.5–3–202(e)(ix) 

(prohibiting sale of GAP when LTV is less than 80); 

4 Colo. Code Regs. sec. 902–1:8(g) (prohibiting sale 

of GAP when the consumer, the credit terms, or the 

purchased vehicle do not qualify for, or conflict 

with, coverage); S.C. Code sec. 37–30–120(I)(1) 

(prohibiting sale of GAP unless seller reasonably 

believes the borrower will be eligible for a benefit). 

140Consistent with TILA, charges included 

entirely in the finance charge are not ‘‘optional 

Add-ons.’’ 

and dealerships that profit from such 

sales put honest dealerships at a 

competitive disadvantage. 

Proposed § 463.5(a) would prohibit 

this practice. A dealer would be in 

violation of this provision if, for 

example, the dealer offered and charged 

for products such as ‘‘rustproofing’’ that 

did not actually prevent rust, offered 

purported theft-prevention or theftrecovery services without proof that the 

services actually prevented theft or 

recovered stolen items, or charged for 

‘‘nitrogen-filled tires’’ that in fact 

contained no more nitrogen than 

naturally exists in the air. A dealer 

would also violate this provision if the 

dealer sold GAP insurance to buyers 

whose financing balance was so low 

that ordinary insurance would be 

adequate to cover any loss.137 Further, 

the proposed restriction would prohibit 

the sale of GAP insurance when hidden 

restrictions would exclude a vehicle 

buyer from coverage (e.g., where the 

consumer’s vehicle is among a list of 

vehicles excluded from coverage, or the 

consumer’s neighborhood is excluded 

from coverage). Similarly, the proposed 

rule would prohibit other optional addon products or services that offer 

consumers no benefit, including 

extended warranties that merely 

duplicate coverage already provided on 

the vehicle.138

Consumers do not agree to purchase 

additional products from which they 

could not benefit unless they are led to 

believe, directly or by omission, that 

these products would be beneficial. 

Rather than requiring an additional, 

confusing disclosure—e.g., that the 

dealer is charging extra for an item that 

will not provide the consumer any 

benefit—this provision would prevent 

dealers from being able to extract 

additional charges from consumers 

based on deception. Accordingly, and 

similar to provisions enacted by a 

number of states,139 § 463.5(a) of the 

proposed rule would prohibit motor 

vehicle dealers from marketing or 

selling an add-on product or service if 

the consumer would not benefit from 

such an add-on product or service. 

Section 463.5(b) of the proposed rule 

would curb the practice of charging for 

optional add-ons without the 

consumer’s consent or misrepresenting 

that an optional add-on is instead a 

required purchase. It would also 

prohibit dealers from changing pricing 

information in the financing office. 

Specifically, proposed § 463.5(b)(1) 

states that dealers may not charge for 

optional add-ons unless they disclose 

up front the cash price at which a 

consumer may purchase the vehicle 

without additional add-ons. The 

proposed rule would require that 

dealers disclose, and offer to close the 

transaction for, the Cash Price without 

Optional Add-ons, separately itemizing 

the Offering Price, any discounts, 

rebates, or trade-in valuation, and 

required government charges. If the 

prospective buyer declines to purchase 

the vehicle at that price, the dealer must 

obtain confirmation in writing, with the 

date and time recorded, signed by the 

consumer and a manager of the 

dealership. The dealer must retain this 

signed form to document that the dealer 

has provided the required Offering Price 

disclosure to consumers before 

including optional add-ons in a sales 

transaction. The Cash Price without 

Optional Add-ons disclosure and 

declination must be limited to the 

information required by this § , and 

cannot be presented together with any 

other written materials. 

Proposed § 463.5(b)(2) would require 

similar disclosures in the context of 

financed transactions: dealers would not 

be permitted to charge for optional addons without disclosing, and offering to 

consummate the transaction for, the 

Cash Price without Optional Add-ons 

plus the finance charge, factoring in any 

cash down payment or trade-in 

valuation (and separately itemizing the 

components of the offer).140 If the 

consumer declines to finance the 

transaction for that amount, the dealer, 

as above, must obtain confirmation of 

that declination in writing. The 

disclosure and declination must be 

limited to the information required by 

this section, and cannot be presented 

with any other written materials 

Proposed § 463.5(b)(3) would require 

a dealer, before charging for any 

optional add-on, to disclose the cost of 

the transaction without any optional 

add-ons (whether the transaction is 

financed or not), and also disclose the 

charges for the optional add-ons 

selected by the consumer, separately 

itemized. 

Section 463.5(c) of the proposed rule 

would prohibit motor vehicle dealers, in 

connection with the sale, financing, and 

leasing of vehicles, from charging 

consumers for any item without their 

Express, Informed Consent. ‘‘Express, 

Informed Consent’’ is defined as an 

affirmative act communicating 

unambiguous assent to be charged, 

made after receiving and in close 

proximity to a Clear and Conspicuous 

disclosure, in writing, and also orally 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42027 

141See, e.g., Stipulated Order, FTC v. Liberty 

Chevrolet, Inc., No. 1:20–cv–03945 (S.D.N.Y. May 

22, 2020) (defining Express, Informed Consent in 

the same manner). 

142See generally Buckle Up, supra note 15. As 

part of the FTC’s qualitative study of dozens of 

consumers who had recently purchased a vehicle, 

nearly all complained about the time spent at the 

dealership and the hefty paperwork needed to 

complete the transaction. Several consumers 

learned during their post-purchase interviews that 

they had bought add-ons that they did not know 

about (or that they had declined), others thought 

they got add-ons for free but in fact paid for them, 

and some purchased GAP insurance only because 

the dealer said or implied that it was mandatory. 

143Universal City Nissan, No. 2:16–cv–07329 at 

¶¶ 58, 60 (C.D. Cal. Sept. 29, 2016) (alleging 

preprinted contracts and rushing consumers to 

sign); Liberty Chevrolet, No. 1:20–cv–03945 at 

¶¶ 17–19 (S.D.N.Y. May 21, 2020) (alleging charging 

consumers for taxes twice by rushing consumers to 

sign); see also Individual consumer complaint, filed 

May 18, 2021 (‘‘They signed me up for a service 

plan even though I never requested one and charged 

an extra $1000 to my auto loan without my consent. 

They stated I signed the paperwork so theres 

nothing I could do that its my fault for not being 

more careful and they refused to reimburse me even 

though I never knew of or used the service.’’). 

144The Commission has observed that some 

businesses use ‘‘dark patterns’’ to steer consumers 

to take particular action, whether it is making 

claims in a particular way to induce them to click 

on a link on a website or to agree to a transaction, 

even if it includes charges for unwanted items. See, 

e.g., Bringing Dark Patterns to Light: an FTC 

Workshop, Fed. Trade Comm’n (Apr. 29, 2021) 

(Public Event), https://www.ftc.gov/news-events/ 

events-calendar/bringing-dark-patterns-light-ftcworkshop; see also supra note 113. And the 

Commission has seen via extrinsic evidence 

(including consumer complaints and surveys) that 

large numbers of consumers experience unexpected 

and unauthorized charges, notwithstanding 

disclosures, contract disclaimers, and signature 

lines. Summary Judgment Order, FTC v. 

Amazon.com, No. 2:14–cv–01038–JCC, at 17–20 

(W.D. Wash. 2016); N. Am. Auto. Servs., No. 1:22– 

cv–0169 at ¶ 27 (N.D. Ill. Mar. 31, 2022) (alleging 

that, according to a survey of dealership customers, 

at least 83% of them were charged for add-on 

products without authorization or as a result of 

deception). 

145 15 U.S.C. 8402(a)(2), 8403(2) (Restore Online 

Shoppers’ Confidence Act); 16 CFR 310.4(a)(7) 

(Telemarketing Sales Rule). 

146 Liberty Chevrolet, No. 1:20–cv–03945 at Art. II 

(S.D.N.Y. May 27, 2020); Stipulated Order, FTC v. 

Consumer Portfolio Servs., No. 14–cv–00819 at Art. 

III (C.D. Cal. June 11, 2014). Based on years of 

experience in a variety of contexts (including for 

dealings not nearly as complex as motor vehicle 

transactions), the Commission has often required 

such Express, Informed Consent provisions. See, 

e.g., Stipulated Order, FTC v. Yellowstone Capital 

LLC, No. 1:20–cv–06023–LAK at Art. III (S.D.N.Y. 

May 4, 2021); Stipulated Order, FTC v. Prog. 

Leasing, No. 1:20–cv–1688–JPB at Art. IV (N.D. Ga. 

Apr. 22, 2020); Decision and Order, FTC v. 

Bionatrol Health, LLC, No. C–4733 at Art. VI (F.T.C. 

Mar. 5, 2021); Stipulated Order, FTC v. Bunzai 

Media Grp., Inc., No. CV 15–4527–GW(PLAx) at 

Art. I.E (C.D. Cal. June 27, 2018); Stipulated Order, 

FTC v. T-Mobile USA, Inc., No. 2:14–cv–00967–JLR 

at Art. I (W.D. Wash. Dec. 19, 2014); Stipulated 

Order, FTC v. AT&T Mobility, LLC, No. 1:14–cv– 

03227–HLM at Art. I (N.D. Ga. Oct. 8, 2014); 

Decision and Order, In re Google, Inc., No. C–4499 

at Art. I (F.T.C. Dec. 2, 2014). 

147Norm Reeves, No. 8:17–cv–01942 at ¶¶ 42–45 

(C.D. Cal. Nov. 3, 2017) (alleging dealer failed to 

keep records of previous advertisements needed to 

demonstrate compliance with prior order); New 

World Auto Imports, No. 3:16–cv–22401 at ¶¶ 32– 

35 (N.D. Tex. Aug. 18, 2016) (alleging dealer failed 

to keep records of previous advertisements needed 

to demonstrate compliance with prior order). 

148 16 CFR 310.5 (Telemarketing Sales Rule); 16 

CFR 437.7 (Business Opportunity Rule); 16 CFR 

453.6 (Funeral Industry Practices Rule); 16 CFR 

301.41 (Fur Products Labeling). 

149See 12 CFR 1015.8. 

for in-person transactions, of the 

following: (1) what the charge is for; and 

(2) the amount of the charge, including, 

if the charge is for a product or service, 

all fees and costs to be charged to the 

consumer over the period of repayment 

with and without the product or 

service.141 The definition also provides 

nonexclusive examples of what is not 

considered Express, Informed Consent. 

First, documents with a mere signature 

or initials, or a form presented to a 

consumer with preprinted checkboxes, 

would not constitute Express, Informed 

Consent. Similarly, agreement obtained 

through any practice, such as a user 

interface or document, designed or 

manipulated with the substantial effect 

of subverting or impairing user 

autonomy, decision-making, or choice, 

would not constitute Express, Informed 

Consent. 

As discussed above, the length and 

complexity of motor vehicle 

transactions has created an environment 

ripe for deceptive or unfair conduct. 

Consumer complaints suggest some 

dealers have added thousands of dollars 

in unauthorized charges, including for 

add-ons consumers had already 

rejected.142 These issues are exacerbated 

when pre-printed consumer contracts 

automatically include charges for 

optional add-ons, when consumers are 

rushed through stacks of paperwork, or 

when they are asked to sign blank 

documents.143

This provision would help protect 

consumers from unfair or deceptive 

charges buried within lengthy contracts 

or stacks of paperwork.144

In sum, the complexities and duration 

of a typical motor vehicle transaction, 

and the myriad problems observed in 

the industry, call for a means to obtain 

and record Express, Informed Consent 

to charges instead of simply collecting 

signatures or initials within dense 

paperwork. Other statutes and rules 

enforced by the FTC likewise include 

Express, Informed Consent requirements 

for consumer purchases,145 and similar 

provisions appear in Commission orders 

resolving charges that motor vehicle 

dealers or other sellers have levied 

unauthorized charges on consumers.146

F. § 463.6: Recordkeeping 

The proposed rule also includes 

various recordkeeping requirements to 

help ensure compliance with the Rule’s 

disclosure requirements. Section 463.6 

of the proposed rule describes the types 

of records motor vehicle dealers must 

keep, and the time period for retention. 

Specifically, this provision requires 

motor vehicle dealers subject to the Rule 

to keep for a period of 24 months: all 

materially different advertisements, 

sales scripts, training materials, and 

marketing materials regarding vehicle 

price, financing, or leasing terms; all 

materially different copies of lists of 

add-on products and services; consumer 

transaction documents such as purchase 

orders, financing and leasing 

agreements (and related 

correspondence, including declination 

documents as required by the preceding 

section); records to show compliance 

with monthly payment disclosure and 

add-on sales requirements; written 

consumer complaints and consumer 

inquiries regarding add-ons or 

individual vehicles; and other records 

needed to demonstrate compliance with 

this Rule. These recordkeeping 

provisions are necessary to ensure 

dealers make required disclosures under 

the Rule. They will also assist the 

Commission in assessing dealers’ 

compliance with the Rule and help to 

ensure its effectiveness.147 These 

recordkeeping obligations are consistent 

with and similar to requirements 

included in similar Commission 

disclosure rules, as tailored to 

individual industries and markets.148

G. § 463.7: Waiver Not Permitted 

Section 463.7 of the proposed rule 

provides that ‘‘[a]ny attempt by any 

person to obtain a waiver from any 

consumer of any protection provided by 

or any right of the consumer under this 

part constitutes a violation of this part.’’ 

This provision would prevent attempts 

to circumvent provisions of the 

proposed rule, for example during the 

paperwork review process with 

consumers. This provision is modeled 

on a similar provision in the Mortgage 

Assistance Relief Services Rule.149

V. Request for Comment 

You can file a comment online or on 

paper. For the Commission to consider 

your comment, we must receive it on or 

before September 12, 2022. Write 

‘‘Motor Vehicle Dealers Trade 

Regulation Rule—Rulemaking, No. 

P204800’’ on your comment. Your 

comment—including your name and 

your state—will be placed on the public 

record of this proceeding, including, to 

the extent practicable, on the https://

www.regulations.gov website. 


jspears on DSK121TN23PROD with PROPOSALS3
42028 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

Because of the public health 

emergency in response to the COVID–19 

outbreak and the agency’s heightened 

security screening, postal mail 

addressed to the Commission will be 

subject to delay. We strongly encourage 

you to submit your comments online 

through the https://www.regulations.gov 

website. To ensure the Commission 

considers your online comment, please 

follow the instructions on the webbased form. 

If you file your comment on paper, 

write ‘‘Motor Vehicle Dealers Trade 

Regulation Rule—Rulemaking, Matter 

No. P204800’’ on your comment and on 

the envelope, and mail your comment to 

the following address: Federal Trade 

Commission, Office of the Secretary, 

600 Pennsylvania Avenue NW, Suite 

CC–5610 (Annex C), Washington, DC 

20580. 

Because your comment will be placed 

on the public record, you are solely 

responsible for making sure your 

comment does not include any sensitive 

or confidential information. In 

particular, your comment should not 

include any sensitive personal 

information, such as your or anyone 

else’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. You are also solely 

responsible for making sure your 

comment does not include any sensitive 

health information, such as medical 

records or other individually 

identifiable health information. In 

addition, your comment should not 

include any ‘‘trade secret or any 

commercial or financial information 

which . . . is privileged or 

confidential’’—as provided by Section 

6(f) of the FTC Act, 15 U.S.C. 46(f), and 

FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2) 

—including in particular competitively 

sensitive information such as costs, 

sales statistics, inventories, formulas, 

patterns, devices, manufacturing 

processes, or customer names. 

Comments containing material 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). 

In particular, the written request for 

confidential treatment that accompanies 

the comment must include the factual 

and legal basis for the request and must 

identify the specific portions of the 

comment to be withheld from the public 

record. See FTC Rule 4.9(c). Your 

comment will be kept confidential only 

if the General Counsel grants your 

request in accordance with the law and 

the public interest. Once your comment 

has been posted publicly at 

www.regulations.gov—as legally 

required by FTC Rule 4.9(b) —we 

cannot redact or remove your comment 

from the FTC website, unless you 

submit a confidentiality request that 

meets the requirements for such 

treatment under FTC Rule 4.9(c), and 

the General Counsel grants that request. 

Visit the FTC website to read this 

document and the news release 

describing it. The FTC Act and other 

laws 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 it 

receives on or before September 12, 

2022. For information on the 

Commission’s privacy policy, including 

routine uses permitted by the Privacy 

Act, see https://www.ftc.gov/siteinformation/privacy-policy. 

VI. Communications by Outside Parties 

to the Commissioners or Their Advisors 

Written communications and 

summaries or transcripts of oral 

communications respecting the merits 

of this proceeding, from any outside 

party to any Commissioner or 

Commissioner’s advisor, will be placed 

on the public record. See 16 CFR 

1.26(b)(5). 

VII. Questions for Comment 

The Commission seeks comments on 

various aspects of the proposed rule. 

Without limiting the scope of issues it 

seeks comment on, the Commission is 

particularly interested in receiving 

comments on the questions that follow. 

Responses to these questions should be 

itemized according to the numbered 

questions in this document. In 

responding to these questions, include 

detailed, factual supporting information 

whenever possible. 

General Questions for Comment 

When responding to any of the 

following general questions, please 

specify the portion(s) of the proposal to 

which your comment relates. 

1. Does the proposed rule further the 

Commission’s goal of protecting 

consumers from unfair or deceptive acts 

or practices in the motor vehicle 

marketplace? Why or why not? 

2. Are there any unfair or deceptive 

acts or practices not addressed by the 

proposed rule that should be? For 

example, should there be additional 

provisions pertaining to leasing or 

provisions pertaining to interest rates or 

other financing terms? 

3. Are there any additional practices 

that occur largely or exclusively at 

certain types of dealerships that any 

final Rule should address? For example, 

should there be additional provisions 

pertaining to collection or repossession 

practices employed by ‘‘buy here, pay 

here’’ dealerships, including the use of 

electronic disabling devices (sometimes 

called ‘‘starter interrupt’’ or ‘‘kill 

switches’’)? 

4. Portions of the proposed rule 

contemplate additional disclosures in 

an already lengthy, confusing and 

disclosure-heavy but lowcomprehension transaction. Would any 

of the additional proposed disclosures 

do more harm than good? If so, is there 

another measure that should be used to 

address the consumer protection 

concerns described herein? 

5. Should the Commission provide 

more detailed requirements regarding 

the content or form of any of the 

proposed disclosures? 

6. What economic burdens would be 

imposed on dealers if the Rule 

proposals were adopted? Are there 

changes that could be made to lessen 

any such burdens without significantly 

reducing the benefits to consumers? 

7. Does the proposed rule adequately 

address sales and leasing practices that 

take place partially or completely 

online? If not, should there be different 

or fewer or additional requirements for 

online sales and leasing? 

8. Should any final Rule include 

additional provisions to address 

electronic disclosures or recordkeeping? 

Why or why not? If yes, in what 

manner(s)? 

9. Should any final Rule address 

disclosures in other languages? Why or 

why not? If yes, in what manner(s)? 

§ 463.2: Definitions 

10. Are the proposed definitions 

clear? Should any changes be made to 

any definitions? Should the scope of 

any of the proposed definitions be 

expanded or narrowed, and if so, why? 

11. Are additional definitions needed? 

§ 463.3: Prohibited Misrepresentations 

Proposed § 463.3 would prohibit 

dealers from making specified 

misrepresentations. 

12. Are the proposed prohibitions on 

misrepresentations in this section clear, 

meaningful, and appropriate? Should 

the scope of any of the proposed 

prohibitions be expanded or narrowed, 

and if so, how and why? 

13. Would any of the proposed 

prohibitions inadvertently discourage 

truthful advertising to the detriment of 

consumers? For example, would 

prohibitions against misrepresenting the 

cost of a purchase make it less likely 

dealers would include truthful pricing 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42029 

claims in their ads? If so, please provide 

suggestions on how to address these 

issues. 

14. Are there any other practices by 

dealers relating to vehicle sales, 

financing, or leasing that are 

particularly harmful to military 

servicemembers? For example, are there 

particular unfair or deceptive acts or 

practices engaged in by dealerships in 

the proximity of, or within, military 

installations? 

15. Proposed § 463.3(e) would 

prohibit dealers from misrepresenting 

the availability of vehicles at an 

advertised price. Are there situations in 

which dealers misrepresent the 

availability of vehicles without 

reference to price (e.g., the total number 

of vehicles of a certain make, model, 

and year the dealer has available)? If so, 

should the Commission amend the 

proposal in § 463.3(e) to directly address 

such misrepresentations? Why or why 

not? 

16. Proposed § s 463.3(h) and (i) 

would prohibit dealers from 

misrepresenting when the transaction is 

final or binding on all parties and from 

making misrepresentations about 

keeping cash down payments or tradein vehicles, charging fees, or initiating 

legal process or any action if a 

transaction is not finalized or if the 

consumer does not wish to engage in a 

transaction. As indicated in this 

document, these proposed provisions 

are intended to curb problems with the 

spot delivery of vehicles while the 

financing for the vehicle remains 

contingent—problems sometimes 

referred to as ‘‘yo-yo financing.’’ Should 

the Commission consider alternative 

approaches to address such problems, 

such as requiring retail installment sales 

contracts to include a clause prohibiting 

financing-contingent sales, prohibiting 

the dealer from transferring title to a 

trade-in vehicle or performing any 

repairs or reconditioning before a sale is 

final or requiring dealers to return tradein, deposit, and fees, if financing is not 

approved? What would be the effect of 

such a requirement, and what costs and 

benefits would it entail? Are there data 

regarding the feasibility of finalizing 

vehicle financing at or before the time 

the retail installment sales contract is 

signed? 

17. Proposed § 463.3(j) would prohibit 

misrepresentations regarding whether or 

when a dealer will pay off some or all 

of the financing or lease on a 

consumer’s trade-in vehicle. Should 

there be additional protections here—for 

example, should there be a requirement 

that dealers pay off outstanding 

financing or liens on a trade-in vehicle 

within a specified amount of time, or 

before selling the trade-in vehicle? 

18. Are there any other common 

misrepresentations in the motor vehicle 

marketplace that are not adequately 

addressed by the proposed rule? If so, 

please identify them and how they 

should be addressed in any final Rule. 

Please also identify the potential costs 

and benefits associated with the 

approach you propose. 

§ 463.4: Disclosure Requirements 

Proposed § 463.4 would require 

dealers to make specified disclosures. 

19. Are the disclosures that would be 

required by this section clear, 

meaningful, and appropriate? Should 

the scope of any of the proposed 

disclosures be expanded or narrowed, 

and if so, how and why? 

20. What would be the economic 

impact, and the costs and benefits, of 

these disclosure requirements? 

21. Should this section include 

additional disclosure requirements? 

Given the length and complexity of the 

transaction, would additional 

disclosures make the consumer 

experience better or worse? Why or why 

not? If so, what are the costs and 

benefits associated with these additional 

disclosures? 

22. Is the timing of disclosures 

contemplated by this section 

appropriate and sufficient to provide 

consumers with useful information 

regarding the purchase or lease of a 

motor vehicle? 

23. Would any of the required 

disclosures inadvertently discourage 

truthful advertising to the detriment of 

consumers? For example, to the extent 

the proposed rule would require that 

certain disclosures (e.g., Offering Price) 

must accompany other specific 

information, will dealers cease 

providing that other information 

altogether? If so, please provide 

suggestions on how to address these 

issues. 

24. Are there circumstances in which 

dealers should be required to make 

disclosures and contracts available in 

languages other than English? For 

instance, should dealers be required to 

provide disclosures and contracts in any 

language they use for advertising, or in 

any language they use to conduct sales, 

financing, or lease transactions? What 

would be the effect of such a 

requirement, and what costs and 

benefits would it entail? Are there other 

steps the Commission should consider 

taking to protect consumers from 

misrepresentations in dealer 

advertisements when the sale, lease, or 

financing transaction is conducted in a 

different language from the one used in 

advertising? 

25. Are the proposed disclosures 

sufficient to provide consumers with 

clear, meaningful and appropriate 

information about the financing terms of 

the transaction? Are there other steps 

the Commission should consider taking 

to protect consumers from being misled 

regarding their financing terms and to 

ensure that consumers understand their 

financing options? 

26. Proposed § 463.4(a) would require 

dealers to disclose the Offering Price in 

certain advertisements. 

a. Do dealers already calculate a figure 

equivalent to the Offering Price for 

every vehicle in their inventory? If so, 

how is this calculated? 

b. In particular, the Commission is 

contemplating whether it is necessary to 

prohibit advertising any price aside 

from the Offering Price to address 

concerns with unfairness and deception, 

including those described in this 

Document. Or, alternatively, should 

dealers be permitted to state in 

advertisements the Offering Price along 

with other offers that may be of limited 

applicability (provided the nature of the 

limited applicability is clearly 

disclosed)? c. Would the mandatory 

disclosure of Offering Price where 

required ‘‘crowd out’’ other information 

in advertising formats where dealers pay 

for time or space? 

27. Proposed § 463.4(a) would also 

require a dealer to disclose the Offering 

Price in the first response to any query 

about any specific vehicle. 

a. Is it appropriate to limit this 

requirement to only the dealer’s first 

response about the specific vehicle? Or, 

should the Commission require dealers 

to include the Offering Price in 

additional communications to potential 

buyers? 

b. What other measures could be 

taken so consumers know the true 

Offering Price of a vehicle earlier in 

their decision-making process, 

including before expending resources to 

visit the dealership? 

28. Proposed § 463.4(b) would require 

dealers to disclose an Add-on List in 

certain circumstances. 

a. How many add-ons do dealers 

typically offer, and how many of those 

are sold regularly? Would this 

disclosure require such a lengthy list of 

add-on products and services that the 

list would be too long to be meaningful 

to consumers? If so, are there changes 

that could be made to this proposed 

requirement to reduce the amount of 

information disclosed while preserving 

the benefits to consumers? For example, 

would limiting this requirement to addons that are proposed by the dealer to 


jspears on DSK121TN23PROD with PROPOSALS3
42030 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

a prospective buyer, as opposed to 

raised by the consumer, adequately 

address the harms that occur to 

consumers in the context of these 

transactions? Or, should the Add-on List 

be limited to a certain number (e.g., 15) 

of add-on products and services most 

frequently sold by the dealer in the 

previous quarter? 

b. How common is it for the price of 

a given add-on product or service to 

vary for different vehicles and different 

transactions, and on what basis would 

the price vary? Would it be necessary 

for dealers to provide disclosures 

specific to an individual consumer, or 

could this proposed requirement be 

satisfied with a pre-formatted disclosure 

that could be provided to all potential 

buyers or lessees? If prices vary greatly, 

would disclosing the price range 

provide meaningful information to 

consumers? 

c. The proposed rule would allow 

certain advertisements (i.e., those not 

presented on a website, online service, 

or mobile application) to disclose the 

website, online service, or mobile 

application where the consumer can 

view the Add-on List, rather than 

disclosing the Add-on List itself within 

the advertisement. Should the 

Commission take the same or similar 

approach with advertisements presented 

via other forms of media? Why or why 

not? 

d. The proposed rule would require 

dealers that run certain types of 

advertisements and charge for optional 

add-ons to maintain a website, online 

service, or mobile application at which 

an Add-on List may be found. Do all or 

most such dealers already operate a 

website, online service, or mobile 

application that could display the Addon List? 

29. Proposed § 463.4(d) would require 

a dealer to disclose the total amount a 

consumer must pay to purchase or lease 

a vehicle when the dealer makes 

representations about monthly 

payments for a vehicle purchase. Can 

dealers calculate accurate monthly 

payment information for a consumer 

without calculating the total amount? If 

not, is there any value in a consumer 

learning monthly payment information 

before the total amount is calculated? If 

so, how can the proposal be adjusted to 

allow for such information without 

obscuring necessary information about 

the total amount required to purchase a 

vehicle? 

30. Proposed § 463.4(e) would require 

dealers to disclose that a lower monthly 

payment will increase the total amount, 

if lowering monthly payments will do 

so. This provision could require this 

disclosure multiple times in the same 

transaction, for example, when a 

dealer’s financing office is discussing a 

range of different monthly payments 

with the consumer. Would requiring 

multiple disclosures result in the 

disclosure losing effectiveness? Would 

limiting the disclosure, for example, to 

the first time the disclosure is triggered 

have benefits, or would this reduce the 

effectiveness of the disclosure by 

requiring it at a time that is not as 

meaningful to consumers? 

§ 463.5: Dealer Charges for Add-Ons and 

Other Items 

Proposed § 463.5(a) would prohibit 

dealers from marketing or selling an 

add-on product or service to a consumer 

who would not benefit from the add-on 

product or service in connection with 

the sale or financing of a vehicle. 

31. Are the proposed prohibitions in 

this section clear, meaningful, and 

appropriate? Should the scope of any of 

the proposed prohibitions be expanded 

or narrowed, and if so, how and why? 

32. Is the proposal adequate and 

appropriate to address consumer harms 

that occur with the sale of add-on 

products or services from which the 

consumer cannot benefit? Why or why 

not? How could the proposal be 

modified to better address such harms? 

33. This provision is intended to 

prevent conflicting and otherwise 

deceptive representations, and to 

protect consumers without requiring 

additional disclosures in an already 

lengthy, disclosure-heavy process. 

Given these concerns, should additional 

restrictions be placed on all add-ons? In 

particular, the Commission is 

contemplating whether any final Rule 

should restrict dealers from selling addons (other than those already installed 

on the vehicle) in the same transaction, 

or on the same day, the vehicle is sold 

or leased. Would such a provision better 

protect consumers without unduly 

burdening competition? 

34. The proposed rule would prohibit 

dealers from charging for non-beneficial 

add-ons, such as nitrogen-filled tires 

that contain no more nitrogen than 

naturally exists in the air, and GAP 

insurance that cannot be used by the 

consumer. Are there other add-ons for 

which dealers commonly charge that are 

similarly non-beneficial and should be 

specifically referenced in any final 

Rule? 

35. The proposed rule would also 

prohibit dealers from charging for GAP 

Agreements if the consumer’s vehicle or 

neighborhood is excluded from coverage 

or the loan-to-value ratio would result 

in the consumer not benefitting 

financially from the agreement. Should 

any final Rule set forth how to calculate 

the loan-to-value ratio? If so, what 

should such a provision require? 

36. Proposed § 463.5(b) would 

prohibit a dealer from charging for 

optional add-ons unless the dealer first 

discloses the vehicle’s Cash Price 

without Optional Add-ons and records 

that a consumer has declined to 

purchase the vehicle at that price. 

Should the Commission consider means 

to require more affirmative engagement 

by consumers to consciously select addon products and services? In particular, 

the Commission is contemplating 

whether any final Rule should require 

separating the purchase of add-ons from 

the vehicle sale or lease transaction, or 

permit consumers to cancel add-ons 

(that do not involve physical alteration 

to the vehicle) within a short time after 

the sale or lease transaction is 

concluded. What practical limitations 

might such additional requirements 

impose? 

37. Would the proposal prompt 

dealers to make offers regarding add-ons 

at a time and in a manner that is 

meaningful to consumers, or would it 

result in yet another disclosure being 

presented to consumers during an 

already disclosure-heavy transaction? If 

it would result in too many disclosures, 

what other measures could be taken to 

protect consumers from unauthorized 

add-ons, or from being induced to 

purchase add-ons under false pretenses? 

38. Proposed § 463.5(c) would 

prohibit dealers from charging 

consumers without their Express, 

Informed Consent, and would provide 

requirements for what constitutes 

Express, Informed Consent. Does the 

proposal provide a meaningful way to 

obtain consent in an already disclosureheavy transaction? If it would result in 

too many disclosures, what other 

measures could be taken to protect 

consumers from unauthorized charges? 

Are there any additional requirements 

that should be mandated to gain 

Express, Informed Consent? How do 

dealers currently obtain consent for 

charges? 

39. The proposed rule would define 

Express, Informed Consent to exclude 

signed or initialed documents by 

themselves (e.g., those without a closely 

proximate disclosure of the basis and 

amount for the charge), preprinted 

checkboxes, and practices designed or 

manipulated with the substantial effect 

of subverting or impairing user 

autonomy, decision making, or choice. 

Should the Commission identify other 

practices that do not, in themselves, 

constitute Express, Informed Consent? 

Why or why not? Are there other ‘‘dark 

patterns’’ that the Commission should 

address? Is there language, such as in 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42031 

150 5 U.S.C. 553. 

151 12 U.S.C. 5519. 

152See 75 FR 57252 (Sept. 20, 2010). 

153Pursuant to Section 22(d)(4) of the FTC Act, 

15 U.S.C. 22(d)(4), this Notice of Proposed 

rulemaking was not included in the Commission’s 

Spring 2022 Regulatory Agenda because the 

Commission first considered this notice after the 

publication deadline for the Regulatory Agenda. 

154See U.S. Census Bureau, All Sectors: County 

Business Patterns, including ZIP Code Business 

Patterns, by Legal Form of Organization and 

Employment Size Class for the U.S., States, and 

Selected Geographies: 2019, https://

data.census.gov/cedsci/table?q=CBP2019.

CB1900CBP&n=44111%3A44112&

tid=CBP2019.CB1900CBP&hidePreview=true&nkd=

EMPSZES∼001,LFO∼001 (listing 21,427 

establishments for ‘‘new car dealers,’’ NAICS code 

44111, and 25,098 establishments for ‘‘used car 

dealers,’’ NAICS code 44112). The discussion in 

this section of the NPRM concerns facts and 

statistics for automobiles; we invite submissions of 

comparable information for other types of motor 

vehicles. 

155See supra Part V.D. 

156See infra Part XII.C.3. 

other statutes, that the Commission 

should use to further protect consumers 

from being charged without Express, 

Informed Consent? 

§ 463.6: Recordkeeping 

Proposed § 463.6 would require 

dealers to keep, for a period of 24 

months, records necessary to 

demonstrate compliance with the 

proposed rule including all materially 

different advertisements, sales scripts, 

training materials, and marketing 

materials regarding vehicle price, 

financing, or leasing terms; all 

materially different copies of lists of 

add-on products and services; consumer 

transaction documents such as purchase 

orders, financing and leasing 

agreements (and related 

correspondence, including declination 

documents as required by proposed 

§ 463.5(b)); records to show compliance 

with monthly payment disclosure and 

GAP sales requirements; and certain 

written consumer complaints and 

consumer inquiries. 

40. Are the proposed recordkeeping 

requirements clear, meaningful, and 

appropriate? Should the scope of any of 

the proposed recordkeeping 

requirements be expanded or narrowed, 

and if so, how and why? 

41. Would the specified records be 

appropriate to verify compliance with 

the proposed rule? Are any of the 

specified records unnecessary to verify 

compliance with the proposed rule? If 

the records listed are not required to be 

retained, how would such compliance 

be verified? 

42. Should any additional records be 

specifically listed? 

43. Is the 24-month record retention 

period appropriate? Why or why not? If 

not, what period is appropriate? 

44. What are the current record 

retention policies and practices of 

dealers with respect to the records 

specified in proposed § 463.6? 

45. What benefits would these 

recordkeeping requirements provide to 

consumers and businesses? What costs 

would these recordkeeping 

requirements impose on businesses, 

including small businesses? What 

would be the overall economic impact 

of these requirements? Please quantify 

these benefits and costs wherever 

possible. 

46. What volume of records would 

have to be maintained to comply with 

this section? 

47. What has been the experience of 

State and local law enforcement 

agencies with respect to record retention 

requirements? Have such requirements 

been useful? If yes, how? If no, why not? 

To what extent have recordkeeping 

requirements impacted businesses? 

§ 463.9: Relation to State Laws 

48. Does any portion of the proposed 

rule duplicate, overlap, or conflict with 

any federal, state, or local laws or 

regulations? 

49. What has been the experience in 

states that have regulated unfair or 

deceptive conduct involving motor 

vehicles sales, leasing, and financing, 

including with respect to add-ons? How 

have any such regulations assisted with 

combatting unfair or deceptive conduct? 

IX. Rulemaking Procedures 

Pursuant to the Dodd-Frank Act, the 

FTC is authorized to prescribe rules 

under Section 553 of the Administrative 

Procedure Act (‘‘APA’’) 150 with respect 

to unfair or deceptive acts or practices 

by motor vehicle dealers as defined in 

Section 1029 of the Dodd-Frank Act.151

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.152

Accordingly, the Commission is 

publishing this Notice of proposed 

rulemaking pursuant to Section 553 of 

the APA.153

X. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’), 44 U.S.C. 3501 et seq., requires 

federal agencies to seek and obtain 

Office of Management and Budget 

(‘‘OMB’’) approval before undertaking a 

collection of information directed to ten 

or more persons. The proposed rule 

contains disclosure and recordkeeping 

requirements that constitute 

‘‘information collection requirements’’ 

as defined by 5 CFR 1320.3(c) under the 

OMB regulations that implement the 

PRA. 

The Commission estimates that there 

are approximately 46,525 franchise, new 

motor vehicle and independent/used 

motor vehicle dealers in the U.S.154

Estimated Annual Hours Burden: 

7,816,819 hours. 

Estimated Annual Labor Cost: 

$221,870,782. 

Disclosure Requirements 

The proposed rule includes disclosure 

requirements designed to curb pricing, 

leasing, and financing-related deception 

and unfairness, particularly regarding 

the truthfulness of key terms, the costs 

of add-on products and services, and 

obtaining consumers’ consent to 

charges, and to promote competition by 

ensuring that transparent, law-abiding 

dealers are not competitively 

disadvantaged. 

Add-on List Disclosures: Under 

§ 463.4(b), the proposed rule would 

require covered motor vehicle dealers 

that charge for optional add-on products 

and services to disclose clearly and 

conspicuously in advertisements and on 

any website, online service, or mobile 

application through which they market 

motor vehicles, and at any dealership, 

an itemized Add-on List of such 

products and services and their prices. 

This information is necessary to prevent 

misrepresentations regarding add-ons 

and unfair charges to consumers 

without their awareness.155 As set out in 

detail in the Preliminary Regulatory 

Analysis,156 of the 46,525 motor vehicle 

dealers that would be subject to this 

Rule, the Commission anticipates those 

that charge for such add-ons and do not 

already maintain a list will require 

approximately 14 hours to create an 

initial disclosure system, including the 

time necessary to create and review the 

required Add-on List, and to design a 

system that provides for display of the 

Add-on List on websites or other online 

services. In addition, the Commission 

anticipates that periodic revision of 

these lists will be required, at an 

estimated 1 hour of clerical staff time 

per year. Finally, for dealers with an 

online presence, the Commission 

estimates 8 additional hours of 

programmer time to integrate this 

system across the dealership’s online 

and mobile applications. Assuming all 

covered dealers charge for such add-ons 

and do not already maintain this 

information for consumers, this yields 

an initial burden estimate of 651,350 

hours for the industry (46,525 covered 

motor vehicle dealers × 14 hours). The 

Commission further estimates an 


jspears on DSK121TN23PROD with PROPOSALS3
42032 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

157Applicable wage rates are based on data from 

the Bureau of Labor Statistics’ May 2020 National 

Industry-Specific Occupational Employment and 

Wage Estimates for NAICS industry category 

441100—Automobile Dealers, which is available at 

https://www.bls.gov/oes/2020/may/oes_nat.htm. 

158See supra Part V.E; see also supra Part V.D. 

159See infra Part XII.C.5. 

160U.S. Dept. of Trans., Bureau of Trans. Stat., 

New and Used Passenger Car and Light Truck Sales 

and Leases, https://www.bts.gov/content/new-andused-passenger-car-sales-and-leases-thousandsvehicles (last visited Apr. 25, 2022) (listing 

17,059,000 new vehicle sales and 40,807,000 used 

vehicle sales in 2019). 

161Melinda Zabritski, Experian Info. Sol’s, Inc., 

State of the Automotive Finance Market Q4 2020 at 

5, https://www.experian.com/content/dam/ 

marketing/na/automotive/quarterly-webinars/ 

credit-trends/2020-quarterly-trends/v2-2020-q4- 

state-automotive-market.pdf (listing 81.12% of new 

vehicles and 34.59% of used vehicles with 

financing in 2020). 

162Nat’l Auto. Dealers Ass’n, Average Dealership 

Profile at 1 (Aug. 2021), https://www.nada.org/ 

media/4129/download?inline (reporting ‘‘F&I 

penetration’’ figures of approximately 93.6% for 

new vehicles and 86.2% for used vehicles). 

163The Commission calculates the estimated 

number of covered transactions as follows: 

57,866,000 total vehicle sales ÷ 46,525 dealers. 

ongoing, annual periodic revision 

burden at 46,525 hours (46,525 covered 

motor vehicle dealers × 1 hour). 

Combined, this yields an overall 

estimated annual burden of 697,875 

hours for the initial design and periodic 

revision of Add-on Lists. 

The Commission estimates the 

associated labor costs for these 

disclosures by applying appropriate 

hourly labor cost-rates to the hours 

calculated above.157 The Commission 

anticipates that managerial, 

administrative, and programming staff 

are likely to perform the tasks associated 

with preparation of Add-on Lists, 

including entering data, posting the 

Add-on Lists in dealerships or 

submitting them for inclusion on a 

dealer’s website or mobile application, 

and revising them as needed. In 

particular, the Commission estimates as 

follows: 5 hours of time for a finance 

manager to compile and review a master 

Add-on List, at a cost-rate of $65.54 per 

hour; 1 hour of review by a compliance 

officer, at a cost-rate of $26.83 per hour; 

8 hours of time for an programmer to 

design a system for posting prices on 

location, at a cost-rate of $28.90 per 

hour; and 1 hour of time for 

administrative support staff to make 

periodic revisions, at a cost-rate of 

$18.37 per hour. This yields an 

associated annual labor cost burden of 

$28,105,752 for the industry. 

The Commission also anticipates that 

the estimated 81% of dealers with an 

online presence will require 8 hours of 

programmer work for integration work 

across online and mobile applications. 

This yields an estimated annual hours 

burden of 301,480 hours (46,525 motor 

vehicle dealers × 81% × 8 hours). 

Applying associated costs to this 

estimate yields an annual labor cost 

burden of $8,712,722 ($28.90 per hour 

× 81% × 8 hours). 

Disclosures Relating to Cash Price 

without Optional Add-ons: Under 

§ 463.5(b), the proposed rule would 

require covered motor vehicle dealers 

that charge consumers for optional addon products or services to disclose 

pricing and cost information without 

such add-ons. First, before discussing 

any aspect of financing for a specific 

vehicle, aside from its Offering Price, 

the dealer must provide the consumer 

with an itemized disclosure of the 

vehicle’s Cash Price without Optional 

Add-ons, along with the option to 

purchase or finance the vehicle for this 

price, which excludes optional add-on 

products or services. Second, before 

charging a consumer for an add-on 

product or service in a financed 

transaction, the dealer must provide the 

consumer with an itemized disclosure 

of the vehicle’s Cash Price without 

Optional Add-ons, the finance charge, 

and any consumer-provided 

consideration. These disclosures must 

be dated and signed by the consumer 

and a manager for the dealer prior to 

consummation of the transaction. As 

with the proposed Add-on List 

provision, this information is necessary 

to prevent misrepresentations regarding 

the costs of add-ons and to make clear 

that these products and services are 

optional to the consumer. This 

requirement is also intended to prevent 

unfair practices where dealers include 

add-ons in contracts without consumer 

awareness.158

As set out in detail in the Preliminary 

Regulatory Analysis,159 the Commission 

anticipates that dealers that charge for 

optional add-ons will incur certain 

initial and ongoing costs to provide the 

disclosures relating to Cash Price 

without Optional Add-ons. Dealers 

likely will incur some costs to create 

and implement templates for these 

disclosures, either in paper or electronic 

form. The Commission estimates that 

these tasks will require approximately 8 

hours of work by a compliance officer, 

at a cost-rate of $26.83 per hour; 4 hours 

by a sales manager, at a cost-rate of 

$63.93 per hour; and 8 hours of 

programmer time, at a cost-rate of 

$28.90 per hour, for a total of $701.56 

and 20 hours per average dealer (($26.83 

per hour × 8 hours) + ($63.93 per hour 

× 4 hours) + ($28.90 per hour × 8 

hours)). This yields an estimated hours 

burden for all dealers, in the first year, 

of 930,500 hours and an associated labor 

cost burden of $32,640,079. 

Dealers are also likely to incur some 

annual labor costs to populate data into 

these disclosures. The Commission 

anticipates that the added time to input 

this data for the disclosures relating to 

Cash Price without Optional Add-ons 

will be minimal, as they consist of 

information that dealers already obtain 

from the consumer in the ordinary 

course of business in order to complete 

these vehicle sales transactions. The 

Commission estimates that inputting the 

data needed for the disclosures in 

§ 463.5(b)(1), (b)(2), and (b)(3) will take 

two minutes for a salesperson to 

complete at a rate of $21.84 per hour. 

This yields an average cost per 

disclosure of $0.73 (rounded to the 

nearest cent) for completing the 

required disclosures. Dealers would 

need to provide the § 463.5(b)(1) 

disclosure for every vehicle they offer 

for sale with any optional add-on 

products or services; the 463.5(b)(2) 

disclosure for every vehicle sale that is 

financed and includes an optional addon; and the 463.5(b)(3) disclosure for 

every vehicle sale that includes an 

optional add-on. 

The Commission estimates that 

approximately 57,866,000 vehicles are 

sold annually, including an estimated 

17,059,000 new vehicles and 40,807,000 

used vehicles.160 The Commission 

assumes that each vehicle sale involves 

an offer of optional add-ons, and further 

estimates that approximately 81% of 

new vehicle sales and 35% of used 

vehicle sales are financed,161 and that 

approximately 94% of new vehicle sales 

and 86% of used vehicle sales includes 

an optional add-on.162

Given these estimates and 

assumptions, the Commission 

anticipates that dealers will be required 

to provide the disclosures in 

§ 463.5(b)(1) in an average of 1,244 

transactions per dealer (57,866,000 

transactions ÷ 46,525 motor vehicle 

dealers).163 This yields an annual hours 

burden of 1,929,237 hours or 

approximately 41 hours per average 

dealer (1,244 × 2/60 hours). The 

associated annual estimated labor cost is 

$42,250,283 for all dealers (1,244 

transactions × 46,525 dealers × $0.73 per 

transaction) or approximately $908.12 

per average auto dealer. 

The Commission anticipates that the 

average dealer will be required to 

provide the disclosures in § 463.5(b)(2) 

in an average of 543 transactions per 

year. This results in an estimated annual 

burden of 842,103 hours across the 

industry or an average of approximately 

18 hours per average auto dealer (543 × 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42033 

164The Commission estimates the estimated 

number of covered transactions as follows: 

((17,059,000 new vehicle sales × 81% financed × 

94% with optional add-ons (i.e., 12,988,722)) + 

(40,807,000 used vehicle sales × 35% financed × 

86% with optional add-ons (i.e., 12,282,907)) ÷ 

46,525 dealers). 

165The Commission calculates the estimated 

number of covered transactions as follows: 

((17,059,000 new vehicle sales × 94% with optional 

add-ons) + (40,807,000 used vehicle sales × 86% 

with optional add-ons)) ÷ 46,525 dealers. 

166See supra Part V.D. 

167See id. 

168See id. 169See infra Part XII.C.7. 

2/60 hours).164 The associated annual 

labor cost is estimated at approximately 

$18,442,045 for the entire industry or 

approximately $396 per average auto 

dealer (543 transactions × $0.73 per 

transaction). 

The Commission estimates that the 

average dealer will be required to 

provide the disclosures in § 463.5(b)(3) 

in an estimated 1,099 transactions.165

This yields an annual hours burden for 

providing required itemizations of 

optional add-ons that are estimated at 

1,704,366 across the industry or 

approximately 37 hours per average 

auto dealer (46,525 auto dealers × 1,099 

× 2/60 hours). The associated labor cost 

is an estimated $37,325,612 for the 

industry or approximately $802 per 

average auto dealer (46,525 motor 

vehicle dealers × 1,099 transactions × 

$0.73). 

Other Required Disclosures. The 

proposed rule would prohibit dealers 

from making certain misrepresentations 

in the course of selling, leasing, or 

arranging financing for motor vehicles. 

The proposed prohibitions are 

consistent with the existing prohibition 

on misrepresentations under Section 5 

of the FTC Act, and do not themselves 

require additional information 

collection or disclosures. Thus, while 

dealers may elect to undertake 

monitoring or review to ensure 

compliance, the Commission estimates 

for present purposes that any additional 

costs associated with the proposed 

misrepresentation prohibitions to be de 

minimis. 

The proposed rule also would require 

covered motor vehicle dealers to clearly 

disclose the Offering Price of a motor 

vehicle in advertisements and in 

response to consumer inquiries. This 

requirement is necessary to address 

deceptive and unfair practices with 

respect to vehicle pricing 

representations, whether add-on 

products and services are optional and 

their costs, and consumer consent to 

purchase such optional products and 

services.166 Vehicle pricing activities are 

usually and customarily performed by 

dealers in the course of their regular 

business activities. While the proposed 

provision may increase the importance 

of these activities, or alter when in the 

course of business they are undertaken, 

the Commission estimates, for present 

purposes, that any additional costs 

associated with the proposed offering 

price requirement to be de minimis. 

In addition, the proposed rule would 

require dealers, when making any 

representation about the monthly 

payment for a vehicle, to disclose the 

total amount the consumer will pay to 

purchase the vehicle at that monthly 

payment after making all payments as 

scheduled, as well as the amount of 

consideration to be provided by the 

consumer if the total amount disclosed 

assumes the consumer will provide 

consideration. The Commission 

anticipates that such disclosures would 

contain information already produced 

in the ordinary course of business and 

known to dealership staff at the time 

such disclosures would be required. As 

such, the Commission anticipates that 

this proposed provision would merely 

require a covered motor vehicle dealer 

to provide readily available information, 

and that the disclosure burdens 

associated with these requirements is 

likely de minimis. 

Finally, the proposed rule would 

require covered dealers that sell 

optional add-on products and services 

to disclose to consumers that these 

products are not required. This 

requirement is necessary to address 

deceptive and unfair practices regarding 

these products and services, including 

misrepresentations that these products 

are required when they are not, and 

charging consumers for such products 

without the consumers’ Express, 

Informed Consent.167 The proposed rule 

would also require covered dealers to 

disclose the total cost of a vehicle when 

making representations about the 

monthly payment for the vehicle, as 

well as that a lower monthly payment 

will increase the total cost where 

applicable. These requirements are 

necessary to address deceptive practices 

with respect to vehicle pricing 

representations, including the use of 

monthly payment amounts to 

incorrectly imply savings or parity 

between offers.168

The Commission anticipates that the 

disclosure burdens associated with 

these requirements is likely de minimis. 

These proposed rule provisions would 

merely require a covered motor vehicle 

dealer to provide readily available 

information to consumers in 

advertisements or direct 

communications with customers, as 

applicable. 

Recordkeeping 

The proposed rule would require 

covered motor vehicle dealers to retain, 

for a period of twenty-four months from 

the date the record is created, records 

sufficient to demonstrate their 

compliance with the Rule and its 

disclosure requirements. Such records 

would include advertising materials 

regarding the price, financing or lease of 

a motor vehicle; copies of Add-on Lists 

offered to consumers; copies of the 

disclosures relating to Cash Price 

without Optional Add-ons required by 

the Rule; copies of purchase orders and 

financing and lease documents signed 

by the consumer; and records 

demonstrating compliance with the 

proposed rule’s requirements for addons in consumer contracts. 

As set out in detail in the Preliminary 

Regulatory Analysis,169 the Commission 

anticipates some incremental 

recordkeeping burden for covered motor 

vehicle dealers who would be required 

to retain copies of Add-on Lists, 

disclosures relating to Cash Price 

without Optional Add-ons, and other 

transaction records necessary to 

demonstrate compliance with the 

proposed rule’s requirements. 

The Commission anticipates that it 

will take covered motor vehicle dealers 

approximately 15 hours to modify their 

existing recordkeeping systems to retain 

the required records for the 24-month 

period specified in the proposed rule. 

This yield a general recordkeeping 

burden of 697,875 hours annually 

(46,525 motor vehicle dealers × 15 hours 

per year). 

The Commission anticipates that 

programming, administrative, 

compliance, and clerical staff are likely 

to perform the tasks necessary to 

comply with these recordkeeping 

requirements. In particular, the 

Commission estimates as follows: 8 

hours of time for a programmer to 

design, implement, or update systems 

for record storage, at a cost-rate of 

$28.90 per hour; 5 hours of additional 

clerical staff work, at a cost-rate of 

$18.37 per hour; 1 hour of sales manager 

review, at a cost-rate of $63.93 per hour; 

and 1 hour of review by a compliance 

officer, at a cost-rate of $26.83 per hour. 

Applying these cost-rates to the 

estimated hours burden described 

above, the total estimated initial labor 

cost burden is $413.81 per average 

dealership (($28.90 per hour × 8 hours) 

+ ($18.37 per hour × 5 hours) + ($63.93 

per hour × 1 hour) + ($26.83 per hour 

× 1 hour)), totaling $19,252,510 

(rounded to the nearest dollar) across 


jspears on DSK121TN23PROD with PROPOSALS3
42034 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

170See Nat’l Consumer Law Ctr., Auto Add-ons 

Add Up: How Dealer Discretion Drives Excessive, 

Inconsistent, and Discriminatory Pricing 9 (Oct. 11, 

2017), https://www.nclc.org/images/pdf/car_sales/ 

report-auto-add-on.pdf (nationwide dataset of 1.8 

million car sale transactions, of which 462,170 

included GAP agreements). 171See infra Part XII.C.7. 

172 Id. 

173Fed. Trade Comm’n, Agency Information 

Collection Activities; Proposed Collection; 

Comment Request; Extension, 84 FR 38979, 38981 

(Aug. 8, 2019) (estimating that average printing cost 

for the one-page, double-sided Buyers Guide is 

thirty cents). In making this estimate for printed 

disclosures, the Commission assumes that all 

dealers will purchase pre-printed template forms 

instead of producing them internally, although 

dealers may produce them at lower expense using 

their own office automation technology. 

174The Commission arrived at this figure based 

on the approximate estimated cost differential 

between hard copy and electronic disclosures under 

the Commission’s Franchise Rule. Fed. Trade 

Comm’n, Agency Information Collection Activities; 

Proposed Collection; Comment Request, 85 FR 

19479, 19480 (estimating $35 for paper disclosures 

and $5 for comparative electronic disclosures). 

175The Commission obtains this cost estimate as 

follows: (a) (($0.11 × 57,866,000 total vehicle sales) 

÷ 46,525 dealers) + (b) (($0.11 × (17,059,000 new 

vehicle sales × 81% financed × 94% with optional 

add-ons) + (40,807,000 used vehicle sales × 35% 

financed × 86% with optional add-ons) ÷ 46,525 

dealers)) + (c) (($0.11 × (17,059,000 new vehicle 

sales × 94% with optional add-ons) + (40,807,000 

used vehicle sales × 86% with optional add-ons) ÷ 

46,525 dealers)). 

the industry ($413.81 per average 

dealership × 46,525 dealerships). 

Beyond those records already created 

and retained in the ordinary course of 

business, proposed § 463.6(a)(4) would 

require covered motor vehicle dealers to 

create and retain calculations of loan-tovalue ratios in contracts including GAP 

agreements. This requirement is 

necessary to prevent deception and 

unfairness relating to the sale of GAP 

agreements under circumstances in 

which the consumer would not benefit 

from such products. As described above, 

the Commission estimates that covered 

motor vehicle dealers sell 

approximately 57,866,000 vehicles each 

year. The Commission further estimates 

that approximately 25.7% of such sales 

include GAP agreements, for an 

estimated total of 14,871,562 covered 

vehicle sales.170

The Commission estimates that 

covered motor vehicle dealers will 

require approximately 1 hour for a sales 

manager to create and implement a 

loan-to-value calculation template, at a 

cost-rate of $63.93 and 1 hour for a 

compliance officer to review the 

template, at a cost-rate of $26.83. This 

yields an estimated initial hours burden 

for the creation of loan-to-value 

calculation templates for all dealers of 

93,050 hours (46,525 covered motor 

vehicle dealers × 2 hours). Applying the 

above-described cost-rates, the 

associated labor cost burden is 

estimated at $4,222,609 for all dealers 

(($63.93 per hour × 1 hour × 46,525 

dealerships) + ($26.83 per hour × 1 hour 

× 46,525 dealerships)). The Commission 

also anticipates that, with the template 

in place, covered motor vehicle dealers 

will expend one minute per sales 

transaction for a salesperson to perform 

the calculation contemplated by this 

requirement, at a cost rate of $21.84 per 

hour. As described previously, the 

Commission estimates that covered 

motor vehicle dealers sell 

approximately 57,866,000 vehicles each 

year and approximately 25.7% of such 

sales include GAP agreements, for an 

estimated total of 14,871,562 covered 

vehicle sales. While the number of 

motor vehicles sold will vary by 

dealership, this yields an average sales 

volume of 320 sales transactions per 

average dealership per year that include 

a GAP agreement. This yields an 

estimated annual hours burden for all 

dealers of 248,133 hours (46,525 

covered dealers × 320 covered 

transactions × 1/60 hours). Applying the 

associated labor rates yields an 

estimated annual labor cost for all 

dealers of $5,419,232 (248,133 hours × 

$21.84 per hour). 

Capital and Other Non-Labor Costs: 

$14,769,361. 

The Commission anticipates that the 

proposed rule would impose limited 

capital and non-labor costs. Covered 

motor vehicle dealers already have in 

place existing systems for providing 

sales and contract-related disclosures to 

motor vehicle buyers and lessees as well 

as persons seeking information during 

the vehicle-shopping process. While the 

proposed rule’s disclosure requirements 

might make limited additions to the 

types of forms and disclosures that must 

be provided during the process of 

selling or leasing a motor vehicle, the 

Commission anticipates that these 

changes will not require substantial 

investments in new systems. Moreover, 

many dealers may elect to furnish some 

disclosures electronically, further 

reducing total costs. 

Section 463.4(b) would require 

dealers who engage in advertising and 

who also charge for optional add-ons to 

have a website, online service, or other 

mobile application by which to disclose 

an Add-on List. In the Commission’s 

estimation, dealers who engage in 

covered advertising generally already 

operate a website or other application 

by which they could make such 

disclosures. As such, the Commission 

estimates the capital costs associated 

with such additional disclosures are 

likely de minimis. 

Covered motor vehicle dealers already 

have in place existing recordkeeping 

systems for the storage of 

documentation they would retain in the 

ordinary course of business irrespective 

of the Rule’s requirements, including 

records associating vehicle financing 

and customer contracts and leases. As 

set out in detail in the Preliminary 

Regulatory Analysis,171 the Commission 

anticipates the proposed rule’s 

additional recordkeeping requirements 

may result in incremental non-labor 

costs to add capacity to these systems in 

order to store the records. The proposed 

rule provides that covered motor vehicle 

dealers may keep the required records 

in any legible form, and in the same 

manner, format, or place as they may 

already keep such records in the 

ordinary course of business. 

Accordingly, the proposed rule would 

not require covered persons to invest in 

new recordkeeping systems and may 

retain records in whatever form they 

prefer, whether hard copy or electronic. 

The Commission estimates the nonlabor costs incurred by dealers for 

providing disclosures in written or 

electronic form will differ based on the 

method of disclosure employed by the 

dealer. As explained in detail in the 

Preliminary Regulatory Analysis,172 the 

Commission estimates an average 

physical cost of disclosure of $0.11 

across paper and electronic disclosure 

methods—a figure which includes (1) an 

estimated cost of $0.15 per printed 

disclosure at one single-sided page per 

disclosure, which is based on industry 

input regarding the printing costs 

associated with the FTC’s Used Car Rule 

Buyers Guides; 173 and (2) a cost of 

$0.02 per disclosure made 

electronically.174 As noted above, 

dealers would need to provide the 

§ 463.5(b)(1) disclosure for every vehicle 

they offer with any optional add-on 

products or services; the 463.5(b)(2) 

disclosure for every vehicle sale that is 

financed and includes an optional addon; and the 463.5(b)(3) disclosure for 

every vehicle sale that includes an 

optional add-on. The estimated cost of 

providing these three disclosures 

annually is approximately $317.45 per 

average covered dealer,175 totaling 

approximately $14,769,361. 

The Commission further estimates 

that covered motor vehicle dealers that 

store records in hard copy are unlikely 

to require extensive additional storage 

for physical document retention. 

Further, due to the low cost of 

electronic storage, the Commission 

anticipates that motor vehicle dealers 

who store their records electronically 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42035 

176 5 U.S.C. 601–612. 

177 5 U.S.C. 605. 

178The Commission is authorized to prescribe 

rules with respect to a motor vehicle dealer that is 

predominantly engaged in the sale and servicing of 

motor vehicles, the leasing and servicing of motor 

vehicles, or both, as defined in 12 U.S.C. 5519(a). 

179U.S. Small Business Admin. Table of Small 

Bus. Size Standards Matched to North American 

Indus. Classification System [‘‘NAICS’’] Codes 

(effective Aug. 19, 2019), https://www.sba.gov/ 

document/support-table-size-standards.19, 2019), 

https://www.sba.gov/sites/default/files/2022-05/ 

Table%20of%20Size%20Standards_

Effective%20May%202%202022_Final.pdf. New 

motor vehicle dealers are classified as NAICS code 

441110. Used motor vehicle dealers are classified as 

NAICS code 441120. 

would incur minimal incremental cost 

to expand their storage capacity in order 

to comply with the proposed rule’s 

recordkeeping requirements due to the 

low cost of cloud and other electronic 

storage options. Any other capital costs 

associated with the proposed rule are 

likely to be minimal. 

The FTC invites comments on: (1) 

Whether the proposed information 

collection requirements should be 

altered to reduce burdens without 

reducing protections to consumers, and 

if so, what alteration should be made; 

(2) the accuracy of the agency’s burden 

estimates, including the validity of the 

methodology and assumptions used; (3) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) ways to minimize the 

burden of maintaining records and 

providing the required information to 

consumers. 

XI. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 176 requires that the 

Commission conduct an initial and a 

final analysis of the anticipated 

economic impact of the amendments on 

small entities. The purpose of a 

regulatory flexibility analysis is to 

ensure the agency considers the impacts 

on small entities and examines 

regulatory alternatives that could 

achieve the regulatory purpose while 

minimizing burdens on small entities. 

The RFA provides that such an analysis 

is not required if the agency head 

certifies that the regulatory action will 

not have a significant economic impact 

on a substantial number of small 

entities.177

The Commission believes that the 

amendments will not have a significant 

economic impact on small entities, 

although they will likely affect a 

substantial number of small entities. 

The proposed rule would apply to 

motor vehicle dealers predominantly 

engaged in the sale and servicing of 

motor vehicles, the leasing and 

servicing of motor vehicles, or both, as 

defined in Section 1029 of the DoddFrank Act. Most covered dealers would 

be classified as small businesses, as 

explained below. 

The Commission invites comment on 

the burden on any small entities that 

would be covered and has prepared the 

following analysis: 

1. Description of the Reasons That 

Agency Action Is Being Considered 

The FTC proposes the Rule to curb 

misleading practices and unauthorized 

charges to consumers during the vehicle 

buying or leasing process, and to 

provide an additional enforcement tool 

to deter dealer misconduct and remedy 

consumer harm. The FTC’s law 

enforcement, outreach and other 

engagement in this area, and the tens of 

thousands of consumer complaints 

received by the FTC each year indicate 

that dealership misconduct and 

deceptive tactics persist despite 

substantial federal and state law 

enforcement efforts. The FTC proposes 

this Rule pursuant to the Dodd Frank 

Act, which authorized the FTC to 

prescribe rules with respect to unfair or 

deceptive acts or practices by dealers. 

2. Statement of the Objectives of, and 

Legal Basis for, the Proposed Rule 

The objective of the proposed rule is 

to prevent unfair or deceptive acts or 

practices in the sale, financing, and 

leasing of motor vehicles. The legal 

basis for the Rule is the FTC Act, 15 

U.S.C. secs. 41 et seq., and the DoddFrank Act, Public Law 111–203. Section 

1029 of the Dodd-Frank Act, 15 U.S.C. 

5519, authorizes the Commission to 

prescribe rules with respect to motor 

vehicle dealers pursuant to the FTC Act, 

which prohibits unfair or deceptive acts 

or practices in or affecting commerce. 

3. Description and Estimate of the 

Number of Small Entities To Which the 

Proposed Rule Will Apply 

The proposed rule applies to motor 

vehicle dealers as defined in Section 

1029 of the Dodd-Frank Act.178 The 

Commission estimates that there are 

approximately 46,525 franchise, new 

motor vehicle, and independent/used 

motor vehicle dealers in the U.S. The 

Commission believes that many of these 

dealers are small businesses according 

to the applicable Small Business 

Administration (‘‘SBA’’) size standards. 

Under those standards, new vehicle 

dealers having fewer than 200 

employees each, and used vehicle 

dealers having annual receipts of less 

than $27 million, are classified as small 

businesses.179

The Commission seeks comment and 

information regarding the estimated 

number and the nature of small business 

entities for which the proposed rule 

would have a significant economic 

impact. 

4. Description of the Projected 

Reporting, Recordkeeping, and Other 

Compliance Requirements 

The proposed rule prohibits unfair or 

deceptive acts or practices, including 

misleading practices and unauthorized 

charges, in motor vehicle sales, 

financing, and leasing. To prevent such 

practices, the proposed rule imposes 

recordkeeping and disclosure 

requirements. The proposed rule 

contains no reporting requirements. 

The proposed rule would require 

motor vehicle dealers to clearly disclose 

the Offering Price of a vehicle in 

advertisements and in response to 

consumer inquires. It would also require 

dealers to make certain disclosures 

during the sales or leasing process, such 

as by providing consumers with written 

disclosures relating to Cash Price 

without Optional Add-ons stating price 

information. To enforce the Rule and its 

disclosure requirements, the proposed 

rule would require dealers to retain 

records necessary to demonstrate 

compliance. Among others, records that 

would need to be retained include 

advertising materials regarding the 

price, financing or lease of a motor 

vehicle; copies of Add-on Lists offered 

to consumers; copies of disclosures 

relating to Cash Price without Optional 

Add-ons; copies of purchase orders and 

financing and lease documents signed 

by the consumer; and, records 

demonstrating compliance with the 

proposed rule’s requirements for addons in consumer contracts. Such records 

would need to be retained for a period 

of 24 months from the date they are 

created, and could be kept in the same 

manner and form (so long as its legible) 

they are already kept in the ordinary 

course of business. 

5. Identification of Duplicative, 

Overlapping, or Conflicting Federal 

Rules 

Although there are other federal 

statutes, rules, or policies that address 

motor vehicle sales and financing, the 

Commission has not identified any 

duplication, overlap, or conflict with 

the proposed rule. The Commission 

invites comment and information on 

this issue. 

6. Description of Any Significant 

Alternatives to the Proposed Rule 

The Commission envisioned and 

drafted this Rule mindful that most 


jspears on DSK121TN23PROD with PROPOSALS3
42036 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

motor vehicle dealers are small entities. 

Accordingly, the Commission has not 

proposed any specific alternative 

compliance mechanisms for small 

businesses. The Commission seeks 

comment and information on the need, 

if any, for alternative compliance 

methods that would, consistent with the 

statutory requirements, reduce the 

economic impact of the proposed rule 

on small entities. 

XII. Preliminary Regulatory Analysis 

A. Introduction 

The Federal Trade Commission is 

proposing a rule to provide additional 

protections to consumers when 

shopping for motor vehicles. The 

proposed rule contains several 

provisions targeted at increasing price 

transparency for consumers with respect 

to purchasing, leasing, and financing 

new and used cars and other motor 

vehicles. The proposed rule prohibits 

misrepresentations in the marketing of 

motor vehicles and motor vehicle 

financing as well as mandates certain 

disclosures about prices (of both 

vehicles and add-on options), fees, and 

interest rates. In addition, charging for 

add-on products from which an 

individual consumer would not benefit 

is prohibited by the proposed rule. 

Section 22 of the FTC Act, 15 U.S.C. 

57b–3, requires the Commission to issue 

a preliminary regulatory analysis when 

publishing a Notice of proposed 

rulemaking. The preliminary regulatory 

analysis must contain (1) a concise 

description of the need for, and 

objectives of, the proposed rule; (2) a 

description of reasonable alternatives 

that would accomplish the Rule’s stated 

objectives consistent with applicable 

law; and (3) a preliminary analysis of 

the benefits and adverse effects of the 

proposed rule and any alternatives, and 

of the effectiveness of the proposed rule 

and any alternatives in meeting the 

objectives of the proposed rule. 

The NPRM discusses regulatory 

requirements in the following broad 

areas: 

1. Prohibited Misrepresentations 

2. Required Disclosure of Offering Price 

in Advertisements and in Response 

to Inquiry 

3. Required Disclosure of Add-on List 

and Associated Prices 

4. Required Disclosure of Total Cost for 

Financing/Leasing Transactions 

5. Prohibition on Charging for Add-ons 

in Certain Circumstances 

6. Requirement to Obtain Express 

Informed Consent Before any 

Charges 

7. Recordkeeping 

In the analysis below, we describe the 

anticipated impacts of the Rule as 

currently proposed. Where possible, we 

quantify the benefits and costs and 

present them separately by provision. If 

a benefit or cost is quantified, we 

indicate the sources of the data relied 

upon. If an assumption is needed, the 

text makes clear which quantities are 

being assumed. The Commission solicits 

comments from the public to improve 

these estimates before promulgation of 

any final Rule. 

Because of the relative size of the 

automobile market compared to other 

types of motor vehicle dealers, and the 

greater availability of relevant 

information for this market, this 

preliminary analysis exclusively 

considers automobile dealers. The 

Commission expects the analysis and 

results to be representative of the 

majority of covered entities and 

transactions, and that expanding the 

scope of the analysis is unlikely to lead 

to different conclusions. The 

Commission invites submissions of 

market information for other types of 

motor vehicles such as boats, RVs, and 

motorcycles that would allow expansion 

of the scope of this analysis. 

A time period of 10 years is used in 

the baseline scenario because FTC rules 

are subject to review every 10 years. 

Quantifiable aggregate benefits and costs 

are summarized as the net present value 

over this 10-year time frame in Table 

1.1. Quantifiable benefits derive from 

time savings due to greater price 

transparency, leading to a more efficient 

shopping and sales process. 

Quantifiable costs primarily reflect the 

resources expended by automobile 

dealers in developing the systems 

necessary to comply with the provisions 

of the Rule. The discount rate reflects 

society’s preference for receiving 

benefits earlier rather than later; a 

higher discount rate is associated with 

a greater preference for benefits in the 

present. The present value is obtained 

by multiplying each year’s net benefit 

by the discount rate a number of times 

equal to the number of years in the 

future the net benefit accrues. 

TABLE 1.1—PRESENT VALUE OF NET BENEFITS, 2022–2032 

Present value 

Total Benefits: 

3% discount rate ..................................................................................................................................................................... $36,337,956,234 

7% discount rate ..................................................................................................................................................................... 31,081,811,411 

Total Costs: 

3% discount rate ..................................................................................................................................................................... 1,568,408,501 

7% discount rate ..................................................................................................................................................................... 1,360,694,552 

Net Benefits: 

3% discount rate ..................................................................................................................................................................... 34,769,547,733 

7% discount rate ..................................................................................................................................................................... 29,721,116,859 

Note: Total costs reflect highest cost scenarios, for a conservative estimate of Net Benefits. 

B. Estimated Benefits of Proposed rule 

In this section, we describe the 

beneficial impacts of the proposed rule, 

provide preliminary quantitative 

estimates where possible, and describe 

benefits that we can only assess 

qualitatively. Most of the benefits cut 

across multiple areas addressed by the 

Rule and these benefits may be 

impossible to identify separately by 

area. As a result, we enumerate the 

benefits of the Rule not by provision, 

but by category. 

1. Consumer Time Savings When 

Shopping for Motor Vehicle Dealers 

Several provisions of the Rule are 

associated with time savings as a 

benefit. Required disclosures of relevant 

prices and prohibitions on 

misrepresentations save consumers time 

when shopping for a vehicle by 

requiring the provision of salient, 

material information early in the 

process and eliminating time spent 

pursuing misleading offers. The 

Commission’s enforcement record 

shows that consumer search and 

shopping is sometimes influenced by 

deceptive advertising that draws 

consumers to a dealership in pursuit of 

an advertised deal, only to find out at 

some point later in the process (if at all) 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42037 

180According to the 2020 COX Car Buyer Journey 

study, consumers spent roughly 15 hours 

researching, shopping, and visiting dealerships for 

each motor vehicle transaction. 3 hours corresponds 

to 20% of an average consumer’s time spent on 

such activities. Cox Automotive, 2020 Cox 

Automotive Car Buyer Journey 5–6 (2020), available 

at https://b2b.autotrader.com/app/uploads/2020- 

Car-Buyer-Journey-Study.pdf. 

181Bureau of Lab. Stats., May 2020 National 

Occupational Employment and Wage Estimates, 

United States, https://www.bls.gov/oes/2020/may/ 

oes_nat.htm (listing mean hourly wage of $27.07 for 

all occupations). 

182 Daniel S. Hamermesh, What’s to Know About 

Time Use?, 30 J. Econ. Survs. 198, 203 (2016). 

that the advertised deal is not actually 

available to them. Motor vehicle 

consumers frequently begin the process 

of a motor vehicle transaction (e.g., by 

visiting a dealership in response to an 

ad or initiating negotiations in response 

to a quoted price that is incomplete) and 

then later abandon the transaction when 

additional information is revealed. This 

bait-and-switch or deceptive dooropener advertising has the effect of 

wasting consumers’ time traveling to 

and negotiating with the dishonest 

dealership, time which would otherwise 

be spent pursuing truthful offers in the 

absence of deception. Unfortunately, the 

Commission lacks adequate information 

to determine the quantity of such 

abandoned transactions and the amount 

of time spent pursuing them. As a 

result, this benefit is unquantified in the 

current analysis. The Commission 

solicits comment on the frequency of 

and reasons for abandoned transactions 

in the motor vehicle market in order to 

help quantify this important benefit. 

However, many consumers end up 

completing transactions under the status 

quo—either because full revelation of 

prices and terms still results in a 

mutually beneficial transaction or 

because of constraints on the time 

consumers can dedicate to their search. 

These consumers also spend additional, 

unnecessary time discovering 

information that dealers would be 

required to disclose earlier under the 

proposed rule. The Commission expects 

these disclosures to improve 

information flows and consumer search 

efficiency, including but not limited to, 

curbing the influence of deception on 

consumer search and shopping 

behavior. 

The Commission assumes that, as a 

result of the proposed rule provisions 

prohibiting misrepresentations and 

requiring price transparency, each 

consumer who ends up purchasing a 

vehicle will spend 3 fewer hours 

shopping online, corresponding with 

dealerships, visiting dealer locations, 

and negotiating with dealer employees 

per motor vehicle transaction.180

Assuming that motor vehicle purchase, 

financing, and lease transactions will be 

stable at the 2019 level of 62.1 million 

transactions per year, that amounts to a 

total time savings of more than 186.3 

million hours per year. According to the 

Bureau of Labor Statistics Occupational 

Employment Statistics,181 the average 

hourly wage of U.S. workers in 2020 

was $27.07, and recent research suggests 

that individuals living in the U.S. value 

their non-work time at 82% of average 

hourly earnings.182 Thus, the value of 

non-work time for the average U.S. 

worker would be $22.20 per hour. The 

resulting total benefit from time savings 

for completed transactions is roughly 

$4.1 billion per year, which translates to 

a present value of between $31.1 billion 

and $36.3 billion as described in Table 

2.1. 

TABLE 2.1—ESTIMATED BENEFITS OF TIME SAVINGS FOR COMPLETED TRANSACTIONS

2022–2032 

Completed Transactions: 

Number of vehicle transactions per year a ............................................................................................................................. 62,107,000 

Hours saved per transaction .................................................................................................................................................. 3 

Value of time for vehicle shoppers ......................................................................................................................................... $22.20 

Abandoned Transactions ............................................................................................................................................................... Unquantified 

Total Quantified Benefit: 

3% discount rate ..................................................................................................................................................................... $36,337,956,234 

7% discount rate ..................................................................................................................................................................... $31,081,811,411 

Note: Benefits have been discounted to the present at both 3% and 7% rates. a National Transportation Statistics, Table 1–17. 

2. Consumer Welfare Benefits From 

Curbing Non-Mutually Beneficial 

Transactions or Price Effects of 

Deception 

Due to the obfuscation and deception 

that has been identified in prior FTC 

law enforcement actions, some 

consumers end up consummating 

transactions where the price paid is 

more than the value they obtain from 

the product or service (i.e., the highest 

price the consumer would be willing to 

pay were the product marketed 

transparently and non-deceptively). In 

cases where the value the consumer 

obtains still exceeds the cost of 

providing the product or service, there 

is still a net gain in social welfare from 

that transaction despite the deception, 

as resources are allocated to a higher 

value use. However, those consumers 

may receive less benefit (i.e., lower 

consumer surplus), and the dealers may 

receive higher profits in some 

transactions relative to a full 

information benchmark because of the 

higher prices that can be sustained 

through deception. Therefore, the 

presence of deceptive marketing results 

in a transfer of welfare from these 

consumers to the dishonest dealers. 

While it is possible that the Rule may 

prevent such transfers of wealth that 

occur through prices supported by 

deception, the overall effects of the Rule 

on pricing and competition are difficult 

to predict. 

Typically, transfers of welfare from 

one set of people in the economy to 

another are documented in a regulatory 

analysis, but do not weigh on the 

outcome. However, as the redistribution 

of welfare from deceptive firms to 

victimized consumers is part of the 

agency’s mission, transfers of this kind 

might weigh in favor of proceeding with 

the Rule. 

In cases where the value a consumer 

obtains is less than the cost of providing 

the product, there is a net loss in social 

welfare from that transaction, as 

resources are allocated to a lower value 

use. Even under the lower prices that 

may result from prohibiting the 

deceptive or unfair practices considered 

in the proposed rule, no such 

transaction would transpire. These cases 

are emblematic of the reduction in 

social welfare caused by the information 

asymmetry under the status quo. Under 

the proposed rule, this information 

asymmetry between dealers and 


jspears on DSK121TN23PROD with PROPOSALS3
42038 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

183Cox Automotive, 2020 Cox Automotive Car 

Buyer Journey 37 (2020), available at https://

b2b.autotrader.com/app/uploads/2020-Car-BuyerJourney-Study.pdf. 

consumers is mitigated and some 

fraction of these transactions (and the 

associated welfare losses) are prevented. 

This avoidance of transactions that 

reduce social welfare is a benefit of the 

Rule. 

i. Advertising Misrepresentations 

As discussed above, some advertising 

misrepresentations regarding prices, the 

availability of rebates/discounts, 

monthly payment amounts, and amount 

due at signing are discovered prior to 

the consumer consummating the 

transaction. In these cases, consumers 

learn that these deceptive door-opener 

claims were false or misleading, update 

their beliefs about the deal being 

presented, and either walk away from 

the transaction or proceed with the 

transaction anyway because they do not 

believe that they will find a better offer 

(especially considering the time and 

cost to start the process anew, which 

can be prohibitive for some consumers). 

For these individuals, the time spent 

negotiating under false pretenses and 

visiting dishonest dealerships is a main 

source of injury. 

In other cases, however, the 

inaccurate beliefs engendered by such 

misrepresentations can remain through 

the consummation of the transaction. 

For example, if actual terms differing 

from those that attracted the consumer 

are buried in the paperwork, the 

consumer can only discover them at 

signing. The consumer may persist in 

the belief that they are getting the deal 

that the misleading advertising or 

salesperson’s verbal misrepresentations 

suggested. Only after completing a 

transaction, if ever, does the consumer 

realize that they have been misled into 

a deal that they would not have agreed 

to with full knowledge of the terms. For 

these transactions, the cost may exceed 

the consumer’s lost time, provided that 

the true value the consumer would 

receive from the transaction is less than 

the dealer’s cost. In these cases, the 

transaction reduces social welfare. As 

discussed above, these 

misrepresentations may also have price 

effects that result in transfers from the 

consumer to a dishonest dealer, which 

the proposed rule would reverse to 

some extent. 

By prohibiting misrepresentations in 

advertising and enhancing the flow of 

truthful information to consumers, the 

proposed rule will reduce the number of 

inefficient transactions. Fewer 

consumers will end up consummating 

transactions that do not benefit them but 

occur under the status quo due to false 

beliefs propped up by misleading 

advertisements or other 

misrepresentations by dealers. This does 

not necessarily imply an overall 

reduction in vehicle sales, as such 

consumers may instead find 

transactions with true terms that are 

mutually agreeable. Ensuring that 

vehicles are sold, leased, or financed 

with terms that are mutually agreeable 

to consumers and dealers will result in 

an allocation of resources that yields 

greater social welfare overall. 

ii. Add-On Products and Services 

Dealers typically offer a host of 

optional add-on products and services 

that are sold in a bundle with the 

vehicle (e.g., extended warranties, 

service and maintenance plans, 

payment programs, guaranteed asset 

protection insurance, emergency road 

service, VIN etching, undercoating, etc.). 

However, these add-on products are 

often not discussed until near the end 

of the transaction, sometimes after 

financing terms have already been 

settled. Some unscrupulous dealers then 

suggest that some set of add-ons may be 

required (even if they are truly 

optional), inflating the price of the 

bundle beyond what the consumer 

thought they had negotiated. 

Alternatively, add-ons that were 

declined by the consumer or not 

discussed at all, may simply be 

‘‘packed’’ into the contract paperwork 

near the end of the process without the 

consumer’s knowledge. The presence or 

true price of these packed add-ons often 

can be obscured by the dealer only 

reporting the monthly payment amount 

to the consumer in these late stages of 

the transaction. 

In cases where such 

misrepresentations are discovered 

before the transaction is completed, the 

consumer will learn of the add-on price 

and the add-on features, decide whether 

the product is worth the price being 

charged, and either proceed or not. 

Again, the consumer’s time is wasted, 

but the transaction itself still yields an 

increase in social welfare. Price effects 

of this type of deception may also result 

in transfers from the consumer to a 

dishonest dealer, the reversal of which 

may or may not weigh on the net 

benefits of the proposed rule depending 

on whether redistribution of welfare 

from dishonest dealers to consumers is 

a goal of the regulation. 

In cases where the consumer never 

learns of the misrepresented or packed 

add-ons, the consumer may end up 

paying for add-ons that he or she would 

not have purchased if the dealer had 

been transparent about the terms of the 

contract. Additionally, when the 

dealer’s cost of providing the add-on 

exceeds the true value the consumer 

receives, the transaction reduces social 

welfare, as resources are allocated to a 

lower value use. The timely flow of 

truthful information facilitated by the 

proposed rule can empower consumers 

to avoid such transactions, generating 

benefits under the Rule. 

Finally, some dealers will charge 

consumers for add-ons from which the 

consumer cannot reasonably expect to 

receive any benefit. For example, 

guaranteed asset protection (GAP) is an 

insurance product that covers the 

difference between what a car is worth 

and the principal on one’s loan in the 

event that the vehicle is totaled and 

one’s auto insurance payout would not 

cover the debt. In some circumstances, 

a consumer’s financing contract will 

outright foreclose this possibility (i.e., if 

the consumer’s down payment is 

sufficiently high and they will never 

owe more than the car is worth). Some 

dealers, however, will still market GAP 

coverage to such consumers, extracting 

payments for a product that will never 

provide any benefit to the consumer. In 

these cases, it is obvious that the 

transaction should never occur when a 

consumer has full information. The 

proposed rule would prohibit such 

charges, thus eliminating these 

transactions and generating benefits. 

Without additional information, it is 

difficult to quantify the number of 

transactions or potential price effects 

that would be avoided by the proposed 

rule. The Commission invites comments 

on these issues, including information 

that may be used to quantify this 

important benefit of the proposed rule. 

3. Benefits Related to More Transparent 

Negotiation 

An additional, albeit difficult to 

quantify, benefit is the reduction in 

discomfort and unpleasantness that 

consumers associate with negotiating 

motor vehicle transactions under the 

status quo. According to the 2020 Cox 

Automotive Car Buyer Journey study, 

filling out paperwork, negotiating 

vehicle price, and dealing with 

salespeople are three of the top four 

frustrations for consumers at car 

dealerships.183 Under the proposed rule, 

all three of these issues will be 

mitigated somewhat by the transparency 

facilitated by the Rule’s required 

disclosures. As a result, the time that 

consumers spend shopping and 

negotiating motor vehicle transactions 

will be less stressful. The Commission 

invites comment on the best approach to 

quantifying the overall benefits of the 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42039 

184While many dealers disseminate more than 

150 marketing representations per year, most are 

variants on the same underlying ‘‘model’’ marketing 

representation. It is these materially distinct 

‘‘models’’ that we consider in this scenario. 185Wage data for dealer employees comes from 

the U.S. Bureau of Labor Statistics, IndustrySpecific Occupational Employment and Wage 

Estimates, https://www.bls.gov/oes/2020/may/ 

naics4_441100.htm, unless otherwise noted. 

Rule’s provisions that reduce 

information asymmetries in search and 

negotiation. 

C. Estimated Costs of Proposed Rule 

In this section, we describe the costs 

of the proposed rule provisions as 

enumerated in Part XII.A, provide 

preliminary quantitative estimates 

where possible, and describe costs that 

we can only assess qualitatively. 

1. Prohibited Misrepresentations 

The misrepresentations prohibited by 

the proposed rule are all material and 

would therefore be considered 

deceptive under Section 5 of the FTC 

Act. As a result, motor vehicle dealers 

who are compliant with Section 5 will 

continue to be compliant under this 

provision of the proposed rule. 

Accordingly, we present one scenario in 

Table 3.1 where dealers conduct no 

additional review. 

However, because of the enhanced 

penalty associated with violating the 

Rule (relative to a de novo violation of 

Section 5 of the FTC Act), dealers may 

choose to incur additional 

administrative burdens and costs in 

order ensure compliance. We present 

another scenario in Table 3.1 where 

dealers employ professionals to engage 

in additional compliance review for all 

new advertisements, websites, listings, 

etc. For this scenario, the Commission 

assumes a professional will spend 5 

additional minutes reviewing each 

public-facing representation and that 

each dealer produces an average of 150 

unique marketing representations per 

year.184 At a labor rate of $26.83 per 

hour for compliance officers employed 

at auto dealers, this cost is estimated at 

$15.6 million per year.185 The total 

present value of costs is tabulated in 

Table 3.1. The Commission seeks 

comments on the foregoing assumptions 

required to reach these estimates. 

TABLE 3.1—ESTIMATED COMPLIANCE COSTS FOR PROHIBITED MISREPRESENTATIONS

2022–2032 

Scenario 1—No Review: 

No cost ......................................................................................................................................................................................... $0 

Total Cost .............................................................................................................................................................................. 0 

Scenario 2—Heightened Compliance Review: 

Number of dealers a ............................................................................................................................................................................. 46,525 

Number of documents per dealer per year ......................................................................................................................................... 150 

Minutes of review per document ......................................................................................................................................................... 5 

Cost per hour of review ....................................................................................................................................................................... $26.83 

Total Cost: 

3% discount rate ............................................................................................................................................................ 137,092,486 

7% discount rate ............................................................................................................................................................ 117,262,588 

Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates. a County Business Patterns 2019, NAICS Code 4411 (Automobile Dealers, used and new) 

2. Required Disclosure of Offering Price 

in Advertisements and in Response to 

Inquiry 

The proposed rule requires all dealers 

to disclose an Offering Price in any 

advertisement that references an 

individual vehicle or in response to any 

consumer inquiry about an individual 

vehicle, as well as on the disclosures 

required at various points in the 

negotiation. Since dealers already 

choose prices for all vehicles under the 

status quo, we present one scenario in 

Table 3.2 where there is no cost to 

dealers of complying with this 

requirement. 

However, another scenario accounts 

for the increased cost to the dealers 

resulting from the increased importance 

of the pricing decision under the 

proposed rule. The discussion below 

considers the marginal costs to the 

dealer associated with calculating prices 

that conform to a certain definition and 

are associated with penalties should 

they fail to conform to that definition. 

We assume that all dealers will incur 

some upfront cost to create/update a 

pricing model that incorporates the 

requirements of the Rule. The 

Commission assumes that each dealer 

employs 8 hours of sales and marketing 

manager time and 8 hours of 

programmer time—at hourly rates of 

$63.93 and $28.90, respectively—in 

order to reformulate their pricing system 

to comply with the required disclosures. 

This total cost is estimated to be $34.6 

million. Both scenarios are summarized 

in Table 3.2. 

The Commission further assumes that, 

once calculated, the cost of including 

this information in response to 

consumer inquiries about specific 

vehicles will be negligible to the extent 

that the dealer would respond to such 

inquiries under the status quo baseline. 

If, however, this provision leads to a 

behavioral adjustment by some 

dealerships to not respond at all to 

consumer inquiries about specific 

vehicles, there may be associated costs 

to consumers and dealers relative to the 

baseline. The Commission lacks enough 

information to determine whether and 

the extent to which such behavioral 

responses would occur or what the 

welfare costs of those adjustments 

would be. As a result, these costs are left 

unquantified in the preliminary 

analysis. 

In addition to the expenditure 

associated with pricing the vehicles, 

there is an opportunity cost to dealers 

and consumers associated with 

mandating disclosures of Offering Prices 

on advertisements. If dealers choose to 

convey the same amount of information 

about offered vehicles as before 

disclosure was required, they must 

reformat their advertisements 

accordingly, spending the required 

resources to do so. If not, dealers must 

choose which information will be 

replaced by the mandated Offering Price 

disclosure. Finally, it is also possible 

that some dealers will choose to comply 

by refraining from advertising 


jspears on DSK121TN23PROD with PROPOSALS3
42040 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

individual vehicles or responding to 

consumer inquiries about specific 

vehicles, which would require 

consumers to seek this information 

through some means other than an 

advertisement, thus increasing their 

costs of search. These opportunity costs 

are difficult to estimate and our 

preliminary analysis does not include 

quantification of these impacts. The 

Commission seeks comments on these 

costs, particularly regarding how dealers 

anticipate complying with these 

requirements, in order to reach more 

accurate estimates of costs. 

TABLE 3.2—ESTIMATED COMPLIANCE COSTS FOR OFFERING PRICE DISCLOSURES

2022 only 

Scenario 1—No Review: 

No cost ......................................................................................................................................................................................... $0 

Total Cost .............................................................................................................................................................................. 0 

Scenario 2—Calculation of Offering Price: 

Number of dealers ........................................................................................................................................................................ 46,525 

Pricing hours per dealer ............................................................................................................................................................... 8 

Cost per hour of pricing ................................................................................................................................................................ $63.93 

Programming hours per dealer .................................................................................................................................................... 8 

Cost per hour of programming ..................................................................................................................................................... 28.90 

Total Cost .............................................................................................................................................................................. 34,551,326 

3. Required Disclosure of Add-on List 

and Associated Prices 

The proposed rule requires all dealers 

to disclose an itemized menu of all 

optional add-on products and services 

along with prices on all dealer-operated 

websites, online services, and mobile 

applications as well as at all dealership 

locations. As add-on product pricing is 

not uniformly posted publicly in 

dealerships or on dealer websites at 

baseline, compliance with the Rule will 

require every dealer who charges for 

optional add-ons to create a publicfacing master Add-on List and a system 

for posting prices at their dealerships. In 

addition, every dealer with an online 

presence must create a system for 

posting add-on prices online and via 

any applications they may publish. 

Without additional information on how 

many dealers charge for optional addons, the Commission assumes that every 

dealer incurs an upfront cost, employing 

a finance manager for 5 hours at an 

hourly rate of $65.54 to create the 

master Add-on List and a compliance 

manager for 1 hour at an hourly rate of 

$26.83 to review the master list to 

ensure it satisfies the requirements 

under the Rule. In addition, each dealer 

will employ 8 hours of programmer time 

at an hourly rate of $28.90 in order to 

design such a system for posting prices 

on location. Additionally, each dealer 

with an online presence (assumed 81%) 

employs 8 additional hours of 

programmer time to implement such a 

system across their online and mobile 

applications. The Commission further 

assumes that periodic revision of these 

lists will be required and budgets 1 hour 

of clerical staff time per year (at a cost 

of $18.37 per hour) for this task. These 

costs are summarized in Table 3.3. 

TABLE 3.3—ESTIMATED COMPLIANCE COSTS FOR ADD-ON LISTS

2022 only 2022–2032 

Creation of Add-On Lists and display systems ........................ ........................

Number of dealers ............................................................................................................................................ 46,525 ........................

Finance manager hours per dealer .................................................................................................................. 5 ........................

Cost per hour of list development .................................................................................................................... $65.54 ........................

Compliance manager hours per dealer ............................................................................................................ 1 ........................

Cost per hour of compliance review ................................................................................................................ $26.83 ........................

Programmer hours per dealer .......................................................................................................................... 8 ........................

Number of dealers with online presence ......................................................................................................... 37,685.25 ........................

Add’l programmer hours per online dealer ...................................................................................................... 8 ........................

Cost per hour of programming ......................................................................................................................... $28.90 ........................

Subtotal ..................................................................................................................................................... $35,963,918 ........................

Periodic revision of lists ........................

Number of dealers ............................................................................................................................................ 46,525 

Clerical hours spent revising Add-on List ........................................................................................................ 1 

Cost per hour of revision .................................................................................................................................. $18.37 

Subtotal 

3% discount rate ................................................................................................................................ ........................ $7,509,173 

7% discount rate ................................................................................................................................ ........................ $6,423,000 

Total Cost 

3% discount rate ................................................................................................................................ ........................ $43,473,091 

7% discount rate ................................................................................................................................ ........................ $42,386,918 

Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42041 

186The benefits from transactions correctly 

identified as non-beneficial to the consumer are 

discussed at supra Part XII.B.2. 

4. Required Disclosure of Total 

Financing/Contract Costs 

The proposed rule requires all dealers 

to disclose, in any transaction that 

features a monthly payment, the total 

cost of the financing/leasing contract. In 

addition, in any comparison of two 

contracts with different monthly 

payments, the dealer is required to 

disclose that the contract with the lower 

monthly payment features a higher total 

cost (if true) and disclose the total cost 

corresponding to each monthly payment 

offer. We consider two scenarios that 

bear on the mechanical costs of 

implementing the requirements under 

these provisions. In the first scenario, 

dealers incur a one-time, upfront cost 

when designing these disclosures and 

informing associates of their obligations 

to provide the disclosures, but incur 

negligible ongoing costs on a per 

transaction basis. This reflects a 

compliance regime where dealers 

already generate the required 

information during the normal course of 

business and must only convey it to 

consumers verbally at an appropriate 

point in the transaction. In the second 

scenario, dealers incur an additional 

ongoing cost per financed transaction in 

order to communicate the required 

disclosures to consumers in writing. 

This reflects a compliance regime where 

dealers may or may not generate the 

required information during the normal 

course of business and/or find it 

necessary to maintain a documentary 

record of compliance with the Rule. 

The upfront costs of complying with 

this provision are relatively limited; 

every dealer must create a template 

disclosure script that contains this 

information and communicate it to 

associates so that they understand their 

obligations. The Commission assumes 

an employee will spend 8 hours creating 

this disclosure and informing sales staff. 

At a labor rate of $26.83 for compliance 

managers, this cost is estimated at $10 

million. 

For the second scenario involving 

ongoing costs, we estimate there are 

roughly 32 million vehicle transactions 

each year subject to this requirement 

(financed sales of new and used 

vehicles plus leased vehicles). The 

Commission assumes an employee will 

spend 2 minutes per vehicle populating 

these disclosures and dealers will incur 

a printing cost of $0.15 per transaction. 

At a labor rate of $21.84 for sales staff, 

the total additional cost under this 

scenario is estimated at $213.4–$249.5 

million; see Table 3.4. 

TABLE 3.4—ESTIMATED COMPLIANCE COSTS FOR FINANCING COST DISCLOSURES

2022 only 2022–2032 

Scenario 1—Creation of disclosure only 

Number of dealers ............................................................................................................................................ 46,525 ........................

Compliance manager hours per dealer ................................................................................................................... 8 ........................

Cost per hour of disclosure creation ....................................................................................................................... $26.83 ........................

Scenario 1—Total Cost $9,986,126 ........................

Scenario 2—Disclosures per transaction 

New vehicle sales per year a ............................................................................................................................ ........................ 17,059,000 

% New vehicle sales involving financing b ....................................................................................................... ........................ 81% 

Used vehicle sales per year ............................................................................................................................. ........................ 40,807,000 

% Used vehicle sales involving financing ........................................................................................................ ........................ 35% 

New vehicle leases per year ............................................................................................................................ ........................ 4,242,000 

Total transactions involving monthly payment/financing .................................................................................. ........................ 32,342,240 

Disclosure minutes per transaction .................................................................................................................. ........................ 2 

Cost per hour of disclosure .............................................................................................................................. ........................ $21.84 

Printing costs per disclosure ............................................................................................................................ ........................ $0.15 

Subtotal 

3% discount rate ............................................................................................................................................... ........................ $249,494,625 

7% discount rate ............................................................................................................................................... ........................ $213,406,193 

Scenario 2—Total Cost 

3% discount rate ............................................................................................................................................... ........................ $259,480,751 

7% discount rate ............................................................................................................................................... ........................ $223,392,319 

Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates. a National Transportation Statistics 2021, Table 1–17. 

bExperian Information Solutions, Inc., State of the Automotive Finance Market Q4 2020. 

5. Prohibition on Charging for Add-ons 

in Certain Circumstances 

The proposed rule prohibits dealers 

from marketing or selling add-on 

products or services from which the 

targeted consumer would not benefit. 

Compliance with this provision will 

require dealers to have a transactionlevel system for identifying consumers 

who will not benefit or, in some cases, 

predicting the potential consumer 

benefit from particular add-on products 

and services. In addition, this system 

will have to be supplemented with 

policies and transaction-level rules 

about when add-on products and 

services can be offered. Finally, because 

dealers will not always have all of the 

relevant information at their disposal at 

the point of sale, such a system is likely 

to falsely identify some transactions as 

non-beneficial for the consumer. In 

cases where consumers would benefit in 

excess of the price of the add-on 

product or service, this provision will 

result in welfare costs associated with 

the foreclosure of such transactions.186

At this stage, all of these costs are 

difficult to quantify. The Commission 

invites comment from dealers and 

consumers in order to assess the 

difficulty of implementing this 

requirement and the possibility for 

foreclosure of mutually beneficial 

transactions. 

The proposed rule also prohibits 

dealers from charging for any optional 

add-on products or services unless 

dealership employees make certain 

disclosures at various points in the 

buying process. Before referencing any 

financing terms (other than Offering 

Price) for a specific vehicle or 

consummating a cash transaction, the 

dealer must disclose the total cost of 

purchasing the vehicle in cash—without 

any charges for optional add-ons or 

financing—in a format that itemizes the 

Offering Price; any discounts, rebates, or 


jspears on DSK121TN23PROD with PROPOSALS3
42042 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

187One consequence of this provision is that 

consumers, with the benefit of clear disclosure of 

the various prices, will renegotiate some aspect of 

the sale in order to obtain a more favorable deal. 

Any such renegotiation would require the 

completion of another disclosure prior to 

consummating the transaction, which is assumed 

away here. 

188The physical costs are $0.15 per paper 

disclosure and $0.02 per electronic disclosure, 

assuming that 27% are made electronically. This 

assumption is informed by a consumer survey that 

indicates 73% of consumers with motor vehicles 

prefer to receive registration renewal notices by 

mail as opposed to electronically. See Consumer 

Action, Your opinion wanted: Paper vs. electronic 

bills, statements and other communications (Winter 

2018–2019), https://www.consumer-action.org/ 

downloads/Consumer_Action_Paper_v_electronic_

survey.pdf. 

189We implicitly assume there is no correlation 

between the presence of optional add-ons and the 

use of financing in a transaction, such that we can 

multiply the percentages. We also assume the 

percentage of sales featuring optional add-ons will 

not decrease in response to the Rule, although 

decreasing the frequency of deceptive or 

unauthorized sales is a significant channel through 

which consumer and social benefits may accrue. 

trade-in values; and required 

government charges. The dealer must 

further indicate clearly that the 

consumer has the option to purchase the 

vehicle for this amount in cash and 

obtain the consumer’s signed 

declination of that option. 

Furthermore, before charging for any 

optional add-ons in a transaction 

involving financing, the dealer must 

disclose the total cost of financing the 

vehicle—without any charges for 

optional add-ons—in a format that 

itemizes the Offering Price; any 

discounts, rebates, or trade-in values; 

any cash down payment made; and 

required government charges. The 

dealer must also indicate clearly at this 

point that the consumer has the option 

to finance the vehicle for this amount 

and obtain the consumer’s signed 

declination of that option. Finally, 

before charging for any optional addons, the dealer must disclose the total 

cost of purchasing or financing the 

vehicle plus the add-ons selected by the 

consumer—either as a separately 

itemized total cash price for a nonfinanced transaction or a separately 

itemized total price for a financed 

transaction. 

In order to comply with these 

disclosure provisions, each dealer will 

have to design form disclosures that 

contain the required information, create 

a system for populating these forms, and 

then provide the disclosures in writing, 

with the appropriate information filled 

in, to each consumer prior to 

completing the transaction. We assume 

that each consumer will receive each 

disclosure required by the provisions 

exactly once during each transaction (if 

relevant).187

The Commission assumes that each 

dealer will employ 8 hours of 

compliance manager time (at a rate of 

$26.83) and 4 hours of sales manager 

time (at a rate of $63.93) creating these 

disclosures, and 8 hours of programmer 

time (at a rate of $28.90) creating a 

system to populate these forms when 

provided inputs by sales staff. We 

further assume that sales staff will 

spend 2 minutes per disclosure (at a rate 

of $21.84 per hour) updating, printing, 

and delivering these forms to consumers 

and that the physical costs of delivering 

the disclosure are roughly $0.11 per 

disclosure.188 One disclosure is required 

for all new and used vehicle sales, an 

additional disclosure is required for 

transactions with optional add-ons 

(94% new and 86% used), and a third 

disclosure would be required for 

financed transactions with optional addons (76% new and 30% used).189 All of 

these costs are summarized in Table 3.5. 

The Commission seeks comments on 

these costs, particularly regarding how 

dealers anticipate complying with these 

requirements, in order to reach more 

accurate estimates of costs. 

TABLE 3.5—ESTIMATED COMPLIANCE COSTS FOR ITEMIZED DISCLOSURES

2022 only 2022–2032 

Creation of disclosures 

Number of dealers ...................................................................................................................................... 46,525 ..............................

Compliance manager hours per dealer ...................................................................................................... 8 ..............................

Cost per hour of compliance manager ....................................................................................................... $26.83 ..............................

Sales manager hours per dealer ................................................................................................................ 4 ..............................

Cost per hour of sales manager ................................................................................................................ $63.93 ..............................

Programmer hours per dealer .................................................................................................................... 8 ..............................

Cost per hour of programming ................................................................................................................... $28.90 ..............................

Subtotal ............................................................................................................................................... $32,640,079 ..............................

Disclosure delivery (per transaction) 

New vehicle sales per year ........................................................................................................................ 17,059,000 

% New vehicle sales involving optional add-ons a .................................................................................... 94% 

% New vehicle sales involving financing ................................................................................................... 81% 

Used vehicle sales per year ....................................................................................................................... 40,807,000 

% Used vehicle sales involving optional add-ons b ................................................................................... 86% 

% Used vehicle sales involving financing .................................................................................................. 35% 

Minutes per disclosure ............................................................................................................................... 2 

Cost per hour of disclosure ........................................................................................................................ $21.84 

Physical costs per disclosure ..................................................................................................................... $0.11 

Subtotal.

3% discount rate .......................................................................................................................... $994,356,865 

7% discount rate .......................................................................................................................... $850,526,991 

Total Cost.

3% discount rate .......................................................................................................................... $1,026,996,944 

7% discount rate .......................................................................................................................... $883,167,070 

Note:In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates. a National Automobile Dealers Association, Average Dealership Profile (Aug. 2020) 

b National Automobile Dealers Association, Average Dealership Profile (Aug. 2020) 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42043 

6. Requirement To Obtain Express 

Informed Consent Before Any Charges 

The proposed rule requires dealers to 

obtain Express Informed Consent before 

charging any consumer for any product 

or service in association with the sale, 

financing, or lease of a vehicle. It is the 

understanding of the Commission that 

all dealers that are complying with the 

law currently have policies in place to 

prevent charges without consent; it is 

unclear what additional practices for 

those dealers will be required to comply 

with this provision. 

7. Recordkeeping 

The proposed rule requires dealers to 

retain records of all documents 

pertaining to Rule compliance. These 

recordkeeping requirements include: 

• Copies of all materially different 

marketing materials, sales scripts, and 

training materials that discuss sales 

prices and financing/lease terms. 

• Copies of all materially different 

Add-on Lists. 

• Records demonstrating that all addons charged for meet the requirements 

under the Rule, including calculations 

of loan-to-value ratios in contracts 

including GAP Agreements. 

• Copies of all purchase orders, 

financing and lease contracts signed by 

the consumer (whether or not final 

approval is received), and all written 

communications with any consumer 

who signs a purchase order or financing 

or lease contract. 

• Copies of all written consumer 

complaints, inquiries related to add-ons, 

and inquiries and responses about 

individual vehicles. 

Most of these documents are already 

being produced in the normal course of 

business prior to the Rule, or the costs 

of creating them have already been 

accounted for in previous sections. The 

Commission assumes that each dealer 

incurs an upfront cost, employing 8 

hours of programmer time, 5 hours of 

clerical time, 1 hour of sales manager 

time, and 1 hour of compliance officer 

time, at hourly rates of $28.90, $18.37, 

$63.93, and $26.83, respectively, in 

order to upgrade their systems and 

create the templates necessary to 

accommodate retention of all relevant 

materials. In addition, loan-to-value 

calculations are now required for all 

transactions with GAP Agreements, the 

creation of which has not been 

accounted for in previous sections. The 

Commission assumes that each dealer 

employs 1 additional minute of sales 

staff time per transaction with a GAP 

agreement in order to populate and store 

all relevant materials. These costs are 

summarized in Table 3.6. 

We expect that some small 

dealerships may not have the ability to 

automate these processes in a way that 

reduces the ongoing costs of 

recordkeeping to the level stated here. 

We invite comment on the proportion of 

dealerships that would rely more 

heavily on manual record retention and 

the associated impact on costs so that 

we may update our cost estimates for 

this provision accordingly. 

In addition, the expansion of the 

volume of records that dealers are 

required to retain and manage will 

likely require investment in additional 

IT systems and hardware. In the absence 

of information regarding the volume of 

new data (e.g., numbers of inquiries per 

dealer, numbers of consumer 

complaints, communications per 

consummated transaction, etc.), the 

Commission leaves these capital costs 

unquantified in the preliminary analysis 

and seeks comment from stakeholders 

in order to obtain the information 

necessary to estimate costs. 

TABLE 3.6—ESTIMATED COMPLIANCE COSTS FOR RECORDKEEPING

2022 only 2022–2032 

Updating systems 

Number of dealers ............................................................................................................................................ 46,525 ........................

Programming hours per dealer ........................................................................................................................ 8 ........................

Cost per hour of programming ......................................................................................................................... $28.90 ........................

Clerical hours per dealer .................................................................................................................................. 5 ........................

Cost per hour of clerical work .......................................................................................................................... $18.37 ........................

Sales manager hours per dealer ...................................................................................................................... 1 ........................

Cost per hour of sales manager review ........................................................................................................... $63.93 ........................

Compliance officer hours per dealer ................................................................................................................ 1 ........................

Cost per hour of compliance review ................................................................................................................ $26.83 ........................

Subtotal ..................................................................................................................................................... $19,252,510 ........................

Recordkeeping (per transaction) 

Number of motor vehicle sales a ...................................................................................................................... ........................ 57,866,000 

% of sales with GAP agreement b ................................................................................................................... ........................ 26% 

Sales staff minutes per transaction .................................................................................................................. ........................ 1 

Cost per hour of recordkeeping ....................................................................................................................... ........................ $21.84 

Subtotal 

3% discount rate ................................................................................................................................ ........................ $47,561,392 

7% discount rate ................................................................................................................................ ........................ $40,681,820 

Total Cost 

3% discount rate ................................................................................................................................ ........................ $66,813,902 

7% discount rate ................................................................................................................................ ........................ $59,934,330 

Note:In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates. a National Transportation Statistics, Table 1–17 

b National Consumer Law Center, Auto Add-ons Add Up: How Dealer Discretion Drives Excessive, Inconsistent, and Discriminatory Pricing 

D. Other Impacts of Proposed Rule 

As the status quo in this industry 

features consumer search frictions, 

shrouded prices, deception, and 

obfuscation, dealers likely charge higher 

prices than could be supported under 

the Rule for a number of products and 

services. The Commission expects that 

prices are likely to adjust in response to 

the transparency facilitated by the new 

Rule. Part XII.B discussed the benefits 


jspears on DSK121TN23PROD with PROPOSALS3
42044 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

that occur when quantities adjust in a 

more transparent and less deceptive 

equilibrium. Price adjustments typically 

serve to transfer welfare from one side 

of the market to the other. For example, 

in a typical market if quantity sold 

remains constant in response to the 

implementation of a rule but prices 

decrease, consumer welfare would 

increase, but producer profits would 

decrease by roughly the same amount, 

leaving total social welfare roughly 

constant. However, if the Rule curbs 

price effects caused by deception, the 

transfers caused by these price effects 

would redistribute welfare away from 

dishonest dealers and toward 

consumers, which may be an explicit 

goal of the rule. 

In addition, deceptive practices by 

dishonest dealers lead consumers to 

engage with those dealers instead of 

honest dealerships. Under the proposed 

rule, some business that would 

otherwise have gone to dealers using 

bait-and-switch tactics or deceptive 

door opening advertisements will now 

go to honest dealerships. Again, 

assuming that the costs of the firms are 

similar, any one-for-one diversion of 

sales from one set of businesses to 

another is generally characterized as a 

transfer under the OMB guidelines for 

regulatory impact analysis. However, in 

this case, it would represent a transfer 

from the set of dishonest dealers to 

honest dealers, which may weigh 

differently if profits from law violations 

are not counted towards social welfare 

in the regulatory analysis. 

While each provision above will affect 

consumer prices for vehicles, add-ons, 

financing etc. and the distribution of 

sales across dealerships, estimating the 

magnitudes of these effects is difficult 

and requires information that is 

currently not available. As a result, we 

have not attempted to quantify these 

impacts. However, these transfers 

should be documented because, at 

minimum, they inform the 

distributional effects of the proposed 

rule. The Commission invites comment 

on how prices might be expected to 

respond to the proposed rule, in order 

to quantify its price effects and resulting 

distributional impact or impact on net 

benefits and costs. 

E. Conclusion 

In the preceding Preliminary 

Regulatory Analysis, we have attempted 

to catalog and quantify the incremental 

benefits and costs of the provisions 

included in the proposed rule. 

Extrapolating these benefits out over the 

10-year assessment period and 

discounting to the present provides an 

estimate of the present value for total 

benefits and costs of the proposed rule, 

with the difference—net benefits— 

providing one measure of the value of 

regulation. 

The present value of benefits for 

consumers from the proposed rule’s 

requirements over a 10-year period 

using a 7% discount rate is estimated at 

$31.1 billion. The present value of costs 

for covered motor vehicle dealers of 

complying with the proposed rule’s 

requirements over a 10-year period 

using a 7% discount rate is estimated at 

$1.4 billion. This generates an estimate 

of the present value of net benefits equal 

to $29.7 billion using a discount rate of 

7%. 

Consequently, this Preliminary 

Regulatory Analysis indicates that 

adoption of the proposed rule would 

result in benefits to the public that 

outweigh the costs. 

PRESENT VALUE OF NET BENEFITS, 

2022–2032 

Present value 

Total Benefits: 

3% discount rate ..... $36,337,956,234 

7% discount rate ..... $31,081,811,411 

Total Costs: 

3% discount rate ..... $1,568,408,501 

7% discount rate ..... $1,360,694,552 

Net Benefits: 

3% discount rate ..... $34,769,547,733 

7% discount rate ..... $29,721,116,859 

Note: Total costs reflect highest cost scenarios, for a conservative estimate of Net 

Benefits. 

List of Subjects in 16 CFR Part 463 

Consumer protection, Motor vehicles, 

Reporting and recordkeeping 

requirements, Trade practices. 

For the reasons stated in the 

preamble, the Federal Trade 

Commission proposes to add part 463 to 

subchapter D of Title 16 of the Code of 

Federal Regulations as follows: 

PART 463—MOTOR VEHICLE TRADE 

REGULATION RULE 

Sec. 

463.1 Authority. 

463.2 Definitions. 

463.3 Prohibited misrepresentations. 

463.4 Disclosure requirements. 

463.5 Dealer Charges for add-ons and other 

items. 

463.6 Recordkeeping. 

463.7 Waiver not permitted. 

463.8 Severability. 

463.9 Relation to State laws. 

Authority: 15 U.S.C. 41 et seq.; 12 U.S.C. 

5519. 

§ 463.1 Authority. 

This part is promulgated pursuant to 

Section 1029 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010, 12 U.S.C. 5519(d). It is an 

unfair or deceptive act or practice 

within the meaning of Section 5(a)(1) of 

the Federal Trade Commission Act (15 

U.S.C. 45(a)(1)) to violate any applicable 

provision of this part, directly or 

indirectly, including the recordkeeping 

requirements which are necessary to 

prevent such deceptive acts or practices 

and to enforce this part. 

§ 463.2 Definitions. 

(a) Add-on or Add-on Product(s) or 

Service(s) means any product(s) or 

service(s) not provided to the consumer 

or installed on the vehicle by the motor 

vehicle manufacturer and for which the 

Motor Vehicle Dealer, directly or 

indirectly, charges a consumer in 

connection with a vehicle sale, lease, or 

financing transaction. 

(b) Add-on List means an itemized list 

of all optional Add-on Products or 

Services for which the Motor Vehicle 

Dealer, directly or indirectly, charges 

consumers. The Add-on List must 

Clearly and Conspicuously disclose 

each such optional Add-on and the 

price of each such Add-on. If the Addon price varies, the disclosure must 

include the price range the typical 

consumer will pay instead of the price. 

(c) Cash Price without Optional Addons means Offering Price, plus required 

Government Charges, minus any 

discounts, rebates, or trade-in valuation 

amounts, and excludes optional Addons. 

(d) Clearly and Conspicuously means 

in a manner that is difficult to miss (i.e., 

easily noticeable) and easily 

understandable, including in all of the 

following ways: 

(1) In any communication that is 

solely visual or solely audible, the 

disclosure must be made through the 

same means through which the 

communication is presented. In any 

communication made through both 

visual and audible means, such as a 

television advertisement, the disclosure 

must be presented simultaneously in 

both the visual and audible portions of 

the communication even if the 

representation requiring the disclosure 

is made in only one means. 

(2) A visual disclosure, by its size, 

contrast, location, the length of time it 

appears, and other characteristics, must 

stand out from any accompanying text 

or other visual elements so that it is 

easily noticed, read, and understood. 

(3) An audible disclosure, including 

by telephone or streaming video, must 

be delivered in a volume, speed, and 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42045 

cadence sufficient for ordinary 

consumers to easily hear and 

understand it. 

(4) In any communication using an 

interactive electronic medium, such as 

the Internet or software, the disclosure 

must be unavoidable. 

(5) The disclosure must use diction 

and syntax understandable to ordinary 

consumers and must appear in each 

language in which the representation 

that requires the disclosure appears. 

(6) The disclosure must comply with 

these requirements in each medium 

through which it is received. 

(7) The disclosure must not be 

contradicted or mitigated by, or 

inconsistent with, anything else in the 

communication. 

(e) Dealer or Motor Vehicle Dealer 

means any person or resident in the 

United States, or any territory of the 

United States, that: 

(1) Is licensed by a State, a territory 

of the United States, or the District of 

Columbia to engage in the sale of motor 

vehicles; 

(2) Takes title to, holds an ownership 

interest in, or takes physical custody of 

motor vehicles; and 

(3) Is predominantly engaged in the 

sale and servicing of motor vehicles, the 

leasing and servicing of motor vehicles, 

or both. 

(f) Express, Informed Consent means 

an affirmative act communicating 

unambiguous assent to be charged, 

made after receiving and in close 

proximity to a Clear and Conspicuous 

disclosure, in writing, and also orally 

for in-person transactions, of the 

following: 

(1) What the charge is for; and 

(2) The amount of the charge, 

including, if the charge is for a product 

or service, all fees and costs to be 

charged to the consumer over the period 

of repayment with and without the 

product or service. The following are 

examples of what does not constitute 

Express, Informed Consent: 

(i) A signed or initialed document, by 

itself; 

(ii) Prechecked boxes; or 

(iii) An agreement obtained through 

any practice designed or manipulated 

with the substantial effect of subverting 

or impairing user autonomy, decisionmaking, or choice. 

(g) GAP Agreement means an 

agreement to indemnify a vehicle 

purchaser or lessee for any of the 

difference between the actual cash value 

of the insured’s vehicle in the event of 

an unrecovered theft or total loss and 

the amount owed on the vehicle 

pursuant to the terms of a loan, lease 

agreement, or installment sales contract 

used to purchase or lease the vehicle, or 

to waive the unpaid difference between 

money received from the purchaser’s or 

lessee’s motor vehicle insurer and some 

or all of the amount owed on the vehicle 

at the time of the unrecovered theft or 

total loss, including products or services 

otherwise titled ‘‘Guaranteed 

Automobile Protection Agreement,’’ 

‘‘Guaranteed Asset Protection 

Agreement,’’ ‘‘GAP insurance,’’ or ‘‘GAP 

Waiver’’. 

(h) Government Charges means all 

fees or charges imposed by a Federal, 

State or local government agency, unit, 

or department, including taxes, license 

and registration costs, inspection or 

certification costs, and any other such 

fees or charges. 

(i) Material or Materially means likely 

to affect a person’s choice of, or conduct 

regarding, goods or services. 

(j) Motor Vehicle means: 

(1) Any self-propelled vehicle 

designed for transporting persons or 

property on a street, highway, or other 

road; 

(2) Recreational boats and marine 

equipment; 

(3) Motorcycles; 

(4) Motor homes, recreational vehicle 

trailers, and slide-in campers, as those 

terms are defined in §§ 571.3(b) and 

575.103(d) of title 49, Code of Federal 

Regulations, or any successor thereto; 

and 

(5) Other vehicles that are titled and 

sold through Dealers. 

(k) Offering Price means the full cash 

price for which a Dealer will sell or 

finance the motor vehicle to any 

consumer, excluding only required 

Government Charges. 

§ 463.3 Prohibited misrepresentations. 

It is a violation of this part and an 

unfair or deceptive act or practice in 

violation of Section 5 of the Federal 

Trade Commission Act (‘‘FTC Act’’) for 

any Motor Vehicle Dealer to make any 

misrepresentation, expressly or by 

implication regarding: 

(a) The costs or terms of purchasing, 

financing, or leasing a vehicle. 

(b) Any costs, limitation, benefit, or 

any other Material aspect of an Add-on 

Product or Service. 

(c) Whether the terms are, or 

transaction is, for financing or a lease. 

(d) The availability of any rebates or 

discounts that are factored into the 

advertised price but not available to all 

consumers. 

(e) The availability of vehicles at an 

advertised price. 

(f) Whether any consumer has been or 

will be preapproved or guaranteed for 

any product, service, or term. 

(g) Any Material information on or 

about a consumer’s application for 

financing. 

(h) When the transaction is final or 

binding on all parties. 

(i) Keeping cash down payments or 

trade-in vehicles, charging fees, or 

initiating legal process or any action if 

a transaction is not finalized or if the 

consumer does not wish to engage in a 

transaction. 

(j) Whether or when a Motor Vehicle 

Dealer will pay off some or all of the 

financing or lease on a consumer’s 

trade-in vehicle. 

(k) Whether consumer reviews or 

ratings are unbiased, independent, or 

ordinary consumer reviews or ratings of 

the Dealer or its products or services. 

(l) Whether the Dealer or any of its 

personnel or products or services is or 

was affiliated with, endorsed or 

approved by, or otherwise associated 

with the United States government or 

any Federal, State, or local government 

agency, unit, or department, including 

the United States Department of Defense 

or its Military Departments. 

(m) Whether consumers have won a 

prize or sweepstakes. 

(n) Whether, or under what 

circumstances, a vehicle may be moved, 

including across state lines or out of the 

country. 

(o) Whether, or under what 

circumstances, a vehicle may be 

repossessed. 

(p) Any of the required disclosures 

identified in this part. 

§ 463.4 Disclosure requirements. 

It is a violation of this part and an 

unfair or deceptive act or practice in 

violation of section 5 of the FTC Act for 

any Motor Vehicle Dealer to fail to make 

any disclosure required by this section, 

Clearly and Conspicuously. 

(a) Offering Price. In connection with 

the sale or financing of vehicles, a 

vehicle’s Offering Price must be 

disclosed: 

(1) In any advertisement that 

references, expressly or by implication, 

a specific vehicle; 

(2) In any advertisement that 

represents, expressly or by implication, 

any monetary amount or financing term 

for any vehicle; and 

(3) In any communication with a 

consumer that includes a reference, 

expressly or by implication, regarding a 

specific vehicle, or any monetary 

amount or financing term for any 

vehicle. With respect to such 

communications: 

(i) The Offering Price for the vehicle 

must be disclosed in the Dealer’s first 

response regarding that specific vehicle 

to the consumer; and 

(ii) If the communication or response 

is in writing, the Offering Price must be 

disclosed in writing. 


jspears on DSK121TN23PROD with PROPOSALS3
42046 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

(b) Add-on List. If a Dealer charges, 

directly or indirectly, for any optional 

Add-on Products or Services, an Add-on 

List must be disclosed: 

(1) On each website, online service, or 

mobile application operated by or on 

behalf of the Dealer, and at each 

dealership; and 

(2) If an advertisement is not 

presented on a website, online service, 

or mobile application, the Dealer must 

disclose the website, online service, or 

mobile application where the consumer 

can view the Add-on List. 

(c) Add-ons not required. When 

making any representation, expressly or 

by implication, directly or indirectly, 

about an Add-on Product or Service, the 

Dealer must disclose that the Add-on is 

not required and the consumer can 

purchase or lease the vehicle without 

the Add-on, if true. If the representation 

is in writing, the disclosure must be in 

writing. 

(d) Total of payments and 

consideration for a financed or lease 

transaction. (1) When making any 

representation, expressly or by 

implication, directly or indirectly, about 

a monthly payment for any vehicle, the 

Dealer must disclose the total amount 

the consumer will pay to purchase or 

lease the vehicle at that monthly 

payment after making all payments as 

scheduled. If the representation is in 

writing, the disclosure must be in 

writing; and 

(2) If the total amount disclosed 

assumes the consumer will provide 

consideration (for example, in the form 

of a cash down payment or trade-in 

valuation), the Dealer must disclose the 

amount of consideration to be provided 

by the consumer. If the representation is 

in writing, the disclosure must be in 

writing. 

(e) Monthly payments comparison. 

When making any comparison between 

payment options, expressly or by 

implication, directly or indirectly, that 

includes discussion of a lower monthly 

payment, the Dealer must disclose that 

the lower monthly payment will 

increase the total amount the consumer 

will pay to purchase or lease the 

vehicle, if true. If the representation is 

in writing, the disclosure must be in 

writing. 

§ 463.5 Dealer Charges for Add-ons and 

Other Items 

It is a violation of this part and an 

unfair or deceptive act or practice in 

violation of Section 5 of the FTC Act for 

any Motor Vehicle Dealer, in connection 

with the sale or financing of vehicles, to 

charge for any of the following. 

(a) Add-ons that provide no benefit. A 

Dealer may not charge for an Add-on 

Product or Service if the consumer 

would not benefit from such an Add-on 

Product or Service, including: 

(1) Nitrogen-filled tire relatedproducts or services that contain no 

more nitrogen than naturally exists in 

the air; or 

(2) Products or services that do not 

provide coverage for the vehicle, the 

consumer, or the transaction, or are 

duplicative of warranty coverage for the 

vehicle, including a GAP Agreement if 

the consumer’s vehicle or neighborhood 

is excluded from coverage or the loanto-value ratio would result in the 

consumer not benefiting financially 

from the product or service. 

(b) Undisclosed or unselected Addons. A Dealer may not charge for any 

optional Add-on Product or Service 

unless the following requirements are 

met: 

(1) Cash Price without Optional Addons.—(i) Disclosure. Before referencing 

any aspect of financing for a specific 

vehicle (aside from the Offering Price) 

or before consummating a non-financed 

sale, whichever is earlier, the Motor 

Vehicle Dealer must Clearly and 

Conspicuously disclose: 

(A) The Cash Price without Optional 

Add-ons, separately itemizing the 

Offering Price, any discounts, any 

rebates, any trade-in valuation, and 

required Government Charges; and 

(B) That the consumer can purchase 

the vehicle for the Cash Price without 

Optional Add-ons; and 

(ii) Declination. The consumer must 

decline to purchase the vehicle for the 

Cash Price without Optional Add-ons. 

(iii) Form and signature. The Cash 

Price without Optional Add-ons 

disclosure and declination set forth in 

paragraphs (b)(1)(i) and (ii) of this 

section must be in writing, date and 

time recorded, and signed by the 

consumer and a manager of the Motor 

Vehicle Dealer. 

(iv) Presentation. The Cash Price 

without Optional Add-ons disclosure 

and declination set forth in paragraphs 

(b)(1)(i) and (ii) of this section must be 

limited to the information required by 

this section, and cannot be presented 

with any other written materials. 

(2) Cash Price without Optional Addons in a financed transaction.—(i) 

Disclosure. Before charging for any 

optional Add-on in a financed 

transaction, the Motor Vehicle Dealer 

must Clearly and Conspicuously 

disclose: 

(A) The total of the Cash Price 

without Optional Add-ons plus the 

finance charge, factoring in any cash 

down payment and trade-in valuation, 

and excluding optional Add-ons. This 

disclosure must separately itemize the 

Cash Price without Optional Add-ons, 

the finance charge, any cash down 

payment, and any trade-in valuation; 

and 

(B) That the consumer can finance the 

vehicle for that total; and 

(ii) Declination. The consumer must 

decline to purchase the vehicle for that 

total set forth in paragraph (b)(2)(i)(A). 

(iii) Form and signature. The 

disclosure and declination set forth in 

paragraphs (b)(2)(i) and (ii) of this 

section must be in writing, date and 

time recorded, and signed by the 

consumer and a manager of the Motor 

Vehicle Dealer. 

(iv) Presentation. The disclosure and 

declination set forth in paragraphs 

(b)(2)(i) and (ii) of this section must be 

limited to the information required by 

this section, and cannot be presented 

with any other written materials. 

(3) Itemization of optional Add-ons. 

Before charging for any optional Addon, the Motor Vehicle Dealer must 

separately itemize and Clearly and 

Conspicuously disclose: 

(i) For a non-financed transaction: 

(A) The Cash Price without Optional 

Add-ons; 

(B) Charges for any optional Add-ons 

selected by the consumer, separately 

itemized; and 

(C) The sum of the items set forth in 

paragraphs (b)(3)(i)(A) and (b)(3)(i)(B) of 

this section; or 

(ii) For a financed transaction, 

(A) The total described in paragraph 

(b)(2)(i)(A) of this section; 

(B) Charges for any optional Add-ons 

selected by the consumer, separately 

itemized; and 

(C) The sum of the items set forth in 

paragraphs (b)(3)(ii)(A) and (b)(3)(ii)(B) 

of this section. 

(c) Any item without Express, 

Informed Consent. A Dealer may not 

charge a consumer for any item unless 

the Dealer obtains the Express, Informed 

Consent of the consumer for the charge. 

§ 463.6 Recordkeeping. 

(a) Any Motor Vehicle Dealer subject 

to this part must create and retain, for 

a period of twenty-four months from the 

date the record is created, all records 

necessary to demonstrate compliance 

with this part, including the following 

records: 

(1) Copies of all Materially different 

advertisements, sales scripts, training 

materials, and marketing materials 

regarding the price, financing or lease of 

a motor vehicle, that the Motor Vehicle 

Dealer disseminated during the relevant 

time period. Provided that a typical 

example of a credit or lease 

advertisement may be retained for 

advertisements that include different 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 42047 

190See Nat’l Consumer L. Ctr., Auto Add-Ons 

Add Up: How Dealer Discretion Drives Excessive, 

Arbitrary and Discriminatory Pricing (2017), 

https://www.nclc.org/images/pdf/car_sales/reportauto-add-on.pdf. Not all add-ons provide no value. 

The NPRM limits its prohibition to ones that do. 

191Fed. Trade Comm’n, Buckle Up: Navigating 

Auto Sales and Financing (2020), https://

www.ftc.gov/system/files/documents/reports/ 

buckle-navigating-auto-sales-financing/ 

bcpstaffreportautofinancing_0.pdf. 

192 Id. at 9. 

193AMG Capital Mgmt., LLC. v. FTC, 141 S. Ct. 

1341 (2021). 

194 12 U.S.C. 5519. 

vehicles, or different amounts for the 

same credit or lease terms, where the 

advertisements are otherwise not 

Materially different; 

(2) Copies of all Materially different 

Add-on Lists and all documents 

describing such products or services 

that are offered to consumers; 

(3) Copies of all purchase orders; 

financing and lease documents with the 

Motor Vehicle Dealer signed by the 

consumer, whether or not final approval 

is received for a financing or lease 

transaction; and all written 

communications relating to sales, 

financing, or leasing between the Motor 

Vehicle Dealer and any consumer who 

signs a purchase order or financing or 

lease contract with the Motor Vehicle 

Dealer; 

(4) Records demonstrating that Addons in consumers’ contracts meet the 

requirements of § 463.5, including 

copies of all service contracts, GAP 

Agreements and calculations of loan-tovalue ratios in contracts including GAP 

Agreements; and the Cash Price without 

Optional Add-ons disclosures and 

declinations required by § 463.5(b); and 

(5) Copies of all written consumer 

complaints relating to sales, financing, 

or leasing, inquiries related to Add-ons, 

and inquiries and responses about 

vehicles referenced in § 463.4. 

(b) Any Motor Vehicle Dealer subject 

to this part may keep the records 

required by paragraph (a) of this section 

in any legible form, and in the same 

manner, format, or place as they may 

already keep such records in the 

ordinary course of business. Failure to 

keep all records required under 

paragraph (a) of this section will be a 

violation of this part. 

§ 463.7 Waiver not permitted. 

It is a violation of this part for any 

person to obtain, or attempt to obtain, a 

waiver from any consumer of any 

protection provided by or any right of 

the consumer under this part. 

§ 463.8 Severability. 

The provisions of this part are 

separate and severable from one 

another. If any provision is stayed or 

determined to be invalid, it is the 

Commission’s intention that the 

remaining provisions will continue in 

effect. 

§ 463.9 Relation to State laws. 

(a) In General. This part will not be 

construed as superseding, altering, or 

affecting any other State statute, 

regulation, order, or interpretation 

relating to Motor Vehicle Dealer 

requirements, except to the extent that 

such statute, regulation, order, or 

interpretation is inconsistent with the 

provisions of this part, and then only to 

the extent of the inconsistency. 

(b) Greater protection under State law. 

For purposes of this section, a State 

statute, regulation, order, or 

interpretation is not inconsistent with 

the provisions of this part if the 

protection such statute, regulation, 

order, or interpretation affords any 

consumer is greater than the protection 

provided under this part. 

By direction of the Commission. 

April J. Tabor, 

Secretary. 

Note: The following statement will not 

appear in the Code of Federal Regulations: 

Joint Statement of Chair Lina M. Khan, 

Commissioner Noah Joshua Phillips, 

Commissioner Rebecca Kelly Slaughter, and 

Commissioner Alvaro M. Bedoya Regarding 

the Notice of Proposed Rulemaking on a 

Motor Vehicle Dealers Trade Regulation Rule 

(June 23, 2022) 

The Commission has voted today to 

release a Notice of Proposed 

Rulemaking to address unfair and 

deceptive practices in car sales. Cars are 

vital for Americans, especially those 

living in rural areas or where mass 

transit is limited. They are crucial for 

people to get to work, to shop for 

groceries, and to get to doctor’s 

appointments. For many Americans, 

buying a car is the most expensive 

purchase they will ever make. And in 

this time of rising prices and supply 

shortages, it is vitally important that 

Americans not be deceived when 

purchasing a car, particularly when it 

comes to ‘‘junk fees’’ or unnecessary 

add-ons.190 Add-ons can cost consumers 

thousands of dollars and can 

significantly increase the overall cost to 

the consumer in the transaction 

The proposed rule builds on the 

FTC’s work over decades, which 

confirmed that add-ons are a significant 

pain point for the car buying public.191

FTC staff’s in-depth interviews with 

consumers during a recent study 

revealed that consumers were unaware 

which add-ons they had purchased, 

were unable to identify add-ons in the 

paperwork, were unclear what those 

add-ons included, and sometimes did 

not realize they had purchased any addons at all. Indeed, add-ons were the 

single greatest area of confusion 

observed in the study.192

If this rule is finalized, the FTC will 

be able to bring enforcement actions to 

obtain civil penalties or redress for 

consumers from those who violate the 

rule’s provisions. This tool will be 

especially important given last year’s 

Supreme Court decision in AMG,193

which held that the FTC cannot use 

Section 13(b) of the FTC Act to make 

consumers who are harmed by 

deception or unfair practices financially 

whole. The proposed rule also has been 

crafted carefully not to impose 

unnecessary burdens on the mostly 

small businesses in this industry. 

This proposed rule is another 

example of how the FTC is using the 

full set of tools granted us by Congress 

to protect Americans from deceptive or 

unfair practices. Here, we are using—for 

the first time—authority that Congress 

gave us back in 2010 through the DoddFrank Act,194 which authorizes the FTC 

to prescribe rules governing motor 

vehicle dealers, and to do so pursuant 

to the FTC Act and the Administrative 

Procedure Act. 

Given the panoply of harms that 

Americans face from unlawful business 

practices, bringing an end to unlawful 

fees that hurt Americans already 

struggling with high prices is critical. 

We thank the Bureau of Consumer 

Protection staff for their excellent work 

on this effort and look forward to 

hearing from the public on this vital 

initiative. 

Dissenting Statement of Commissioner 

Christine S. Wilson 

Today the Commission votes to seek 

comment on a proposed Motor Vehicle 

Dealers Trade Regulation Rule. 

Experience reveals that even when 

motivated by the best of intentions, 

regulatory schemes frequently fail to 

generate promised improvements for 

their intended beneficiaries. Instead, 

they tend to create market distortions 

that stifle innovation, increase costs and 

prices, and ultimately harm consumers. 

For these reasons, I respectfully dissent. 

Here, there is no question that our 

staff is motivated by the best of 

intentions. The FTC has brought scores 

of law enforcement actions attempting 

to curb deceptive or unfair practices in 

this industry, including deceptive 

pricing claims and undisclosed charges 

for add-ons. Staff also has conducted an 

industry study, worked extensively with 

industry trade associations to educate 


jspears on DSK121TN23PROD with PROPOSALS3
42048 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Proposed Rules 

1One study found the FTC takes more than five 

years, on average, to formulate a consumer 

protection rule. See Jeffrey S. Lubbers, It’s Time to 

Remove the ‘Mossified’ Procedures for FTC 

Rulemaking, 83 Geo.Wash. L. Rev. 1979 (2015), 

https://digitalcommons.wcl.american.edu/cgi/ 

viewcontent.cgi?article=2086&context=facsch_

lawrev. 

2The updates to the Contact Lens Rule generated 

significant interest from Congress and industry 

trade groups, for example, and took 5 years to 

complete. See Remarks of Christine S. Wilson for 

the Federalist Society at ‘‘The Future of Rulemaking 

at the FTC’’ Event, Hey, I’ve Seen This One: 

Warnings for Competition Rulemaking at the FTC 

(June 9, 2021), https://www.ftc.gov/system/files/ 

documents/public_statements/1591666/wilson_

statement_back_to_the_future_of_rulemaking.pdf. 

3Christine S. Wilson & Keith Klovers, The 

Growing Nostalgia for Past Regulatory 

Misadventures and the Risk of Repeating These 

Mistakes with Big Tech, 8 J. Antitrust Enf’t. 10 

(2019), https://academic.oup.com/antitrust/article/ 

8/1/10/5614371; Remarks of Christine S. Wilson at 

British Institute of International and Comparative 

Law, Remembering Regulatory Misadventures: 

Taking a Page from Edmund Burke to Inform Our 

Approach to Big Tech (June 28, 2019), https://

www.ftc.gov/system/files/documents/public_

statements/1531816/wilson_remarks_biicl_6-28- 

19.pdf; Dissenting Statement of Christine S. Wilson 

on the Energy Labeling Rule, Comm’n Matter No. 

R611004 (Oct. 22, 2019), https://www.ftc.gov/ 

system/files/documents/public_statements/ 

1551786/r611004_wilson_dissent_energy_labeling_

rule.pdf. 

4See Remarks of Christine S. Wilson for the 

Federalist Society at ‘‘The Future of Rulemaking at 

the FTC’’ Event, supra note 2. 

5 Id. at 9. 

6 Id. at 8 (describing how ICC jurisdiction over 

railroads expanded to include other forms of 

transportation, including trucks, barges, and 

pipelines, as those industries grew to compete with 

railroads). 

7See, e.g., McFadden, Christopher, 20+ Greatest 

Innovations and Inventions of Automobile 

Engineering: From the First Engine to Today, 

Interesting Engineering (Jun. 18, 2020), https://

interestingengineering.com/20-greatest-innovationsand-inventions-of-automobile-engineering-from-thefirst-engine-to-today (discussing the 20 greatest 

innovations in automobiles from the steam engine 

to internal combustion, including flashing turn 

signals, air bags, rear back-up cameras, GPS and 

connected cars). 

8See Stern, Randy, Historiography: A Different 

Kind of Car Company, Victory & Reseda (Jul. 25, 

2020), https://www.randystern.net/historiographysaturn/. 

9See, e.g., Howarth, Josh, 5 Important Auto 

Industry Trends (2022–2024), exploding topics 

(May 19, 2022), https://explodingtopics.com/blog/ 

auto-industry-trends (noting over 90% of car 

purchasers perform online research; 80% of buyers 

used third-party services to assist in purchasing a 

car in 2019; and Carvana’s sales grew 37% in 2020); 

Soucie, Hale, NADA 2022: Top 3 Trends & 

Strategies To Watch, Edifice Automotive Marketing 

(Mar. 2022), https://blog.edificeautomotive.com/ 

nada-2022-top-3-trends (noting continued increase 

in digital car buying). 

10Stenquist, Paul, Why You Might Buy Your Next 

Car Online, N.Y. Times, Jun. 21, 2022, https://

www.nytimes.com/2022/06/21/business/teslaonline-salesdealerships.html?referringSource=articleShare 

(discussing the Tesla online car buying system); 

Korn, Morgan, More consumers are shopping online 

for cars. Can dealerships keep up? ABC News, Mar. 

28, 2021, https://abcnews.go.com/Business/ 

consumers-shopping-online-cars-dealerships/ 

story?id=76650042 (discussing increase in online 

shopping for cars, limited trips to dealerships to 

buy chosen vehicles, and solely online purchases 

through Carvana and Tesla). 

11See, e.g., The future of car buying: 

Omnichannel, personalized, and fun, McKinsey & 

Co. (Sept. 2020), https://www.mckinsey.com/∼/ 

media/McKinsey/Featured%20Insights/ 

The%20Next%20Normal/The-Next-Normal-Thefuture-of-car-buying-vF. 

businesses on best practices, and 

engaged in consumer education about 

vehicle purchases. Despite this array of 

efforts that spans law enforcement, 

consumer and business education, and 

guidance on industry self-regulatory 

programs, unlawful practices persist. 

The proposals in this Federal Register 

Notice generally are tied to the practices 

challenged in our law enforcement. 

Notably, the Commission has authority 

to promulgate this Rule under the 

Administrative Procedures Act (APA), 

and therefore does not need to 

demonstrate prevalence as would be 

necessary for a Rule proposed under 

Section 18 of the FTC Act (i.e., a socalled Mag-Moss Rule). Nevertheless, 

the Notice sets forth a record of law 

enforcement that likely would satisfy a 

prevalence analysis. I commend staff on 

their careful approach to this proposed 

Rule. 

Despite staff’s meticulous analysis 

and drafting, I have concerns about this 

proposal. It prohibits deceptive 

practices but also requires numerous 

disclosures related to offering price, 

add-ons, and monthly financing. 

Although staff endeavored to tailor 

these provisions to the deceptive 

practices challenged in our cases, I 

anticipate unintended but negative 

consequences. 

Several factors drive this concern. 

First, even APA rulemaking is 

cumbersome and lengthy, making it 

difficult to keep rules up to date.1

Politically charged topics (as this one 

may be) impose even greater delays on 

rulemaking.2 Second, historical 

experience demonstrates that complex 

regulatory frameworks stifle innovation, 

increase costs, raise prices, limit choice, 

and decrease output. For example, the 

intricate regulatory frameworks for the 

airline and railroad industries 

suppressed competition and harmed the 

very parties they were intended to 

benefit.3 Ultimately, they were repealed 

on a bipartisan basis.4 The FTC has its 

own experience with rules that limit 

competition: the FTC’s Care Labeling 

Rule has been criticized for excluding 

new competition in the form of wet 

cleaners that would compete with dry 

cleaners.5 Third, attempts to narrowly 

tailor rules are frequently unsuccessful. 

Technologies and markets evolve in 

ways regulators are unable to predict, 

leading either to mission creep 6—the 

expansion of regulatory regimes to 

address these unforeseen 

developments—or to ossification, given 

the opportunity cost of frequent updates 

to reflect emerging market realities. 

Notably, the motor vehicle industry 

has benefitted from innovation in all 

areas—safety, performance, options, and 

sales.7 For example, in the 1980s, GM 

created the Saturn project, introducing a 

then-revolutionary way to manufacture, 

market, and sell cars.8 More recently, 

consumer car shopping has moved 

online with services that assist 

consumers in price negotiation and 

location of desired vehicles.9 In 

addition, Tesla and Carvana have 

introduced sales models that obviate the 

need to enter a dealership at all.10 And 

sales practices will continue to evolve.11

The market dynamism flowing from 

these innovations make it likely that an 

FTC rule will be incomplete even as it 

is finalized. 

Stakeholder input on these potential 

concerns would be constructive. I 

would be interested in comments on the 

following issues: 

1. Anticipated changes in the 

automobile marketplace with respect to 

technology, marketing, and sales, and 

whether it is possible to future-proof the 

proposed Rule so that it avoids 

inhibiting beneficial changes in these 

areas. 

2. Insights into why deceptive 

practices persist in this industry and 

whether additional business education 

would assist businesses with 

compliance. 

3. Avenues for consumer education to 

assist consumers with navigating these 

and other important financial 

transactions and decisions, including 

through improved financial literacy. 

How could state and local agencies 

support and amplify FTC consumer 

education efforts? To what extent is 

financial literacy taught in middle 

schools and high schools, and how 

effective are those efforts? What more 

could be done? 

4. Potential negative consequences of, 

or costs attendant to, the Rule that the 

Commission may not have anticipated. 

I encourage stakeholders to provide 

detailed comments on these questions, 

as well as on the issues in the Federal 

Register Notice. I look forward to 

reviewing the record as it develops. But 

for the reasons discussed above, I 

respectfully dissent. 

[FR Doc. 2022–14214 Filed 7–12–22; 8:45 am] 

BILLING CODE 6750–01–P 


jspears on DSK121TN23PROD with PROPOSALS3