Vol. 77 Monday, No. 242 December 17, 2012

Part II

Federal Trade Commission

16 CFR Part 455 Used Motor Vehicle Trade Regulation Rule; Proposed Rule

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FEDERAL TRADE COMMISSION manner detailed in the SUPPLEMENTARY ftc/usedcarrulenprm. If this Notice INFORMATION section below. appears at http://www.regulations.gov/ 16 CFR Part 455 FOR FURTHER INFORMATION CONTACT: John #!home;tab=search, you may also file an C. Hallerud, (312) 960–5634, Attorney, electronic comment through that Web Used Motor Vehicle Trade Regulation Midwest Region, Federal Trade site. The Commission will consider all Rule Commission, 55 West Monroe Street, comments that regulations.gov forwards AGENCY: Federal Trade Commission Suite 1825, Chicago, IL 60603. to it. You may also visit the FTC Web (‘‘FTC’’ or ‘‘Commission’’). SUPPLEMENTARY INFORMATION: Interested site at http://www.ftc.gov to read the ACTION: Notice of proposed rulemaking; parties are invited to submit written Notice and the news release describing request for public comments. comments electronically or in paper it. form. Comments should refer to ‘‘Used A comment filed in paper form SUMMARY: Except as specifically Car Rule Regulatory Review, Project No. should include the ‘‘Used Car Rule described below, the FTC has completed P087604’’ to facilitate the organization Regulatory Review, Project No. its regulatory review of its Used Motor of comments. Please note that your P087604’’ reference both in the text and Vehicle Trade Regulation Rule (‘‘Used comment—including your name and on the envelope, and should be mailed Car Rule’’ or ‘‘Rule’’) as part of the your state—will be placed on the public or delivered to the following address: FTC’s systematic review of all current record of this proceeding, including on Federal Trade Commission, Office of the Commission regulations and guides. the publicly accessible FTC Web site, at Secretary, Room H–113 (Annex T), 600 The Commission has decided to retain http://www.ftc.gov/os/ Pennsylvania Avenue NW. Washington, the Rule and, in a separate Federal publiccomments.shtm. DC 20580. The FTC requests that any Register document, to amend it by Because comments will be made comment filed in paper form be sent by changing the Spanish translation of the public, they should not include any courier or overnight service, if possible, Buyers Guide. In addition, the sensitive personal information, such as to avoid security related delays. Commission also has decided to issue a any individual’s Social Security The FTC Act and other laws that the notice of proposed rulemaking (‘‘NPR’’) Number; date of birth; driver’s license Commission administers permit the soliciting comments on proposed number or other state identification collection of public comments to changes to the Rule. In this NPR, the number, or foreign country equivalent; consider and use in this proceeding as Commission addresses the comments passport number; financial account appropriate. The Commission will received during its review and invites number; or credit or debit card number. consider all timely and responsive public comment on the following four Comments also should not include any public comments that it receives, proposed changes to the Buyers Guide: sensitive health information, such as whether filed in paper or electronic adding boxes to the back of the Buyers medical records or other individually form. Comments received will be Guide where dealers would have the identifiable health information. In available to the public on the FTC Web option to indicate manufacturers’ and addition, comments should not include site, to the extent practicable, at http:// other third-party warranties; adding a ‘‘[t]rade secret or any commercial or www.ftc.gov/os/publiccomments.shtm. statement to the Buyers Guide financial information which is obtained As a matter of discretion, the FTC makes encouraging consumers to seek vehicle from any person and which is privileged every effort to remove home contact history information and directing or confidential’’ as provided in § 6(f) of information for individuals from the consumers to an FTC Web site for more the Federal Trade Commission Act public comments it receives before information about vehicle histories; (‘‘FTC Act’’), 15 U.S.C. 46(f), and FTC placing those comments on the FTC adding catalytic converters and airbags Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Web site. More information, including to the List of Systems on the back of the Comments containing matter for which routine uses permitted by the Privacy Buyers Guide; and adding a statement in confidential treatment is requested must Act, may be found in the FTC’s privacy Spanish to the English Buyers Guide be filed in paper form, must be clearly policy, at http://www.ftc.gov/ftc/ directing consumers who cannot read labeled ‘‘Confidential,’’ and must privacy.htm. the Buyers Guide in English to ask for comply with FTC Rule 4.9(c).1 Comments on the proposed disclosure a copy of it in Spanish. Because paper mail addressed to the amendments, which are subject to review under the Paperwork Reduction DATES: Written comments relating to the FTC is subject to delay due to Act, 44 U.S.C. 3501–3521, additionally Used Car Rule must be received on or heightened security screening, please should be submitted to the Office of before February 11, 2013. consider submitting your comments in Management and Budget (‘‘OMB’’). If ADDRESSES: Interested parties are electronic form. Comments filed in electronic form should be submitted by sent by U.S. mail, they should be invited to submit written comments addressed to Office of Information and electronically or in paper form. For using the following weblink: https:// ftcpublic.commentworks.com/ftc/ Regulatory Affairs, Office of important information concerning the Management and Budget, Attention: comments you file, please review the usedcarrulenprm and following the instructions on the web-based form. To Desk Officer for the Federal Trade SUPPLEMENTARY INFORMATION section Commission, New Executive Office below. Comments in electronic form ensure that the Commission considers an electronic comment, you must file it Building, Docket Library, Room 10102, should be filed at the following 725 17th Street NW., Washington, DC electronic address: https:// on the web-based form at the weblink https://ftcpublic.commentworks.com/ 20503. Comments sent to OMB by U.S. ftcpublic.commentworks.com/ftc/ mail, however, are subject to delays due usedcarrulenprm by following the 1 to heightened security precautions. instructions on the web-based form. The comment must be accompanied by an explicit request for confidential treatment, Thus, comments instead should be sent Comments in paper form should be including the factual and legal basis for the request, by facsimile to: (202) 395–5167. mailed or delivered to the following and must identify the specific portions of the address: Federal Trade Commission, comment to be withheld from the public record. Table of Contents The request will be granted or denied by the Office of the Secretary, Room H–113 Commission’s General Counsel, consistent with I. Overview of the Used Car Rule (Annex T), 600 Pennsylvania Avenue applicable law and the public interest. See FTC II. Rulemaking Procedures NW., Washington, DC 20580, in the Rule 4.9(c), 16 CFR 4.9(c). III. Summary of Comments

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IV. Analysis of Comments and Regulatory Buyers Guide for use in states that do on the Buyers Guide to acknowledge Alternatives Under Further Review not permit ‘‘as is’’ sales. receipt if accompanied by a disclosure V. Regulatory Review The Rule also requires certain other that the buyer is acknowledging receipt VI. Communications to Commissioners and disclosures, including: a at the close of the sale. Commissioner Advisors by Outside recommendation that consumers ask the As discussed in Section III below, the Parties dealer if a pre-purchase inspection is Commission initiated a review of the VII. Paperwork Reduction Act 6 VIII. Regulatory Analysis permitted; a warning against reliance on Rule in 2008. The Commission is IX. Regulatory Flexibility Act spoken promises and a recommendation publishing this NPR based upon that X. Invitation To Comment to have all promises confirmed in Regulatory Review and its consideration writing; and a list of fourteen major of the comments received during the I. Overview of the Used Car Rule systems of an automobile and the major review. defects that may occur in these systems. A. The Rule B. Rulemaking History The Rule provides that the Buyers In 1975, Congress passed the Guide disclosures are incorporated by The Rule promulgated by the Magnuson-Moss Warranty-Federal reference into the sales contract and Commission in 1984 has a long and Trade Commission Improvements Act govern in the event of an inconsistency complicated rulemaking history. The (‘‘Magnuson-Moss Act’’), which between the Buyers Guide and the sales Rule grew out of an investigation begun required the Commission to initiate a contract. by FTC staff in 1973. That investigation rulemaking in connection with used car The Rule attempts to protect eventually led to a staff warranties using both the authority consumers from potential post-purchase recommendation for the adoption of a granted by the Magnuson-Moss Act and problems in several ways. First, the trade regulation rule that would have the rulemaking procedures set forth in Buyers Guide may prompt consumers to required mandatory inspections by § 18 of the FTC Act, 15 U.S.C. 57a.2 have a car inspected before purchase. dealers, disclosure of defects, and Pursuant to this authority, the Second, the Buyers Guide requires mandatory warranties on parts that were Commission issued its final Used Car dealers to provide consumers with found to be without defects.7 In 1975, in Rule, which became effective on May 9, warranty information so that they can the midst of the staff investigation, the 1985, to create a remedy for oral shop for a car with a warranty that Magnuson-Moss Act became effective, misrepresentations and unfair omissions protects them in the event that the car which required the Commission to of material facts by used car dealers subsequently has mechanical problems. initiate this rulemaking using certain concerning warranty coverage, such as Third, the Buyers Guide warns procedures as set forth in § 18 of the untrue and unenforceable promises consumers not to rely on spoken FTC Act, 15 U.S.C. 57a.8 The about dealers’ responsibilities and promises and to get any assurances Magnuson-Moss Act explicitly prohibits willingness to make repairs after sale. about a car from the dealer in writing. the Commission from mandating To accomplish that goal, the Rule In addition, the Rule requires that warranties.9 provides a uniform method for dealers use Spanish language versions The Commission published an initial disclosing warranty information on a of the Buyers Guide and make Spanish staff report in December 1975 and window sticker called the ‘‘Buyers contract disclosures related to the issued an initial notice of proposed Guide’’ that dealers are required to Buyers Guide when conducting used car rulemaking in January 1976. The notice display on used cars offered for sale to sales in Spanish.3 In practice and as contained a proposed rule requiring a consumers. recommended by staff,4 dealers who window sticker that disclosed warranty The Rule requires used car dealers to conduct substantial numbers of sales in terms, warranty disclaimers, prior use of disclose on the Buyers Guide whether Spanish should display both English the vehicle, mileage, prior repairs, and they are offering a used car for sale with and Spanish Buyers Guides to ensure dealer identification information. The a dealer’s warranty and, if so, the basic that Spanish-speaking customers receive proposed rule also specified a terms and conditions of the offered the required Spanish disclosures. disclaimer for ‘‘as is’’ contracts.10 The warranty, including the duration of The Commission last reviewed and Commission issued a second notice coverage, the percentage of total repair amended the Used Car Rule in 1995.5 asking for public comment on whether costs to be paid by the dealer, and the Specifically, the Commission amended dealers should be required to disclose exact systems covered by the warranty. the Rule by: (1) Adopting several minor known defects and whether a vehicle The Rule also requires dealers to grammatical changes to the Spanish had been inspected for defects. After disclose that a used car is offered for language version of the Buyers Guide; receiving comments and conducting sale without a warranty by checking a (2) permitting dealers to display a hearings in six cities, the staff box marked ‘‘AS IS—NO WARRANTY’’ Buyers Guide in any location on a used recommended a revised rule that on the Buyers Guide. An ‘‘as is’’ sale vehicle so long as the Buyers Guide is voids implied warranties that arise displayed conspicuously and 6 73 FR 42285 (July 21, 2008) (‘‘Regulatory Review Notice’’). under state law, such as an implied prominently and with both sides of it readily readable; and (3) allowing 7 SBP, 49 FR at 45692–95. warranty of merchantability (which may 8 These procedural requirements include issuing mean, among other things, that goods dealers to obtain a consumer’s signature an advance notice of proposed rulemaking, are fit for the purposes for which such providing an opportunity for an informal hearing, goods are ordinarily used). The Rule 3 16 CFR 455.5. The Spanish language and submitting the advance notice of proposed requirement was part of the Rule as promulgated in rulemaking to the Committee on Commerce, specifies an alternative version of the 1984. SBP, 49 FR at 45728. Science, and Transportation of the United States 4 Staff Compliance Guidelines, Used Motor Senate and the Committee on Energy and 2 15 U.S.C. 2309(b). This provision requires that Vehicle Trade Regulation Rule (‘‘Staff Compliance Commerce of the United States House of the Commission ‘‘initiate * * * a rulemaking Guidelines’’), 53 FR 17658, 17667 (May 17, 1988) Representatives. 15 U.S.C. 57a. proceeding dealing with warranties and warranty (Illustration 3.10). The Staff Compliance Guidelines 9 15 U.S.C. 2302(b)(2) (‘‘Nothing in this chapter practices in connection with the sale of used motor are available at http://www.ftc.gov/bcp/guides/ * * * shall be deemed to authorize the Commission vehicles.’’ Trade Regulation Rule Concerning Used usedcar-comply.pdf. * * * to require that a consumer product or any of Motor Vehicles, Statement of Basis and Purpose and 5 60 FR 62195 (Dec. 5, 1995). The history of the its components be warranted.’’); SBP, 49 FR at Regulatory Analysis (‘‘SBP’’), 49 FR 45692, 45703 Used Car Rule is summarized in the SBP. 49 FR at 45718. (Nov. 19, 1984). 45692–95. 10 SBP, 49 FR at 45693.

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required mandatory inspections, after the Second Circuit’s entry of a Section 553 of the Administrative disclosure of defects regarding certain judgment that disposed of the reinstated Procedure Act (‘‘APA’’) 23 with respect mechanical and safety components of petitions for review, and, on the same to unfair or deceptive acts or practices used cars, warranty coverage, repair cost date, also decided to reexamine the by motor vehicle dealers.24 Under the estimates, prior use, mileage, 1981 Rule. The parties filed a motion Dodd-Frank Act, the FTC’s APA availability of service contracts, vehicle with the Second Circuit seeking leave to rulemaking authority became effective identification information, and make additional submissions and as of July 21, 2011, the designated dealership identification information.11 written presentations to the ‘‘transfer date’’ established by the The Commission itself met and heard Commission. Pursuant to that motion Treasury Department.25 oral presentations from selected and the Commission’s own decision to Because the Dodd-Frank Act rulemaking participants concerning the reexamine the 1981 Rule, the authorized the Commission to use APA proposed rule 12 and, without making a Commission and the parties agreed to a procedures for notice and public final determination, rejected staff’s remand to the Commission from the comment in issuing or amending rules recommendation for mandatory Second Circuit. The remand order with respect to motor vehicle dealers, inspections, and directed staff to required the Commission to reopen the the FTC will not use the procedures set analyze an optional inspection record, particularly with respect to forth in Section 18 of the FTC Act, 15 approach. The staff then recommended sections of the 1981 Rule dealing with U.S.C. 57a, with respect to these optional inspections, and, in May 1980, the disclosure of known defects, and to proposed revisions to the Used Car Rule the Commission tentatively adopted an provide notice and an opportunity to and the Used Car Buyers Guide. optional inspection rule.13 The submit comments and rebuttal Accordingly, the Commission is Commission also directed staff to delete comments. Other than the remand, the publishing this Notice of Proposed a requirement that dealers provide an Second Circuit retained jurisdiction Rulemaking pursuant to Section 553 of estimated cost of repair for systems over the Rule. the APA. marked ‘‘NOT OK’’ and a disclosure In 1984, the Commission adopted a relating to vehicles that an insurer had final rule that superseded the 1981 Rule. III. Summary of Comments declared to be a ‘‘total loss.’’ 14 The Commission eliminated the known The Commission received comments In August 1981, the Commission defects provision, among others, in the addressing the three categories of adopted a final rule that did not include final 1984 Rule.18 The 1984 Rule was specific questions expressly asked by the optional inspection provision. not challenged further in the Second the Regulatory Review Notice: 26 Instead, the Commission decided to Circuit or elsewhere. The 1984 Rule comments concerning the Spanish require that dealers disclose on a became effective in 1985 and applies translation of the Buyers Guide and window sticker warranty information throughout the United States, except whether a bilingual Buyers Guide would and major defects known to the dealer. Wisconsin and Maine.19 be feasible and beneficial; 27 comments In May 1982, both houses of Congress During the Commission’s last concerning the utility of the List of vetoed the 1981 Rule, under the regulatory review of the Rule in 1995, a Systems and defects on the reverse side authority of the FTC Improvements Act number of the proposals raised during of the Buyers Guide; and comments of 1980. Several consumer groups then the original rulemaking, or similar concerning whether the Buyers Guide brought suit against the FTC, the U.S. proposals, were again considered and could better disclose manufacturer and Senate, and the U.S. House of rejected by the Commission. For other third-party warranties. In Representatives to block the veto, example, in 1995, the Commission addition, many commenters again raised arguing that the legislative veto was rejected requiring dealers to disclose issues as to whether the Rule should or unconstitutional.15 In 1983, the known defects,20 requiring dealers to should not be expanded to broaden the Supreme Court held that the legislative keep copies of the Buyers Guides,21 and types of information that dealers are veto that invalidated the 1981 Rule was 16 expanding the Rule to encompass required to disclose on the Buyers unconstitutional. 22 Prior to the Congressional veto, private used car sales. The Guide, such as information concerning several parties had sought review of the Commission decided to retain the Rule, an individual vehicle’s prior use, title 1981 Rule in the Second Circuit.17 This with minor amendments, and since then history, and mechanical condition. review was stayed following the the Rule has remained unchanged. The Commission received twenty-five comments from twenty-one legislative veto and reinstated after the II. Rulemaking Procedures Supreme Court’s reversal of the veto. In Pursuant to the Dodd-Frank Act Wall 23 1983, the Commission decided that the 5 U.S.C. 553. Street Reform and Consumer Protection 24 Rule would become effective six months Public Law 111–203, Title X, § 1029(d); 12 Act (‘‘Dodd-Frank Act’’), the FTC is U.S.C. 5519(d). The term ‘‘motor vehicle dealer’’ authorized to prescribe rules under refers to ‘‘any person or resident in the United 11 Id. States, or any territory of the United States, who— 12 The selected participants included several (A) is licensed by a State, a territory of the United organizations that have also commented during the 18 See id. at 45694–95. States, or the District of Columbia to engage in the current rule review, including the National 19 The Rule provides that the Commission will sale of motor vehicles; and (B) takes title to, holds Automobile Dealers Association, National exempt a state from the Rule’s coverage upon an ownership in, or takes physical custody of motor Independent Automobile Dealers Association, and application by an appropriate state agency if the vehicles.’’ 12 U.S.C. 5519(f)(2). National Consumer Law Center. Id. at 45694 n.19. Commission determines that the state has a 25 See 75 FR 57252 (Sept. 20, 2010); Dodd-Frank 13 Id. at 45694. requirement that affords equal or greater protections Act § 1029A. 14 Id. to consumers than the Rule. The exemption shall 26 73 FR 42285, supra note 6. last as long as the state administers and enforces its 15 Consumers Union of the U.S., Inc., and Public 27 Along with this NPR, the FTC is also requirement effectively. 16 CFR 455.6. Citizen, Inc., were plaintiffs in the underlying suit. publishing a final rule revising the Spanish Consumers Union of the U.S., Inc. v. FTC, 691 F.2d The Commission granted Wisconsin an translation of the Buyers Guide. In issuing this final 575 (DC Cir. 1982), aff’d sub nom., Process Gas exemption pursuant to 455.6 in 1986. 51 FR 20936 rule, the FTC concluded that it would continue to Consumers Group v. Consumers Energy Ass’n of (June 9, 1986). The Commission granted Maine an require translations of the Buyers Guide only into America, 463 U.S. 1216 (1983). exemption in 1988. 53 FR 16390 (May 9, 1988). Spanish rather than into multiple languages as 16 Process Gas Consumers Group, 463 U.S. 1216. 20 60 FR at 62196–97. some commenters proposed. Spanish is the second 17 SBP, 49 FR at 45694 (citing Miller Motor Car 21 Id. at 62197. most commonly spoken language in the United Corp. v. FTC, No. 81–4144 (2d Cir. 1981)). 22 Id. at 62197–98. States after English.

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commenters.28 The commenters Association of Lemon Law Spanish translation changes supported include: an automobile auction firm,29 Administrators,41 and the Wisconsin the changes. an automotive repair firm,30 an online Department of Transportation.42 None of the commenters provided seller of used cars,31 automobile Although not specifically raised in the studies or other empirical evidence in dealers,32 individual consumers,33 a Regulatory Review Notice, a number of support of the positions taken. consumer protection attorney,34 a group comments address whether dealers 35 IV. Analysis of Comments and of consumer advocacy organizations, should be required to provide Regulatory Alternatives Under Further national automobile dealers’ consumers with vehicle history Consideration associations,36 state automobile dealers’ information, including title history, associations,37 suppliers of dealer damage history, prior use, and whether The Commission is considering forms,38 county consumer protection a vehicle ever was a lemon law buyback. several revisions to the Buyers Guide agencies,39 the National Association of A group of consumer advocacy based upon its review of the comments Attorneys General,40 the International organizations recommended mandatory received in response to the Regulatory dealer inspections and that dealers be Review Notice. The Commission has 28 Comments were submitted in response to the required to disclose known defects.43 determined to retain the Rule and is Regulatory Review Notice from: Allain-Geisel seeking comments on the following (‘‘Allain-Geisel’’); Anderson, David (Folsom Lake This group also proposed that the Rule require dealers to disclose state title potential revisions to the Rule: (1) Dodge) (‘‘Anderson’’); Broward County, Florida, Revising the Buyers Guide to provide Permitting, Licensing and Consumer Protection record information, and, in particular, Division (‘‘Broward County’’); Campbell, James information that is now being made additional boxes where dealers would (Carlabels.com) (‘‘Carlabels’’); CarMax Auto have the option to indicate Superstores, Inc. (‘‘CarMax’’); Copart, Inc. available through the National Motor Vehicle Title Information System manufacturers’ and third-party (‘‘Copart’’); Dealer Specialties (‘‘Dealer warranties; (2) adding a statement to the Specialties’’); Hillig, Rebecca for Hillig Auto Center (‘‘NMVTIS’’), a Department of Justice Buyers Guide encouraging consumers to (‘‘Hillig’’); Howard County Office of Consumer system that provides consumers with Affairs (‘‘Howard County’’); Oregon Vehicle Dealer seek vehicle history information and automobile information to prevent the Association (‘‘Ore. Vehicle Dealer Ass’n’’); directing consumers to an FTC Web site Minnesota Automobile Dealers Association sale of stolen and unsafe vehicles.44 for more information about vehicle (‘‘MADA’’); National Association of Attorneys Industry commenters opposed these General (‘‘NAAG’’) (appending and incorporating histories and sources for that proposals to expand the Rule to require comment from International Association of Lemon information; 45 (3) retaining the List of the display of vehicle history and title Law Administrators (‘‘IALLA’’) (Att. A.)); National Systems and adding catalytic converters Automobile Dealers Association (‘‘NADA’’); information. They expressed concern and airbags to it; and (4) adding a Consumers for Auto Safety and Reliability, et al. that dealers would have difficulties (collectively referred to here as ‘‘CARS,’’ see note statement in Spanish to the English complying with a federal standard in 35); National Independent Automobile Dealers Buyers Guide directing consumers who Association (‘‘NIADA’’); Barbara Sachau light of the large variation in state cannot read the Buyers Guide in English (‘‘Sachau’’); Stephen Swann (‘‘Swann’’); Wholesale regulation of vehicle titles. Industry Forms, Inc. (‘‘Wholesale Forms’’); and Wisconsin to ask for a copy of it in Spanish. Department of Transportation (‘‘WI DOT’’). These commenters also raised concerns about comments are available online at http:// the costs that dealers would face in A. Proposed Revisions to Buyers Guide www.ftc.gov/os/comments/usedcarrule/index.shtm. attempting to comply with Buyers Warranty Disclosures Comments from Downey Brand LLP (‘‘Downey Guide disclosures of title information The Regulatory Review Notice asked Brand’’) and NAAG submitted during the reopened and with the increased risk of liability comment period are available at: a series of questions seeking comments http://www.ftc.gov/os/comments/ that dealers could face if they are about possible changes to the Buyers usedcarrulereopen/index.shtm. required by the Rule to make such Guide intended to enhance the 29 Copart. disclosures. disclosure of warranties, such as 30 Hillig. Commenters also discussed the unexpired manufacturers’ warranties, 31 Downey Brand. specific issues raised in the Regulatory certified used car warranties, and other 32 Anderson; CarMax. Review Notice: whether to permit a 33 third-party warranty products Allan-Geisel; Sachau. bilingual Buyers Guide and to change 34 Swann. (Questions III.B(4)–(8)). The 35 The comment from the consumer advocacy the Spanish translation; whether to Commission proposes revising the groups collectively referred to as ‘‘CARS’’ is a joint retain the List of Systems; and whether Buyers Guide as described in this NPR letter from the National Consumer Law Center, to modify the Rule to address to improve the way in which dealers Consumer Action, Consumers for Auto Reliability disclosures of manufacturers’ and other and Safety (‘‘CARS’’), Consumer Federation of can indicate whether a manufacturer’s America (‘‘CFA’’); Consumer Federation of third-party warranties. On all but one of or other third-party warranty applies.46 California (‘‘CFC’’), National Consumer Law Center these issues, the various commenters The Commission invites comments on (‘‘NCLC’’) (on behalf of its low income clients); U.S. often expressed differing views, as its proposal. Public Interest Research Group (‘‘PIRG’’); and described and analyzed below. The only Watsonville Law Center (‘‘WLC’’). CARS signed the The Regulatory Review Notice comment on behalf of the other members of the commenter to discuss the proposed included a proposed Buyers Guide group. containing boxes where dealers could 36 NIADA and NADA. On March 17, 2009, NIADA 41 IALLA. IALLA=s comment is appended to indicate whether a vehicle was covered and NADA submitted supplemental comments. NAAG1. by third-party warranties other than NIADA’s comments are identified respectively as 42 WI DOT. NIADA1 and NIADA2. NADA’s comments are 43 CARS at 17–18. warranties from the dealer. To similarly identified as NADA1 and NADA2. 44 NMVTIS was created pursuant to the Anti-Car 37 Ore. Vehicle Dealer Ass’n; MADA. Theft Act of 1992, 49 U.S.C. 30501–05. NMVTIS 45 The Web site would be created if the 38 Carlabels; Dealer Specialties; Wholesale Forms. Final Rule, 74 FR 5740 (Jan. 30, 2009). NMVTIS Commission amends the Rule and adopts such a 39 Broward County; Howard County. Howard provides consumers with vehicle history Buyers Guide statement. The Commission also is County joins the CARS comment. information such as title issue date, latest odometer exploring, and invites comments on, additional 40 NAAG. Forty-two attorneys general signed onto data, any theft history data, any brand assigned to ways that this information could be made available the NAAG comment. On June 15, 2009, during the a vehicle and date applied, and any salvage history. to consumers for whom Internet access may not be reopened comment period, NAAG submitted a National Motor Vehicle Title Information System readily available. second comment responding to NADA and NIADA. Frequently Asked Questions, http:// 46 In the proposed rule appearing at the end of NAAG=s comments submitted during the initial www.nmvtis.gov/nmvtis_faq.html#info. For a more this NPR, the Commission also proposes comment period are identified as NAAG1, and its extensive discussion of NMVTIS, see infra Part corresponding changes to ’ 455.2 Consumer sales- second comment is identified as NAAG2. III.B.1. window form, which discusses the Buyers Guide.

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differentiate among the various types of Commission proposes that disclosing disclosure of the warranty coverage possible warranties, this Buyers Guide manufacturers’ warranties should be offered by a used car dealer. Currently, used the term ‘‘dealer warranty.’’ optional because dealers often do not the Buyers Guide has two large boxes Industry commenters generally favored know whether a manufacturer’s where dealers can indicate whether they the approach outlined in the Regulatory warranty applies. offer a warranty on a used car or offer Review Notice, but suggested 1. Current Buyers Guide Warranty it without a warranty, i.e., ‘‘as is:’’ alternatives that might make a revised Disclosures Buyers Guide clearer to consumers. In The Buyers Guide’s primary purpose light of the comments from industry, the is to create a readily understandable

The Rule currently provides for an prohibit dealers from waiving implied alternative Buyers Guide in states that warranties by selling vehicles ‘‘as is.’’

Beneath these large boxes is a space MANUFACTURER’S WARRANTY STILL 2. Proposal for Disclosing Third-Party where dealers are instructed to provide APPLIES. The manufacturer’s original Warranties on Buyers Guide details of the warranty coverage they warranty has not expired on the vehicle. The Regulatory Review Notice Consult the manufacturer’s warranty booklet offer by identifying the ‘‘Systems contained a proposed Buyers Guide that for details as to warranty coverage, service Covered’’ and the ‘‘Duration’’ of included additional boxes, comparable location, etc.47 coverage for each system. Dealers are to those now used to identify dealer required to indicate the warranties that When a vehicle is still covered by an warranties, where dealers could easily they offer by checking the appropriate unexpired manufacturer’s warranty but identify third-party warranties, such as large warranty box and completing the is not warranted by the dealer, the Staff unexpired manufacturers’ warranties. Systems Covered/Duration section. The Compliance Guidelines advise that The Regulatory Review Notice version Rule does not require dealers to identify dealers may add an optional statement of the Guide included the boxes for any other applicable warranties, such as that: ‘‘[t]he dealership assumes no third-party warranty information on the unexpired manufacturers’ warranties, responsibility for any repairs, regardless front of the Guide. After reviewing the comments, the Commission is seeking that are the responsibility of third of any oral statements about the vehicle. public comment on a modified Buyers parties. The Rule also does not provide All warranty coverages comes from the Guide format that differs slightly from any mechanism comparable to the large unexpired manufacturer’s warranty.’’ 48 boxes to identify these warranties. the version included in the Regulatory Review Notice. Instead, the Rule permits (but does Specifically, the Commission not require) dealers to indicate the proposes a revised Buyers Guide that applicability of an unexpired 47 16 CFR 455.2(b)(2)(v). The SBP does not contains some minor wording changes manufacturer’s warranty by adding the discuss the optional unexpired manufacturer’s designed to increase readability. More following statement in the Systems warranty statement. important, the proposed revised Buyer Covered/Duration section: 48 53 FR at 17663 (1988). Guide places the additional boxes for

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third-party warranty disclosures on the was available in the modified Buyers vehicle,’’ instead of the current reverse side, above the List of Systems. Guide that appeared in the Regulatory instruction to see the back for the List Dealers who choose to disclose warranty Review Notice, and it separates the of Systems.49 coverage from manufacturers or other ‘‘Dealer Warranty’’ section from the The Commission seeks comments on third parties may do so by checking the ‘‘Non-Dealer Warranty’’ section. The the following proposed revised Buyers appropriate box or boxes on the reverse face of the proposed revised Buyers Guide: In states that do not permit ‘‘as side of the Buyers Guide. This format Guide includes a statement directing leaves more space for dealers to describe consumers to the back of the Buyers is’’ sales, the face of the Buyers Guide details of their own warranties in the Guide for ‘‘more about warranties and would appear as: Systems Covered/Duration section than other information that applies to this BILLING CODE 6750–01–P m m -< C ::a Ci) en c c j .. II" ~ I J J t , .. • 'OJ I f J ! I - I I , I I I i I I I I 1 !; I i '" , fii m 2J (II; ;II ::I ;) Ii II m Z z 0 $! i 0 D t< 1-0 I f- JII"" Jf IJ 8'1 .. ji! Ii tl~::a I fli:::l ijlm I 'i i!l~ I,r!: 1 II' j!! ~ XI m m 0 ~ ::a ::a :;! ~ I I ! DoD It. "'~ I, I!~ "laIl ill rr UI 'I~ 111 ill tll( "'. 11'1 'tJI~ f;JI 1 un j ~ " :: I i I I 't [. jo Ii II II" I' d 11 f'iI 'Ill 1'1 II J r ph I i -jri i J I la It I Ii I f I f & I" Iri i , i phlP .. P I : I i

49 The Buyers Guide currently states, ‘‘SEE THE information, including a list of some major defects BACK OF THIS FORM for important additional that may occur in used motor vehicles.’’

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BILLING CODE 6750–01–C raise questions about how to make the location, etc.’’ 52 Some consumer The back of the Buyers Guides in both disclosures clearer and about how advocacy groups argued that dealers cases would appear as: dealers would complete the revised should be required to provide warranty Both NADA and NIADA generally Buyers Guide included in the booklets to consumers for these third- favored revising the Buyers Guide by Regulatory Review Notice, including (1) party warranties. Industry groups, on adding boxes that dealers could check to whether dealers can check multiple the other hand, explained that dealers 50 disclose third-party warranties. No boxes in the ‘‘Non-Dealer Warranty’’ often do not have such warranty commenters raised significant section; (2) what dealers should do booklets, do not receive them from objections to the proposed additional when they cannot determine if a trade-in customers, and cannot obtain 51 boxes. The comments, however, also manufacturer’s warranty applies; (3) them from manufacturers. Moreover, what dealers should do when only dealer groups commented that many 50 The proposed revised Buyers Guide in this NPR may address some of the questions raised by NADA portions of a manufacturer’s warranty manufacturers do not provide booklets and NIADA about how to complete the Buyers apply; and (4) how to treat warranties and, therefore, dealers cannot possibly Guide proposed in the Regulatory Review Notice. from third parties other than comply with a requirement that they See NADA1 at 6–10; NIADA1 at 8–11. The manufacturers. provide the books. Commission will reexamine those comments in Several commenters addressed the Considering the comments as a whole, light of the comments it receives concerning the proposed revised Buyers Guide. statement in the version of the Buyers the Commission is proposing to modify 51 One commenter, Wholesale Forms, thought Guide in the Regulatory Review Notice that using the terms ‘‘dealer warranty’’ and that directs consumers to ‘‘[c]onsult the 52 This statement was set forth in the ‘‘Non-Dealer ‘‘manufacturer’s warranty’’ in the same document warranty booklet for details as to Warranties’’ section, below the ‘‘other used car could confuse consumers. Wholesale Forms at 5–6. warranty applies’’ box. The proposed revised That commenter and others also voiced concerns warranty coverage, expiration, service Buyers Guide in this NPR uses the term ‘‘vehicle’’ that any changes to the Buyers Guide should be in place of ‘‘car’’ to recognize that the Rule applies carefully considered because of the costs that would more than twenty-five years of using the same to vehicles, such as light duty pickup trucks, in be imposed on dealers to change to a new form after Buyers Guide. addition to cars.

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the warranty booklet statement. simply by leaving the boxes associated Buyers Guide is incorporated into the Commenters have noted that dealers with third-party non-dealer warranties final contract of sale.60 may not have full information on blank. The Commission believes that The Rule does not now require manufacturers’ warranties. Franchised these points are well taken and, dealers to disclose warranties, such as dealers may have warranty information therefore, the proposed revised Buyers manufacturers’ warranties, for which on their own manufacturers’ products Guide included in this NPR does not the dealers are not responsible, and the but not on other manufacturers’ contain the ‘‘NO INFORMATION’’ box. comments do not present compelling vehicles, and independent reasons to expand the Rule’s current nonfranchised dealers may not have 3. Disclosure of Unexpired scope. Industry groups noted that ready access to warranty terms from Manufacturers’ Warranties dealers do not necessarily have, and manufacturers. Other types of warranty The Regulatory Review Notice asked cannot easily acquire, the warranty products such as so-call ‘‘certified’’ for comments on the Rule’s current information that the consumer advocacy manufacturers’ warranties also may not system for disclosing unexpired groups assume they possess. be memorialized by actual ‘‘booklets.’’ 53 manufacturers’ warranties, which Consequently, dealers may not always Therefore, the proposed revised Buyers permits, but does not require, dealers to be able to provide consumers with Guide advises: ‘‘Ask the dealer for a indicate that an unexpired accurate information and may be unable copy of the warranty, and for any manufacturer’s warranty applies. Some to comply with a mandatory disclosure documents that explain warranty commenters suggested that the Rule provision.61 Therefore, the Commission coverage, exclusions, and the dealer’s should require dealers to disclose does not propose making mandatory the repair obligations.’’ The current Buyers unexpired manufacturers’ warranties, optional disclosure of unexpired Guide already contains a similar but industry commenters opposed such manufacturers’ warranties. statement with respect to dealer a requirement. B. Proposals on Vehicle History and warranties.54 The proposed revised Consumer protection authorities and a Condition Buyers Guide is not intended to provide consumer advocacy group commented As in the earlier proceedings full details about any non-dealer that dealers should be required to involving this Rule, many commenters warranty and would simply alert disclose any manufacturers’ warranties urged that the Buyers Guide provide a consumers to obtain additional and whether a manufacturer’s warranty variety of information on the history of information for details about the has been terminated because of a the vehicle and let consumers know warranty coverage. salvage title or other vehicle history.56 The Commission proposes removing a whether the car has problems at the The comments differ in the amount of box from the Buyers Guide proposed in time of sale. As noted above, many of information that each would require the Regulatory Review Notice that these proposals were previously dealers to disclose, but all assume that would have stated: considered and rejected, in part because dealers have, or can readily determine, the information is already provided in a ‘‘NO INFORMATION PROVIDED. The whether a manufacturer’s warranty different form, dealers do not dealer provides no information about other applies to an individual vehicle. warranties that may apply.’’ necessarily themselves have reliable Industry groups opposed mandatory Industry groups questioned when to information for making disclosures, and disclosure of manufacturers’ warranties, it is not clear that, overall, placing some check this box, including whether noting that dealers often cannot dealers should check the box when they of this information on a buyers guide determine readily whether a would actually aid consumer purchase have reason to believe, but are not manufacturer’s warranty applies.57 The certain, that a manufacturer’s warranty decisions. association of franchised new car The Rule as it currently stands applies.55 In addition to confusing dealers (NADA) commented that dealers about when to check the box, attempts to address some of the franchised dealers may not have access concerns consumers might have about the ‘‘NO INFORMATION’’ box also to warranty information from could confuse consumers into believing post-sale problems. The Buyers Guide manufacturers other than the ones for makes it easier for consumers to shop that third-party warranty coverage 58 which they have a franchise. NADA for and choose a warranty that would applies, although the dealer has not also commented that trade-in customers determined that it does. Moreover, the provide protection in the event of may not provide dealers with sufficient mechanical problems. It alerts box is not actually needed because information to determine if a dealers could indicate that they offer no manufacturer’s warranty still applies 60 information about third-party warranties Copart. because coverage can be denied for so 61 NADA proposed permitting dealers to state on many reasons in addition to expiration the Buyers Guide that an unexpired manufacturer’s 53 Certified used car programs began appearing in of the warranty term, such as damage, new car warranty may apply and, because of the the mid-1990s. The programs vary, but typically a uncertainty in confirming coverage, simultaneously manufacturer attaches a new warranty to vehicles poor maintenance, differing terms for stating that ‘‘[t]he dealer makes no representation that have been returned to a dealer from a lease or separate vehicle systems, and non- regarding any non-dealer warranty or other a trade-in if they are ‘‘certified’’ by its franchised transferability.59 An automobile auction coverage.’’ NADA1 at 6. A consumer protection dealer to meet certain mechanical, age, and mileage firm commented that a mandatory attorney, however, commented that dealers requirements. Some dealerships offer their own sometimes check the Buyers Guide’s Warranty box warranties on used cars that are ‘‘certified’’ to meet disclosure requirement could expose and add statements such as ‘‘balance of factory certain mechanical, age, and mileage requirements. dealers to potential liability for a warranty, if any, may apply’’ to suggest falsely that See Certified Used Cars—The Wave of the Future, manufacturer’s warranty because the a vehicle is covered by an unexpired manufacturer’s Edmunds.com, Inc., http://www.edmunds.com/car- warranty. Swann at 1. The Rule necessarily requires buying/certified-used-cars-the-wave-of-the- dealers to determine whether a manufacturer’s 56 future.html. NAAG1 at 8 (also urges that Buyers Guide list warranty applies before stating so because it 54 Adjacent to the full or limited warranty boxes past history indicating salvage, damage, or permits, but does not require, dealers to state that above the Systems Covered/Duration section of the manufacturer buyback); id. at 10; CARS at 19; a manufacturer’s warranty applies 455.2(b)(2)(v), Buyers Guide, the Buyers Guide states, ‘‘[a]sk the Broward County at 2–3, 10–11. when such a warranty applies. In light of the dealer for a copy of the warranty document for a 57 NADA1 at 4–6; NIADA1 at 8; Ore. Vehicle potential for deception when dealers suggest full explanation of warranty coverage, exclusions, Dealer Ass’n at 2. coverage that the dealer has not confirmed, no and the dealer’s repair obligations.’’ 58 NADA1 at 5. change concerning the disclosure of unexpired 55 NADA1 at 10. 59 Id. manufacturers’ warranties is proposed in this NPR.

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consumers not to rely on spoken consumers and dealers to obtain. Today Vehicle history reports available from promises, so that they can avoid false consumers can obtain useful title CARFAX and AutoCheck may often assurances about steps the dealer would information from NMVITIS, and include information on prior ownership, take in the event of future problems. commercial services offer that in usage, odometer readings, damage, and The Buyers Guide also suggests that combination with vehicle history repair history, among other things. consumers get an independent information from a variety of sources. Consumers can use the vehicle inspection of a vehicle before buying it. Car titles usually are issued by state identification number (‘‘VIN’’) for a Since the Rule was promulgated, DMVs, and the titles typically show the particular vehicle to purchase a report however, there have been significant legal owner of the vehicle and other on that vehicle from these commercial changes in the types of vehicle history identifying information. The amount of sources. Both CARFAX and AutoCheck available to those buying used cars— information in a car title varies widely also offer consumers the option of both for dealers purchasing cars for from state to state. Some states issue car paying a flat fee to receive reports on as resale and for consumers who are titles that include ‘‘brands,’’ the many individual vehicles as the shopping for one. State automobile title descriptive labels assigned by state consumer wishes during a designated information is being combined into a titling agencies to describe the current time frame. Some dealers also have database where it can be searched or past condition of a vehicle, such as chosen to distribute commercial vehicle through DOJ’s NMVITIS. In addition, ‘‘junk,’’ ‘‘salvage,’’ or ‘‘flood.’’ 62 The history reports to their customers for firms such as CARFAX and AutoCheck brands that states use on their car titles free. provide individualized vehicle history differ in important ways from state to reports which include not only the 2. Comments Received on Disclosure of state. The definitions of those brands Title Information information in a NMVITIS report but also vary from state to state so that, for also may include a wealth of example, a brand of ‘‘junk’’ in one state The Commission received many information about prior wrecks, may mean something different in comments suggesting that vehicle title odometer readings, and even another state. At the time of the original information be disclosed on the Buyers maintenance history. Although these rulemaking, state DMVs may have been Guide. Comments from NAAG, CARS, reports are not necessarily perfect, they the only source, other than prior WI DOT, and an individual consumer do provide far more useful information owners, of vehicle history information. favored requiring dealers to disclose than was available previously. prior title status information on the The Commission is proposing a One source for vehicle history 66 information that has become available Buyers Guide. The comments assume Buyers Guide accompanying this NPR that dealers have this information or that contains a statement advising since the Rule was promulgated is NMVTIS. The Department of Justice could easily obtain it. For example, WI consumers to obtain vehicle history DOT noted that dealers usually have a information. This statement would be began its implementation of NMVTIS in January 2009.63 NMVTIS is a federal copy of the title or direct access to state combined with the Buyers Guides’ DMV databases in relation to their state- existing recommendation that system designed to enable nationwide access to title information submitted by imposed duty to process title consumers obtain an independent applications on behalf of buyers.67 The inspection before purchase. The state titling agencies. NMVTIS includes odometer readings from state titling data commenters who favored including statement directs consumers to an FTC vehicle history information generally Web site that the Commission would and brands that state titling agencies assign to vehicles. NMVTIS does not recommended requiring dealers to create where consumers could obtain obtain the information and to report that information about vehicle history create federal uniform definitions for brands or require that state DMVs assign information on the Buyers Guide. reports and sources for those reports. CARS proposed a separate warning brands in issuing car titles. Consumers The FTC site could also provide other label stating that a vehicle is listed in may purchase some forms of NMVTIS useful information for consumers who NMVTIS as ‘‘salvage, junk, or otherwise reports for fewer than five dollars.64 are shopping for a used car. totaled by an insurer or sold at However, not all states fully participate Dealers would not be required to auction.’’ 68 An individual consumer in NMVTIS, and the program is still obtain vehicle histories or to display commented that the Buyers Guide being developed. specific vehicle history information on should disclose whether the vehicle was the proposed revised Buyers Guide. The In addition, state title information, recently sold at an auction.69 Buyers Guide would continue to combined with other information about Industry groups stated that better recommend to consumers that they individual vehicles, can be obtained information about title brands would protect themselves by obtaining an from commercial sources such as benefit them as well as consumers but, independent inspection before making a CARFAX and AutoCheck, among others. for a variety of reasons, suggested that purchase. CARFAX obtains data for its reports it is impracticable to require disclosure from state titling agencies, insurers, 1. Availability of Vehicle History of this information on the Buyers Guide. repair facilities, automobile auctions, Information First, these groups contended that salvage facilities, and fleet rental firms. dealers often do not themselves have Since the Rule’s promulgation in AutoCheck competes with CARFAX and 1984, a variety of public and private accurate information about titles or obtains information from similar vehicle histories. They noted that sources offering information about the sources.65 history of individual vehicles have consumers trading in a car may well not have the title itself, either because it is become available. When the Rule was 62 See NMVTIS Final Rule, 74 FR 5740 n.1 (Jan. adopted, vehicle history information held by a financing company or a 30, 2009). consumer has simply lost it. They stated was available primarily from prior 63 Id. at 5740. owners of used cars or from state car 64 See information concerning approved NMVTIS 66 NAAG1 at 1–10; CARS at 19–21; WI DOT at 2– titling agencies like a state department data providers at: www.nmvtis.gov/ nmvtis_vehiclehistory.html. 3; Allan-Geisel. of motor vehicles (‘‘DMV’’). For cars 65 See, e.g., CARFAX v. AutoCheck, https:// 67 WI DOT at 2. titled in several states, that information www.autocheck.com/consumers/content/carfax- 68 CARS at 19–21. sometimes was difficult both for autocheck-compare.do. 69 Allan-Geisel.

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that some of that information may be that brand because title brands vary vehicle history information on a Buyers available from the online databases at dramatically from state to state. In fact, Guide. Complete vehicle histories may state DMVs, but may take time to obtain a particular brand in one state may have be several pages long. and may be as much as six weeks out a different meaning in another.75 NADA Thus the question is whether some of date. noted, for example, that the term subset of that information, particularly Industry groups also contended that ‘‘salvage’’ has different legal meanings from titles, should be provided on the even if dealers do have a title, it may not in Arkansas, Connecticut, Colorado and Buyers Guide. Because title records, provide an accurate history of the Montana.76 especially brands, vary considerably vehicle because the title may have been Third, dealers are concerned about from state to state, there may be a risk ‘‘washed.’’ 70 Removing or ‘‘washing’’ their potential legal liability if they are that consumers could be confused or brands from a title—generating a ‘‘clean made the ‘‘guarantors’’ of information misled by these terms. Moreover, title’’—is accomplished by transporting that they could be required to disclose providing a partial vehicle history on a vehicle with a branded title in one on a Buyers Guide. NIADA noted that the Buyers Guide also could discourage state to a state that does not check either ‘‘the types of damage, repair and history consumers from seeking more complete with the state that issued the previous issues noted [on forms required by state vehicle history information. title (or with all states that may have law] are considered material facts In addition, industry groups raised a previously issued titles on that vehicle) affecting a consumer transaction, such concern about dealers’ potential liability to determine if the vehicle has any that the information must be disclosed for reporting information that they do existing brands not shown on the under [each state’s Unfair and Deceptive not control. Vehicle history information current paper title.71 Indeed, NADA’s Acts and Practices Act] statute.’’ 77 It is available from multiple sources, and examples of how states treat brands added that many disclosures are already that information could be inaccurate, from other states differently, and how a required or otherwise dealt with by untimely, or incomplete. Dealers face brand or other negative title information other laws and administrative potential legal risks for reporting third- reported in one state may not be carried regulations. According to NIADA, party information that turns out to be over in a different state,72 highlight the radical changes as to what information deficient. regulatory conditions that make title is required to be displayed on what Thus, while commenters agreed that washing possible. forms and the time when disclosures consumers could benefit from Dealers offered strong support for must be made would expose dealers to additional information, even if it has NMVTIS—which is designed in part to significant legal costs by making them potential deficiencies, the Commission prevent or defeat title ‘‘washing’’ by the ‘‘guarantors of information over believes that requiring dealers to place providing a national ‘‘brand carry which they have no control.’’ 78 potentially misleading partial or forward’’ function—but contend that it NIADA stated that dealers are deficient information on the Buyers is not fully functioning. NMVTIS retains concerned that they may be liable if Guide would not necessarily benefit and makes available to users of the they put out of date or incomplete consumers. Instead, the Commission system all reported brands applied to a information on Buyers Guides that they believes that consumers should be vehicle so that transporting the vehicle obtain from vehicle history reports or alerted to the existence of this from one state to another will not other databases. NIADA noted that information and encouraged to obtain ‘‘wash’’ the brand. Once a vehicle is information in vehicle history reports is and to evaluate it themselves—while branded by a state motor vehicle titling only as good as the data that goes into combining that knowledge with an agency, that brand becomes a permanent them. In addition, NIADA stated that independent inspection of the vehicle. there is a lag time before information is part of the vehicle’s NMVTIS record. 4. Proposed Buyers Guide Vehicle included in vehicle history reports. NMVTIS also is intended to prevent History Statement criminal title washing, in which a NIADA opined that, even if dealers salvage or destroyed vehicle is used to complete a Buyers Guide with current Having considered all of these generate a clean paper title that is information, they would have to comments, and to facilitate consumer subsequently attached to a stolen consistently recheck and update that access to vehicle history information, vehicle ‘‘cloned’’ to the destroyed information. Industry groups noted that the Commission proposes adding the vehicle. such disclosures may duplicate existing following statement to the Buyers Guide NADA raised concerns about legal requirements, and that dealers that would encourage consumers to NMVTIS’s completeness and pointed might be subject to legal action if the obtain vehicle history reports and that out that NMVITIS had complete information they report later turns out would direct consumers to an FTC Web information from only thirteen states (as to be inaccurate or incomplete. site, to be created by the Commission, where consumers could learn details of March 17, 2009, the date of NADA’s 3. Analysis of Vehicle History 73 about vehicle history information and comment). Since then, NMVITIS is Disclosure Comments now receiving data from forty states.74 sources, including NMVTIS, for that Thus, while still in development, Both consumer and industry information: NMVITIS already provides a great deal commenters agreed that consumers Before you buy this used vehicle: of useful information. benefit from better information about 1. Get information about its history. A second concern offered by dealer the history of vehicles. In addition, Visit the Federal Trade Commission at groups is that, even if consumers know dealers themselves often purchase cars, ftc.gov/usedcars. You will need the vehicle either at auction or as trade-ins, and identification number (VIN), shown above, to the brand appearing on a car title, they make the best use of the resources on this may not understand the significance of thus also have a real use for better information. However, it is not site. 2. Ask the dealer if your mechanic can 70 NADA2 at 7. practicable to include all available inspect the vehicle on or off the lot. 71 See 74 FR at 5741. 72 NADA2 at 5. 75 NADA2 at 4–5. The proposed statement would further 73 NADA2 at 6. 76 Id. at 5. two principal purposes of the Rule: (1) 74 See National Motor Vehicle Title System: For 77 NIADA2 at 2. Providing consumers with important States, www.nmvtis.gov/nmvtis_states.html. 78 Id. pre-sale information about a vehicle

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they may purchase, and (2) diminishing relying on dealers.79 Accordingly, for mechanical condition’’ and that the degree to which consumers must these and the additional reasons requiring disclosure of repair history rely solely upon the selling dealer for discussed below, the Commission would reduce a dealer’s incentive to information when they are shopping for declines to reverse its long-held position make necessary repairs.87 Like repair used cars. on these issues in this NPR. history, damage history would not be an In much the same way that the a. Disclosure of Prior Vehicle Damage indicator of current mechanical current Buyers Guide encourages condition and forced disclosure of it The Commission declines to propose could reduce dealer incentives to consumers to ask the dealer about an amending the Rule to require dealers to independent inspection, the proposed ascertain damage and repair it. disclose prior damage history, as several For reasons similar to those outlined vehicle history statement would commenters recommended.80 Several above in discussing vehicle history encourage consumers to obtain commenters who broadly favored information generally, the Commission information about a particular vehicle’s disclosure of vehicle title history does not propose mandatory disclosure history from independent sources. Both stressed the particular importance of by dealers of the prior damage history the proposed vehicle history statement disclosing damage history. For example, of individual vehicles. Nevertheless, and the existing independent inspection NAAG urged that the Buyers Guide prior damage information may be statement direct consumers to should require dealers to disclose past available to consumers if it is reported independent sources of information damage, including title history showing in title documents or vehicle history about the mechanical condition of such damage.81 Similarly, CARS reports. The vehicle history statement vehicles that are not controlled by the recommended a warning label for used on the proposed revised Buyers Guide selling dealer. Under this proposal, vehicles with salvage title histories.82 encourages consumers to seek out and dealers would not be required to obtain NAAG and CARS also recommended to obtain these reports. vehicle history reports or to provide that the Buyers Guide disclose if a those reports to consumers in manufacturer’s warranty has been b. Disclosure of Prior Use conjunction with the Buyers Guide, terminated because of salvage or other The Commission declines to propose thereby alleviating concerns that a title history.83 the prior use disclosure urged by three dealer could be held responsible for NIADA opposed a Rule requirement commenters 88 because such a shortcomings in vehicle history to disclose damage history, for the same requirement was rejected by the information that is controlled by others. reasons that it opposed a requirement Commission in 1979 and the comments that dealers disclose title history: (1) do not provide sufficient new evidence 5. Other Mechanical Condition and Lack of reliable information, and (2) Vehicle History Disclosures for the Commission to revisit that potential liability for third-party vehicle conclusion. In any event, prior use Recommended by Some Comments 84 history statements. As with title information may be available to history disclosures, NIADA In addition to recommending that the consumers in a NMVTIS report or a recommended a ‘‘safe harbor’’ from Buyers Guide include vehicle history commercial vehicle history report. liability should dealers be required to information from NMVTIS and other In 1979, the Commission rejected a disclose damage history.85 staff recommendation that the Buyers sources, some commenters also The Commission did not directly recommended expanding the Rule to Guide disclose prior use because the address a damage history disclosure record did not demonstrate either that require disclosure of prior damage, prior requirement during the 1984 use history (such as whether a vehicle consumers were injured by the lack of rulemaking. In 1979, however, it had such a disclosure or that prior use was was a taxi, rental, police car, etc.), and adopted a staff recommendation to drop manufacturer buyback or ‘‘lemon law’’ an accurate indicator of a vehicle’s a proposed provision requiring the 89 status. These, or similar proposals, were mechanical condition. Commenters disclosure of any repair work performed did not present new evidence about the extensively argued, carefully 86 by the dealer. The Commission agreed possible benefits of a prior use considered, and ultimately rejected by with staff’s conclusion that the record the Commission during the original disclosure on the Buyers Guide. To the did not show that prior repairs are extent that individual consumers are rulemaking. Many were raised again and ‘‘reliable indicators of current rejected during the 1995 Rule review. interested in prior use information, however, they may be able to obtain it The current comments do not provide 79 See, e.g., SBP, 49 FR at 45716 (rejecting a sufficient new evidence or point to any known defects disclosure requirement in part from a NMVTIS report or a commercial change in circumstances that compel because ‘‘[i]t gives the wrong signal to consumers vehicle history report. The Commission the Commission to reach a different by encouraging them to focus their attention on thus declines to alter its long-held view dealer-controlled information about a car’s on this issue. conclusion during this review of the mechanical condition’’). Rule. Moreover, the Commission’s 80 NAAG1 at 2–5, 7–9; CARS at 18–21; WI DOT c. Disclosure of ‘‘Manufacturer proposal to revise the Buyers Guide—by at 2–3; Allan-Geisel. Buyback’’ or ‘‘Lemon Law’’ Status adding a recommendation that 81 NAAG commented that the Buyers Guide should disclose ‘‘[P]ast title history indicating prior The Commission does not propose consumers obtain a vehicle history salvage, damage or manufacturer buyback.’’ NAAG1 requiring that dealers disclose a report, in addition to an independent at 7–8. vehicle’s ‘‘lemon law’’ (also called inspection, before purchasing a used 82 The proposed warning label would apply to ‘‘manufacturer buyback’’ or car—should serve to provide consumers vehicles listed as ‘‘salvage, junk, or otherwise ‘‘repurchase’’) status on the Buyers with the means to obtain important totaled by an insurer or sold at auction’’ in NMVTIS. CARS at 20–21, 30. Guide. All fifty states have some form of information about the mechanical The Rule does not apply to vehicles ‘‘sold only ‘‘lemon law’’ that requires condition of individual vehicles. The for scrap or parts (title documents surrendered to manufacturers to repurchase new cars Commission continues to believe that the State and a salvage certificate issued).’’ 16 CFR that fail to conform to express consumers can obtain more reliable 455.1(d)(2). 83 NAAG1 at 7–8; CARS at 19–21. information about the mechanical 84 NIADA2 at 1–3. 87 Id. condition of a used vehicle from 85 Id. at 2–3. 88 CARS at 20; NAAG1 at 16–17; WI DOT at 2. independent sources than they can from 86 SBP, 49 FR at 45720–21. 89 SBP, 49 FR at 45720.

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warranties, typically after a number of designated period of time or a manufacturer repurchase to the first unsuccessful repair attempts. Many designated number of miles. According retail purchaser.97 Even in those states states also require that dealers disclose to the IALLA, fifteen states require in which statutes or associated manufacturer repurchase status to the manufacturers to issue warranties to the regulations do not expressly require a first retail purchaser of a repurchased first retail buyer of a vehicle after the manufacturer repurchase disclosure, the vehicle. However, it is not clear that vehicle’s repurchase pursuant to a state failure to disclose the vehicle’s used car dealers would necessarily lemon law.93 IALLA further reports that repurchase status could violate the know whether a vehicle is a several manufacturers offer limited state’s unfair and deceptive practices manufacturer repurchase in subsequent warranties on repurchased lemon law statute. In most states, then, dealers are sales. In more than half the states, the vehicles, even if not required to do so already required to disclose that an 94 fact that a vehicle has been repurchased by state law. Several commenters individual vehicle is a manufacturer by the manufacturer pursuant to a recommended that the Commission repurchase at least to the first retail lemon law is not a ‘‘brand’’ that is require dealers to disclose on the Buyers purchaser. Therefore, with respect to the carried on the vehicle’s title.90 Guide that a vehicle had been first retail purchaser at least, an Accordingly, the Commission believes repurchased by a manufacturer and to additional disclosure on the Buyers that a manufacturer repurchase in a provide information about warranty Guide would merely duplicate existing vehicle’s history should be treated in coverage associated with the requirements. The Commission is the same way as other aspects of vehicle repurchase.95 history discussed above. The proposed Commenters advocating the unaware of any evidence suggesting that revised Buyers Guide would disclosure of manufacturer repurchase these existing state disclosure recommend that consumers obtain a status typically do so in the context of requirements have been inadequate or vehicle history report that may include a broader recommendation that the that an apparently duplicative federal information on whether an individual Commission model a revised Buyers disclosure is necessary. vehicle is a manufacturer repurchase. Guide on Wisconsin’s Buyers Guide, Disclosures of manufacturer However, the proposed Rule would not which requires dealers to check boxes to repurchase status may be more affirmatively require that dealers obtain disclose various types of vehicle history problematic with respect to vehicles this information and disclose it on the and ‘‘title brands,’’ including boxes for resold after the first retail sale. It is not Buyers Guide.91 prior use and brands like ‘‘rebuilt clear that dealers who sell these State lemon laws typically require salvage’’ or ‘‘manufacturer buyback.’’ 96 vehicles necessarily would know or be manufacturers to repurchase and, if As discussed above, the Commission able to determine readily whether any necessary, to repair new vehicles that declines to propose the type of check such vehicle is a manufacturer fail to meet warranty standards because box disclosures for vehicle history and repurchase. Although IALLA reports of alleged defects. Once repurchased title brands that are used on the that all fifty states have some form of and repaired, the vehicles are then often Wisconsin Buyers Guide, and instead 92 lemon law, titles in fewer than half of offered for sale as used cars. Laws in proposes that a statement be added to those states carry brands such as some states require that the the Buyers Guide recommending that ‘‘buyback’’ or ‘‘lemon.’’ 98 As a result, manufacturer warrant the repair of the consumers obtain vehicle history depending on the applicable state’s law, vehicle’s nonconformity for a reports. None of the commenters has dealers may not always be able to provided persuasive reasons for treating determine from a vehicle’s title or 90 See NADA2, Exhibit A (chart: ‘‘Brand/Vehicle manufacturer repurchase status Status-Reference’’). NMVTIS report whether a vehicle is a 91 Notably, in 1996, the Commission held a public differently from other aspects of a manufacturer repurchase, and the forum on issues related to lemon law buybacks. vehicle’s history. availability of that information from Participants in that forum included manufacturers, Moreover, given the extensive state other sources is unclear. Dealers who dealer associations, state and local consumer laws and regulations on this topic, a know that a vehicle is a manufacturer protection agencies, and consumer groups. No Buyers Guide disclosure that a vehicle lemon law disclosure proposal resulted from that repurchase, however, are likely to is a manufacturer repurchase appears to forum. Information about the proceedings, disclose that information because the including a transcript, is available at http:// be unnecessary and duplicative. State failure to do so could expose the dealer www.ftc.gov/bcp/lemon/. laws already require dealers to disclose 92 The number of cars repurchased pursuant to to liability for violating state unfair and to the first retail purchaser after the state lemon laws and resold by manufacturers is deceptive practices statutes. Under unknown. Accurate estimates are difficult to make repurchase that a vehicle has been for many reasons including the fact that repurchased by a manufacturer under these circumstances, the Commission manufacturers also repurchase cars for reasons that state law. According to the IALLA, all sees no reason to treat manufacturer may be unrelated to defects, such as ‘‘goodwill’’ fifty states have some form of lemon repurchase differently from other programs designed to enhance customer relations. aspects of vehicle history such as, for In 1995, CARS, citing NAAG figures, stated that law, and forty-one states require a 50,000 vehicles were repurchased annually under disclosure that a vehicle is a example, salvage, flood, or prior use. lemon laws. See Request for Comments Concerning Rather than requiring dealers to attempt Disclosures in the Resale of Vehicles Repurchased 93 to obtain, to report, and essentially to be Due to Warranty Defects, 84 FR 19067, Petition for Arkansas, California, Florida, Georgia, Hawaii, Investigation of ‘‘Lemon Law’’ Motor Vehicle Resale Idaho, Indiana, Iowa, Minnesota, North Dakota, responsible for the accuracy of a Practices (Nov. 8, 1995), 84 FR 19069, at 19070 Ohio, Pennsylvania, South Carolina, Texas, and disclosure on the Buyers Guide that a (Apr. 30, 1996). That figure would amount to about Washington require the manufacturer to warrant the repair of the nonconformity to the first subsequent vehicle is a manufacturer repurchase, 0.56% of the more than 8.6 million new cars sold the Commission proposes a statement that year. Research and Innovative Technology retail buyer for a period of at least one year or Administration [‘‘RITA’’] Bureau of Transportation 12,000 miles, whichever occurs first. NAAG1, Att. on the Buyers Guide recommending that Statistics, U.S. Dept. of Transportation, http:// A (IALLA comment). consumers obtain vehicle history 94 www.bts.gov/publications/ For example, several manufacturers issue information, which may reveal whether national_transportation_statistics/html/ separate one year/12,000 mile limited warranties on table_01_16.html. their reacquired vehicles regardless of where the Industry sources contacted by staff in preparing vehicle is resold. Id. 97 NAAG1, Att. A (IALLA comment). this NPR estimated that only 0.2% of used vehicles 95 CARS at 20; IALLA (NAAG1, Att. A); NAAG1 98 IALLA; See NADA2, Exhibit A (chart: ‘‘Brand/ sold by used car dealers are manufacturer at 3, 8–9. Vehicle Status-Reference’’ listing states that carry repurchases. 96 NAAG1, Att. B. lemon law brands).

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an individual vehicle is a manufacturer disclosure rule have not provided any and Minnesota (which had neither).106 repurchase under state law. new information about its benefits that Although the Wisconsin Study In terms of specific warranty coverage would cause the Commission to change suggested that the Wisconsin disclosure that applies because of state lemon law, its long-held view. The Commission law had resulted in a slight increase in dealers who have knowledge of this believes that the recommendations on consumer knowledge of defects at the warranty coverage may disclose the Buyers Guide that consumers obtain time of sale, other data were information about it on the current a vehicle history report and inspection inconclusive about the law’s benefits. Buyers Guide by using a statement from independent sources are likely to For example, the study showed that similar to the one permitted for provide consumers with more reliable more consumers in Minnesota, which disclosing an unexpired manufacturer’s information about the mechanical had no defect disclosure requirement, warranty.99 The proposed revised condition of a used car than a reported an awareness of defects than Buyers Guide in this NPR would make requirement that dealers disclose known did consumers in Wisconsin. Moreover, that disclosure easier because it defects. the study failed to show that includes boxes where dealers would be When a known defects disclosure Wisconsin’s disclosure requirement able to indicate whether a requirement was raised in connection made it more likely that consumers manufacturer’s original or used car with the 1995 Rule review, the would receive the information they felt warranty applies. Dealers could check Commission explained that it had they needed about the mechanical 107 the ‘‘Manufacturer’s Used Vehicle carefully considered such a requirement condition of a used vehicle. Indeed, Warranty Applies’’ box when a vehicle in the original rulemaking but had then the study ‘‘revealed that 51% of is covered by a manufacturer’s lemon decided that the requirement would Wisconsin consumers still ultimately law warranty. When that or any of the ‘‘not provide used car buyers with a experienced repair problems not 108 other non-dealer warranty boxes is reliable source of information identified at the time of purchase.’’ checked, the proposed revised Buyers concerning a car’s mechanical condition From this somewhat contradictory data, Guide advises: ‘‘Ask the dealer for a and that the provision would be the Commission concluded that the copy of the warranty document and an exceedingly difficult to enforce.’’ 103 The results of the Wisconsin Study tended explanation of warranty coverage, Commission instead decided in 1984, ‘‘to indicate that the Wisconsin defect exclusions, and repair obligations.’’ and reaffirmed in 1995, that the Buyers disclosure requirement did not have a Consumers who follow this advice are strong effect on consumers’ knowledge Guide’s ‘‘warranty and ‘As-Is’ 109 then likely to learn the terms of the disclosures—along with the warnings of defects.’’ A second study discussed in the coverage and that it results from the about spoken promises and the pre- original rulemaking, which compared vehicle’s status as a manufacturer purchase inspection notice—are buyback or repurchased lemon. results from Wisconsin with the rest of effective remedies for the deceptive the country (the ‘‘Baseline Survey’’), 6. Disclosure of Known Defects practices occurring in the used car 104 also did not demonstrate that industry.’’ The new proposed notice Wisconsin’s experience with a known Some comments urge that the that consumers obtain vehicle history Commission require that dealers defects disclosure requirement had information would serve to supplement produced beneficial results. The disclose on the Buyers Guide whether the Rule’s existing disclosures, the vehicle has defects. The Baseline Survey suggested that providing consumers with another Wisconsin’s defect disclosure Commission declines to alter its independent source for particularized previous decisions on a ‘‘known requirement had not increased the information about the mechanical amount of information that consumers defects’’ disclosure requirement. The condition of a used vehicle. Commission carefully considered such a receive about the mechanical condition requirement in the original rulemaking As in 1995, those advocating a known of a used car, had not improved and ultimately rejected it in 1984.100 defects disclosure requirement have not consumers’ ability to predict future The issue was raised and rejected again pointed to any new studies showing that repair costs, and had not reduced the in the 1995 Rule review.101 Although such a requirement would ‘‘provide need for post-sale repairs.110 The substantial information benefits in Commission concluded that, taken as a consumer groups like CARS again have 105 advocated for a known defects practice.’’ In the original rulemaking, whole, the Baseline Survey data disclosure requirement, NAAG did not, the Commission discussed two studies, ‘‘suggest that the expected beneficial acknowledging in its comment the neither of which established that a effects of a defect disclosure controversy that this proposal known defects disclosure requirement requirement were not achieved in 111 engendered in the original rulemaking had achieved beneficial results in Wisconsin.’’ and declining to ‘‘reincarnat[e] that long practice. The inconclusive nature of these ago debate.’’ 102 As explained below, the The first such study, known as the earlier studies and the absence of any commenters seeking a known defects ‘‘Wisconsin Study,’’ produced new empirical data establishing the inconclusive results after comparing the benefits of a known defects disclosure 99 As noted elsewhere, see note 41 and experiences of consumers in three states accompanying text, the Rule currently provides that with different inspection and defect 106 SBP, 49 FR at 45713–15. unexpired manufacturers’ warranties may be disclosure rules: Wisconsin (which 107 The study showed only a minor decrease in identified by adding the following statement to the the percentage of Wisconsin consumers who Buyers Guide: ‘‘MANUFACTURER’S WARRANTY required, and continues to require, reported that dealers failed to provide important STILL APPLIES. The manufacturer’s original mandatory inspections and disclosure of information about a vehicle’s mechanical condition warranty has not expired on the vehicle. Consult known defects), Iowa (which at the time and virtually no change in the percentage of the manufacturer’s warranty booklet for details as required mandatory safety inspections, Wisconsin consumers reporting that dealers to warranty coverage, service location, etc.’’ Dealers provided inaccurate mechanical defect information could use similar language and state that a but not disclosure of known defects), after the Wisconsin disclosure law became effective. ‘‘MANUFACTURER’S LEMON LAW WARRANTY SBP, 49 FR at 45714. APPLIES.’’ 103 60 FR at 62196–97 (quoting SBP, 49 FR at 108 60 FR at 62197; SBP, 49 FR at 45712. 100 See SBP, 49 FR at 45694–95, 45711–18. 45712). 109 SBP, 49 FR at 45714. 101 60 FR at 62197. 104 Id. at 62197. 110 Id. at 45715. 102 CARS at 18–19; NAAG1 at 7. 105 Id. 111 Id. at 45714.

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requirement counsels against reversing any defects in a car provides no significant beneficial effects.’’ 122 The the Commission’s decades-old decision information about the actual existence Commission was concerned, in short, that the Buyers Guide not require the of an undiscovered or latent defect’’ but that ‘‘a mandatory inspection rule has disclosure of known defects. may cause consumers to conclude the potential to do more harm than good In addition to the lack of empirical mistakenly ‘‘that the dealer’s lack of because it encourages reliance on dealer data supporting a known defects knowledge about defects means that no inspections and, as a consequence, disclosure requirement, the Commission defects exist.’’ 116 The consumer’s discourages consumers from seeking also is concerned that such a confusion could even be used by dealers more reliable information.’’ 123 requirement would be inconsistent with to blunt the impact of an ‘‘as-is’’ The reasons behind the Commission’s the overall goal of decreasing warranty disclosure—that is, dealers 1984 decision to reject an inspection consumers’ reliance on dealer- could tell consumers that the ‘‘as-is’’ requirement are still applicable today. controlled information when making a disclosure is irrelevant because the The Commission would add only that used car purchase decision. The vehicle has no known defects.117 reliance on a mandatory inspection also Commission concluded in the original Finally, as the Commission noted in could cause consumers to forego seeking rulemaking, for instance, that the the original rulemaking, a known vehicle history information. As requirement would send ‘‘the wrong defects disclosure requirement may previously noted, the Commission signal to consumers by encouraging actually serve to lessen the likelihood believes that obtaining these vehicle them to focus their attention on dealer- that dealers would carefully inspect history reports and an independent controlled information about a car’s their used vehicles: inspection provide consumers with the 112 mechanical condition.’’ By contrast, Disclosing ‘‘known defects’’ calls attention most reliable information on the the Commission explained, ‘‘the to the car’s problems but does not reward the mechanical condition of a used vehicle. warranty disclosure requirements, the dealer’s integrity for revealing those C. List of Systems and Defects warning about spoken promises and the problems. Thus, a dealer who regularly pre-purchase inspection notice inspects and honestly discloses all ‘‘known 1. Summary of Comments encourage consumers to avoid reliance defects’’ may be put at a competitive disadvantage relative to dealers who do not The Regulatory Review Notice on dealer-controlled information about a requested comments on whether the List car’s mechanical condition.’’ 113 If inspect. This factor may then have the unintended and perverse effect of of Systems should be retained or dealers were required by the Rule to discouraging, rather than encouraging, modified. The List of Systems has not disclose known defects, there likely inspections and disclosure of defects.118 been updated since 1984 despite would be a tendency for consumers to changes in automotive technology. The rely completely on the dealer for For all of these reasons, the Commission again declines to impose a Commission received several comments information about the mechanical recommending retention and several condition of a used car and to ignore the requirement as part of the Buyers Guide that dealers disclose known defects. recommending deletion. Buyers Guide’s important advice that Two commenters, NAAG and the they seek an inspection and vehicle 7. Dealer Inspections Oregon Vehicle Dealer Ass’n, stated that history information from independent the List of Systems should be deleted.124 114 Similarly, the Commission also sources. The Commission believes declines to propose a dealer inspection NAAG noted that the List of Systems is that consumers are likely to obtain more requirement, as urged by several of little value when compared with reliable information about the commenters.119 The comments important information, such as past mechanical condition of particular advocating an inspection requirement history of the vehicle, that it argued vehicles from an independent do not offer any new evidence that the should be disclosed.125 The Oregon inspection and vehicle history report Commission did not previously Vehicle Dealer Ass’n observed that than from the dealer’s required consider in rejecting mandatory ‘‘[n]obody looks at’’ the List of disclosure of known defects. inspections. Systems.126 In addition, as discussed in the In originally promulgating the Rule, On the other hand, NIADA original rulemaking, consumers might the Commission declined to impose an recommended retaining the List and assume incorrectly that a dealer’s failure inspection requirement and noted that opined that ‘‘the list provides useful to disclose any defects pursuant to a some of the reasons for rejecting the information to a customer who might, mandatory disclosure requirement otherwise, have no or limited 115 known defects disclosure provision means that no defects actually exist. applied ‘‘with equal force’’ to knowledge of the mechanical systems in Of course, no disclosure requirement mandatory inspections.120 The a motor vehicle.’’ 127 According to could ever insure that all defects would Commission explained that mandatory NIADA, if the customer takes the be discovered and disclosed to potential inspections would tend to encourage vehicle to a mechanic for inspection, the purchasers. Particular defects might go reliance by consumers on the dealer’s information in the List of Systems may undisclosed for a variety of reasons, inspection and thus discourage make possible a more understandable including an intentional decision by the consumers from seeking independent exchange between the mechanic and the dealer not to inspect for defects in the inspections and warranty protections.121 customer prior to the customer electing first place, a good faith failure to The Commission also noted that the to purchase a vehicle.128 NIADA added discover a particular defect during an Baseline Survey discussed above had that ‘‘Retaining the list is useful but not inspection, or an intentional shown that Wisconsin’s mandatory critical. For example, if space is needed concealment of defects that in fact were inspection rule ‘‘ha[d] not achieved to achieve other goals for revising the discovered. As explained in the original rulemaking, a disclosure on the Buyers 116 Id. at 45716. 122 Id. Guide ‘‘that the dealer is not aware of 117 Id. 123 Id. 124 NAAG1 at 10; Ore. Vehicle Dealer Ass’n. 112 Id. at 45716. 118 Id. at 45713. 125 NAAG1 at 10. 113 Id. 119 CARS at 17–18; Sachau; Hillig. 126 Ore. Vehicle Dealer Ass’n. 114 Id. 120 SBP, 49 FR at 45718. 127 NIADA1 at 6. 115 Id. at 45715–16. 121 Id. at 45719. 128 Id.

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Guide, then deletion of part or all of the but retained the List of Systems when a state emissions test required for list should be considered.’’129 the Rule was adopted. The Commission licensing. Wholesale Forms also supported concluded, for example, that the List of In light of the universal use of retaining the List of Systems for similar Systems would help address catalytic converters in U.S. vehicle reasons. Wholesale Forms commented misrepresentations about the exhaust systems and the expense that the List of Systems conveys mechanical condition of vehicles that associated with replacing them, the information to uneducated buyers who dealers may make on a system-by- Commission proposes amending the may not know much about cars.130 system basis by providing consumers Rule to add catalytic converters to the Broward County commented that with a framework to evaluate the extent List of Systems in the Buyers Guide as boxes should be added next to each item of the warranty coverage that must be a component of the exhaust system. on the List of Systems where dealers indicated in the warranties section of b. Airbags could indicate which are covered by any the Buyers Guide.133 The Commission warranty, along with a duration column also concluded that the List of Systems The Commission proposes adding where dealers would be instructed to would help consumers compare airbags to the List of Systems. Airbags indicate the duration of warranty warranties on different cars or from became a standard component of motor coverage for each system. Broward different dealers and identify vehicles after the Rule’s 1984 issuance. County further proposed that the front mechanical and safety systems that In 1984, the federal government of the Buyers Guide direct the consumer consumers may wish to have inspected mandated passive restraint systems for to the reverse side of the Buyers Guide by third parties.134 The Commission all vehicles manufactured after 1989. to obtain details about warranty believes that retaining the List of Manufacturers could comply with the coverage over individual systems.131 Systems is appropriate for the reasons mandate by installing systems such as articulated during the original airbags or automatic seat belts. Dual 2. Retention of List of Systems rulemaking. driver and front passenger airbags were The Commission proposes retaining not mandated until 1997.136 the List of Systems and revising it by 3. Adding Catalytic Converters and Although the Commission did not adding catalytic converters, as a Airbags to the List of Systems receive comments recommending that component of the exhaust system, and The Commission is proposing to add airbags be added to the List of Systems, airbags. The proposed revised Buyers catalytic converters and airbags to the it did receive comments about the Guide in this NPR decreases the type List of Systems. Both are required on failure of airbags in used cars and the size of the List of Systems to free space vehicles operated in the United States, need to require disclosures about their 137 for boxes where dealers can indicate the and the Commission believes that functionality. Therefore, the applicability of manufacturers’ and consumers would likely want to Commission proposes to amend the other third-party warranties, as evaluate the warranty coverage and to Rule by adding airbags to the List of described in Part IIIC. In making this consider an inspection of these Systems because of their widespread proposal, the Commission recognizes components. use and obvious importance to vehicle safety. The Commission invites the limitations of the value of the List a. Catalytic Converters of Systems described by some comments on this proposal. Catalytic converters can be expensive commenters as well as the benefits of D. Spanish Buyers Guides the List of Systems that would be lost and are targets for theft. Catalytic converters have been mandated for all The Rule requires that dealers display by deleting it altogether. Spanish language Buyers Guides when Adding boxes to the items on the list U.S. vehicles since 1975. Catalytic they conduct sales in Spanish. The where dealers could disclose details of converters remove hydrocarbons from a current Staff Compliance Guidelines their own warranty coverage, as vehicle’s exhaust by converting the recommend that dealers who conduct Broward County suggested, is not hydrocarbons into water and carbon sales in both English and Spanish necessary because that information dioxide. Precious metals such as platinum, palladium, rhodium, or gold display each version of the Buyers already can be provided by using the Guide.138 The Regulatory Review Notice Systems Covered/Duration section of are used as the catalyst for the chemical reaction that results in the conversion. specifically asked whether a single the Buyers Guide. bilingual Buyers Guide was desirable The Commission does not believe that The use of these metals makes catalytic and feasible, and sought design deleting the List of Systems entirely, as converters relatively expensive to 135 proposals for a bilingual Buyers Guide some commenters recommend, would replace and a target for thieves. (Question III.B(1)). The Notice did not benefit consumers. The List of Systems Catalytic converters may fail for a variety of reasons, including road include a draft bilingual Buyers Guide. arose out of the Commission’s After reviewing the comments, the consideration of prior proposed versions damage or premature wear caused by, for example, faulty welds or Commission proposes to retain separate of the Rule, including a version in 1980 English and Spanish versions of the that would have required dealers to uncombusted fuel reaching the converter. The failure of a catalytic disclose known defects in what were 136 Airbags are a passive restraint system that identified as the fourteen major systems converter could cause a vehicle to fail supplement seatbelt restraints. Manufacturers of a vehicle.132 The Commission originally conceived of the airbag as a replacement rejected the known defects requirement 133 See 49 FR at 45706. for the seat belt, but eventually it became a 134 See id. supplement to the seat belt. Passive restraint 135 Replacement converters can cost over $1,000. systems (automatic seat belts, airbags, or some 129 Id. Thieves can sell the converters to metal recyclers combination) are mandated for vehicles built after 130 Wholesale Forms at 4–5. for $20 to $200 and the metal recyclers in turn can September 1989. 49 CFR 571.208, S4.1.4.1. Dual 131 Broward County at 3–4, 16. extract the precious metal for as much as $6,000 per front driver and passenger airbags are mandated for 132 See SBP, 49 FR at 45711–12. The 1980 ounce. Not surprisingly, the incidence of catalytic all passenger vehicles manufactured after proposed rule would have required dealers to check converter theft increases as metal prices rise. See September 1, 1997. 49 CFR 571.208, S4.1.5.3. off each system as ‘‘OK,’’ ‘‘Not OK,’’ or ‘‘We Don’t Edmunds.com, Inc., In Under Two Minutes: 137 For example, CARS cited to missing, Know.’’ Sale of Used Motor Vehicles; Disclosure Catalytic Converter Theft, Edmunds.com, Inc., previously deployed, and nonfunctioning airbags. and Other Regulations, 45 FR 52750 (Aug. 7, 1980) http://www.edmunds.com/auto-insurance/in- CARS at 7–8. (Summary). under-two-minutes-catalytic-converter-theft.html. 138 Staff Compliance Guidelines, 53 FR at 17664.

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Buyers Guide. To ensure that the environmentally friendly because it because of a state-mandated Spanish guide reaches its intended would use less paper.144 warranty.149 audience, however, the Commission A supplier of forms to car dealers The Commission declines to propose also proposes adding a sentence in commented that a bilingual Buyers such changes to the Buyers Guide Spanish on the face of the English Guide would contain too much text, because both the current and proposed language Buyers Guide, alerting would likely require reduced font sizes revised Buyers Guide provide an Spanish-speaking consumers who that would be illegibly small for some adequate mechanism to disclose cannot read the Buyers Guide in English consumers, and would leave little space warranties required by state law. As to ask for a copy in Spanish. for important information.145 The noted in the current Compliance supplier suggested retaining separate Guidelines, dealers can already disclose The Commission received only one 139 English and Spanish versions and details of state-mandated warranties in proposed bilingual Buyers Guide. adding the following statement to the the ‘‘Systems Covered/Duration’’ section This proposed Buyers Guide compresses English Buyers Guide in Spanish: ‘‘If of the Buyers Guide in the same way the contents of the Buyers Guide to fit you are unable to read this document [in that they disclose details of warranties both an English and a Spanish version English], ask your salesperson for a copy that are not prescribed by law.150 The on a single page (front and back). The in Spanish.’’ 146 Rule would also permit pre-printing the proposal does not appear to follow the After reviewing the comments and applicable state-mandated warranties on Rule’s specific type styles, sizes, and considering the difficulties in devising a the Buyers Guide. The additional space format requirements. Displaying both a clear and understandable bilingual that will be created by moving the Non- Spanish and English Buyers Guide side Buyers Guide,147 the Commission has Dealer Warranty and Service Contract by side on a single sheet of paper decided to retain separate English and boxes to the back of the Buyers Guide arguably may be permitted by the Rule, Spanish Buyers Guides. The comments should help accommodate disclosures but such a bilingual guide would do not show that a clear and of state-mandated dealer warranties and require extremely large, oversized paper understandable bilingual Buyers Guide address MADA’s concern that the to comply with the Rule’s type style, can be drafted. Instead, the Commission appendices in the Regulatory Review size, and format requirements,140 which proposes to add a statement in Spanish Notice did not provide sufficient space are intended to ensure the clarity and to the English Buyers Guide that directs for these disclosures.151 readability of the Buyers Guide. consumers to request a copy of the Buyers Guide in Spanish if they cannot 2. Application of Rule to Private/ Three commenting dealers, two trade Individual Sales associations, and a supplier of forms read the English Buyers Guide. generally supported an optional Accordingly, the proposed revised The Commission declines to propose bilingual Buyers Guide to generate English Buyers Guide in this NPR expanding the Rule to cover private potential cost savings for dealers.141 includes, in Spanish, the following sales. The Rule applies to ‘‘dealers,’’ NIADA qualified its support for a statement: ‘‘If you are unable to read which is defined as ‘‘any person or bilingual Buyers Guide by noting that this document in English, ask your business which sells or offers for sale a any change to paper size or major format salesperson for a copy in Spanish’’ (‘‘Si used vehicle after selling or offering for changes to fit in the additional text usted no puede leer este documento en sale five (5) or more used vehicles in the ´ 152 would entail heavy compliance costs for ingles, pidale al concesionario una previous twelve months.’’ The ˜ dealers that have automated systems copia en espanol’’). Commission rejected coverage of private programmed to produce the current E. Miscellaneous Issues sales during the original rulemaking and Buyers Guide, which would discourage again in 1995. In the present rule 1. Box to Indicate State-Mandated use of the optional bilingual version. review, the Commission received one Warranty Two commenters stated that a bilingual comment recommending that the Rule Buyers Guide would make test driving The Commission declines to propose apply to sales by private individuals so adding boxes to the Buyers Guide where that the Rule would treat all used car safer because the view from the vehicle 153 would be less obstructed with one dealers can indicate the applicability of sales transactions in the same way. During the original rulemaking, the window sticker instead of two.142 A warranty coverage required by state law. Commission concluded that the Rule national used car seller added that the Nine states currently have mandatory should not extend to private or casual informational impact of the Buyers warranty, as well as lemon law, 148 sellers of used cars because the record Guide may be diluted by the ‘‘clutter’’ coverage for some used vehicles. failed to support a finding that of posting two separate versions and Accordingly, comments from both noted that permitting a single bilingual NAAG and IALLA favor including a box on the Buyers Guide where dealers 149 Id. document potentially could reduce 150 Staff Compliance Guides, 53 FR at 17663. 143 could indicate warranty coverage displaying errors or omissions. An 151 MADA. A non-binding Commission staff automobile auction firm noted that a opinion letter previously approved a Buyers Guide bilingual Buyers Guide would be more 144 Copart at 1. containing Minnesota’s required warranty terms 145 Wholesale Forms at 4. listed in the Systems Covered/Duration section. 146 Id. Letter from Joyce E. Plyler, Used Car Coordinator, 139 Carlabels. 147 Staff attempted to devise a bilingual Buyers Division of Enforcement, Federal Trade 140 The Rule provides that ‘‘[t]he capitalization, Guide in which an English statement was followed Commission, to James Schutjer, Assistant Counsel, punctuation, and wording of all items, headings, immediately by the Spanish translation, but the MADA (May 25, 1988). and text on the form must be exactly as required resulting guide was cluttered and confusing. The Staff Compliance Guidelines permit dealers by this Rule. The entire form must be printed in 148 Arizona, Connecticut, Hawaii, Massachusetts, to enlarge the Systems Covered/Duration section if 100% black ink on a white stock no smaller than Minnesota, New Jersey, New Mexico, New York, necessary to comply with state or local disclosure 1 11 inches high by 7 ⁄4 inches wide in the type and Rhode Island have enacted warranty laws requirements. 53 FR at 7663. styles, sizes and format indicated.’’ 16 CFR specific to used cars. These laws mandate warranty/ 152 16 CFR 455.1(d)(3). The Rule excludes from 455.2(a)(2). lemon law coverage for periods that range from 15 the definition banks or financial institutions, 141 CarMax; Copart at 1; Anderson; NADA1 at 4; days/500 miles to 90 days/4,000 miles for either all businesses selling a used vehicle to their NIADA1 at 5; Carlabels. vehicles or those sold above a certain price or employees, or a lessor selling a leased vehicle to the 142 CarMax at 2; Carlabels. within certain age and mileage limitations. NAAG1, lessee. Id. 143 CarMax at 1. Att. A (IALLA comment). 153 Hillig.

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deceptive sales practices were prevalent providing online customers with consumers prior to sale. Staff also in private sales.154 The Commission electronic Buyers Guides applicable to advises dealers to include the final noted that in private sales, prospective individual vehicles, either by posting version of the Buyers Guide with the customers often receive more reliable them on dealer Web sites or emailing final sales contract because the Buyers information about mechanical condition them to consumers who request Guide is incorporated into that contract. than they do from dealers and that copies.160 The Commission is unaware of private sellers typically do not offer The Rule requires that dealers evidence of prevalent deceptive warranty protection.155 In 1995, the complete and display the Buyers Guide practices by dealers in the Internet sale Commission rejected a suggestion from on vehicles offered for sale.161 Some of used cars. The three comments that NIADA that Buyers Guides be displayed information in the Buyers Guide, such address Internet sales do not cite to in all advertised used car sales, noting as the warning that oral promises are evidence of prevalent deceptive that warranties typically are not offered difficult to enforce and the practices by dealers in Internet sales, in private sales and that enforcing the recommendation that consumers ask and, in particular, to those Internet sales requirement in private sales would not about an independent pre-purchase in which the consumer does not be cost effective.156 The one comment inspection, is most valuable if physically see the offered vehicle or recommending that the Rule be consumers see the Buyers Guide as early Buyers Guide prior to consummation of extended to private sales does not as possible in the potential transaction. the transaction. In fact, Internet used provide any compelling reasons for the The terms of the Buyers Guide are vehicle purchasers may in some Commission to revisit its prior decision. incorporated into the contract of sale circumstances have greater protections The Commission therefore declines to and override any contrary provisions in from fraud than traditional purchasers. propose extending coverage of the Rule the contract.162 Consumers who eBay Motors, for example, lists to private sales. physically view a car on a dealer’s lot consumer buying tips on its Web site can see information contained in a 3. Internet Sales and provides certain protections to Buyers Guide before purchase whereas consumers buying used cars through its Used car sales that to some degree consumers who purchase entirely service.163 Finally, the comments do not involve the Internet are a potentially online may not see that information suggest that deceptive practices are large and growing segment of the used until after the sale is completed. unique to or any more prevalent in 157 car market. The Commission received The Rule currently has no provisions private Internet sales of used vehicles three comments about Internet sales specifically addressing Internet used car than in traditional sales. The Rule does from industry groups, all generally sales. Like classified, other forms of not apply to private used car sales addressing the availability of the Buyers print, or electronic media advertising, generally, and the comments do not Guide to consumers in such sales. A Internet advertising is often used to suggest reasons to treat private Internet supplier of forms to car dealers, draw a consumer’s attention to the used car sales differently. including Buyers Guides, suggested that advertised goods or services, and the Therefore, in this NPR, the the Buyers Guides be available sale is ultimately consummated at a Commission does not propose amending electronically and viewable in dealership. Consumers who respond to the Rule to address Internet used 158 dealership Internet listings. NIADA this form of Internet advertising are in vehicle sales, but seeks comment on suggested that dealers could post a position similar to those who visit a whether deceptive practices by dealers examples of Buyers Guides online to dealer because of other forms of are prevalent in the Internet sale of used identify each category of warranty, advertising. The Rule has no provisions cars. including whether vehicles are sold ‘‘As concerning the general advertising of Is,’’ rather than posting individual used cars, and the comments do not 4. Use of the Term ‘‘Certified’’ Buyers Guides applicable to each suggest reasons to treat this form of The Commission is making no vehicle.159 A multi-state Internet dealer Internet advertising differently from proposals to change the Rule, as urged proposed giving dealers the option of classified, other print, and other by CARS, to restrict the use of the term electronic media advertising. ‘‘certified’’ or similar terms in used car 154 SBP, 49 FR at 45708. Internet sales may also be sales.164 CARS commented that the Rule 155 Id. consummated entirely online with should prohibit dealers from labeling 156 60 FR at 62197. consumers never physically seeing a 157 According to NIADA, in 2008, 48,700,000 certain less valuable and problem used cars were offered over the Internet, but only vehicle or the Buyers Guide that is vehicles as ‘‘certified.’’ 165 7,700,000 were sold through the Internet. In 2007, displayed on it. Although the Rule As explained elsewhere in this NPR, 39,100,000 used cars were offered over the Internet, requires that dealers display a Buyers the term ‘‘certified’’ in used vehicle and 7,900,000 were sold through the Internet. Guide prior to sale, it does not preclude NIADA Used Car Industry Report 2009 at 19. sales typically refers to used vehicles In its comment, a multi-state Internet dealer cites them from disclosing that information that have been ‘‘certified’’ to meet to projections that ‘‘Internet-generated’’ sales (sales in other ways, such as by making Buyers certain prescribed mechanical, age, and that are generated by the Internet but consummated Guides available online. Staff routinely mileage conditions after a mechanical either on or off-line) will grow to 5.6 million in tells dealers that they should attempt to 2012 (11.3 percent of used car sales) from 4.1 inspection that are then offered for sale million in 2007 and ‘‘direct online’’ sales (Internet- provide the Buyers Guide to purchasers with a manufacturer’s ‘‘certified’’ used generated sales in which consumers make their first before an Internet sale is concluded car warranty.166 The term ‘‘certified’’ financial commitments to purchase online) will rise because some of the information in the has no standard definition and could be from 1.4 million vehicles in 2007 (3% of total used Buyers Guide is most valuable to car sales) to 2.1 million in 2012 (4% of total used car sales). Downey Brand at 2 and 3. Although these 163 See eBay Motors Vehicle Purchase Protection, statistics suggest that use of the Internet is 160 Downey Brand at 4–5. The comment is not http://pages.motors.ebay.com/buy/purchase- increasing in the used car market, they do not shed clear whether it proposes that dealers should be protection/index.html. any light on the prevalence of sales consummated permitted to make Buyers Guides electronically 164 CARS at 25–28. entirely online or the prevalence of deception in available online in addition to or as an alternative 165 CARS at 25. connection with Internet used vehicle sales to requiring that they be displayed on a used 166 See note 47, Edmunds.com, Inc., Certified generally. vehicle offered for sales. Used Cars—The Wave of the Future, http:// 158 Dealer Specialties. 161 16 CFR 455.2. www.edmunds.com/car-buying/certified-used-cars- 159 NIADA1 at 5. 162 16 CFR 455.3(b). the-wave-of-the-future.html.

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used to describe manufacturer Rule itself,170 and state consumer Commission noted that other practices, supported warranty programs, dealer protection laws. The deceptive practices such as inadequate disclosures, could warranty programs, or simply used that CARS seeks to remedy can be constitute unfair or deceptive acts or vehicles that a dealer represents to be in addressed on a case-by-case basis. practices and that such determinations good mechanical condition, regardless At this time, the Commission is would be made on a case-by-case basis. of whether the vehicle is offered for sale unconvinced that the Rule should be The Magnuson-Moss Act allows the with a warranty. Even when the term changed to address deception that Department of Justice or the ‘‘certified’’ refers to manufacturers’ potentially may be associated with use Commission to seek injunctions to stop certified used vehicle warranty of the term ‘‘certified’’ or with vehicle deceptive warranty practices.175 Such programs, those programs can vary certification programs generally. The practices would also violate § 5 of the widely in their precise terms, such as Commission is unclear how the FTC Act,176 and could be attacked warranty duration and vehicle adoption of a federal standard for use of under § 13(b) of that act. CARS offered components covered. Manufacturers, a term like ‘‘certified’’ or for vehicle no evidence suggesting that pricing used and dealers for that matter, are free to certification programs would uniformly in connection with 50/50 warranties is adopt their own competing certification address the potential for deception likely to mislead consumers or that programs and to define the meaning of suggested by the comment. Therefore, evidence could be developed to show the term ‘‘certified,’’ or any other term the Commission does not propose any that such warranty pricing practices are that they choose to use, in describing Rule changes to address use of the term prevalent. The Commission can address those programs. ‘‘certified’’ or vehicle certification any such practices on a case-by-case CARS recommends possible federal programs generally. basis. Therefore, the Commission sets standards for when a vehicle can be sold 5. ‘‘50/50’’ and Other ‘‘Split Cost’’ forth no proposal to address this issue as ‘‘certified.’’ The CARS comment in this NPR. refers to a California law that prohibits Warranties use of the term ‘‘certified’’ or similar One commenter suggested that the 6. Buyers Guide Statement That terms whenever any of seven Commission should amend the Rule to Purchase of Service Contract May Give enumerated conditions apply.167 prohibit 50/50 or other split cost used Consumers Additional Rights Under Similarly, the comment proposes that car warranties. In a split cost warranty, State Law Implied Warranties the Commission prohibit describing a the consumer pays a percentage of the The Commission proposes no change used car as ‘‘certified’’ if any of several cost of warranty work. A 50/50 warranty to the statement on the Buyers Guide conditions is present.168 refers to a split cost warranty in which that describes the relationship between CARS did not offer evidence that a consumer pays half of the cost of the the purchase of a service contract and a application of ‘‘certified’’ labels to warranty service (i.e., 50% of the parts dealer’s capacity to disclaim implied substandard vehicles is a prevalent and 50% of the labor). The Commission practice other than several news reports warranties. The Magnuson-Moss Act has already determined that split cost prohibits suppliers from disclaiming or showing anecdotal instances of the warranties are permissible, as described practice. Misrepresenting the modifying state law implied warranties below. Indeed, the Buyers Guide if the supplier enters into a service mechanical condition of used cars with contemplates split cost warranties by terms such as ‘‘certified’’ is already contract with the consumer within 90 requiring dealers to identify the 177 prohibited by § 5 of the FTC Act,169 the days of the time of sale. The Buyers percentage of labor and parts that the Guide explains this relationship by dealer will pay for warranty service. stating, ‘‘[i]f you buy a service contract 167 Specifically, California prohibits applying the CARS commented that 50/50 within 90 days of the time of sale, state term ‘‘certified’’ to used cars when any of the warranties are inherently deceptive following conditions are met: (1) The dealer knew law ‘implied warranties’ may give you under the Magnuson-Moss Act’s or should have known that the odometer had been additional rights.’’ rolled back; (2) the dealer knew or should have prohibition of deceptive warranties 171 known that the vehicle had been reacquired by the because the warrantor could raise the The Commission received one manufacturer or a dealer under state or federal price of the warranty work high enough comment asserting that the statement on warranty law; (3) the vehicle had been titled as a the Buyers Guide is confusing to ‘‘Lemon Law Buyback,’’ ‘‘manufacturer to make consumers pay the entire repurchase,’’ ‘‘salvage,’’ ‘‘junk,’’ ‘‘nonrepairable,’’ warranty repair cost, both parts and consumers. According to MADA, the ‘‘flood,’’ or similar title designation required by labor.172 The comment argues that 50/50 statement is confusing because it leads California or another state; (4) the vehicle had warranties also violate the Magnuson- consumers to believe that dealers must sustained damage in an impact, fire, or flood that offer a service contract for up to 90 days substantially impairs the use or safety of the Moss Act’s prohibition against ‘‘tying’’ a 178 vehicle; (5) the dealer knew or should have known warranty to a consumer’s use of any after a sale. MADA noted that most that the vehicle had sustained frame damage; (6) the product, article, or service identified by dealer fails to provide a completed inspection brand or corporate name, unless the (‘‘2002 Magnuson-Moss Opinion Letter’’ report prior to sale; or (7) the dealer disclaims the interpreting § 102(c) of the Magnuson-Moss Act warranty of merchantability. Id. at 26–27 (citing product, article, or service is provided (codified at 15 U.S.C. 2302(c))). Cal. Veh. Code 11713.18). 173 without charge. The CARS comment urges the Commission to 168 According to CARS, vehicles that should not In 2002, the Commission formally adopt a position that, according to CARS, was be advertised or sold as ‘‘certified’’ include those suggested by the Commission’s comments in 1999 that: (1) Have substantial nonconformities that declared that 50/50 warranties are not that split cost warranties that require repair work substantially impair the use, value or safety of the prohibited by the Magnuson-Moss Act’s to be performed by the dealer or at a place of the vehicles, such as vehicles repurchased under lemon 174 anti-tie in provisions. Moreover, the dealer’s choosing ‘‘likely violate’’ the anti-tie in laws; (2) have manufacturers’ warranties or provisions. CARS at 24 (citing 64 FR 19700, 19703 extended service contracts that exclude coverage for 170 16 CFR 455.1(a)(1) (deceptive act or practice (Apr. 22, 1999)). The 2002 Opinion Letter clarified prior damage; (3) were previously used as daily for a dealer to ‘‘misrepresent the mechanical the Commission’s interpretation that the Magnuson- rentals, program cars, taxicabs, police vehicles, or condition of a used vehicle’’). Moss Act’s anti-tie in provisions do not prohibit were reported as stolen; and (4) are grey market 171 split cost warranties, notwithstanding the prior vehicles (imported vehicles that were not 15 U.S.C. 2310(c)(2). manufactured in compliance with United States 172 CARS at 23–24. Federal Register document. 175 emissions and safety standards and that require 173 Id. (citing 15 U.S.C. 2302(c)). 15 U.S.C. 2310(c)(1)(A). additional regulatory approvals to be licensed as 174 Letter to Keith E. Whann, Whann & Assocs., 176 15 U.S.C. 45, 2310(b). road ready). Id. at 27–28. representing NIADA (December 31, 2002), http:// 177 15 U.S.C. 2308(a)(2). 169 15 U.S.C. 45. www.ftc.gov/os/2003/01/niadaresponseletter.htm. 178 MADA.

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dealers will offer a service contract only required to obtain a signature and to without the need for enhanced at the time of sale and not afterwards. retain a second signed copy. penalties.189 MADA did not propose an alternative Broward County commented that the As to civil penalties, the Federal Civil statement or offer any survey or other Rule should be revised to make a Penalties Inflation Adjustment Act of evidence suggesting the statement often signature mandatory on two copies, one 1990, as amended by the Debt causes consumer confusion. of which would be given to the Collection Improvement Act of 1996, requires the Commission to adjust the The statement on the Buyers Guide consumer and the other kept in the civil penalty amount that applies to clearly explains the relationship dealer’s file, to facilitate subsequent violations of Commission trade between the purchase of a service investigations into consumer regulation rules every four years.190 The contract and a dealer’s capacity to complaints.182 Commission, however, has no disclaim implied warranties. Neither the As the Commission noted in 1995 independent authority beyond that Act statement on the Buyers Guide nor the when it added the optional signature to adjust the statutory civil penalty Magnuson-Moss Act sets the length of line, mandating that dealers obtain amount that applies to violations of time during which a service contract purchaser signatures might help Commission trade regulation rules. Over must be made available for purchase or establish whether consumers received the years the Commission has whether a dealer must make a service the Buyers Guide but would not prove undertaken a number of ‘‘sweeps’’ of contract available. At most, MADA’s that the dealer had displayed a a Buyers dealers to investigate compliance with 183 comment suggests that consumers may Guide on the vehicle. Only requiring the Rule, often working with State and complain when they learn that the dealers to keep copies of the signed local partners. The Commission remains dealership will not offer a service Buyers Guides (with omissions committed to enforcing the Rule. contract after the time of sale or that suggesting non-compliance) could serve dealers may have difficulty selling that purpose.184 The Commission noted, V. Regulatory Review service contracts because consumers however, that dealers already had a There is a continuing need for the mistakenly believe that they can always ‘‘considerable incentive’’ to obtain Rule, and the Commission has purchase them later. Dealers who offer signatures and concluded that the determined to retain it, to propose the service contracts only at the time of sale compliance costs of mandatory additional amendments described can address consumer confusion about signatures, with the necessary above, and to adopt the Spanish the Buyers Guide statement simply by recordkeeping requirements, would be translation of the Buyers Guide explaining the meaning of the statement ‘‘unnecessarily burdensome.’’ 185 discussed in the Regulatory Review as well as the dealership’s policies Thus, during the original rulemaking, Notice.191 Industry groups supported concerning service contract sales. and again in 1995, the Commission retaining the Rule, in part, because it The Buyers Guide ultimately adopted declined to impose mandatory signature provides valuable information to in 1984 was designed and reviewed to and recordkeeping provisions, reasoning consumers.192 Consumer groups ensure that the disclosures in it were that the possible benefits of the supported retaining the Rule, and conveyed in a clear and succinct requirements did not justify their recommended various modifications manner.179 Various versions of the cost.186 The comment does not discussed above.193 The comments Buyers Guide were subjected to several demonstrate a need to revisit the prior provide evidence that the Rule serves a rounds of consumer testing to measure decision, and the Commission intends useful purpose, while imposing comprehensibility.180 The Commission to retain the optional signature line as minimal costs on industry. considered that consumer testing when it now stands. VI. Communications to Commissioners it adopted the 1984 Buyers Guide, 8. Enhanced Enforcement and Commissioner Advisors by Outside which included the current statement Parties describing the relationship between the The Commission received several Written communications and purchase of a service contract and comments concerning enforcement of summaries or transcripts of oral implied warranties. the Rule that do not directly pertain to communications respecting the merits The comment does not offer any the Regulatory Review Notice, which is of this proceeding from any outside evidence of widespread consumer concerned with whether, and in what party to any Commissioner or confusion caused by the Buyers Guide form, the Rule should be retained. A Commissioner’s advisor will be placed statement describing the relationship consumer protection attorney on the public record. between the purchase of a service commented that he hoped that the contract and implied warranties. Commission ‘‘will more clearly VII. Paperwork Reduction Act Therefore, the Commission does not establish rules for and aggressive As discussed above, the Commission propose changing this statement. enforcement of non-complying is proposing amendments to the Rule dealers.’’ 187 CARS and an individual designed to provide dealers with a 7. Consumer Acknowledgment consumer commented that the FTC method to disclose optional additional Signature Line should increase relevant financial information. The proposed amendments penalties.188 Two suppliers of forms do not require dealers to disclose this The 1995 amendments to the Rule commented that stepping up monitoring gave dealers the option of adding a and enforcement actions would be 189 Wholesale Forms; Carlabels. signature line to the Buyers Guide adequate to improve compliance 190 28 U.S.C. 2641 note. The civil penalty amount where dealers could obtain consumers’ for § 5 violations was last increased on January 9, 2009, effective February 9, 2009, and is currently acknowledgment that they had received 182 181 Broward County at 2. $16,000 per violation. 74 FR 857–888; 16 CFR 1.98. the Buyers Guide. One commenter 183 60 FR at 62197. 191 The translation revisions are made in a final suggested that dealers should be 184 Id. rule published in a separate Federal Register 185 Id. document. 179 SBP, 49 FR at 45724. 186 Id. at 62197 n.36. 192 E.g., NADA1 at 2; NIADA1 at 2; Wholesale 180 Id. at 45725. 187 Swann at 1. Forms at 1. 181 60 FR at 62205. 188 CARS at 2; Sachau. 193 E.g., NAAG1 at 2; CARS at 2.

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additional information nor do they alter disclosures will total $799,792 per year IX. Initial Regulatory Flexibility the Rule’s existing disclosure [57,539 hours × $13.90 per hour]. Analysis requirements or impose recordkeeping Assuming, as stated above, that The RFA requires an agency to requirements. The FTC previously dealers will make the optional submitted ‘‘collection of information’’ provide an IRFA with a proposed rule disclosures on 25% of the 27,618,480 and a Final Regulatory Flexibility requirements and related Paperwork used cars offered for sale, and assuming Reduction Act (‘‘PRA’’) burden analyses Analysis (‘‘FRFA’’) with the final rule, further a cost of twenty cents per pre- for public comment 194 that have been if any, unless the agency certifies that printed Buyers Guide, incremental cleared by the Office of Management the rule will not have a significant and Budget (‘‘OMB’’).195 purchase costs per year will total economic impact on a substantial $1,380,924. Any other capital costs number of small entities. See 5 U.S.C. The FTC anticipates making amended associated with the proposed 603–605. The FTC does not expect that Buyers Guides, if adopted, available on amendments are likely to be minimal. the Proposed Rule will have a its Web site for downloading by dealers. significant economic impact on a The FTC expects that current suppliers VIII. Regulatory Analysis substantial number of small entities. of Buyers Guides, such as commercial The Proposed Rule, like the current vendors and dealer trade associations, Section 22 of the FTC Act, 15 U.S.C. Used Car Rule, does not contain will supply dealers with amended 57b, requires the Commission to issue a reporting or recordkeeping Buyers Guides. Accordingly, dealers’ preliminary regulatory analysis when requirements, but does require that cost to obtain amended Buyers Guides publishing a Notice of Proposed dealers disclose certain information. should increase only marginally, if at Rulemaking, but requires the The disclosure requirements of the all. Commission to prepare such an analysis Proposed Used Car Rule are the For simplicity, FTC staff assumes that for a rule amendment proceeding only if it: (1) Estimates that the amendment minimum necessary to give consumers dealers will make the optional the information that they need to protect will have an annual effect on the disclosures on 25% of used cars offered themselves and to permit effective national economy of $100,000,000 or for sale. Dealers who choose to make the enforcement of the rule. The Proposed optional disclosures should obtain more; (2) estimates that the amendment Rule requires only that dealers use a amended Buyers Guides and complete will cause a substantial change in the revised Buyers Guide. It does not them by checking additional boxes not cost or price of certain categories of impose additional recordkeeping appearing on the current Buyers Guide. goods or services; or (3) otherwise requirements or change the information Staff previously estimated that determines that the amendment will that dealers themselves must disclose completing Buyers Guides would have a significant effect upon covered on the Buyers Guide. Additional require approximately 2 minutes per entities or upon consumers. The disclosures consist of pre-printed vehicle for cars sold without a warranty Commission has set forth in Section IX verbatim statements and check boxes and 3 minutes per vehicle for vehicles below, in connection with its Initial that dealers will have the option, but are sold with a warranty. Checking the Regulatory Flexibility Analysis not required, to complete. As such, the additional boxes should require dealers (‘‘IRFA’’) under the Regulatory economic impact of the proposed Used no more than an additional 30 seconds Flexibility Act (‘‘RFA’’), 5 U.S.C. 601– Car Rule will be minimal. In any event, per car. Thus, making the optional 612, and has discussed elsewhere in this the burdens imposed on small disclosures presented by the proposed Document: The need for and objectives businesses are likely to be relatively amendments would increase estimated of the Proposed Rule (IX.B below); a small, and in the Commission’s × burden by 57,539 hours (25% description of reasonable alternatives enforcement experience, insignificant in 196 × 27,618,480 cars sold 1/120 hour that would accomplish the Rule’s stated comparison to their gross sales and per car). objectives consistent with applicable profits. Assuming that dealers use lower level law (IX.F below); and a preliminary This document serves as notice to the clerical staff at a mean hourly wage of analysis of the benefits and adverse Small Business Administration (‘‘SBA’’) $13.90 per hour 197 to complete the effects of those alternatives (id.). of the agency’s certification of no effect. Buyers Guides, incremental labor costs Nonetheless, the Commission has The Commission estimates that the associated with making the optional determined that it is appropriate to proposed amendments to the Used Car publish an IRFA in order to inquire into Rule will not have such an annual effect 194 76 FR 144 (Jan. 3, 2011); 75 FR 62538 (Oct. the impact of the Proposed Rule on 12, 2010). on the national economy, on the cost or small entities. Therefore, the 195 OMB Control No. 3084–0108 (exp. Feb. 28, prices of goods or services sold by used Commission has prepared the following 2014). Should final rule amendments change car dealers, or on covered businesses or analysis. existing disclosure requirements for the Used Car consumers. The Commission has not Rule, the FTC will pursue OMB clearance and A. Description of the Reasons That appropriate adjustment for its prior PRA burden otherwise determined that the proposed estimates. amendments will have a significant Action by the Agency Is Being 196 See NIADA Used Car Industry Report (2012) impact upon regulated persons. As Considered (‘‘Used Car Industry Report 2012’’), available at www.niada.com/publications.php, at 16,18 (citing noted in the PRA discussion above, the The comments received during the CNW Marketing Research data for 2011). Dealers Commission staff estimates each Regulatory Review Notice indicate a sold 71.2% (i.e., 27,618,480 vehicles) of the business affected by the Rule will likely continuing need for the Rule. The approximately 38,790,000 used cars sold in 2011. incur only minimal initial added The remaining used cars were sold in casual/private comments indicate that consumers party sales. Id. at 16. compliance costs as dealers obtain would benefit from a revised Rule that 197 The hourly rate derives from Bureau of Labor revised Buyers Guides and become enhances consumer access to Statistics data for the mean hourly wage of ‘‘Office familiar with them. To ensure that the information about manufacturers’ and clerks, general.’’ See Occupational Employment and Commission has considered all relevant Wages—May 2011 (released March 27, 2012), other third-party warranties. The available at http://www.bls.gov/news.release/ facts, however, it requests additional comments also indicate that consumers archives/ocwage_03272012.pdf. comment on these issues. would benefit with improved

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knowledge about the availability of revenue is well below the maximum $23 sale.203 Two states that are exempt from vehicle history information. million in annual sales established by the Rule, Maine and Wisconsin, require the SBA for classification as a small disclosure of related but different B. Succinct Statement of the Objectives business. information regarding used car sales.204 of, and Legal Basis for, the Proposed The Commission invites comments on Rule Many franchised new car dealers would also be classified by the SBA as federal rules that may duplicate, The objective of the proposed Used overlap, or conflict with the Proposed Car Rule is to provide material small businesses. In 2011, the nation’s 17,540 franchised new car dealers had Rule. information about used car warranties 201 and used vehicle histories. This an average of fifty employees. The F. Description of Any Significant information will help protect consumers average number of employees at each Alternatives to the Proposed Rule That from dealer misrepresentations and aid dealership was 53, well below the 200 Would Accomplish the Stated consumers in making informed choices employee maximum established by the Objectives of Applicable Statutes and when considering the purchase of a SBA for classification as a small That Minimize Any Significant 202 used car, while minimizing the business. Economic Impact of the Proposed Rule compliance burdens on dealers. The D. Projected Reporting, Recordkeeping on Small Entities, Including Alternatives legal basis for this proposed rule is the and Other Compliance Requirements, Considered, Such as: (1) Establishment FTC Act and ’ 1029 of the Dodd-Frank Including an Estimate of the Classes of of Differing Compliance or Reporting Act, 12 U.S.C. 5519. Section 18(a)(1)(B) Small Entities That Will Be Subject to Requirements or Timetables That Take of the FTC Act, 15 U.S.C. 57a, the Requirement and the Type of Into Account the Resources Available to authorizes the Commission to issue Professional Skills Necessary for Small Entities; (2) Clarification, rules that define with specificity acts or Preparation of the Report or Record Consolidation, or Simplification of practices in or affecting commerce that Compliance and Reporting are unfair or deceptive within the The Used Car Rule imposes disclosure Requirements Under the Rule for Such meaning of ’ 5(a)(1) of the FTC Act, 15 obligations on used car dealers, but does Small Entities; and (3) Any Exemption U.S.C. 45(a)(1), and may include not impose any reporting or From Coverage of the Rule, or Any Part requirements for the purpose of recordkeeping requirements. Thereof, for Such Small Entities preventing such acts or practices. Specifically, dealers are required to The Proposed Rule’s disclosure Section 1029 of the Dodd-Frank Act complete and display a Buyers Guide on requirements are designed to impose the authorizes the Commission, when each used car offered for sale. Dealers minimum burden on all affected issuing such rules with respect to motor are required to complete and display dealers, regardless of size. The Proposed vehicle dealers, to use standard APA Spanish versions of the Buyers Guide Rule is intended to avoid increasing the procedures in accordance with 5 U.S.C. when sales are conducted in Spanish. burden on dealers. The Proposed Rule 553. Staff has determined that clerical or does not impose any new recordkeeping C. Description of and, Where Feasible, low-level administrative personnel can requirements and does not require Estimate of the Number of Small perform the tasks necessary to meet dealers to disclose more information on Entities To Which the Proposed Rule dealers’ disclosure obligations. Neither the Buyers Guide than the current Rule Will Apply the current Rule nor the Proposed Rule does. requires dealers to retain any records The proposed revised Buyers Guide The Used Car Rule primarily applies other than may be necessary to meet contains additional pre-printed to ‘‘dealers,’’ defined as individuals or their obligations to complete and disclosures not found in the current businesses which sell or offer for sale a display the Buyers Guides. The Buyers Guide. These include a verbatim used vehicle after selling or offering for Proposed Rule does not change the tasks statement advising consumers to obtain sale five or more used vehicles in the that dealers must perform to meet their 198 vehicle history information prior to previous year. The Commission obligations under the Rule. Dealers may believes that many of these dealers purchasing a used vehicle and a experience a slight initial increase in statement in Spanish on the English would be considered small businesses costs as they familiarize themselves according to the applicable SBA size Buyers Guide advising consumers to ask with using revised Buyers Guides. The for a Spanish Buyers Guide if they are standards. Under those standards, Commission invites comments on the independent used car dealers having unable to understand the English Buyers Proposed Rule’s compliance Guide. The revised Buyers Guide also annual receipts of less than $23 million requirements and on the types of and franchised new car dealers, which lists airbags and catalytic converters as professional skills necessary to meet components of vehicles in which also typically sell used cars, having dealers’ compliance obligations. fewer than 200 employees each are defects may arise. classified as small businesses.199 E. Other Duplicative, Overlapping, or The information that the Proposed In 2011, the nation’s 37,594 Conflicting Federal Rules Rule would require dealers to provide independent used car dealers had on a revised Buyers Guide is unchanged average total revenue of $3,974,916.200 No other federal statutes, rules, or from the current Rule. The revised Used car dealers’ average annual policies conflict with the Used Car Rule Buyers Guide contains additional or with the Proposed Rule. No other sections pertaining to manufacturers’ 198 16 CFR 455.1(d)(3). federal law or regulation requires that and third-party warranties that dealers 199 U.S. Small Business Admin. Table of Small the Buyers Guide disclosures be made Bus. Size Standards Matched to North American when a used vehicle is placed on the 203 Some states also have adopted the Rule as Indus. Classification System [‘‘NAICS’’] Codes dealer’s lot or when it is offered for state law. In addition, the Magnuson-Moss (effective Mar. 26, 2012), http://www.sba.gov/sites/ Warranty Act, 15 U.S.C. 2301–2312, requires that default/files/files/Size_Standards_Table.pdf. Used written warranties on consumer products be car dealers are classified as NAICS 441120 and 201 Calculated from the monthly number of new available before sale, as specified by 16 CFR Part franchised new car dealers as NAICS 441110. dealers listed in 2011 Data Source Book at 10. 702, but displaying warranty information is not 200 Used Car Market Report 2012, at 16, 20. Used 202 NADA Data 2012, available at http:// required. vehicle sales accounted for 36.2% ($1,463,564) of www.nada.org/Publications/NADADATA/2012/, at 204 Both states were granted exemptions from the that revenue. Id. 5, 14 (data as of January 1, 2011). Rule pursuant to 16 CFR 455.6.

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have the option, but are not required, to 2. Please provide comment on any or INFORMATION PART IVA, to include complete by simply checking boxes on all of the provisions in the Proposed check boxes for disclosing the revised Buyers Guide. Rule with regard to: (a) the impact of the manufacturers’ and other third-party The Commission does not believe that provision(s) (including benefits and warranties? Why or why not? What the Proposed Rule will impose a costs to implement and comply with the alternative revisions to the Buyers significant economic impact on a Proposed Rule or any of its provisions), Guide, if any, should be adopted to substantial number of small businesses. if any; and (b) what alternatives, if any, improve disclosure of manufacturers’ Nonetheless, the Commission the Commission should consider, as and third-party warranties? specifically requests comment on the well as the costs and benefits of those 2. Should the proposed vehicle question of whether the Proposed Rule alternatives, paying specific attention to history statement on the front of the would impose a significant impact upon the effect of the Proposed Rule on small proposed Buyers Guide be adopted? a substantial number of small entities, entities in light of the above analysis. In Why or why not? and what modifications to the Proposed particular, please describe any ways in 3. Should the proposed vehicle Rule the Commission could make to which the Proposed Rule could be history statement be modified? If so, minimize the burden on small entities. modified to reduce any costs or burdens how? Moreover, the Commission requests for small entities consistent with the 4. Should the proposed vehicle comment on the general question of Proposed Rule’s purpose, and costs to history statement list both ftc.gov/ whether new technology or changes in implement and to comply with usedcars (the FTC Web site) and technology can be used to reduce the provisions of the Proposed Rule, vehiclehistory.gov (the NMVTIS Web burdens imposed by the Proposed Rule. including expenditures of time and site)? Should it list only ftc.gov/ In some situations, the Commission money for: any employee training; usedcars? Should it list only has considered adopting a delayed attorney, computer programmer, or vehiclehistory.gov? Why or why not? effective date for small entities subject other professional time; preparing 5. Should the List of Systems include to a new regulation in order to provide relevant materials (e.g., completing catalytic converters? Why or why not? them with additional time to come into Buyers Guides); and recordkeeping. 6. Should the List of Systems include compliance. In this case, however, the 3. Please describe ways in which the airbags? Why or why not? Commission believes that small entities Proposed Rule could be modified to 7. Should the proposed statement, ‘‘Si should feasibly be able to come into reduce any costs or burdens on small usted no puede leer este documento en compliance with the Proposed Rule by entities, including whether and how ingle´s, pidale al concesionario una the proposed effective date, six months technological developments could copia en espan˜ ol,’’ directing Spanish- following publication of the final Rule. further reduce the costs of speaking consumers to ask for a copy of Nonetheless, the Commission invites implementing and complying with the the Buyers Guide in Spanish be comment on whether small businesses Proposed Rule for small entities. adopted? Why or why not? What 4. Please provide any information might need additional time to come into alternative statement, if any, should be quantifying the economic costs and compliance and, if so, why. considered? What alternative proposals benefits of the Proposed Rule on the In addition, the Commission has the to alert Spanish-speaking customers to entities covered, including small authority to exempt any persons or the Spanish Buyers Guide should be entities. classes of persons from the Proposed 5. Please identify any relevant federal, considered? Rule’s application pursuant to § 18(g) of state, or local rules that may duplicate, 8. Identify and describe deceptive the FTC Act. By definition, sellers of overlap, or conflict with the Proposed practices, if any, that are prevalent in used cars that have not sold or offered Rule. Internet used vehicle sales. Provide for sale five or more used cars in the studies, analyses, and data previous year are exempt from the X. Invitation to Comment demonstrating the extent of those Rule.205 The Proposed Rule does not The Commission invites interested practices. If deceptive practices are change this threshold. The Commission members of the public to submit written prevalent in Internet used vehicle sales, requests comment on whether it should data, views, facts, and arguments what regulatory steps, if any, should the consider exempting any persons or addressing the issues raised by this FTC consider taking to prevent those classes of persons covered by the Rule NPR, including the proposed revisions practices? from application of the proposed to the Buyers Guide. Such comments 9. What is the extent of consumer amendments. The Commission notes, must be received by February 11, 2013, injury, if any, that results from however, that the Proposed Rule’s and must be filed in accordance with consumers’ inability to see information purpose of protecting consumers from the ADDRESSES section of this document. on the Buyers Guide prior to purchase unfair or deceptive acts or practices in The Commission asks that comments in Internet used vehicle sales in which used car sales could be undermined by be confined to the following specific consumers cannot visually inspect a car the granting of a broad exemption to issues pertaining to the proposals and see the Buyers Guide prior to small entities. discussed in SUPPLEMENTARY purchase? Provide examples, studies, analyses and data indicating the nature G. Questions for Comment To Assist INFORMATION PARTS IVA–IVD and IVE3. and extent of such consumer injury. Regulatory Flexibility Analysis In particular, the Commission requests written responses to any or all of the 10. To what extent do consumers who 1. Please provide information or following questions. The Commission consummate Internet used vehicle sales comment on the number and type of requests that responses be as specific as online receive copies of the Buyers small entities affected by the Proposed possible, including a reference to the Guide with their final sales contracts? Rule. Include in your comment the question being answered, and a Provide examples, studies, analyses, number of small entities that will be reference to empirical data or other and data to support your answer. required to comply with the Proposed evidence wherever available and 11. The FTC also invites comments on Rule’s disclosure requirements. appropriate. the nature and extent of information 1. Should the Buyers Guide be that it should make available on the 205 16 CFR 455.1(d)(3). revised, as discussed in SUPPLEMENTARY Web site, ftc.gov/usedcars that it

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proposes to create in connection with (b) Warranties—(1) No Implied not expired on the vehicle,’’ the proposed Buyers Guide. Warranty—‘‘As Is’’/No Dealer Warranty. ‘‘MANUFACTURER’S USED VEHICLE 12. If the FTC creates the proposed (i) If you offer the vehicle without any WARRANTY APPLIES,’’ and/or Web site, ftc.gov/usedcars, should the implied warranty, i.e., ‘‘as is,’’ mark the ‘‘OTHER USED VEHICLE WARRANTY FTC include active links to other Web box appearing in Figure 1. If you offer APPLIES.’’ sites, such as the Web sites of providers the vehicle with implied warranties If, following negotiations, you and the of vehicle history reports, and, if so, only, substitute the IMPLIED buyer agree to changes in the warranty which Web sites? If the FTC includes WARRANTIES ONLY disclosure coverage, mark the changes on the form, active links to other Web sites, what specified in § 455.2(b)(1)(ii) below, and as appropriate. If you first offer the mechanisms and standards should the mark the IMPLIED WARRANTIES vehicle with a warranty, but then sell it FTC apply to ensure that it directs ONLY box illustrated by Figure 2. If you without one, cross out the offered consumers only to Web sites and firms first offer the vehicle ‘‘as is’’ or with warranty and mark either the ‘‘As Is— that are trustworthy and that implied warranties only but then sell it No Dealer Warranty’’ box or the accommodate consumer privacy and with a warranty, cross out the ‘‘As Is— ‘‘Implied Warranties Only’’ box, as data security expectations? No Dealer Warranty’’ or ‘‘Implied appropriate. Warranties Only’’ disclosure, and fill in List of Subjects in 16 CFR Part 455 the warranty terms in accordance with (3) Service contracts. If you make a service contract (other than a contract Motor vehicles, Trade practices. paragraph (b)(2) of this section. that is regulated in your State as the For the reasons set forth in this (ii) If your State law limits or prohibits ‘‘as is’’ sales of vehicles, that business of insurance) available on the document, the Federal Trade vehicle, you must add the following Commission is proposing to amend part State law overrides this part and this rule does not give you the right to sell heading and paragraph below the Non- 455 of title 16, Code of Federal Dealer Warranties Section on the back of Regulations, as follows: ‘‘as is.’’ In such States, the heading ‘‘As Is—No Dealer Warranty’’ and the the Buyers Guide, as illustrated by paragraph immediately accompanying Figure 3, and mark the box labeled PART 455—USED MOTOR VEHICLE 3 TRADE REGULATION RULE that phrase must be deleted from the ‘‘Service Contract:’’ form, and the following heading and b SERVICE CONTRACT. A service 1. Revise the authority citation to read paragraph must be substituted. If you contract on this vehicle is available for an as follows: sell vehicles in States that permit ‘‘as is’’ extra charge. Ask for details about coverage, Authority: 15 U.S.C. 2309; 15 U.S.C. 41– sales, but you choose to offer implied deductible, price, and exclusions. If you buy 58. warranties only, you must also use the a service contract within 90 days of your following disclosure instead of ‘‘As Is— purchase of this vehicle, implied warranties 2. Amend § 455.2 by revising the under your state’s laws may give you No Dealer Warranty’’ 206 as illustrated introductory text of paragraph (a), and additional rights. by the Buyers Guide in Figure 2. paragraphs (a)(2), (b)(1), (b)(2)(v), (b)(3), * * * * * and (e) to read as follows: IMPLIED WARRANTIES ONLY (e) Complaints. In the space provided, § 455.2 Consumer sales—window form. The dealer doesn’t make any promises to put the name, telephone number, and fix things that need repair when you buy the email address of the person who should (a) General duty. Before you offer a vehicle or afterward. But implied warranties used vehicle for sale to a consumer, you be contacted if any complaints arise under your state’s laws may give you some after sale. must prepare, fill in as applicable and rights to have the dealer take care of serious display on that vehicle the applicable problems that were not apparent when you * * * * * ‘‘Buyers Guide’’ illustrated by Figures bought the vehicle. 3. Revise § 455.5 to read as follows: 1–6 at the end of this part. (2) * * * (1) * * * (v) You may, but are not required to, § 455.5 Spanish language sales. (2) The capitalization, punctuation disclose that a warranty from a source If you conduct a sale in Spanish, the and wording of all items, headings, and other than the dealer applies to the window form required by § 455.2 and text on the form must be exactly as vehicle. If you choose to disclose the the contract disclosures required by required by this Rule. The entire form applicability of a non-dealer warranty, § 455.3 must be in that language. You must be printed in 100% black ink on mark the box labeled ‘‘Non-Dealer may display on a vehicle both an a white stock no smaller than 11 inches Warranties’’ on the back of the Buyers English language window form and a high by 71⁄4 inches wide in the type Guide, as illustrated by Figure 3, and Spanish language translation of that styles, sizes and format indicated. When also the applicable box or boxes to form. Use the translation and layout for filling out the form, follow the indicate: ‘‘MANUFACTURER’S Spanish language sales in Figures 4, 5, directions in paragraphs (b) through (e) WARRANTY STILL APPLIES. The and 6.4 of this section and § 455.4 of this part. manufacturer’s original warranty has BILLING CODE 6750–01–P

206 See § 455.5 n. 4 for the Spanish version of this El concesionario no hace ninguna promesa de CONTRATO DE SERVICIO. Por un cargo extra, disclosure. arreglar aquello que necesite reparacio´n cuando usted puede disponer de un contrato de servicio ´ 3 See § 455.5 n. 4 for the Spanish version of this usted compra el vehıculo o a partir de ese para este vehı´culo. Consulte los detalles sobre la momento. Pero, las garantı´as implı´citas establecidas disclosure. cobertura, deducibles, precio y exclusiones. Si por la ley de su estado pueden otorgarle algunos 4 usted compra un contrato de servicio dentro de los Use the following language for the ‘‘Implied derechos para que el concesionario se haga cargo de ´ ´ Warranties Only’’ disclosure when required by resolver problemas graves que no eran evidentes al 90 dıas posteriores a la compra de este vehıculo, las § 455.2(b)(1): momento de comprar el vehı´culo. garantı´as implı´citas establecidas por la ley de su GARANTI´AS IMPLI´CITAS SOLAMENTE Use the following language for the ‘‘Service estado pueden otorgarle derechos adicionales. Contract’’ disclosure required by § 455.2(b)(3):

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FIGURE 1 - "AS IS"- NO DEALER WARRANTY Buyers Guide (English)

BUYERS GUIDE 2ft pt bald caps IlI!IIIJ!n!d 'I pilUle 8:5 pt bald & I1!gIJIiIr. caps & Ie -- --_...... _- ---- WARRANTIES FOR THIS VEHICLE: '12 pt bald caps 2f11:1U1e 2:2 pt me. 1 pt sIn:tte D AS IS - NO DEALER WARRANTY 24 pt bald caps tHE IIE'AI..ER WON'T PAY FORMY _ i11Jo, _ Is _lajIIIIIIIIbllol'Dr_1IOIJIIh. '-*"".... 8.liM!i pt R!gIJIar. 'caps & Ie -~--- 1 fII: dai!h!d IUIe 2:2 pt me. t pt sIn:tte D DEALER WARRANTY 24 pt bald caps D FUll. W,IIIIIRANTY.

D LJm'IEiD~.1"I2 ____""' __ , __ "'aI'_"""'_~ __ 8ptbmies.1ptslldle ____- ___ ...... A*1IIe'_lDr ...... ,. ...IIIe_I¥,_IIw_...... -_ 8.5!9pt~, caps &Ic e..-...... w_,_... - ...... _-f\DIIIL... _._lhe--.~ ...... JrJIjIIIIed' ___

2f11:1U1e 8II!IiIft! JIiIU ...,IllisIl!5l!lil ¥I!hicII!:: 10 pt bdd. -:2 pt aIIE!r p;iII3

f. GI!I: ilab...... iIs I!istmJ. Visit ChI! FeliknllAdt! CanRis5ian at ~ 111112 pt bdd. :m pi It incI, -11 pt YaI.1 need ChI! fthicII! idt:tIIiIitiIIi nunD!rfVW). 51-. ~ In IIIiIIIIe ChI! bI!5t_~ tirst line ind. -:2 pt

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FIGURE 2 - IMPLIED WARRANTIES ONLY Buyers Guide (English)

BUYERS GUIDE 26 pi bold caps eenIEn.!d '1 :pi rule 8.5:p1 bald I.. R!gIIIar. caps & Ie ------

WARRANTIES FOR THIS VEHICLE: 12 pi bold caps 2;pltrule 22 pi baJr. 1 pi: sIn:Ite D IMPLIED WARRANTIES ONLY 24 pit bold caps 1be_daem'l:_... y_II8"IIIr~ __""" ___ II1e_ ... _. _._--_----___ -elllilllllS .. -II1e--....,d &;!Il'I!i pt~ caps&1e ~piI!IIIIIoms--..IId: __ -_IIDIiIIIItIl1e-- '1 :pi da!shed rule 22 pit baJr. 1 pi: sIIDfte D DEALER WARRANTY 24 pt bold caps D FLlLL WNIIRItN1Y. 8 :pi I:!mIes. 1 pi simile D LllillTED~ TIIE_wfII __'lli---_'lliIlf ...... _1IIe"""""""' ...... &;!iIOpt~ caps I.Ie _'I'IIu."....------______...... ---.po!ItIKL ....1Id1l1e_ -- ...... _lr...._.

2ptrule Bermn!. JIiIU ...,IllisIl!5l!lil ¥I!hicII!:: "10 pi: bold. -2 pi.idler para

t. Gl!l:klib amm ..... its IlistaIy. Visit "FeI!BaITndJ! Conni!isimn iIIl~ 111112 pi: bald. 2D pi Ii ind. -11 pi: YcIu .llII!lI!ditlll! vehide idl!lltlilii:iillium 1IIIRIberCWQ. s'-...... to 1IIiIiII!" best_of fir.;t line ind. -2.pt iIIIb!r p;II3I lie I1!5IIIIRlI!5 mllis site. 1m12 pi: Wd. :m pt III. ind. -11 pi 2.. II!;ik till! ....i'JDIIrlllll!l:llilllicCilll insped" wItiI:II! _ or DIllie lilt. fir.;t line ind. -2 pt iIIIb!r p;II3I 111112 pt Wd. caps & Ie, -2 pi SEE OTIIER!!IDE'" _ ..... _iiRIiI!!; ami aliter iulmiuiillioM fbiIIlapplies 1D1his~_ illlb!rJlilfil1 5i usIId lID pIEde leer I!!5b! ~_ inglis..... iIIllCIIIIl!I!5iIJ 1IIIiII"'_~ 111112 pt bald.1c

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FIGURE 3 - Back of Buyers Guide (English)

2ptne 22 pt beD. 1 pt sIn:Ike D NON-DEALER WARRANTIES 24 pt bald. tapS o IoIIINUFACTIJRER'II1IIIfoRR.IIIIITBTlLLAPPUE8. Dte~ ...... -tI __ ...... 8 pt beD. 1 pt sIn:Ike -~ 8.51'102 pt ft!9IIIar. tapS & Ie o IoIIINUf"ACTIJRER'III.IBED \IBIICl.E -..wn' 1\PPiI.I8Il. o OTHER UED \IEHICLE 'If'JIIlIRI'IMT'I' N'lPUEIJ.

.-___II"-

T 1:IIImm!i.1d.~. rigH: 7 pt bold. 2 pi: b!I!fmre para. 7.18..4pt~ 15ptlltiml -10 pi: it5Une ind

2ptne 0.5pt .. 8 pt A!gUa. tapS

2ptne .10.B pi: bold & l1!!IJuIIiIr:. CIiIp!ii & Ie

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FIGURE 4 - "AS IS"- NO DEALER WARRANTY Buyers Guide (Spanish)

GUiA DEL COMPRADOR .26 pt bold caps Clf!I1II!n!d '1 ptrule ~1IIE:1:.r& ___"""'''''~DIII1P8t_IIII~"",, ___ __--CGniRI'II! ..... -. 8..5 pt bOld" R!gUIar. caps'& k: --- - -

12 pt bold caps GARAI'I1iIu; PARA ESTE VB4c:uto: 2 ptrule Zl pt bcB:. 1 pt sfmfre D COMO ESTA - SIN GARANTiA DEL 24124 pit tdt:I caps CONCESIONARIO ELCIJIIIICESIDIII_IIOPHli.IIRI\N_~.EI ___","'--_ 8.!iI15 pt A!gUIiir. mp!i & Ie ~ ~IBI_~'_ I1IIIJIIl_...... 1pt dashed rule Zl pt bcB:. 1 pt sfmfre D GARANTiA DEL CONCESIONARIO 24 pt bold, mp!i o 6MNfT1II00IMPLEJ"1I.. o ~u.r_EltDIIClI!_Io, __ ,", __IIO"'III_"'_:r"' __IIO"""' ____ 8 pt IxDe;. 1 pt sbdie ...... ___--el..- ...... -.-... --.... _lIIRlII 8..519 pt H!!fPJr. mps & Ie __ .,*IWIIIIpJIer __IIe~ ... -.__ y ... ~R

~_"""""'_ ... Las __---.egiIn_lQn"" ... -.,____ _ -- GlIIiIACIICIII:

AnlI!!i * t:IIIIIpI3I"!!!!iII! lft!hicuIg, U5IIfD: 1.. ~ iIIfonnac:iin __ * sullist!lria. CcIn!iiuIIeillii CanIisiIin FI!cIer.II* CGnEn:iD I!II ~"N"""" llell: -Izief "-"-*~"wbicado(Vlllt1lll!lll:imnadD ~ JIIiIIi1 podEs" iIJIII'IlI'II'! de Ia 1'II$r_1Ds n!CUI!i05 E 1!511! siIi!!I.. 2..~,;II ~ '5i mlllll!lCliinillD pIIII!de ilispeccilluiII"ef wbicIH delrlmDfIEriI del CIJIIIIlII!5ion_ COfIRIIE a DORIO pillillllilllBll!rlllis .1Ib ;!lI:iiin BI!RiI*1iIs IJiIDIIIias I" DIms diIla!i lp! seiipliquen JIIiIIi1I!511! wIIi:UIn.

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FIGURE 5 - IMPLIED WARRANTIES ONLY Buyers Guide (Spanish)

GUiA DELCOMPRADOR 26 pi: bdd caps CI!IIIeR!d _1OE: .... __..... -..·lk_ ... 1 ;FJl:ruIe UIIIEn_ ... __ _ 8..5 pt bc:IId & Il!IIIIJIiu;. caps & Ie -par--~.....,-.- ...... ""---- 12 pi: bdd caps 2 ,FJI: rule 22 pi: baK. 1 pi: sIrote D SOLO GARANTiAS IMPLiclTAS 24- pl:bdd caps E1 ...... _""""""' __ _~ca

2 pi: rule An1iI!s.CIJIIV

t_ ~ illlciuiwciU.l_ de! 5111 hisIDria.. Cmn5IIIII:e alii CaniIsiDn l'edl!r.llde CUnEn:iD_ 1D1'12p1:bdd,. 2OpUI.ind. -11 pi: ~!!9""'"""s1ll!1l 'liui eI..m.-. iIII!uIiIii:ai:. del wIII-"'f'I'II\IlIII!ocimniIIID first line ind.. -2 _ aIer piIIf.iII ~ pill'apoder ~ de! 1iI1III!jar_k1s R!IWI5IISdeesll!: siIiD..

:t.~·iIII~sisu-n.:.pIII!de~elwltir:mDdl!nlmDfuI!ra 1D1'12p1:bdd,.20ptlllind. -11 .. dI!I CIII1IlI!SiIlIniIriIt, first. line ind. -2 _ aIer piIIf.iII CONStDE;a.. DORIO piIIiI oIitI!III!rllllis ...... -u. g;nnIiz; Y DIms IIiItus _.1;& 1D1'12 pi: bold" caps & Ie que ow iJIIIiquen. pill'aesll! VI!I:JicuIo.

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By direction of the Commission. Donald S. Clark, Secretary. [FR Doc. 2012–29920 Filed 12–14–12; 8:45 am] BILLING CODE 6750–01–C

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