October 17, 2023
By Barrie Charapp Beaty
Mahdavi Bacon Halfhill & Young, PLLC
bbeaty@mbhylaw.com
You need to protect your right to spot deliver, because the FTC is ready to dismantle the model.
In August, the NADA sent notice to the state associations that consumer advocacy groups have advanced the following proposed language at the Federal Trade Commission regarding proposed rulemaking language for spot deliveries.
ACTION REQUESTED AND PROPOSED REGULATORY LANGUAGE
We recommend the following language for a rulemaking:
“A. Every consumer credit contract for the sale of a vehicle by a dealer shall include the following paragraph: “BY PRESENTING THIS CONSUMER CREDIT CONTRACT TO A CONSUMER FOR SIGNATURE, THE DEALER AS CREDITOR AFFIRMS THAT THE CONSUMER HAS BEEN FULLY APPROVED FOR THE CREDIT THAT IS BEING EXTENDED. ANY TERMS THAT ASSERT THAT THIS CREDIT CONTRACT IS “CONDITIONAL” OR “NOT YET APPROVED” OR SIMILAR TO THAT EFFECT SHALL BE VOID AND UNENFORCEABLE. ONCE SIGNED BY THE CONSUMER, THIS CREDIT CONTRACT CANNOT BE WITHDRAWN BY THE DEALER WHETHER OR NOT THIS CREDIT CONTRACT IS ASSIGNED TO A THIRD PARTY.”
Regarding a consumer credit contract for the sale of a vehicle by a dealer, misrepresenting the credit contract as conditional after the consumer has signed it is an unfair and deceptive practice under 15 USC Section 45(a).”
The NADA has requested a response from the state associations on the language and whether it conflicts with the association’s state law and if, at all, this would affect dealers in the association’s state.
We have warned previously that spot delivery was a major topic at the three FTC roundtables on dealer practices that took place last year. We have also reported that on the FTC’s “civil investigative demands” (which are really administrative subpoenas) served on dealers around the country to gather information from the dealers on spot deliveries.
The time has come to protect the industry standard of spot delivering vehicles, which is the delivering a vehicle prior to the completion of payment. Although these consumer groups want to conflate spot deliveries with “yo-yo sales,” which is essentially the delivery of a vehicle with no intention to assign the retail installment sale contract on the terms agreed between the dealer and the customer to force the customer to return and change the deal to enhance the dealer’s profit, the industry norm is spot deliveries. Reputable dealers are not putting their cars out on the street with no hope of having them financed on the terms on which they were delivered.
It's time now to protect spot deliveries by supporting your state association, together with the NADA, in combating the FTC’s desire to control how you do business. The association wants to protect the rights of the dealers. Let the association know how the proposed FTC language will affect your business. Reach out to the association to find out how you can assist in protecting your rights to spot deliver vehicles. The more information you provide to the state associations and the NADA the better tools they have to fight this attempt by the FTC.