The Revised FTC Used Car Rule is Now in Effect

At the end of last year, we alerted you to the FTC’s revision to the Used Car Rule. The revised Rule does not change the circumstances and method for display of the Buyers Guide. It does change the Buyers Guide form.

On January 27, 2017, the revised Rule went into effect. Unfortunately, there has been little publicity about the change, and there appears to be some misunderstanding about the revised Rule and dealer compliance obligations. Here are some questions and answers about dealer responsibilities under the new FTC Rule.

Q:        I don’t have compliance obligations now since there is a lengthy period during which I can          get ready to comply, correct?

A:        Incorrect. The revised Rule was published November 18, 2016. Its effective date was        January 27, 2017.

Q:        I understand I can still use the old forms under the revised rule. That is all I need to do, correct?

A:        Incorrect. The revised rule allows you to continue to work through “remaining stock” of the former Buyers Guide forms until January 27, 2018. However, that does not mean you have no new obligations. If you choose to work through the “remaining stock”, you still must take action on guides for vehicles where you disclose available non-dealer warranties. For vehicles where “manufacturer’s warranty still applies” or there is a manufacturer certified warranty or one not backed by the dealer, the following statement must be made: “Ask the dealer for a copy of the warranty document and an explanation of warranty coverage, exclusions, and repair obligations.” Therefore, if you choose to work through the remaining stock of the former Buyers Guide forms, you must still change guides on vehicles in stock and must complete guides for newly stocked vehicles with the required language if you are disclosing a non-dealer warranty.

Q:        We will change over to the new forms, but there is no difference in filling those out, correct?

A:        Incorrect. There is a substantial difference in disclosing non-dealer warranties. In selling under the revised Rule, one must either disclose the vehicle is being sold “as is” (or with limited warranties only in some states that prohibit “as is” sales, like Maryland), or that a dealer warranty is being issued. If a dealer warranty is being issued, that is when the box for “limited warranty” is checked. If there is a warranty other than a dealer warranty, the “as is” (or implied warranties only) box must be checked. That is a significant difference from the former Buyers Guide where a dealer could check that a vehicle is sold with a limited warranty if sold with the remainder of the manufacturer’s factory warranty, a factory certified program warranty, or a non-dealer backed warranty.

Q:        But there are no other significant changes in filling out the Buyers Guide, right?

A:        Incorrect. In the revised Rule, the FTC made clear that when disclosing the covered systems of a dealer warranty, a dealer may not use the shorthand term “powertrain”. It must disclose the individual covered systems like engine, transmission, differential. Also, there is a significant change in the signature of the Buyers Guide by the consumer. There is now mandated language that must be included, and the language must be included in the box for the contact for complaints. If you have customers sign the Buyers Guide, which we recommend since that is the best proof the customer saw and received the Buyers Guide, and it is mandatory in Virginia by state law, the following phrase must be used: “I hereby acknowledge receipt of the Buyers Guide at the closing of the sale.”

Q:        If I know that the vehicle is covered by the original factory warranty I can disclose that even if I don’t have a copy of it, correct?

A:        Incorrect. The rule provides that a dealer “may” disclose if there is original factory warranty remaining. However, the language that is incorporated in the new form and the language we discussed above that must be used on the former form inviting the customer to ask about the warranty terms requires the dealer to be able to provide that information. If you do not have the actual warranty, and you cannot provide that information, you probably should not disclose a remainder of the factory warranty.

Q:        I have the same flexibility on service contracts to disclose or not disclose they are available if I choose, correct?

A:        Incorrect. If you are offering to make available a service contract for a used motor vehicle, that must be disclosed.