Prepare now for potential FTC regs, attorney says

Dealerships shouldn't count on the Federal Trade Commission's proposed auto retail regulations to be "fixed" or "not take effect," an industry attorney told retailers Thursday.

"You need to become familiar with the rule," Hudson Cook partner Jean Noonan said during the Automotive News Retail Forum: NADA.

Noonan said retailers should "probably now" start taking steps to prepare for the FTC to act, she said.

The FTC unveiled draft dealership regulations in June. The proposal would require retailers to disclose an "offering price" on advertised vehicles — an out-the-door amount before government fees or taxes the retailer would honor for any consumer.

Dealerships would also have to give customers a written form that displays the vehicle price without all optional products. If the customer finances the vehicle, the financing charge over the life of the loan would be on the form. If the customer wishes to buy optional finance and insurance products or physical accessories, they and a dealership manager must sign a form confirming the customer declined the out-the-door price.

Another potential FTC provision would ban dealers from selling any accessories or F&I products where "the consumer would not benefit."

"I think it's a mistake not to be concerned," panelist Sam D'Arc, COO of Zeigler Automotive Group, said of the FTC's move.

Noonan said dealerships should prepare for FTC regulations by ensuring customers know what they're purchasing and items aren't being slipped into deals.

She also encouraged dealers to evaluate their F&I products now. Earlier in the panel discussion, she recalled having conducted a mock exam of F&I products on behalf of clients. Some offerings were "great," and "some of them weren't," she said.

Dealerships would be liable for parroting a product provider's claim to a customer, she warned. "I would push back on my vendors and ask for their substantiation," Noonan said.

D'Arc said his group sought to prepare for potential FTC regulation by cutting down the number of products it offered.

Panelist Cindy Merry, finance director for Continental Auto Group, suggested such refinement might have value regardless.

"We've been very careful about vetting products," she said. Customers get overwhelmed with too many offerings, and her staff — which serve both as sales and F&I personnel — would be overwhelmed trying to learn too large a portfolio.

D'Arc said one "silver lining" was dealers were likely doing what Noonan advised anyway.

"Those are good, basic practices that most dealers in this room would be doing in some form," he said.

Everything the FTC sought to crack down on with the new rule was already illegal, Noonan said. But even good dealers needed to worry about its new proposal for regulating that behavior, she said.

The FTC has ended the public comment period on its plan and received thousands of responses. Noonan said she expected the agency would issue the rule within a year.

"The longer they take, the more they're thinking about it," she said.

But Noonan, who once directed FTC regulation and financial practices enforcement, was pessimistic about the agency's direction on the dealership regulations.

"I don't think we can count on getting a sensible rule," she said.

Retailers could seek recourse through judicial or political processes. Dealerships also could talk to members of Congress. "You need to put it on their radar," she said.