On June 21, 2023, the American Financial Services Association (“AFSA”) asked the House Appropriations Committee to include language in the Financial Services and General Government appropriations bill that would prevent the Federal Trade Commission (“FTC”) from finalizing or implementing the Motor Vehicle Dealers Trade Regulation Rule (the “Proposed Rule”).
In a letter to Representative Steve Womack, the Chairman of the Subcommittee on Financial Services and General Government, AFSA criticized the Proposed Rule as a limitation on consumers’ ability to purchase voluntary protection products, such as service contracts, guaranteed asset protection (“GAP”) coverage, tire and wheel protection, and other products that protect vehicles. AFSA also took issue with procedural deficiencies it saw in the rulemaking process, including a failure by the FTC to issue an Advanced Notice of Proposed Rulemaking and a lack of sufficient justification for the Proposed Rule under the Administrative Procedures Act (“APA”).
The Proposed Rule would impose a number of new substantive and disclosure requirements on auto-dealers in the car-buying process. The FTC has justified the Proposed Rule as necessary “to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience.” When it announced the Proposed Rule, the FTC cited surging auto prices, and high levels of consumer complaints related to automobiles in spite of vigorous enforcement efforts in recent years in the car-buying space. (Two episodes of our Consumer Finance Monitor Podcast feature in-depth discussions with industry and FTC representatives regarding the Proposed Rule. The episodes are available here and here.)
We have previously discussed AFSA’s comment letter regarding the FTC’s proposal, submitted with the Consumer Bankers Association, which proposed changes to the Proposed Rule, highlighted deficiencies under the APA, and asked for at least 18 months to implement the rule should it be finalized. AFSA and CBA’s comment letter were among the close to 27,000 comments the FTC received regarding the Proposed Rule.
Proponents of the Proposed Rule also weighed in this week. In a June 21, 2023 letter to FTC Chair Lina Khan, a group of 17 Democratic Members of Congress, including Senator Ed Markey (D-MA) and Representative Pramila Jayapal (D-WA), urged the FTC “to finalize the strongest possible rule to protect consumers from deceptive and unfair practices.”
The comment period for the Proposed Rule closed on September 15, 2022. The continued debate over the FTC’s proposal amongst stakeholders and Congress as they wait for the FTC’s final rule will likely not end even if a final rule is promulgated. In last week’s episode of Consumer Finance Monitor Podcast, Ballard Spahr’s Alan Kaplinsky and Temple University School of Law Professor Craig Green discussed the current challenge to the viability of the traditional Chevron deference standard used in evaluating agency actions and what that means for challenges to CFPB and FTC regulations.