Reposted with permission from National Consumer Law Center, www.nclc.org/library.
The FTC on November 10 issued a final rule amending its Used Car Rule, 16 CFR 455. The Rule chiefly requires dealers to affix a sticker on used cars for sale, disclosing whether a warranty accompanies the vehicle. The existing Rule is described in detail at NCLC’s Consumer Warranty Law § 15.6.
This article explains how the new amendments strengthen this disclosure, but the Rule still provides only limited assistance to the many consumers who purchase used vehicles “as is.” This article then lists 15 legal theories to challenge vehicle defects even when the vehicle is sold “as is.”
The New FTC Amendments
The FTC changes to the Used Car Rule go into effect January 27, 2017, but dealers can use their existing supply of sticker forms for an additional year.
The new rule adds a new requirement that must be disclosed on stickers affixed to all used cars for sale, directing consumers to obtain a vehicle history report and to check for open recalls. The sticker informs consumers that related information can be found at www.ftc.gov/usedcars and www.safercar.gov. Even more detailed information on summary vehicle history reports can be found at NCLC’s Automobile Fraud § 2.3 and for full reports from state registries at § 2.4.
The amendment changes the language on the sticker describing an “as is” sale. The old language arguably misstated the law by saying: “The dealer assumes no responsibility for any repairs regardless of any oral statements about the vehicle.” The language the FTC initially proposed in its new rule as a replacement would have been even worse: “The dealer is not responsible for any repairs, regardless of what anybody tells you.” After opposition from consumer groups, the language is now changed to “The dealer does not provide a warranty for any repairs after sale.” Since the Rule prohibits the dealer from making an “as is” disclosure when there is a warranty under state law, this is an accurate statement.
The new sticker also improves disclosures for service contracts and unexpired manufacturer warranties, increases Spanish language disclosure information, and adds air bags and catalytic converters to the sticker’s list of major defects that can occur.
Private Remedies for Rule Violations
While there is no private right of action for violation of an FTC Rule promulgated under the FTC Act, there is a private right of action for actual damages and attorney fees for violation of an FTC Rule promulgated under the Magnuson-Moss Warranty Act. See NCLC’s Consumer Warranty Law § 2.7. Interestingly, as explicitly pointed out by the original rule’s statement of the authority under which it was adopted) and in the Supplemental Information to the new rule amendments, the Used Car Rule was promulgated under both statutes. (The supplemental information states that certain of the new amendments were promulgated under the FTC Act only but other provisions are pursuant to the Magnuson-Moss Warranty Act). As a result, many violations should be actionable under the Magnuson-Moss Warranty Act. Id. § 188.8.131.52.
As to violations related to portions of the rule promulgated only pursuant to the FTC Act, violations should also be violations of a state UDAP statute, prohibiting deceptive practices, and offering strong private remedies. Id. § 184.108.40.206.
15 Ways to Defeat an “As Is” Disclaimer in a Used Car Sale
Many used cars, particularly lower end cars, are sold “as is,” and dealers like to claim that this immunizes them from all consumer claims. The law cannot be more different. Here is a listing of 15 ways to litigate a used car case even when the vehicle is sold “as is.”