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The retail automotive industry is buzzing about the Federal Trade Commission’s recent proposed changes to regulations impacting federal advertising laws and prohibitions on unfair and deceptive dealership practices. The 37-page document outlines six key areas the agency would like to address:

  • Full up-front pricing, costs and finance disclosures
  • Sales process disclosures
  • Add-on product benefits
  • Bait & switch
  • Surprise junk fees
  • Record retention

The public commentary period closes on September 12, at which time the agency will evaluate the responses and make a final ruling. Industry associations – including NADA – requested an extension to the 60-day review period proposal, which the FTC declined.


The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.

Compliance Economy Industry Trends

Skipping Steps Is Never a Good Idea

While the country is still in the grips of the pandemic, sales of new and used vehicles showed signs of life in May and June with big pickup trucks leading the way. For the quarter, analysts predict that car sales were off about one-third from 2019 levels, thanks in large part to plant shutdowns and shelter-in-place restrictions imposed in March and April. The economic stimulus CARES and PPP programs, along with enhanced state-level unemployment benefits, provided a bit of a boost in May, prompting consumers to consider purchasing a vehicle. Low interest rates and OEM incentives sweetened the deal. Savvy dealerships who pivoted to online and digital sales were able to capture the bulk of the upswing in June.

Q3 results hinge on several factors. Pandemic hot spots across the country could prompt local governments to return to some level of shutdown. Whether or not Congress provides a second round of stimulus could also have a dramatic impact on consumer confidence. And the U.S. unemployment rate could put a notable damper on both new and used vehicle sales.

Also, let’s not forget inventory concerns. Factories that shut down in March and April are just beginning to ramp up. There will be a noticeable delay in restarting the parts supply chain as well. Areas of the country that experienced strong sales in May and June could be faced with slim pickings on their lots.

But there is another – somewhat hidden – concern. Identity fraud has reared its ugly head. While fraud has always been an area of focus and concern in the retail automotive world, a couple of unique pandemic situations have exacerbated the situation.