Compliance Regulators

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of costs offered to consumers.

The FTC would like a standardized set price and markup.

“They are focusing very much on how the dealers are setting the price of a vehicle and how it’s being reflected online in advertisements and in social media.”

Last month, Mike Stanton, president and CEO of the National Automobile Dealers Association, warned about the broad scope of this proposed rule.

For example, under this requirement, if a customer called and asked if a dealer had an F-150 in stock, the dealer would be required to cite every F-150 they have in stock, including the stock number and offering price.

“It’s insane,” Stanton said.

Crowell’s big concern is that the rule proposes a very set process for dated time stamps and forms that have to be utilized by dealers.

“It’s going to be very, very difficult to be in compliance if this rule passes,” he said.

If someone asks about the price of a car, the dealer will have to provide what is called an “offering price,” the calculation would be every single fee that goes into the vehicle price if the customer wanted to buy the vehicle right now, Crowell said.

Dealers will have to start talking about an “offering price” long before a dealer even starts discussing F&I or payments.

However, there has been a lot of pushback by national and state associations, as well as possible litigation if the rule is passed.

The rule was introduced last summer. The FTC called it a “first step toward establishing a set of guidelines that would provide consumers with key protections against dealers who unlawfully charge junk fees without their consent or engage in bait-and-switch advertising.”

The proposed measures would:

• Ban bait-and-switch claims.

• Ban fraudulent junk fees.

• Require full upfront disclosure of costs and conditions.

The proposal came at a time when the FTC made news by dropping heavy penalties against dealerships over the past year.

Last November, the FTC sent payments totaling more than $9.8 million to consumers who were harmed by Illinois-based Napleton Automotive Group’s junk fees and discriminatory practices.

In October, the FTC announced Maryland-based Passport Automo - tive Group paid more than $3.3 million for tacking on hundreds to thousands of dollars in illegal junk fees to car prices and for discriminating against Black and Latino consumers with higher financing costs and fees.

A month earlier, the commission sent payments totaling $415,000 to customers of Tate’s Auto, based in Arizona and New Mexico, for allegedly deceiving consumers about payment information and falsified information on consumers’ financing applications.

An auto marketing company was also banned from the auto industry entirely by the FTC after it found that they illegally misled consumers to believe their websites were affiliated with a government stimulus program, among other misdeeds.

The auto industry got some reprieve this year when the FTC extended the deadline for compliance of the new Safeguards Rule. The original deadline had been in January and now is delayed until June 6.

The Safeguards Rule requires nonbanking financial institutions, such as mortgage brokers, motor vehicle dealers, and payday lenders, to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe.

One change is dealers must have a written risk assessment that identifies security risks, confidentiality, and integrity of customer information. Dealers need to look at their systems for handling consumer information along with paper and physical records. Dealers must identify risks to the systems, evaluate the adequacy of existing controls for addressing risks and identify how these risks can be mitigated.

Dealers must name an individual who is qualified to head up their information security program. Qualifications will depend on the size and complexity of a dealer’s information system. The individual must have some level of information security training and knowledge. The individual must report in writing, at least annually, to the dealer’s board of directors or equivalent concerning the businesses’ Safeguards program and effectiveness. Also, all customer data must be encrypted at all times.

Several other requirements are also part of the revised rule and dealers should consult with their attorney or a compliance firm.

The Equal Employment Opportunity Commission also monitors wrong doing, recently levying a $62,500 fine on a franchise dealer for paying a female employee less than the male employee.