On June 23, 2022, the Federal Trade Commission (FTC) introduced the Motor Vehicle Dealers Trade Regulation Rule that would, if approved, dramatically transform and complicate the process for consumers to purchase, trade in, and finance new and used cars and trucks and optional products like extended service contracts and GAP Waivers. If passed, the proposed rule would also massively expand the liability exposure for dealers related to advertising and vehicle sales and expose dealers to large monetary fines from the FTC that are not available today.

The FTC is the primary federal regulatory agency that oversees automotive retail. As proposed, the FTC Dealers Trade Rule would:

1. Prohibit misrepresentations involving several activities related to the advertising and sales process;
2. Require dealerships to calculate the loan-to-value ratio before offering GAP agreements to customers;
3. Prohibit sales of add-on products or service that confers no benefit to the consumer;
4. Require dealers to keep records for 24 months to include, among many other items, all advertisements, sales scripts, training materials, and marketing materials regarding the price, financing, or lease of a motor vehicle; all “Add-on” lists and all documents describing such products and services; calculations of loan-to-value ratios in contracts including GAP Agreements; and copies of all written consumer complaints related to a wide variety of topics; and
5. Require dealerships to disclose the following:
   
   1. A vehicle’s “offering price” (the full cash price a dealer will sell or finance a motor vehicle to a consumer excluding only required government charges) in any communication with a consumer or advertisement that references a specific vehicle or any monetary amount or financing term for a vehicle;
   2. An “Add-on list” on each website, online service, or mobile application. The list must include an itemized list of all of the dealer’s optional “Add-on Products or Services” and the price of each item (or, if the price varies, a price range the typical consumer will pay for the item);
   3. That the purchase of “Add-ons” is not mandatory;
   4. The total amount a consumer will pay to purchase or lease a vehicle when the dealer makes any representation about monthly payment amounts; and
   5. Whenever comparing payment options and discussing a lower monthly payment, that a lower monthly payment will increase the total amount the customer will pay to purchase or lease a vehicle (if such statement is true).

NJ CAR joined with NADA and scores of other dealer advocacy groups in mounting a comprehensive and detailed response to the proposal, which will defend the highly competitive and pro-consumer benefits of the optional, dealer-assisted financing model, and show that, in fact, the FTC’s proposal is likely to harm consumers.

The proposed rule will lengthen the car buying process for consumers by adding unnecessary forms and complicating the process by adding layers of compliance to existing regulations in New Jersey. The New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 et seq., is one of the strongest and most effective consumer protection laws in the United States. Its resulting regulations promulgated by the Division of Consumer Affairs, N.J.A.C. 13:45A-1.1 et seq., contain many of the prohibitions that the proposed rule is aimed at combating and includes:

1. N.J.A.C. 13:45A-26A.4. Bait and Switch
2. N.J.A.C. 13:45A-26A.5. Advertisements; mandatory disclosure requirements in all advertisements for sale
3. N.J.A.C. 13:45A-26A.6. Advertisements: mandatory disclosure in advertisements for lease of a new or used motor vehicle
4. N.J.A.C. 13:45A-26A.7. Unlawful advertising practices
5. N.J.A.C. 13:45A-26A.8. Certain credit and installment sale advertisements
6. N.J.A.C. 13:45A-26A.9. On-site disclosures
7. N.J.A.C. 13:45A-26A.10. Record of transactions

On the leasing side, the New Jersey Consumer Protection Leasing Act (CPLA), N.J.S.A. 56:12-60 et seq., governs all motor vehicle leases which have a duration of more than 120 days. The CPLA supplements New Jersey’s Consumer Fraud Act (CFA), and accordingly, violations of the CPLA are treated the same as violations of the CFA. The CPLA mandates the disclosure of certain lease terms and conditions and affords lessees certain substantive rights on default and termination of a lease. Compliance with Federal Regulation M is compliance under the CPLA, although the CPLA goes beyond the CPLA. The CPLA and N.J.A.C. 13:45A-28.8 give consumers the right to review the lease for one business day unless this right is waived.

Additionally, New Jersey has been active for decades to protect consumers purchasing what the FTC refers to as “Add-ons”, providing even more effective protection than the proposed rules. Voluntary Protection Products such as extended service contracts or GAP Waiver (“VPPs”) are typically sold by F&I personnel.

New Jersey started regulating the sale of “theft prevention” devices, such as Etch, in 2007 by enacting N.J.S.A. 17:18-19. The New Jersey Division of Consumer Affairs promulgated regulations, N.J.A.C. 13:45A-30.1., on June 15, 2009, regulating vehicle protection warranties such as Etch and any other warranty that promises to pay a fixed, set amount for incidental damages in the event of an occurrence.

New Jersey enacted P.L. 2013, c.197 (N.J.S.A. 56:12-87 et seq.) to regulate Service Contracts. Service Contracts include motor vehicle ancillary protection products, which is a contract or agreement between a provider and a consumer for a specific duration for a provider fee or other separately stated consideration, to perform any number of services on a motor vehicle. In fact, this year, the New Jersey Legislature enacted P.L. 2022, c.91 amending the service contract law to impose several consumer protection requirements on service contract providers.

Furthermore, N.J.S.A. 17:16BB-1 et seq. regulates the offering of Guaranteed Asset Protection Waivers (GAP Waivers). It mandates requirements and conditions for offering GAP waivers, obligations of the insurer, and contents of the GAP waiver agreement. New Jersey statutes offer more regulation of dealers offering VPPs and are superior to the proposed rules.

These and other laws and regulations place New Jersey at the forefront of consumer protection, which is why it is unnecessary to add complicated, duplicative, and burdensome layers of compliance that will only serve to confuse consumers and lengthen the car buying process.