Cosponsor the "FTC REDO Act." 

The FTC’s “Vehicle Shopping Rule” Would Burden Consumers with Added Costs, More Paperwork and a Longer Sales Process

ISSUE

In 2022, the Federal Trade Commission (FTC) proposed its “Vehicle Shopping Rule” which would needlessly overwhelm car buyers and small businesses with added costs, additional paperwork and a longer car buying process. The FTC proposed this rule without credible data-driven analysis or the necessary time for public comment and denied a routine request for an extension of the public comment period. NADA submitted comments to the FTC summarized here. Members of Congress should cosponsor the “FTC REDO Act” to ensure the flawed and rushed “Vehicle Shopping Rule” does not negatively impact consumers and small businesses.

BACKGROUND

Auto retailing generates 17% of national retail sales, and the “Vehicle Shopping Rule” would affect 42 million consumer transactions a year. A study by the Center for Automotive Research (CAR) found that the FTC’s untested mandates on consumers would increase the time spent shopping for a car by 2 hours and that the FTC’s proposed rule would cost $38 billion. It is critical that the FTC be transparent to prevent the issuance of excessive, untested or vague rules.                                                                                                                       

On a bipartisan basis, members of Congress have expressed concerns through letters to the FTC and Federal Reserve Board that the proposed rule was rushed, excessive, and would adversely affect consumers and small business dealers. Responding to these concerns, on July 13, the House Appropriations Committee reported out the Fiscal Year 2024 Financial Services and General Government appropriations bill (H.R. 4664) which included language that stops the FTC from finalizing, implementing, or enforcing the “Vehicle Shopping Rule.” NADA strongly supports this legislation, which complements the FTC REDO Act. A companion Senate bill approved by the Senate Appropriations Committee (S. 2309) does not include this language. 

The “FTC REDO Act” directs the FTC to “redo” its “Vehicle Shopping Rule,” but this time with basic regulatory safeguards the agency should have properly undertaken in the first place. The bill requires the FTC to: 1) issue an Advance Notice of Proposed Rulemaking; 2) conduct a quantitative study on auto retailing; 3) conduct consumer testing; and 4) publish a cost benefit analysis based on actual data. The FTC failed to perform any of these essential steps before proposing its rule.

KEY POINTS

• The FTC has not followed a fair and transparent process in issuing this proposed rule which would add more time and costs to the car buying process. Despite adding more paper to the sales process, the FTC counterintuitively (and without any analysis or support) assumes that this new rule would save consumers three hours per transaction and, in turn, save consumers $29.7 billion. The CAR report, with clear supporting evidence, shows that consumers would spend an additional two hours per transaction, with an overall cost of $38.1 billion. 

• This rule increases the complexity of the car-buying process, adding more paperwork for consumers while also creating inconsistent and unnecessary rules and burdens for small businesses. Vehicle sales are already extensively regulated with a document-intensive process. Under the rule, every time a consumer asks about a specific vehicle or monthly payments, there would be new written (and untested) disclosures involved.  

• Congress must stop the FTC’s rushed and flawed rule since adding additional regulatory burdens must be the result of an informed process. All the behaviors the FTC’s rule is aimed at addressing are already against the law, and the agency presently has sufficient enforcement authority to police any alleged wrongdoing. The FTC should work collaboratively with the auto industry, as it has in the past, to promote compliance without unnecessarily adding costs, lengthening transaction times, and harming consumers.

STATUS

The FTC has not disclosed a timeframe for releasing a final rule. The FTC REDO Act will be introduced soon by Rep. Kelly Armstrong (R-N.D.) in the House and Sen. Jerry Moran (R-Kan.) in the Senate. Members of Congress are urged to cosponsor the “FTC REDO Act” to direct the FTC to redo its proposed “Vehicle Shopping Rule” to prevent the agency from needlessly imposing significant burdens and costs on consumers and small business dealers.

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