NADA: Unjustified Expansion of FTC Powers Could Harm Dealers, Consumers



WASHINGTON (March 12, 2010) - The National Automobile Dealers Association strongly opposes Congressional efforts to remove the safeguards on the Federal Trade Commission's rulemaking authority because of the commission's track record of repeatedly overstepping its authority. The repeal or weakening of the so-called “Magnuson-Moss” protections could subject auto dealers to new regulatory burdens and would decrease access to and increase the cost of credit for consumers, states David Regan, NADA vice president for legislative affairs, in a letter to Senate Commerce, Science and Transportation Committee members.  

The Magnuson-Moss safeguards and other restrictions on the FTC's authority were put in place by Congress over a 30-year period after numerous incidents of regulatory overreach by the agency. The Senate Commerce Committee is considering the repeal of the Magnuson-Moss safeguards as part of a package intended to overhaul the nation's financial system. The House already passed similar legislation last December.

NADA's letter reminds members of the Senate Commerce Committee that the Magnuson-Moss procedures have successfully compelled the FTC to use its broad discretion and regulatory powers judiciously, and its repeal would upset the regulatory balance between the FTC and business community.

“NADA is concerned that the removal of these well-established safeguards would re-establish a less rigorous regulatory procedure for the FTC and give the agency free rein to conduct fishing expeditions into any area of automotive retailing it perceives as 'unfair,'” Regan states.

For example, repeal of Magnuson-Moss and other related laws, such as the FTC Improvements Act of 1980, give the commission expedited rulemaking authority to limit compensation a dealer earns for arranging vehicle financing. Under such a rule, alternative sources of financing for consumers at dealerships may not be as readily available.

Following the release of the letter, Regan warned of the unintended consequences on auto financing, which he notes, was not a contributor to the 2008 credit crunch.

“Under the current Magnuson-Moss rules, consumers have access to one of the most efficient credit delivery systems in the world. The FTC's existing authority gives the agency the necessary tools to identify and correct problems without risking consumers' access to credit at competitive rates,” Regan stated.

“Congress set the correct regulatory balance between the FTC and businesses nearly three decades ago,” Regan states in the letter. “Repeal of the Magnuson-Moss protections would set the stage for potential regulatory overreach by the FTC as we have seen in the past.”

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