On September 16, California Governor Jerry Brown signed AB 2354, a bill that expands the definition of a “vehicle service contract” to include agreements to repair, replace, or maintain any of the vehicle’s mechanical components, conditioned upon the use of a specific lubricant, treatment, fluid, or additive. The law goes into effect on January 1, 2017. In similar fashion, the Missouri legislature recently voted to override the Governor’s veto of HB 1976, thus expanding the definition of “extended service contracts” to include tire and wheel replacement, dent repair, key and key fob replacement, and other ancillary services as approved by the Director of Insurance. The Missouri law will also eliminate the requirement that a provider pay a full refund to the contract holder if the contract is cancelled during the initial 20-day period, providing instead the option to give a credit to the contract holder or a specified designee.
On December 19, the CFPB announced the release of “Consumer Credit Trends,” a beta version of its new web-based tool to help the public monitor developments in the mortgage, credit card, auto loan, and student loan markets. According to the Bureau, the data used by Consumer Credit Trends “draws from a nationally representative sample of credit records maintained by one of the top three U.S. credit repositories.” The CFPB plans to update this information regularly, and will offer analyses on notable findings as warranted. It also clarifies that “before being provided to the Bureau,” the credit records are “stripped of any information that might reveal consumers’ identities, such as names, addresses, and Social Security numbers.” The ability to “chart the state of consumer markets,” says CFPB Director Richard Cordray, “will help us identify and act on trends that warn of another crisis or that show credit is too constricted.”
FTC Seeks Additional Comments Regarding Proposed Research on Consumers’ Experience with the Auto Finance Industry
On September 14, the FTC published its second Federal Register notice regarding a proposed consumer survey designed to provide the FTC with insights into consumer understanding of the process whereby automobiles are purchased and financed through a dealer. The FTC issued its first notice regarding the survey on January 7, 2016. The second notice summarizes industry comments received in response to its first notice. Commenters suggested that the survey include questions addressing such topics as, (i) consumers’ experiences specifically with “Buy Here Pay Here” dealers; (ii) “yo yo financing scams”; and (iii) add-on products or services. The second notice outlines the FTC’s planned methodology for conducting the survey, and identifies the areas on which the consumer interview questions will focus. The FTC estimates that 170 consumers will participate in the survey and that it will require approximately 367 burden hours. Comments regarding the accuracy of burden estimates, as well as ways to minimize the information collection burden, are due by October 14, 2016.
On August 18, the FTC announced that three Texas-based auto dealers will pay an $85,000 civil penalty to resolve allegations that they violated a 2014 administrative order prohibiting them from deceptively advertising the cost of buying or leasing a car. The FTC complaint alleges, among other things, that since receiving the 2014 order, the auto dealers frequently misrepresented offers to finance or lease motor vehicles by “focusing only on a few attractive items, such as a low monthly payment or annual percentage rate, while concealing material terms that add significant extra costs or that limit who can qualify for the advertised prices.” In addition to the $85,000 civil penalty, the proposed consent order bars the defendants from (i) deceptively advertising a vehicle’s cost of purchase with financing, the cost of leasing, or any other material fact regarding price, sale, financing or leasing; (ii) misrepresenting who is likely to receive financing or leasing and who qualifies for specific finance or lease terms; and (iii) violating the Truth in Lending Act’s and the Consumer Leasing Act’s requirements to clearly and conspicuously disclose credit and lease terms.
On July 25, California Governor Edmund Brown signed into law Assembly Bill (AB) 516. The bill amends or repeals various sections of the California Vehicle Code, and adds Section 4456.2. Pursuant to new section 4456.2, the Department of Motor Vehicles (Department) is required to develop a system for dealers and lessor-retailers to electronically report the sale of a vehicle before it is delivered to the purchaser. The bill outlines minimum requirements for the new dealer reporting system, including assignment of a unique report-of-sale number to each transaction, which must be displayed on the report of sale forms and any temporary license plate. The new system must be ready for operational use no later than January 1, 2019. In addition, AB 516 increases the document processing charge that a dealer may impose on the purchaser or lessee of a vehicle. Specified fee changes will also take effect January 1, 2019.