Avoid Devastating Fines- FTC Used Car Buyers Guide Compliance

Avoid Devastating Fines- FTC Used Car Buyers Guide Compliance

Since 1985, the Federal Trade Commission (FTC) Used Car Rule has required automobile dealerships to prominently display Buyers Guides in all used vehicles offered for retail sale at the dealership. The Guide may be removed temporarily for a test drive, but must be reinstated immediately thereafter.
Among other things, the Buyers Guide must disclose the following:

• Full description of the vehicle including the year, make, model, VIN#, and mileage.
• Warranty offered by the dealership, if any, and if so, the terms and conditions of the warranty. It must include the duration of the coverage, as well as the percentage of total repair costs that will be paid by the dealer. It must also include which vehicle systems are covered by the warranty. If the vehicle is being sold “as is”, then the Buyers Guide must also clearly state that information.
• The back of the Buyers Guide must list the name and address of the dealership and include the name and phone number of the contact at the dealership if the customer has questions or concerns after the sale.

Dealership management should ensure that all eligible vehicles are in compliance as soon as possible to avoid potential fines in the event of an audit. The potential fine per violation of the FTC Used Car Rule is $16,000. In 2015, a New Jersey dealership was fined almost $700,000 for non-compliance of various regulations, including failure to adhere to the Used Car Rule.

It is not uncommon for dealers to be in violation and be unaware of it. Common violations include:

• Displaying incomplete or blank Buyers Guide
• Failure to display the Guide in new and used vehicle demos
•  Reliance on a vendor to install the Buyers Guides, but the vendor comes in on a weekly basis, which means fresh used vehicles will be in violation until the vendor comes in
• Failure to place a “Not For Sale” sign in wholesale vehicles, or other vehicles not intended for retail sale

Displaying a properly completed Buyers Guide is only a part of the FTC’s requirements. The customer should also be provided with a copy of the form which he/she is required to sign, and a copy of the signed document should be kept in the deal folder.

It should be further noted that dealerships are required to offer the FTC Buyers Guide in Spanish, if the deal was conducted in Spanish.

Please contact Louis Young if you have any questions by filling out the form below.

Louis Young T (732) 572 3900 [email protected]

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.