Today's Trends in Credit Regulation

Participation in the FTC’s Motor Vehicle Sales and Leasing Roundtables
By Nicole F. Munro

Beginning in April, the Federal Trade Commission will host a series of roundtables around the country to gather information on consumers’ experiences when buying or leasing motor vehicles. The FTC intends to use the roundtables to explore consumer protection issues pertaining to the sales and leasing of cars, SUVs and light trucks by dealers over which they have exclusive or concurrent (with the CFPB) authority.

The roundtables will be held in three to five cities around the United States and will provide an opportunity for regulators, consumer advocates, industry participants, and other interested parties to discuss consumer protection issues in connection with motor vehicle sales and leasing. As stated in the federal register notice introducing the first roundtable, “the motor vehicle roundtables are intended to inform the FTC regarding what consumer protection issues, if any, exist that could be addressed through a possible rulemaking or other initiatives.” All of the roundtables will be free and open to the public.

The first roundtable will take place on April 12 at Wayne State University Law School in Detroit, the co-host of the event. FTC staff will identify and invite people with relevant expertise, including representatives from the industry and consumer advocates, to participate as panelists, and may invite others who submit requests in response to the Federal Register notice.

Tom Hudson from Hudson Cook’s Maryland office and Michael Benoit, from Hudson Cook’s D.C. office have been invited by the FTC staff to participate in the Detroit Roundtable. Tom will serve on a panel which will explore the auto finance transaction in the dealership. Michael will serve on a panel which will discuss the use of GPS devices as a collection tool.

Topics proposed for comment and for the roundtable include the following.[1]

  • What categories of motor vehicle dealers (i.e. ‘‘franchise,’’ ‘‘independent,’’ and/or ‘‘buy here, pay here’’) offer credit or leases to consumers? Do these different categories of dealers offer different types, or terms, of credit or leasing to consumers?
  • What types of financing and leasing are offered to consumers today?
  • What practices involving motor vehicle dealers raise consumer protection issues?
  • Do motor vehicle dealers engage in ‘‘yo-yo financing?’’ If so, please describe in detail how such a transaction occurs.
  • Do finance companies provide incentives or payments to motor vehicle dealers in exchange for consumers receiving more expensive credit? What types of consumers are impacted by this practice and how?
  • Do motor vehicle dealers misrepresent credit or lease terms to consumers?
  • Do motor vehicle dealers charge interest rate mark-ups or up-front charges to consumers for credit or leases about which consumers are unaware?
  • Is substantial negative equity from a prior purchase, or money owed on a prior lease, frequently rolled into consumers’ next vehicle purchases or leases?
  • Do motor vehicle dealers engage in credit or lease packing, such as by including amounts for credit insurance, guaranteed automobile protection (‘‘GAP’’), or other add-ons into payment amounts or other terms quoted to consumers?
  • Do dealers include warranties, service contracts, and other add-ons in credit or lease contracts?
  • Do consumers experience discrimination on a prohibited basis as set forth in Section 701 of the Equal Credit Opportunity Act, 15 U.S.C. 1691, in motor vehicle financing or leasing?
  • Do military personnel or their families face unique consumer protection concerns when purchasing motor vehicles?
  • Do motor vehicle dealers fail to pay off liens or trade-ins or otherwise fail to transfer title at a sale?
  • Do motor vehicle dealers use global positioning systems or similar devices to locate and track financed and leased cars?
  • How do motor vehicle auction houses operate? Do consumer protection issues exist in connection with such auction houses?

Whether you think these are valid questions or an indictment of motor vehicle dealer practices – it’s good to know that Tom and Michael will be there to assist with the responses.

Dates for the additional roundtables to be held in 2011 will be posted on the FTC Web site at

Nicole F. Munro is a partner in the Maryland office of Hudson Cook, LLP. Nikki can be reached at (410) 865-5430 or by email at

[1] Note that we have not provided all the question or all of the subparts of the questions presented for discussion by the FTC. These are available in the federal register here.

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