Insights

This month we report developments from the Consumer Financial Protection Bureau, Congress, and the Federal Trade Commission.

The FTC Wants to Know About Your Car Buying Experience.

In December, the FTC asked for public comment on a proposed qualitative survey of consumers to learn about their experiences buying and financing vehicles at dealerships. The FTC asked for comments on the following: whether the proposed consumer survey, which will include consumer interviews and receipt of consumers' purchase and finance documents, is necessary and useful; the accuracy of estimates of the burden on consumers to be surveyed; ways to enhance the quality of the information collected; and ways to minimize the burden of collecting information.

Native Advertising? Not What You Think.

In December, the FTC issued a policy statement concerning online ads and promotional messages that are deceptively formatted to look like surrounding non-advertising content. The policy statement notes that online ads known as "native advertising" or "sponsored content," which may be indistinguishable from news, feature articles, product reviews, and editorial and other regular content, have become more prevalent. The policy statement sets forth the general principles the FTC considers in determining whether a particular ad format is deceptive and violates the FTC Act. The policy statement reaffirms the Commission's view that "advertising and promotional messages that are not identifiable as advertising to consumers are deceptive if they mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself." The policy statement explains that if the source of an ad or promotional message is clear, consumers can make informed decisions about whether to interact with the ad, the weight to give the information conveyed in the ad, and the credibility of the ad. The FTC also released a guide for businesses on native advertising to help companies comply with the policy statement.

Visiting Your Delinquent Customers? Be Careful.

In December, the CFPB issued Compliance Bulletin 2015-07 to provide guidance to creditors, debt buyers, and third-party collectors about compliance with certain sections of the Dodd-Frank Act and the Fair Debt Collection Practices Act when collecting debts from consumers. The bulletin notes that in-person debt collection visits to a consumer's workplace or home may violate these laws. In a recent enforcement action, the Bureau alleged that the disclosure or risk of disclosure of debts to third parties during in-person collection visits ... as well as going to a consumer's place of employment when the creditor knew or should have known that personal visitors were not permitted or that going to the consumer's place of employment was inconvenient to the consumer ... was unfair, in violation of the Dodd-Frank Act.

Congress Actually Eases the Regulatory Burden.

A section of the Fixing America's Surface Transportation Act creates an exception to the Gramm-Leach-Bliley Act requirement that financial institutions deliver to their customers annual privacy notices spelling out how the institutions use and disclose their nonpublic personal information and whether customers can limit the sharing of their NPI. Under the exception, now effective, institutions will not have to send an annual privacy notice to customers if the institution only shares NPI with nonaffiliated third parties in a way that does not require the institution to give customers an opt-out choice (i.e., information shared under the joint marketing exception or servicing exceptions) and the institution has not changed its policies since its most recent annual privacy notice. If the institution changes its policies in a way that requires it to offer customers the right to opt out, it must send the revised privacy notice to its customers before implementing the change. This change follows a 2014 CFPB amendment to the GLB Privacy Rule allowing financial institutions to publish their annual privacy notices online rather than by mail, provided that they satisfy several requirements.

Spanish, Anyone?

On January 22, the FTC issued its newest Spanish-language fotonovela in an effort to educate Spanish-speaking consumers about the car buying process and increase awareness of possible scams.

The CFPB Rides Herd on a BHPH Dealer.

In late January, the CFPB announced a consent order with Herbies Auto Sales, a Colorado buy-here, pay-here used car dealer. The CFPB alleged that Herbies engaged in abusive acts or practices through its sales process and misled consumers about the cost of credit.

CPO, Warranted, and Guaranteed Cars with Open Recalls.

On January 28, the FTC announced proposed consent orders with General Motors Company, Jim Koons Management, and Lithia Motors Inc., under which the companies agreed to settle separate FTC administrative complaint allegations that they touted how rigorously they inspect their cars, yet failed to disclose that some of the cars they were selling were subject to unrepaired safety recalls. The FTC's complaint against GM cited the company's representations for "Certified Pre-Owned Vehicles," while the complaint against Koons dealt with that company's purported "guarantee," and the Lithia complaint involved the company's "warranty." The proposed consent orders would remain in effect for 20 years and prohibit the companies from claiming their used vehicles are safe or have been subject to a rigorous inspection unless they are free of unrepaired safety recalls or unless the companies clearly disclose the recalls in close proximity to the inspection claims. The proposed orders also would prohibit the companies from misrepresenting material facts about the safety of used cars they advertise.

So, there's this month's report. See you next month.

Michael A. Benoit is a partner in the Washington, DC office of Hudson Cook, LLP. Michael can be reached at 202-327-9705 or by email at mbenoit@hudco.com.