FTC proposal on saving records ‘extreme'

The Federal Trade Commission's proposed new regulations on dealership ads and F&I practices also would require a "dramatic" expansion in document retention by the industry, according to a National Automobile Dealers Association official.

"The record keeping is the most extreme of all the requirements," said Paul Metrey, NADA senior vice president of regulatory affairs.

The FTC's potential record-keeping rules would include some documents dealerships should save anyway, and for a longer period of time than the 24 months the FTC would require, according to Fisher Phillips partner Usama Kahf.

But the FTC's proposed language also suggests keeping text messages between sales personnel and consumers, he said.

"That's gonna be the one that's gonna cause the most burden," Kahf, co-chair of the law firm's privacy practice group, told Automotive News.

The FTC is considering requiring dealerships to keep "all written communications relating to sales, financing, or leasing between the [dealership] and any consumer who signs a purchase order or financing or lease contract." This means text messages and emails, Kahf said.

The FTC also wants dealerships to save "all written consumer complaints relating to sales, financing, or leasing," customer "inquiries" about F&I coverage and physical add-on products and "inquiries and responses" about vehicles.

Metrey said dealerships would be compelled to keep multiple new categories of documents, calling it a "dramatic" expansion beyond typical document retention. New obligations included all advertising and marketing materials; sales scripts; training materials; lists and descriptions of F&I products; written communications like text messages; loan-to-value calculations; and complaints, he said.

"These record-keeping provisions are necessary to ensure that dealers make required disclosures under the Rule," the FTC wrote of these and the other documents it might require dealerships to keep. "They will also assist the Commission in assessing dealers' compliance with the Rule and help to ensure its effectiveness. These record-keeping obligations are consistent with and similar to requirements included in similar Commission disclosure rules."

But Metrey described the record keeping as going beyond the scope of an "investigatory" agency such as the FTC and into the territory of a "supervisory" agency such as a bank regulator. He pointed out the FTC had by its own account brought numerous enforcement actions against dealerships without such a rule in place.

"Absolutely no justification" existed for the "unbelievably burdensome" record-keeping rule, he said.

The text retention policy is impractical, according to Kahf.

A dealership could ensure control over staff- consumer communications such as texts by issuing electronic devices owned by the retailer, Kahf said.

"Is that realistic?" he said. "No."

Kahf said he didn't know of any dealerships with that practice today.

"It's a big financial burden," he said, noting the expense of doing so would put smaller dealerships at a disadvantage.

Salespeople are "more often than not" going to give customers their personal contact information, Kahf said.

And unless the employee has waived their right to privacy and granted device access to their employer, the FTC can't require the dealership to have control over it. With the exception of some situations involving managers, an employee's personal device would be "generally off limits" in federal litigation, according to Kahf.

Even if a dealership issued staff company-owned devices, "it's just not practical," Kahf said.

The FTC's requirement to keep all materially different documents related to add-ons also created a preservation provision typically found only in litigation, Kahf said. It would be technologically challenging to preserve material changes to some customer-facing records without software that can track every alteration, he said.

The FTC has not yet given a response to comments made by Kahf and Metrey.

There is an upside to the FTC's proposal, Kahf said. State consumer privacy laws have exemptions permitting document retention pursuant to the Gramm-Leach-Bliley Act, and the materials discussed by the FTC might fall under that umbrella, he said. This reduces the burden on dealerships to manage individual pieces of data in compliance with state laws, such as deleting it upon a customer request, he said.