FTC's proposed rules on car dealer ads, F&I would hurt customers, NIADA says

The National Independent Automobile Dealers Association on Friday said the Federal Trade Commission's proposed new advertising and finance and insurance rules would hurt consumers and make vehicles more expensive.

The trade group estimated compliance would require at least $1.4 billion during the next 10 years, "driving up prices for consumers and making the car-buying process longer and more difficult." It said many of the issues the FTC sought to address fall under existing regulations.

"Independent auto dealers are small-business owners and the proposed rule from the FTC has the potential to negatively impact the ability of our members to operate their businesses," NIADA CEO Robert Voltmann said in a statement.

"We look forward to working with the commissioners and their staff to ensure NIADA members' voices are heard."

NIADA, which counts 16,000 dealerships among its members, represents the nation’s licensed used-vehicle dealerships.

The new proposals target auto-retail behavior such as bait-and-switch advertising and F&I products sneaked into deals without consumer consent.

The FTC said in its notice of rule-making June 27 that it received more than 100,000 complaints each of the past three years related to vehicle sales, service, rentals, leasing and warranties and transactions, and it said complaints about car deals are "regularly in the top 10 complaint categories tracked by the agency."

As NIADA referenced, the FTC estimated the combined expense to dealerships could reach $1.4 billion over a decade. It's one of two cost-benefit scenarios the agency offered the public in its rule-making proposal.

One FTC hypothesis — the one cited by NIADA — estimated dealerships would pay a combined $1.36 billion between 2022 and 2032 to comply. The other forecast costs of $1.57 billion over the same period. The largest element within these estimates involved dealerships spending $850.5 million or $994.4 million to disseminate various disclosures to customers. Either calculation assumes a sales professional paid $21.84 an hour spending 2 minutes preparing and delivering each disclosure.

While dealerships could over a decade absorb more than $1 billion in additional costs, the FTC estimated society would recognize more than $30 billion in benefits. It forecast $31.08 billion in gains over the decade under its first cost-benefit scenario and $36.34 billion under the second projection.

"The Commission assumes that, as a result of the proposed Rule provisions prohibiting misrepresentations and requiring price transparency, each consumer who ends up purchasing a vehicle will spend three fewer hours shopping online, corresponding with dealerships, visiting dealer locations, and negotiating with dealer employees per motor vehicle transaction," the FTC wrote.

The average worker made $27.07 an hour in 2020 and is shown by research to view their time off the job as worth 82 percent of hourly pay, according to the FTC. Over a decade of millions of auto transactions a year, those three hours per deal at $22.20 an hour add up, the FTC said.