2018 GNYADA Membership Directory

All 50 states and the District of Columbia have also enacted their own UDAP laws (state UDAP laws). In addition to these laws authorizing Attorney General actions, many state UDAP laws give consumers a private right of action to obtain injunctions and recover actual damages, court costs, and attorney’s fees. Many of the laws also permit recovery of statutory, punitive, or treble damages as a deterrent to deceptive or unfair business conduct. Some state UDAP laws permit a consumer to bring a lawsuit as a private Attorney General. Most state UDAP laws allow class actions as well. This chapter discusses auto dealer liability risks for UDAP practices under the FTC Act, the Dodd-Frank Act, and state UDAP laws. As these laws are a “catch all” for bad conduct, they present a substantial risk for a variety of misdeeds in selling vehicles to, or financing vehicles for, consumers. Section 5 of the FTC Act prohibits “unfair methods of competition and unfair or deceptive acts and practices in or affecting commerce”against consumers. Enforcement authority is vested in the FTC and the FTC has not hesitated to use its authority, most recently for lax data security practices that it considers to be an unfair act or practice and for deceptive dealer advertising as discussed in Chapter 8: The FTC: Marketing and Advertising Vehicles, and Credit Terms. The FTC can bring an administrative enforcement action and, depending on the nature of the violation, bring a court action to seek injunctive relief or damages. States look to FTC lawsuits on UDAP violations or consent decrees as precedent for their own state UDAP actions. Unfair Trade Practices The FTC has noted that “[u]njustified consumer injury is the primary focus of the FTC Act. As noted above, the FTC’s standard for “unfairness” is: (1) whether the practice creates a substantial consumer injury; (2) whether the injury exceeds any offsetting consumer benefits or benefits to competition; and (3) whether the injury was one that consumers could not reasonably have avoided. The FTC considers“deceptive”practices to consist of a material representation, omission, or practice that is likely to mislead a consumer, as examined from the perspective of a reasonable consumer. An“unfair”practice may not be“deceptive,”and some deceptive practices may not be unfair. The legal standards are independently applied. The FTC may also consider public policy in determining whether an act or practice is unfair, but it may not solely rely on public policy in making its determination. The FTC has also been given a streamlined process to issue new rules and regulations for auto dealer unfair and deceptive trade practices by the Dodd-Frank Act. Previously, the FTC had to conduct detailed studies and hold hearings under procedures contained in the Magnuson-Moss Warranty Act and demonstrate that the prohibited act was “prevalent” in the industry. Now, the FTC merely needs to publish proposed regulations for a comment period and then can adopt final rules or regulations after reviewing the comments without having to make the prior showing that the regulated practices are “prevalent.” One authority indicated the lead time for the FTC to enact unfair or deceptive practice regulations against auto dealers has been reduced from approximately seven years to approximately one year. In 2011, the FTC conducted a series of roundtable hearings on dealer auto finance practices and continues to investigate practices like spot deliveries, with the expectation that the FTC will use its new streamlined authority to restrict or limit dealer practices or require more transparent disclosures to consumers. However, the FTC appears to be employing the IMPORTANT LAWS AND REGULATIONS Section 5 of the FTC Act

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