The principal federal regulator for dealers in the consumer sales, lease and finance area is the Federal Trade Commission. The FTC enforces the federal Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Privacy Act and the Magnuson Moss Warranty Act against dealers, to mention a few. It also enforces its own regulations, which include privacy regulations, the Used Car Rule, the Credit Practices Rule and others. The FTC is, not surprisingly, very pro-consumer, and I consider it the toughest of the federal cops. The FTC likes to stretch its thin resources by making examples of bad folks in a very noisy way, thus attracting the attention of other potential bad guys; sort of like a public hanging.
The Federal Reserve Board really doesn’t function as a cop, as such, but it is the federal body that Congress often turns to when it wants a regulation written to implement a law. The FRB wrote Reg. Z (the Truth in Lending Act), Reg. M (the Consumer Leasing Act) and Reg. B (the Equal Credit Opportunity Act), among others. Dealers need to keep an eye on the Board at all times, but the Board’s not going to show up at your door for an investigation.
The federal banking agencies don’t directly police dealers, but they do police federally-chartered and federally-insured depository institutions. Since these institutions often buy retail installment contracts and leases from dealers, dealers are occasionally affected by their activities. Again, these folks are people to keep an eye on because they can affect your business.
The states also have gendarmes. All of the states have an Attorney General. The AG usually sues to enforce state laws and regulations. The AGs have had their hair on fire recently over dealer advertising, as an example. They are very difficult adversaries, since they have the state’s treasury to fund their operations. Any fight you have with an AG likely will be one sided.
The state agencies can also have teeth. State motor vehicle administrations usually regulate the activities of dealers, and usually have audit authority to root out evildoings. States will also usually have a consumer protection unit, sometimes as part of the AG’s office, sometimes connected to a functional regulator like a department of licensing and regulation.
The state units that are involved with licensing of any sort will almost always have audit authority, but even those not connected with a licensing unit can sometimes have that authority. The state agencies enforce a host of varying state laws and regulations and, in many states that have made federal violations an unfair and deceptive trade practice or who have otherwise bootstrapped federal violations into state law violations, the state agencies in effect enforce state laws as well.
For the same reasons that fighting with an AG usually isn’t a good idea, fighting with a state agency is usually a bad move.
For car dealers, these are the main enforcers of sales, credit and lease laws. Before you decide to lay down a bit of rubber, it would probably be a good idea to know where they are and what they’re up to.
Vol 2, Issue 7