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FTC Seeking Clearance to Study Car-Buying Experience at Dealerships

September 15, 2016

WASHINGTON, D.C. — The Federal Trade Commission (FTC) has issued its second Federal Register Notice (FRN) on a proposed qualitative survey that would examine the consumer experience of buying and financing a car at a dealership. It is also seeking clearance from the Office of Management and Budget in order to conduct the study, the agency noted.

Consumers that will be eligible for the study must have purchased a vehicle from a dealer in the previous six months, used financing offered or arranged by the dealer, kept the documentation that he or she received as part of the purchase and financing, and be located in the greater District of Columbia metropolitan area, the agency noted.

The FTC has contracted Shugoll Research Inc., a consumer research firm located in the metropolitan District of Columbia area, to locate participants for the study.

The proposed survey will begin with five in-person consumer interviews that will test the survey questionnaire, according to the agency. Once that initial group is interviewed, 40 more in-person interviews will be conducted. The agency plans for half of the respondents to have prime or above nearprime credit ratings and the other half to have subprime credit ratings. If at the end of these 40 interviews, the agency feels that additional interviews would be beneficial to the study, it will interview 40 more consumers.

Among other aspects, the interviews will focus on the consumer’s experience in shopping for and choosing an automobile, the process of agreeing to a price for the automobile, the trade-in process, the process involving the sale of additional products and services the dealer offers, the review and signing of paperwork, and the consumer’s overall understanding of the documents presented.

While this is the second FRN the FTC has issued on this matter, it is the first this year. The agency issued the first FRN proposing a qualitative survey of the dealership buying experience on Dec. 29 of last year. The most recent survey proposed in this year’s FRN is similar to the survey proposed last year, however, the agency claims that it has addressed some of the issues that consumers and other agencies had with the initial proposed survey.

After the FTC issued the first FRN in December of last year, it opened the proposed survey up for comments from consumers and agencies. It received 13 comments on the matter, ranging from consumers providing anecdotal evidence of negative experiences at dealerships and consumer groups applauding the FTC for the proposed survey, to dealer-facing organizations questioning the need for the survey.

One of the comments submitted was from Paul D. Metrey, vice president of Regulatory Affairs at the National Automobile Dealers Association (NADA). He questioned the need and methodology of the study. He also noted that less than four years ago, the FTC had concluded an “extraordinarily broad and comprehensive examination of the same question and developed an in depth record that completely obviates the need for a further examination of this matter.”

In that examination, the FTC conducted a series of motor vehicle roundtables in Detroit, Mich., San Antonio, Texas, and Washington, D.C., that covered issues that were “nearly identical” in language to the issues the new study will cover. During this year-long process, Metrey added, the FTC repeatedly requested credible data that demonstrated that prevalent abuses exist in the auto industry, but received none.

“In light of the foregoing, it is difficult to imagine how the commission could have conducted a more comprehensive examination into issues that it now contends — less than four years after this process concluded — it needs to consider again," Metrey's comment read, in part. "It is equally difficult to comprehend what justification — from either a substantive or budgetary perspective — exists for revisiting topics that are all a subset of those listed above.".

To this, the FTC said that its work since "2011 demonstrates, not obviates, the need for further examination of consumer protection issues in the automotive marketplace." Since that time, the agency states, it has brought more than 25 auto dealer cases, many of which dealt with issues discussed in the roundtables.

“Despite these public law enforcement actions, there has continued to be illegal conduct in the auto marketplace, often involving the same or similar conduct as the conduct challenged in prior actions,” the FTC stated in its recent FRN. “This persistent conduct indicates that additional measures are necessary, including to study consumer experiences to help determine additional ways to protect consumers in auto transactions.”

As it did with the FRN it issued in December, the FTC is opening up this version of the proposed study to public comment. All comments, however, must be received on or before Oct. 14, 2016.

Comments

  1. 1. Mike Roderick [ September 16, 2016 @ 05:49AM ]

    So we are going to sell 17 million cars in 2016 and The Federal Trade Commission thinks spending all of this money to "survey" 80 people in the Metropolitan D.C. area will give them a good outlook on the Industry?!?! They won't even be able to gather enough info to tell if one dealership is handling things in a proper manner. How could they tell industry trends on 80 deals in a huge market. Absolute waste of time and dollars.

  2. 2. Glenn Clark [ September 24, 2016 @ 01:10PM ]

    I agree with Mike Roderick's comment. If they think that in a country of 330,000,000 people that a study of 80 people in a particular geographical area would minutely resemble a fair and random sampling they are really really not smart.

 

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