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Federal Deception Law: 2.4.1 Scope of the Used Car Rule

The FTC’s trade regulation rule on the sale of used motor vehicles (“the Used Car Rule”)231 applies to “motor vehicles,” defined as any motorized vehicle other than a motorcycle, with a gross vehicle weight rating under 8500 pounds, a curb weight less than 6000 pounds, and a frontal area less than forty-six square feet.232 The Used Car Rule applies to any “used vehicle,” defined as a vehicle driven more than the limited use necessary in moving or road testing a new vehicle prior to delivery to a

Federal Deception Law: 2.4.4 Remedies for Used Car Rule Violations

Violations of the Used Car Rule violate the FTC Act, and the FTC has brought enforcement actions for such violations.265 As with any FTC rule, there is no private right of action under the FTC Act for rule violations.266 Nevertheless, a rule violation should be actionable under a state UDAP statute, since an FTC rule should guide courts in interpreting state UDAP statutes.267

Federal Deception Law: 2.4.5 When Buyers Guide Warranty Disclosure Conflicts with Warranty Provided in the Sales Agreement

The Used Car Rule states clearly that the dealer may not make any statements, oral or written, that contradict the disclosures in the Buyers Guide. The dealer can negotiate the warranty coverage so that the final sale has different terms than those first disclosed on the Buyers Guide. However, in such a case, the final warranty terms have to be identified in the contract of sale and summarized on the copy of the Buyers Guide that is provided to the consumer.271

Federal Deception Law: 2.1.1 Introduction

The Federal Trade Commission (FTC) has broad authority under the FTC Act to prohibit unfair or deceptive acts and practices in trade or commerce and to enact trade regulation rules that define and prevent such practices.1 The FTC has issued sixteen such trade regulation rules, and many of them establish important standards and requirements for sellers, creditors, and others.

This chapter focuses on eight FTC trade regulation rules of special relevance to consumer law:

Federal Deception Law: 2.2.1 The Nature of Trade Regulation Rules

Trade regulation rules (TRRs) “define with specificity acts and practices which are unfair or deceptive acts or practices. . . . Rules under this subparagraph may include requirements prescribed for the purpose of preventing such acts or practices.”22 Trade regulation rules not only enumerate practices that are unfair or deceptive but add requirements to prevent such practices—for example, three-day cooling-off periods, required disclosures, and notices placed in contracts that alter substantive rights.

Federal Deception Law: 2.2.2 Scope

The FTC can enact trade regulation rules (TRRs) with respect to unfair and deceptive practices “in or affecting commerce.”29 This is a broad standard applying to almost any commercial activity. Nevertheless, there are a number of statutory exemptions to the FTC’s authority and thus to the scope of its TRRs.

Federal Deception Law: 2.2.3 Substantive Scope of FTC Rulemaking

The FTC Act gives the FTC authority to adopt rules defining unfair or deceptive acts or practices in or affecting interstate commerce.36 In order to declare an act unfair, the FTC must find that it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.37 This standard is discussed in detail in NCLC’s Unfair and Deceptive Acts and Practices.

Federal Deception Law: 2.2.5 FTC Remedies for TRR Violations

The FTC may institute a civil action in federal court for TRR violations.63 The court in such an action has authority to grant consumer redress, including rescission or reformation of contracts, refund of money or return of property, damages, and public notification of the rule violation, but not punitive damages.64 There is a three-year statute of limitations.65

Federal Deception Law: 2.2.6 CFPB Remedies

The Consumer Financial Protection Bureau (CFPB) has authority to take action to prevent a person covered by the CFPB’s authority from committing an unfair or deceptive or abusive act or practice (UDAAP).72 This CFPB authority, and CFPB remedies to enforce this authority, are examined in Chapter 3, infra.

Federal Deception Law: 9.1 Introduction

Chapter 8, infra, analyzes federal Racketeer Influenced and Corrupt Organizations Act (RICO) statutes. This chapter analyzes their state counterparts—state RICO statutes and state civil theft laws.

Federal Deception Law: 9.2.1 Strategic Advantages of State RICO Statutes As Compared to Federal RICO

State RICO laws offer a number of strategic advantages over a federal RICO claim. A consumer who prefers to stay in state court may not wish to file a federal RICO claim, as it creates federal question jurisdiction. As a result, a defendant can remove the case to federal court. A state RICO claim, however, does not usually create federal question jurisdiction,4 so the claim can be removed to federal court only if there is another basis—such as diversity of citizenship—for federal jurisdiction.