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Consumer Warranty Law: Leased Vehicles

The rule is not clear as to whether it applies to leases of used vehicles or only to sales of used vehicles. This lack of clarity may be explained by the fact that when the rule was enacted, used vehicles were rarely leased.

Consumer Warranty Law: Covered Buyers and Sellers

The rule applies to any person or business that offers a used vehicle for sale after selling or offering for sale five or more used vehicles in the previous twelve months.432 The rule therefore applies not just to licensed vehicle dealers but to curbside sellers,433 consignments to or from dealers,434 automobile repair shops, and other occasional sellers as long as they meet the rule’s numerical requirements.

Consumer Warranty Law: Territorial Applicability

The rule applies in all fifty states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.449 The two exceptions are Maine and Wisconsin, which have been granted exemptions because state law provides similar protections to the Used Car Rule.450 The rule also covers vehicles exported from the United States for sale at military post exchanges.451

Consumer Warranty Law: State Exemptions

The FTC can grant an exemption to a state which petitions the Commission and demonstrates that it has existing laws that apply to the same transactions as the FTC’s rule and that provide consumers an overall level of protection equal to or greater than that provided by the FTC’s rule.452 Maine and Wisconsin have been granted exemptions.453

Consumer Warranty Law: General

The FTC Used Car Rule requires that each used car offered for sale454 contain, prominently and conspicuously on the vehicle so that both sides are readily readable, a “Buyers Guide,” also known as a window sticker. The Guide may be removed during a test drive, but must be returned immediately thereafter.455 The Buyers Guide must be displayed even if the car is sold “as is.”456

The Buyers Guide must provide the following information:

Consumer Warranty Law: 15.6.5 Buyers Guide Disclosures Must Be Repeated in Other Documents

The Buyers Guide must be given to the consumer upon sale,500 and must be incorporated by reference into the contract, using specific language, overriding any contrary provisions in the contract.501 The disclosure that the Buyers Guide is incorporated into the contract must be conspicuously displayed,502 and it is a violation of the rule if it is included only in the fine print boilerplate of the contract.503 The warranty disclosure found in the Buyers Guide must b

Consumer Warranty Law: 15.6.6 Spanish Disclosures

When a sale is conducted in Spanish, the Buyers Guide and the contract language disclosures must be available in both Spanish and English.506 If a dealer offers to sell vehicles to a substantial number of consumers who speak Spanish and others who speak English, and its staff is trained to conduct sales in both languages, the dealer should display both an English and a Spanish Buyers Guide before the vehicle is offered for sale.507 The English-language Buyers Guide must also include a statement in Spanish advising Spa

Consumer Warranty Law: 15.6.8 Rule Does Not Displace Stricter State Law

The FTC Used Car Rule does not preempt stricter state law requirements for the sale of used cars.514 The rule does not affect state laws that require special language or a separate form to make an effective “as is” sale.515 Dealers must comply with stricter state law requirements.516 The rule does not override state laws that limit or prohibit the sale of used cars “as is.”517

Consumer Warranty Law: State UDAP Remedies

Violations of the FTC Used Car Rule violate the FTC Act. Although there is no private right of action under the FTC Act for a violation of an FTC rule,518 the FTC interprets a violation of the rule as an unfair and deceptive practice. The rule also specifies certain used car sales practices that are unfair or deceptive. Consequently, a violation of the FTC rule should also be a state UDAP violation.519

Consumer Warranty Law: Magnuson-Moss Warranty Act Remedies

A violation of the Used Car Rule should violate the Magnuson-Moss Warranty Act, which authorizes private actions for damages and attorney fees.524 The Magnuson-Moss Warranty Act requires the FTC to enact a used car rule,525 and the Used Car Rule specifies that it was promulgated pursuant to both the FTC Act and the Magnuson-Moss Warranty Act.526

Consumer Warranty Law: 15.7.2 Other Grounds for Cancellation

There are a number of bases upon which to cancel a used car sale. Used and even new car lemon laws enacted in some states allow used car purchasers to obtain a complete refund or obtain a replacement vehicle.550 Contracts also can be canceled based on fraud or misrepresentation. In general, consumers will not have to prove knowledge or intent as part of their misrepresentation claim when the remedy is cancellation even when they must prove those elements to recover damages.551

Consumer Warranty Law: 15.7.3 Three Day Cooling-Off Periods

The FTC Three Day Cooling-Off Rule and analogous state home solicitation laws allow the consumer to cancel for any reason within three business days, even if the car is sold “as is.”554 The rule and state laws do not apply to most car sales because those sales take place at the seller’s principal place of business.

Consumer Warranty Law: 15.8.2 Special Causes of Action Under State Motor Vehicle Laws

Several state motor vehicle laws provide enhanced damages for warranty violations, even those involving used cars. Colorado567 and New Mexico,568 for example, give consumers a special private cause of action, including attorney fees and multiple damages in some circumstances, for breach of a manufacturer’s warranty. This claim might be available to consumers who buy demonstrators, lemon buybacks, or other used cars that are still under a manufacturer’s warranty.

Consumer Warranty Law: Advantages of the UDAP Claim

A state deceptive practices (UDAP) statute can be pleaded in many used car warranty cases.573 UDAP claims offer enhanced remedies such as statutory damages, treble damages, sometimes punitive damages, and attorney fees. In addition, a UDAP claim may avoid the parol evidence rule and similar impediments to warranty claims.574 There are rarely scope issues in applying state UDAP statutes to the sale of used cars for consumer purposes.

Consumer Warranty Law: Failure to Disclose Defects As a UDAP Claim

Another UDAP claim in used car warranty cases may be that the dealer failed to disclose known vehicle defects.578 UDAP statutes prohibit not only oral deception but the failure to disclose. Although the FTC considered and rejected a requirement in its Used Car Rule that dealers disclose known defects, compliance with the rule does not foreclose a UDAP action alleging that the dealer failed to disclose known defects.579

Consumer Warranty Law: Compliance with Used Car Rule Does Not Prevent UDAP Claim

Compliance with the FTC Used Car Rule is no defense to a consumer’s UDAP claim, even one based on the failure to disclose a known defect. The failure to disclose known defects is an actionable state UDAP violation even when the dealer had complied with the Used Car Rule by disclosing the warranty “as is.”587 Enactment of the Used Car Rule does not generally preempt state regulation of the area, so the state UDAP statute can be used to challenge conduct not prohibited by the rule.588