Under pressure from Congress, the Federal Trade Commission yesterday approved watered-down final regulations on used-car sales that require dealers to disclose on window stickers information about a vehicle's warranty and mechanical condition.
Last year, as part of a proceeding that began in 1976, the FTC staff proposed that dealers be required to perform mandatory inspections of used cars in order to prevent deceptive sales practices.
Commission members revised the rule last spring, although they denied that this was because of external opposition to the staff proposal from the National Automobile Dealers Association and 51 senators, among others. The proposal would have required dealers to tell consumers which parts of a car are "OK" and which are "Not OK."
The rule still may undergo congressional scrutiny in what may become the first major test of new congressional veto powers over FTC rules. Under last year's FTC authorization legislation, Congress has 90 days to consider a veto of an FTC rule. If no action is taken, it will go into effect six months after the review period.
Nevertheless, in issuing the rule yesterday, the commission made it plain that used-car dealers "have engaged in deceptive sales practices" and said dealers and their agents often "misrepresent the mechanical condition" of cars, fail to disclose defects and assert that cars are in good shape "without a reasonable basis for such representation."
"The record demonstrates not only that many used cars have serious defects at the time of sale, but also that dealers often know that these defects are present," the FTC said in a notice published yesterday in the Federal Register.
In addition, the FTC said that dealers often do not make warranty information available and misrepresent the terms of warranties.
The rule covers cars, most pickup trucks and vans, but does not cover large recreational vehicles, motorcycles and private sales of any vehicles. Dealers are defined as merchants offering to sell more than five vehicles during a 12-month period.
Under the rule, the window sticker or Buyer's Guide must describe all warranties on the car, disclose whether the purchaser is responsible for repairs and disclose certain defects known to the dealer.