WASHINGTON (CN) – The Federal Trade Commission cannot force car dealers to comply with a “risk-based pricing” disclosure rule that requires fronting the cost of credit score reports, a trade group claims in federal court.
The National Automobile Dealers Association The car dealers says the new FTC rule violates the Administrative Procedures Act with its interpretation of the Dodd-Frank Act, which requires dealers to notify consumers if they extend credit “that is on terms materially less favorable than the most favorable terms available to a substantial portion of that person’s customers.”
But the FTC rule extends this regulation to dealers who don’t use consumer reports at all.
“As a result of the FTC Interpretation, such dealers must provide consumers with a risk-based pricing notice or an alternative notice permitted by the FTC known as ‘credit score disclosure exception notice,’ and obtain a credit score typically at their own expense in order to provide consumers with all of the disclosures that must be included in either of these notices,” the group says, adding that the measure affects dealers that do not “obtain, receive, or review a consumer report.”
The association says it represents approximately 16,000 franchised auto dealers across the country that use third-party financing. It wants the court to agree that the FTC requirements are unlawful and issue an injunction.
The group is represented by Michael Charapp of Charapp Weiss in McLean, Va.