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Consumer Law

: CL&P Blog

House Holds Hearing on Used Cars

By Deepak Gupta

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by Deepak Gupta

Yesterday, the House Subcommittee on Commerce, Trade, and Consumer Protection held a hearing on ?Consumer Protection in the Used and Subprime Car Market." The hearing focused on two types of problems for consumers, especially lower-income consumers: (1) a lack of available information about a vehicle's true history (which can lead to consumers becoming victims of salvage fraud, title-washing, and related practices, and, in many cases, to serious injury or death) and (2) abuses in financing and sales of used cars, some of which are quite similar to predatory mortgage practices. Here is Public Citizen's statement on the hearing.

I was pleased that there was much discussion at the hearing about the National Motor Vehicle Title Information System, a subject we've blogged about several times here. Last year, Public Citizen sued the U.S. Department of Justice to force it to implement the system, a long-delayed vehicle history database that Congress first mandated in 1992. The database is intended to gather information from the states, insurers, and junk and salvage yards, and to allow consumers and law enforcement to instantly verify the salvage history of a vehicle. In our lawsuit, the court ordered the government to issue final regulations and launch consumer access by January 30, 2009, which the government did, right on the deadline. But many states still are not participating. The focus now is on getting all 50 states to comply with the system (including California--which is reporting data but barring consumers from accessing it) and getting the Federal Trade Commission, through its Used Car Rule, to require the placement of NMVTIS data on the car itself.

There was also a great deal of discussion at the hearing about the need to address abusive financing practices in the used car industry, including a proposal to create a database, similar to the one required by the Home Mortgage Disclosure Act (HMDA), that would allow consumer advocates and regulators to analyze data and determine whether lenders are engaging in, for example, racially discriminatory practices. For more on this and many other policy proposals, see this terrific report prepared by John Van Alst of the National Consumer Law Center, one of yesterday's witnesses. His testimony is here. The other witnesses were Eileen Harrington, Acting Director, Bureau of Consumer Protection, Federal Trade Commission James H. Burch II, Acting Director, Bureau of Justice Assistance, Department of Justice; and Rosemary Shahan, President, Consumers for Automobile Reliability and Safety, who is my client in the NMVTIS lawsuit. Representing industry were Keith Whann, General Counsel, National Independent Automobile Dealers Association and Scott Waldron, President, Experian Automotive. You can watch the hearing and read the witnesses' testimony (once it's posted) at the committee's website.

One broader theme emerged yesterday: The Federal Trade Commission's rulemaking authority is hopelessly constrained. The Commission cannot engage in regular APA rulemaking. Any interested party can demand a hearing and the process typically drags out for several years. In an era when regulators are failing to keep up with sophisticated and constantly evolving unfair and deceptive trade practices across a wide range of sectors, does this need to be changed?

Full post as published by CL&P Blog on March 06, 2009 (boomark / email).