OAR 137-020-0040: Adoption of FTC Used Car Rule, Federal Truth-in-Lending Act, and Federal Consumer Leasing Law

(1) For purposes of this rule, the following definitions shall apply: (a) “Truth-in-Lending Act” means the Federal Truth-in-Lending Act, as amended and in effect as of January 2, 2008, including 15 U.S.C. 1601-1665(a), and any regulations which have been adopted thereto and in effect as of January 2, 2008, including but not limited to Regulation Z (12 CFR 226); (b) “Federal Consumer Leasing Law” means the consumer leasing portions of the Truth-in-Lending Act, 15 USC §1667 et seq., as amended and in effect as of January 2, 2008 and all regulations which implement this section including but not limited to Regulation M (12 CFR 213); (c) “FTC Used Car Rule” means the Federal Trade Commission Used Motor Vehicle Trade Regulation Rule, 16 CFR § 455 et seq., as amended and in effect as of January 2, 2008; (d) “Person” refers to those individuals and entities as defined in ORS 646.605(4); (e) “Real Estate, Goods or Services” refers to those items defined in ORS 646.605(7); (f) “Consummation” means the time at which a consumer becomes contractually obligated on a credit transaction. The time the obligation arises is a matter determined under state law; and (g) The definitions set forth in OAR 137-020-0020. (2) It is unfair or deceptive conduct in trade or commerce for a person to advertise, offer credit or extend credit related to the purchase of real estate, goods or services in violation of the Truth-in-Lending Act or the Federal Consumer Leasing Law. (3) It is unfair or deceptive conduct in trade or commerce for a person to advertise, display for sale or lease, or sell or lease a motor vehicle in violation of the FTC Used Car Rule. OFFICIAL COMMENTARY: Many advertisements for sales and leases, in particular those for motor vehicles, use one or more of the Regulation Z or Regulation M triggering terms and then fail to make the required disclosures. All three acts also have very specific disclosure requirements which must be given to the consumer prior to the execution of a sales, credit or lease agreement. This rule makes it clear that failure to comply with these federal regulations is a violation of the Oregon Unlawful Trade Practices Act. Each of these three acts is discussed below: (a) “Regulation Z” Advertising. The Truth-in-Lending Act and accompanying regulations govern credit advertising. An advertisement for closed-end credit which contains a “triggering term” must disclose other major terms, including the annual percentage rate. This rule is intended to ensure that all important terms of a credit plan, not just the most attractive ones, appear in an advertisement. (b) The following triggering terms require certain disclosures to be made in an advertisement for closed-end credit (12 CFR 226.24): (A) The amount of the down payment (expressed as either a percentage or dollar amount), in a “credit sale” transaction; Examples: “10% down” “$1000 down” “90% financing” “trade-in with $1000 appraised value required” (B) The amount of any payment (expressed as either a percentage or dollar amount); Examples: “Monthly payments less than $250 on all our loan plans” “Pay $23.44 per $1000 amount borrowed” “$210.95 per month” (C) The number of payments or the period of repayment; or “Up to four years to pay” “48 months to pay” “30-year mortgages available” (D) The amount of any finance charge. Examples: “Financing costs less than $300 per year” “Less than $1200 interest” “$2.00 monthly carrying charge” (c) If any one of the triggering terms appears, it would be an unfair or deceptive trade practice to fail to clearly and conspicuously disclose in the advertisement: (A) The amount or percentage of the down payment; (B) The terms of repayment; and (C) The “annual percentage rate,” using that term or the abbreviation “APR.” If the annual percentage rate may be increased after consummation of the credit transaction, that fact also must be stated. The amount or percentage of the “down payment” need not be shown directly, as long as it can be determined from the advertisement. For example, “10% cash required from buyer” or “credit terms require minimum $1000 trade-in” would satisfy the disclosure requirement. The “terms of repayment” may be expressed in a variety of ways, as long as they convey the required information. For example, an automobile finance company might use unit cost to disclose repayment terms: “48 monthly payments of $23.44 for each $1000 borrowed.” Similarly, the length of the loan can be expressed as the number of payments or the time period of the loan. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See § 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract, as permitted under comment 17(a)(1)–(3). In such cases, the timing requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and the disclosures to the consumer to read and sign, and the consumer is free to take possession of and review the document in its entirety before signing. It is not sufficient, however, if the document containing the disclosures is merely shown to the consumer before the consumer signs and becomes obligated; the creditor must give the document to the consumer. If after receiving the document, the consumer signs it and becomes obligated, the consumer may return it to the creditor to execute or process, provided the consumer is also given a copy at that time to keep. http://www.fdic.gov/regulations/laws/rules/6500-1700.html#6500226.17. “Regulation M” Advertising. If an advertisement promoting a “consumer lease” contains any of the following triggering terms, then five specific disclosures must also be clearly and conspicuously included in the advertisement. It is an unfair or deceptive trade practice to fail to clearly and conspicuously make all five disclosures. (d) The triggering terms are: (A) A statement of any capitalized cost reduction or other payment required before or at lease consummation, or by delivery if delivery takes place after consummation, or that no payment is required; or (B) The amount of any payment. (e) If any triggering term is used in a consumer lease advertisement then all five of the following disclosures must be in the advertisement: (A) A statement that the transaction advertised is a lease; (B) The total amount of any payment (such as security deposit or capitalized cost reduction) required before or at the consummation of the lease, or by delivery if delivery takes place after consummation, or a statement that no such payment is required; (C) The number, amounts and due dates or periods of scheduled payments under the lease; (D) Whether or not a security deposit is required; and (E) In leases where the consumer’s liability is based on the difference between the property’s residual value and its realized value at the end of the lease term, that an extra charge may be imposed at the end of the lease term. For further information on advertising consumer credit or consumer leases, see the Federal Trade Commission website titled: “How to Advertise Consumer Credit & Lease Terms” at http://www.ftc.gov/bcp/conline/pubs/buspubs/creditad.htm. Disclosure. Regulation M mandates that all required disclosures be given prior to the consummation of a consumer lease. “FTC Used Car Rule” - Motor vehicle dealers must post a Buyers Guide, also known as an “As-Is” disclosure, in every used vehicle which they display for sale or lease as required under the FTC guidelines. If a used car transaction is conducted in Spanish, the seller must post a Spanish language Buyers Guide on the vehicle before it is displayed or offered for sale. Dealers must post a Buyers Guide before they “offer” a used vehicle for sale. A vehicle is offered for sale when it is displayed for sale or a dealer lets a customer inspect it for the purpose of buying it, even if the car is not fully prepared for delivery. This requirement also applies to used vehicles for sale on a dealer’s lot through consignment, power of attorney, or other agreement. At public auctions, dealers and the auction company must comply. The Rule does not apply at auctions that are closed to consumers. (f) Previously titled or not, any used vehicle that meets the following specifications must post a Buyers Guide. (See OAR 137-020-0020 for the Oregon definition of a used vehicle.) Previously titled or not, any vehicle driven for purposes other than moving or test driving is considered a used vehicle, including light-duty vans, light-duty trucks, demonstrators, and used cars that meet the following specifications: (A) A gross vehicle weight rating (GVWR) of less than 8,500 pounds; (B) A curb weight of less than 6,000 pounds; and (C) A frontal area of less than 46 square feet. (g) Exceptions to the Rule are: (A) Motorcycles; (B) Any vehicle sold for scrap or parts if the dealer submits title documents to the appropriate state authority and obtains a salvage certification; and (C) Agricultural equipment. FTC “Dealer's Guide to the Used Car Rule” http://www.ftc.gov/bcp/conline/pubs/buspubs/usedcarc.htm FTC consumer guide to “Buying a Used Car” http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut03.shtm [Publications: Publications referenced are available from the agency.]