WASHINGTON, D.C. – The U.S. House of Representatives Committee on Energy and Commerce’s Subcommittee on Consumer, Trade and Consumer Protection held a hearing March 5 to discuss “Consumer Protection in the Used and Subprime Car Market.”
The Honorable Bobby Rush (D-Ill.), chairman, said in his opening remarks, “While the mortgage and home foreclosure crisis has garnered much deserved attention in Congress and in the media, there has been much less focus on similar problems in the purchase of automobiles … Evidence suggests that fraudulent practices with regard to both the condition and financing of used cars are on the rise. When it comes to the condition of vehicles, consumers are too often unaware of previous damage inflicted on the vehicle.”
Rush specifically mentioned abusive financing schemes and frauds related to the purchase of automobiles and described the National Motor Vehicle Title Information System (NMVTIS), which he said, “will eventually be a very valuable tool to aid consumers in obtaining information about the condition of their vehicles by establishing a database in which states and other stakeholders share their title information.”
Witnesses Eileen Harrington, acting director, Bureau of Consumer Protection, Federal Trade Commission (FTC); James Burch II, acting director, Bureau of Justice Assistance, Department of Justice; Rosemary Shahan, president, Consumers for Automobile Reliability and Safety; and John Van Alst, staff attorney, National Consumer Law Center, testified in support of improving information accessibility and efficiency dealing with automobile titles.
Harrington discussed the FTC’s request for public comments on the effectiveness and impact of the Used Motor Vehicle Trade Regulation Rule (Used Car Rule). The Used Car Rule requires used car dealers to disclose on a window sticker (the Buyers Guide) whether they are offering a dealer warranty, and if so, its basic terms and conditions. Harrington said the results showed that the majority of those surveyed find the Used Car Rule useful as is, while others suggest minor changes to the existing rule.
The FTC believes that an online database such as the NMVTIS is useful, but worries that the “digital divide” – those with convenient access to the Internet vs. those with limited or no access – will perpetuate any potential challenges of the used car market for lower-income families.
