The American Financial Services Association on June 21 sent a letter to a Congressional subcommittee requesting it consider amending a proposed Federal Trade Commission rule and preserve dealers’ ability to sell consumers protection products for their vehicles.

The trade association sent a letter to U.S. Rep Steve Womack, R-Ark., who chairs the Subcommittee on Financial Services & General Government, asking him to add language to stop the FTC from finalizing or implementing the Motor Vehicle Dealers Trade Regulation Rule.

The rule would limit dealers’ ability to sell consumers add-on protection products such as service contracts, Guaranteed Asset Protection coverage and tire and wheel protection at the time of their car purchase. The rule’s current language would require dealers to disclose accurate pricing in ads and sales discussions, obtain consumers’ consent for add-on charges and keep records of ads and transactions. It also would prohibit sales of add-on products or services that don’t benefit consumers. It is intended to stop deceptive practices at dealerships during the sale, leasing or financing of a car.

In Automotive News‘ 2023 Dealer Outlook Survey, about half of the 179 dealers who responded said they think the FTC’s June proposal around stricter regulation of dealership advertising and finance-and-insurance practices will be a net negative for the industry. Aside from the issue regarding protection product sales, other industry concerns around the proposal include added costs, paperwork, training and time consumers would have to spend at the dealership.

Jean Noonan, a partner with consumer financial services law firm Hudson Cook LLP in Washington, D.C., and former FTC executive, told Automotive News the proposed rule could be ruinous for dealers.

“The FTC has the authority to challenge any unfair or deceptive act or practice,” Noonan said. “What this rule would add to that are potentially ruinous civil penalties of up to $50,000 per violation; it also complicates and lengthens the car purchasing experience for consumers, which is already long enough.”

All dealers would be impacted by the rule despite their current level of compliance, she added.

“Even the best, most compliant dealer in the country would not be in compliance with this rule today; even excellent dealers would have to radically change their processes,” Noonan said.

AFSA also said the FTC, in proposing the rule, omitted the Advanced Notice of Proposed Rulemaking stage of regulation, which it contends is a key step in collecting information from key impacted stakeholders — in this case, the automotive and consumer finance industries. The trade association also said “the FTC lacks sufficient justification, required under the Administrative Procedure Act, for the proposed rule in the first place.”

Ann Harter, AFSA vice president of congressional affairs, said in a written statement: “In addition to the FTC’s inability to recognize the importance of voluntary protection products in automobile purchases, the FTC has neglected to follow the typical regulatory process in implementing the proposed rule.”

The comment period for this proposed rule was 60 days, which is common for a rule considered “routine,” Noonan said, adding: “This rule is far from routine and had no advance warning, and although there were requests for extensions, they were all denied,” she said.