Don't Ask - Don't Tell, Buyer Beware, And The Little Old Lady From Pasadena: Outmoded Concepts In Automobile Sales
By E. L. Eversman, Esq.
As consumers, we live in a progressive era in which we are legally entitled to make purchases in an informed manner. As the U.S. Federal Trade Commission Consumer Protection website states, "Education is a key tool to prevent consumer injury." We have the Federal Trade Commission Act, Uniform Commercial Code, the Uniform Deceptive Trade Practices Act, the Magnuson-Moss Warranty - Federal Trade Commission Improvements Act, the Consumer Leasing Act, and state statutes addressing consumer fraud, consumer sales, and lemon laws to name a few. The Uniform Acts are prepared and presented by the National Conference of Commissioners on Uniform State Laws encouraging each act's adoption by the states and territories of the United States. Unless adopted by the individual states, the Uniform Acts are not "law" capable of enforcement but serve as a persuasive guide.
Deceptive and Unfair Trade Practices
In the United States, the Federal Trade Commission (FTC) is charged with the responsibility for prohibiting "unfair" and "deceptive" trade practices. 15 U.S.C. § 45. This responsibility, however, does not preclude states from enacting their own consumer protection laws and policies, provided they do not conflict with any practice or area over which the FTC has joint or exclusive jurisdiction. Definitions of what constitutes an unfair or deceptive practice vary across jurisdictions, but the definitions utilized by the FTC and in the Uniform Deceptive Trade Practices Act (UDTPA) give an idea of the types of activities for which a seller can be held liable.
Under the UDTPA, §2(6), it is a deceptive trade practice to represent that "goods are original or new if they are deteriorated, altered, reconditioned, reclaimed, used, or second-hand". Using the UDPTA's description, any vehicle which has been damaged, altered, or not maintained, even if it never left a dealer's lot, could be could be argued to be used for purposes of consumer protection actions. This raises a variety of questions. What about adding stripes or aftermarket parts, installing a CD player, or adding keyless entry? Do these actions really mean that a vehicle is no longer new? While this description sounds completely unreasonable in the current world of automotive sales, to be fair, the UDTPA has been in existence for decades and it was actually revised in 1966. National Conference of Commissioners on Uniform State Laws archives.
The FTC, however, defines a used vehicle as "any vehicle which has been driven more than the limited use necessary in moving or road testing a new vehicle prior to delivery to a consumer . . ." 16 C.F.R. § 455.1(d)(2). This definition may surprise many dealers because they rely on licensing statutes where most states differentiate "new" verses "used" motor vehicles on the basis of titling. Based on state titling laws, until a vehicle is titled in the name of a consumer or end-user, it is considered "new", irrespective of the number of miles it has been driven. Unfortunately, that does not also mean that it is considered "new" for purposes of defining unfair or deceptive trade practices under either state or federal law.
Demonstrator Models?
What about demonstrator models? In publishing its analysis of public comments on the compliance guidelines for the Used Car Rule, according to the FTC, a demonstrator model is a used car, at least for purposes of displaying a Buyer's Guide. FTC Analysis of Public Comments. State law may also designate a dealer's failure to disclose to a consumer, in writing, that a vehicle has been a demonstrator model to be a deceptive trade practice. See e.g., Ohio Administrative Code § 109:4-3-08(D). Likewise, most states require dealer's to disclose to consumers previous damage to a vehicle over a certain percentage of the manufacturer's suggested retail price (6% is common) or in excess of a specific dollar amount ($300, $600 are common), and a failure to make that disclose is a deceptive trade practice.
Common Law Fraud
I'm not a dealer and I am selling my car in the newspaper. I don't have to tell anyone that it was damaged and repaired, do I? In short, yes, you do - as much for your own self-interest as for any potential buyer. Many people are misled by the idea that, if they are not car dealers, they can misrepresent or fail to disclose important facts about a vehicle, of which they are aware, without any repercussions. That simply is not true, and, while there may be no state or federal statute or agency rule prohibiting private persons from making misrepresentations or failing to disclose a vehicle's condition, a buyer still has resort to an action for common law fraud.
The "common law" is the body of principles and rules based on usage and custom and are pronouncements of law from judicial decisions, in contrast to legislative enactments. At common law, a person can be liable for misrepresenting a fact or suppressing the truth when the information would be important to a reasonable person. Of course, this is a simplified description of fraud, and for information about definitions and legal actions relating to fraud, try Findlaw.
Dealers can also be sued under theories of common law fraud, so it is important for them to keep an eye on their overall trade practices. It is simply unwise to misrepresent or fail to disclose material information about a vehicle whether you are selling it as a dealer or as a private person. With the proliferation of information available today about vehicles, how long do you really think it will be before an angry buyer sues you for taking money and allowing him/her to believe the vehicle was something it was not? The best insurance you can ever get is disclosure - and that will save you money, time, and aggravation in the long run.
E. L. Eversman
State specific consumer protection information available from the federal government. The Consumer Action Website
The information provided in this column is for information purposes only and should not be construed as legal advice. You should always consult an attorney licensed to practice in your Country, State, and/or Territory as laws vary from Country to Country, State to State, and Territory to Territory. The author is delighted to share information but cannot be responsible for damage or adversity encountered by reliance upon that information and urges you to consult with local counsel.
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