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Understanding the CFPB & FTC

The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are two U.S. federal agencies tasked with protecting consumers from unfair, deceptive, or abusive business practices. In relation to auto dealers, the primary focus of both agencies is to ensure that consumers are not taken advantage of during the car-buying process.


The CFPB was established in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its mission is to promote fairness and transparency in consumer financial markets, including auto lending. The CFPB's jurisdiction over auto dealers is limited, as the agency can only regulate dealers who offer or arrange financing for vehicle purchases.

The CFPB has taken action against auto lenders for discriminatory practices, such as charging higher interest rates to minority borrowers. In 2013, the agency issued guidance to auto lenders encouraging them to take steps to prevent discriminatory pricing. The CFPB also oversees the financing of add-on products, such as extended warranties and gap insurance, to ensure that consumers are not pressured into purchasing these products or charged excessive fees.


The FTC, on the other hand, has broad jurisdiction over auto dealers, regardless of whether they offer financing. The agency enforces consumer protection laws, including the Federal Trade Commission Act and the Truth in Lending Act, which require dealers to disclose key information about the vehicles they sell and the terms of any financing they offer.

The FTC has taken action against auto dealers for a variety of deceptive practices, such as advertising cars at a certain price and then adding on undisclosed fees at the time of sale. The agency has also brought cases against dealers who engage in unfair practices, such as misrepresenting the condition of used cars or failing to honor warranty claims.

In addition to enforcing existing laws and regulations, both the CFPB and the FTC work to educate consumers about their rights when buying a car. The CFPB has created a number of resources to help consumers navigate the car-buying process, including a guide to auto loans and a tool for comparing loan offers. The FTC has also published a consumer guide to buying a new or used car, which includes tips on negotiating with dealers and avoiding scams.


In conclusion, the primary focus of the CFPB and the FTC in relation to auto dealers is to ensure that consumers are treated fairly and that they have the information they need to make informed decisions about their purchases. While the CFPB's jurisdiction is limited to dealers who offer financing, the agency has taken action to prevent discriminatory practices and to ensure transparency in the sale of add-on products. The FTC, with its broader jurisdiction, enforces a range of consumer protection laws and works to educate consumers about their rights when buying a car. Together, these agencies play a critical role in protecting consumers from unfair and deceptive practices in the auto industry.


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