NYC Department of Consumer Affairs Announces Rules to Combat Predatory Practices in the Used Car Industry

NYC Department of Consumer Affairs (DCA) defense lawyer Richard B. Newman reports that the DCA recently announced that all used car dealers in New York City are now required to provide consumers with a Consumer Bill of Rights, a financing disclosure form and a cancellation option. The foregoing must be provided in the language used to negotiate the contract. The new requirements are the result of legislation signed into law last year to combat predatory practices in the used car industry.

“Buying a used car is a major financial commitment,” said DCA Commissioner Lorelei Salas. “By requiring used car dealerships to offer additional disclosures, we ensure that hard-working New Yorkers are able to have a fair and transparent deal when purchasing a car. These rules provide added protections for all consumers, especially those who fall victim to predatory practices.”

Under the new rules, used car dealerships, which DCA licenses, must:

1. Provide consumers with and have them sign the Consumer Bill of Rights. The Consumer Bill of Rights must also be posted in any area or office where consumers negotiate or execute sales contracts;
2. Provide consumers who finance a used car with the Financing Disclosure Form. This disclosure must include the lowest annual percentage rate (APR) offered by any financing company for a loan with the same term, number of payments, collateral, and own payment; and
3. Provide consumers with a Contract Cancellation Option. This allows consumers to cancel the contract within two weekdays, excluding legal holidays, and gives consumers time to review the contract and any financing agreement away from the dealership.

In addition to the NYC DCA, the Federal Trade Commission and the NY Office of the Attorney General have recently focused on rules to help address common deceptive and predatory practices employed by used car dealers, including failing to inform consumers about the financing terms of a deal, deceiving consumers into purchasing a car with expensive “add-on” products that are often misrepresented as “mandatory” to obtain financing, misrepresenting monthly payment amounts to make the car appear cheaper, and failing to disclose dealer rate markups.

“After months of investigation and research led by the Department of Consumer Affairs and the City Council, we passed comprehensive legislation to rein in the predatory aspects of the used auto industry,” said NYC Council Member Rafael Espinal, Chair of the Committee on Consumer Affairs. “I am pleased that DCA continues to prioritize car buyer’s protections and that as our legislation now goes into effect, New York City consumers will be the ones to benefit. I urge prospective buyers to take advantage of the Consumer Bill of Rights, financial disclosure forms and cancellation options to make sure they make the right decisions for themselves and their families.”

“Unscrupulous actors are too common in the used car industry, and when unchecked they take advantage of people dealing with the uncertainty of a purchase,” said NYC Council Member Jumaane Williams. “Years ago, I passed legislation enforcing accuracy in advertising within this industry, in the interest of providing consumers with accurate information. Now, by mandating that those buyers be informed of their rights, those consumers can reclaim further power through information and self advocacy. I want to thank DCA for acting to defend the rights of people who are making this major financial decision. I would also like to thank Council Member Espinal, former Council Member Garodnick for making this issue a priority and championing legislation to that effect.”

The DCA’s efforts include consistently advocating for consumers’ rights and more aggressive laws designed to protect those rights. In fact, last year the DCA charged one of New York City’s largest used car dealerships with deceptive financing and sales practices. The agency has also recently filed charges against multiple used car dealerships in Brooklyn for engaging in deceptive and unlawful practices.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP focusing on local, state and federal advertising and digital media matters. Follow him on Twitter @FTCLawDefense.

Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

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