Agency Information Collection Activities; Submission for OMB Review; Comment Request

AGENCY:

Federal Trade Commission (“Commission” or “FTC”).

ACTION:

Notice.

SUMMARY:

The FTC plans to conduct a qualitative survey of consumers who recently purchased an automobile and financed that purchase through a dealer. Through a survey research firm, the FTC seeks to interview consumers about the consumers' experience in selecting, purchasing, and financing an automobile from a dealer. The interviews also will involve reviewing the consumer's documentation from the purchase and financing. This is the second of two notices required under the Paperwork Reduction Act (“PRA”) in which the FTC seeks public comments on its proposed consumer research. The proposed information collection described below will be submitted to the Office of Management and Budget (“OMB”) for review, as required by the PRA.

DATES:

Comments must be received on or before October 14, 2016.

ADDRESSES:

Interested parties may file a comment online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Write “Auto Buyer Consumer Survey, Project No. P154800” on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/autobuyersurveypra2,, by following the instructions on the web-based form. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex J), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT:

Carole Reynolds, 202-326-3230, or Teresa Kosmidis, 202-326-3216, Division of Financial Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW., Mail Stop-CC-10232, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

For many consumers, aside from housing costs, a car purchase is their most expensive financial transaction. With prices averaging more than $34,000 for a new vehicle and $20,000 for a used vehicle from a dealer, most consumers seek to finance the purchase of a new or used car. Consumers may seek financing from their local bank or credit union, as well as from the dealer selling the vehicle. Financing obtained at the dealership, whether it is provided by a third party or directly by the dealer, may provide benefits for many consumers, such as convenience, special manufacturer-sponsored programs, access to a variety of banks and financial entities, or access to credit otherwise unavailable to a buyer. Financing that is offered or arranged by dealers, however, can be a complicated, opaque process and potentially involve unfair or deceptive practices.

As the nation's longstanding consumer protection agency, the Commission is committed to protecting consumers in connection with auto-related transactions. The Commission has broad authority to protect consumers in this area. The agency enforces the FTC Act, which prohibits unfair and deceptive practices by a wide variety of entities, including automobile dealers. Also pursuant to the Dodd-Frank Act, the FTC is authorized to prescribe rules under Section 553 of the Administrative Procedure Act (“APA”) with respect to unfair or deceptive acts or practices by motor vehicle dealers.

In recent years, the FTC has been particularly active in enforcement and other initiatives related to automobile transactions. Since 2011, the FTC has brought more than 25 cases protecting consumers in this area, including a sweep of ten actions against automobile dealers for deceptive advertising, and a coordinated federal-state effort that yielded more than two hundred automobile actions for fraud, deception, and other illegal practices. In 2011, the FTC conducted three automobile “roundtables” around the country, where panelists from government, consumer advocacy groups, and industry discussed consumer protection issues related to sales, financing, and leasing practices involving automobiles; the Commission also sought and received public comments on these issues. Additionally, the FTC has produced many consumer education and business education materials related to automobile purchasing and financing.

The FTC's proposed survey will explore in more detail the experience of actual consumers who recently purchased and financed an automobile from a dealer. The survey is intended to inform the Commission about current consumer protection issues that may exist and that could be addressed through FTC action, including enforcement initiatives, rulemaking, or education.

II. The FTC's Proposed Study

A. Study Description

The FTC plans to conduct a qualitative survey of consumer experiences in recent purchases of automobiles that were financed through automobile dealers. The survey will involve an initial sample of five in-person consumer interviews to test the survey questionnaire, followed by in-person interviews of 40 consumers, with the option to interview 40 more, if the FTC deems the additional interviews likely to be helpful. For the initial 40 consumers, the FTC seeks to interview approximately 20 consumers who have “prime” or “above subprime” credit scores and approximately 20 consumers who have “subprime” credit scores in order to learn about the consumer's experience with purchasing and financing in these two market segments. Generally, the sample group of consumers will be racially diverse and will include participants of both sexes. The contractor also generally will strive to obtain a mix of ages and income levels, as well as a mix of consumers who purchased and financed a vehicle from franchise, independent, and buy here pay here dealers. The FTC has contracted with Shugoll Research, Inc. (“Shugoll”), a consumer research firm located in metropolitan Washington, DC, with substantial experience conducting consumer surveys, to locate the participants, conduct the survey, and write a brief methodological report and any other report if requested by the FTC. Shugoll will select the consumers from a pool of people who previously have indicated that they are willing to participate in surveys but who have not participated in any in-depth survey interviews in the past year. Shugoll will identify interview participants who have purchased an automobile, from a dealer in the greater Washington, DC metropolitan area, in the previous six months, and used financing offered or arranged by the dealer to make the purchase. The participants also must have kept the documentation (e.g., credit contract) he or she received as part of the purchase and financing. The consumer's credit score will be used in the survey; if survey participants do not have their credit score, the consumer may obtain it through services that provide this information and provide documentation of the score to Shugoll. The interview participants and their personal identifying information will be anonymized in material received by the FTC, and will be vigorously protected by the survey firm.

Shugoll will conduct interviews lasting approximately 90 minutes with each consumer. The interviews will focus on, among other things:

• The consumer's experience in shopping for and choosing an automobile;
• the process of agreeing to a price for the automobile;
• the process of trading in the consumer's used automobile, if applicable;
• the consumer's experience in obtaining financing, and discussion of any GPS or tracking device installed in connection with the financing;

• additional products or services the dealer may have offered;
• contracts and post-purchase experience, such as that related to review and signing of paperwork;
• other points raised by the consumer about the process; and

• the consumer's overall perception of the purchase experience.

The interviews will conclude by reviewing the consumer's documentation and exploring the consumer's understanding of that documentation. The walk-through of the consumer's documents will include:

• The consumer's overall understanding of the documents;
• a review of the available documents;
• a review of the terms of the deal;
• the consumer's views of the documents and terms;
• discussion of any other documents; and
• other points raised by the consumer about the documents.

Participation in the survey will be voluntary. While the results will not be generalizable to the U.S. population, the Commission believes that they can provide useful insights into consumer experiences and understanding of the automobile purchasing and financing process at the dealership.

B. PRA Burden Analysis

In its January 7, 2016 Notice, the FTC provided PRA burden estimates for the proposed research. Staff believes that these estimates generally remain applicable and appropriate for the survey; however, as noted below, staff has adjusted certain aspects of the estimates after consultation with the contractor for the study.

A. Estimated number of respondents: 170.

B. Burden Hours: 367 hours.

C. Labor Costs: Negligible.

More specifically, staff estimates that the contractor's preliminary review of consumers to select for the survey would involve no more than 170 consumers (at most twice the maximum number of consumers—85—that would be involved in the survey).

The estimated hours are a total of the time for preliminary review, the pretest, the interviews, and obtaining credit scores. The preliminary review will include topics such as whether the consumer has recently purchased a car and has participated in a survey in the past year, as well as the consumer's self-identified race and origin. This review, done by phone, could require no more than 12 minutes per consumer, for 34 hours (170 respondents × 12 minutes). Staff also estimates that at most, each of the 170 consumers would take approximately 30 minutes to locate or ascertain whether they have their documentation and their credit score for the survey, for 85 hours. Thus, the preliminary review total would be 119 hours.

Staff will pretest the questionnaire and interview materials with approximately five respondents to ensure that questions are easily understood. Based on further FTC staff discussions with the contractor, the survey will involve three additional backup consumers to be available in the event that any of the five scheduled respondents do not show up for the pretest. Staff estimates that each interview (including the documentation review) will take approximately 90 minutes, and 60 minutes travel time to and from the survey. Allowing for an extra ten minutes for questions unique to the pretest, the pretest will total approximately 19 hours (5 respondents × 160 minutes each for the pretest, plus 3 backups × 60 minutes travel time per backup, plus 2 (of the 3) backups × 100 minutes of maximum wait time per backup).

Once the pretest is completed, the initial 40 interviews, including travel, will cumulatively total an estimated 108 hours: 60 hours for the interviews (i.e., 40 interviews at 90 minutes each) plus 40 hours travel time to and from the interview facility for the 40 participants, cumulatively, plus eight additional hours, cumulatively, for eight additional participants' travel time to and from the interview facility as potential replacements for possible no-show participants. If an additional 40 consumers are interviewed, that will require an additional 108 hours, for the same reasons as above. Thus, for the interviews of 80 consumers, including travel time for 16 backup consumers, staff estimates that 216 hours will be required (80 respondents × 150 minutes each plus 16 backup consumers × 60 minutes each).

Staff further estimates that approximately 75%, or 78, of the 85 survey participants and 19 backups who are potential participants (three pretest backups and 16 interview backups), for both pretest and interviews, do not already have their credit score and thus will procure it through the services that provide this information. Staff estimates that ten minutes per consumer will be required for this purpose, for a total of 13 hours (78 respondents × 10 minutes each).

Thus, the FTC's survey will require 367 hours (119 hours for preliminary review + 19 hours for pretest + 216 hours for interviews + 13 hours for obtaining credit scores). The monetary cost per respondent should be negligible. The consumers who participate will already have or will obtain their credit score and provide documentation of that information to Shugoll. Costs to obtain their credit score should be nil or negligible. Increasingly, Web sites offer free credit scores; additionally, credit score information often is available to consumers through credit sources they already have access to, such as credit card or other credit statements, in some cases.

Shugoll will pay respondents (including regular participants and backups) a reasonable and customary financial incentive for participation. Participation will not require start up, capital, or labor expenditures by interview participants.

III. Analysis of Comments

In response to the January 7, 2016 Notice, the Commission received 17 germane comments regarding the proposed collection of information.

A majority of the commenters supported the need for the FTC's proposed study and/or recognized the importance of the topics and area to be studied, and suggested what they view as improvements or specific issues for the proposed study. Three comments questioned the need for the survey in view of the FTC's prior auto activities and/or raised questions about the purpose or objectivity of the survey.

Center for Responsible Lending, National Council of La Raza, Americans for Financial Reform, Consumer Action, Consumers for Auto Reliability and Safety, NAACP, National Association of Consumer Advocates, National Consumer Law Center, National Urban League, Public Citizen, and U.S. PIRG: This joint comment by 11 broad-based national consumer groups applauded the FTC for proposing a survey to explore issues in auto purchasing and financing. They noted the FTC's roundtables examined issues that persist in auto financing today, on which the interviews will shed additional light and serve to probe for information about consumers' treatment and experience. They noted that the information should help shape enforcement and regulatory efforts. They suggested that the survey size be increased to 80 consumers with an option for more consumers. They also suggested that Buy Here Pay Here (“BHPH”) dealers be addressed separately, through 10-20 additional interviews exclusively focused on BHPH consumers. Finally, they suggested various survey questions or topics, including but not limited to those involving “yo yo financing scams” and add-on products or services. As noted above, the survey plan has an option for an additional 40 consumers. The FTC believes this size will provide useful information in this qualitative survey, about consumers' experiences and issues in the auto purchase and financing area. The information gleaned from this survey will help the agency prioritize subsequent initiatives to protect consumers in auto-related transactions, including selecting strategic areas of focus for enforcement, rulemaking, or education. The FTC appreciates the commenters' suggestions of topics and questions, and believes that the topics it has identified for the survey cover areas that will enable consumers to address broadly their experiences, including those noted in the comment such as occurrences after the contract is signed and add-on products or services.

National Association of Consumer Advocates (“NACA”): This consumer interest group supported a well-executed survey aimed at uncovering important data to assist the FTC in monitoring the marketplace and curbing unfair and deceptive practices in auto sales and lending. The group suggested that the survey should be large enough to provide an accurate representation of the population. It agreed with the FTC approach to obtain experiences from different populations and encouraged the FTC to include Native Americans, non-English speakers and military members. The FTC notes that this survey is not intended to be representative of the full population; one of its aims is to help the agency shape strategic priorities, including whether follow-on surveys studying particular segments of the population more in-depth should be among the agency's next priorities. However, the survey will be racially diverse and include participants of both sexes; the survey will strive to be inclusive, and respondents' characteristics will in part depend on consumers who participate in the survey. Finally, the suggested topics and questions provided by NACA fall within the survey topic areas and may be addressed depending on experiences that participants may have encountered.

National Automobile Dealers Association (“NADA”): NADA raised questions about the purpose, necessity, and methodology of the survey. NADA stated that the Commission already conducted a broad examination of the same questions and developed a record that obviates the need for further examination of this matter, through its roundtable discussions and related comments received through May 2012. It also stated that the FTC does not cite complaint data or data from another source that supports the exercise, that the FTC requested data demonstrating that prevalent abuses exist in the auto industry but received none, and that the FTC overlooks credible quantitative surveys that have been conducted finding a high level of consumer satisfaction, which NADA references in its comment. NADA also provided comments on survey methodology, including asking how the Commission will control for respondent fatigue during the survey; what questions will be asked of consumers and how the Commission will control for interviewer influence; how the Commission will be aided by anecdotal results; how it will control for limits of location research facilities; how it will control for survey respondent characteristics that may not be representative of the consumer population, and control for different attitudes and experiences over time; and whether it will include key analytical variables with only 40 respondents. It also asks about pre-set review criteria for documentation review, asks how the Commission will determine whether to go beyond the initial 40 consumers, and requests that the Commission make available the full methodological report or other written report, and identify additional stages that the Commission will conduct.

The FTC's work since 2011 demonstrates, rather than obviates, the need for further examination of consumer protection issues in the auto marketplace. During the 2011 roundtables, with comments through May 2012, participants raised various auto purchase and lease issues. Since that time, the FTC has brought more than 25 auto dealer cases, many focusing on issues that became known in the roundtables, including misrepresentations in auto dealer advertisements about payments and rates; issues related to negative equity; add-ons; and many others. Despite these public law enforcement actions, there has continued to be illegal conduct in the auto marketplace, often involving the same or similar conduct as the conduct challenged in prior actions. This persistent conduct indicates that additional measures are necessary, including to study consumer experiences and help determine additional ways to protect consumers in auto transactions.

The proposed survey is expected to provide in-depth information about consumer protection issues that could be addressed through FTC initiatives, including enforcement, rulemaking, or education. The survey will focus on learning directly from consumers their specific experiences through the entire purchase and financing process, and will include a review of their documents, as opposed to hearing about more general experiences from the perspective of the auto industry, consumer advocates, and regulators, as the roundtables did. While the latter stakeholders' perspectives are certainly important, it is also critical to hear from consumers themselves.

As the proposed survey is qualitative, the results will not be interpreted as quantitative measures of prevalence of practices. A qualitative survey facilitates an understanding of the nuances of consumer comprehension and thought-processes in the complex task of vehicle purchasing and financing. The proposed survey focuses expansively on consumers' experiences at the dealership in car purchasing and financing, and the interviewer will avoid suggesting particular problems. There is no indication that respondent fatigue will impede consumers in their ability to describe their own experiences, which they will do on a voluntary basis. Only consumers who purchased a car within the past six months will be involved, which is a recent timeframe. The Commission cannot state for now whether it would go beyond the initial 40 consumers in the survey, which may, in part, be contingent on the time required for that first segment. The FTC has not determined whether it will publish a report on the survey results. Finally, the information obtained by the FTC through the survey could support or be useful in various initiatives for this important area, such as enforcement, rulemaking, or education.

American Financial Services Association and Consumer Bankers Association: These groups supported the general professionalism of the FTC's work and its research staff. However, they expressed concern about possible bias, based on references about potentially “unfair or deceptive practices” in the January 7, 2016 Notice, and they noted that the FTC previously had three roundtables and “did not find any problems with the selling, financing, or leasing of motor vehicles.” The comment also expressed a preference for separating research from enforcement and for removing all identifying information about dealers and financiers from the survey. The comment stated that the survey size is too small, making an analysis for statistical trends impossible; inquired about the questions to be asked; expressed the need to avoid interviewer steering of respondents; and encouraged the survey to focus on third party financing at a bank or credit union. Finally, it provided various questions, including about: The reason for the project, additional phases of the project, issues for consideration, the purpose of the documents, the reason for diversity in the respondents, and how results of the project will be distributed.

The FTC is charged with enforcement of numerous statutes, as noted in the January 7, 2016 Notice, including protecting consumers against unfair or deceptive conduct, in violation of Section 5 of the FTC Act; this focus was also noted in the FTC's announcements regarding its auto roundtables. The FTC has brought more than 25 enforcement actions, which specifically address such alleged conduct, as well as other alleged violations of federal laws and regulations related to automobile sales and financing. It is erroneous to state that the FTC has found no problems in this area; indeed, it has found many diverse problems affecting consumers at auto dealerships, and has been bringing enforcement actions repeatedly since that time to address them, as described in the prior Notice and as available at its Web site at https://www.ftc.gov.

The purpose of the survey is to explore broadly consumers' experiences in the purchase and financing process of their automobiles; as indicated, no decision has been made about what initiatives would be appropriate as an outgrowth of the process because the survey itself has not occurred. As noted above, the survey is qualitative; therefore, its size or structure is not designed to be representative of the population. Steering of respondents will be avoided; the survey is broadly explorative of the auto buying and financing process and consumers' experiences at the dealership. Additional information about survey topics, including about the review of consumers' documents, appears above. The survey focuses on entities and activities over which the agency has jurisdiction, namely auto dealerships and their financing practices—not third party financing from banks (or federal credit unions) over which the FTC does not have jurisdiction. The survey will be racially diverse and include participants from both sexes—as these various consumers may offer information about differing experiences at dealerships where consumers have purchased and financed vehicles. The results of the study will be used to inform and provide insights to the FTC regarding consumer understanding of the automobile purchasing and financing process at the dealership. The FTC has not determined whether it will publish a report on this matter.

National Independent Dealers Association (“NIADA”): This organization stated that the survey's results will not be generalizable to the U.S. population, and thus it does not believe its costs are warranted. The comment stated that the survey was duplicative of the prior FTC roundtables. As noted above, the survey will be qualitative, and is not duplicative of prior roundtables because it focuses on consumers' individual experiences and the process of purchasing and financing automobiles at dealerships, including through a review of their documents. Thus, the survey will provide new information in this area, which involves a significant and costly financial transaction for most consumers. The FTC believes the information will be useful to the Commission, as it continues striving to address issues in the important area of auto purchases and financing at dealerships.

Syracuse University School of Law Legal Clinic: This comment provided information regarding problems affecting consumers in the auto financing area, and suggested that regulation in this area would protect consumers. It stated that dealers use high-pressure tactics to force people into vehicles they cannot afford, that some vehicles involve warranties and other costly additional items, and that dealers routinely falsify documents to finance the deals. The comment provided several examples of consumers who have experienced specific problems with auto dealerships. The FTC appreciates this information, as it is helpful to know about issues in the marketplace given that we are focused on protecting consumers in this area.

Eleven Additional Individuals: Each of these comments raised specific problems that the individuals or consumers, or others for whom they provided the FTC information, had encountered with auto dealerships. They described a variety of problems that the consumers experienced, including but not limited to: Changing offers at the dealership for financing after the consumer had responded to a specific ad; dealers that sold cars on terms beyond the consumers' circumstances or ability to pay; dealerships that convinced the consumer to accept dealer-financing that was later declined to be finalized; misrepresentations by dealers to sell vehicles; dealer financing of “back-end products” like warranties, GAP policies and wheel protection; and problems in used car sales and trade-ins. The FTC appreciates this information regarding specific issues consumers face in the auto buying marketplace because we are focused on protecting consumers in this area.

IV. Request for Comment

Pursuant to the OMB regulations, 5 CFR part 1320, that implement the PRA, the Commission is providing this second opportunity for public comment. In addition to inviting comment on the practical utility of the proposed survey, accuracy of the FTC's associated PRA burden estimates, ways to enhance the information to be collected and to minimize burden, the FTC seeks comments on the proposed survey methodology and specific issues or questions that should be included in the interview process.

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before October 14, 2016. Write “Auto Buyer Consumer Survey, Project No. P154800” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including to the extent practicable, on the public Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to remove individuals' home contact information from comments before placing them on the Commission Web site.

Because your comment will be made public, you are solely responsible for making sure that your comment does not include any sensitive personal information, like anyone's Social Security number, date of birth, driver's license number or other state identification number or foreign country equivalent, passport number, financial account number, or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, like medical records or other individually identifiable health information. In addition, do not include any “[t]rade secret or any commercial or financial information which is . . . privileged or confidential,” as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do not include competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

If you want the Commission to give your comment confidential treatment, you must file it in paper form, with a request for confidential treatment, and you have to follow the procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c). Your comment will be kept confidential only if the FTC General Counsel or the General Counsel's designee grants your request in accordance with the law and the public interest.

Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at https://ftcpublic.commentworks.com/ftc/autobuyersurveypra2,, by following the instructions on the web-based form. When this Notice appears at https://www.regulations.gov/#!home,, you also may file a comment through that Web site.

If you prefer to file your comment on paper, write “Auto Buyer Consumer Survey, Project No. P154800” on your comment and on the envelope and mail or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex J), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service.

Comments on the information collection requirements subject to review under the PRA should also be submitted to OMB. If sent by U.S. mail, they should be addressed to: Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for the Federal Trade Commission, New Executive Office Building, Docket Library, Room 10102, 725 17th Street NW., Washington, DC 20503. Comments sent to OMB by U.S. postal mail, however, are subject to delays due to heightened security precautions. Thus, comments instead should be sent by facsimile to (202) 395-5806.

Visit the Commission Web site at http://www.ftc.gov to read this Notice and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before [30 days from Federal Register date of publication]. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see http://www.ftc.gov/ftc/privacy.htm.