Last spring advocates for the auto dealer industry fought to exclude auto dealers from the oversight of the Consumer Financial Protection Bureau, created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. And in July, when that legislation was signed into law, advocates claimed a major victory. They pointed to a small section of the legislation that exempts from the new regulatory body those auto dealers that do not make or broker their own loans.

The Federal Trade Commission, however, is pointing to that same section as the reason behind a possible increase in its authority over auto dealers and how they do business. In recent comments at an American Bar Association meeting, Joel Winston, the Director of the Division of Financial Practices within FTC’s Bureau of Consumer Protection, noted that the Dodd-Frank bill “appears to give us very broad authority over the auto dealer industry.” He said that the FTC has put together a group to study this new authority and to determine how it should be applied.

The FTC oversight of auto dealers is nothing new. The FTC currently has authority over the financial and advertising practices of dealers. Historically, however, the procedures associated with rulemaking process meant that it could take up to ten years for the FTC to broadly exercise that authority. The Dodd-Frank legislation will significantly ease that process. Rather than a ten year process to enact a rule, the revised process could result in new rules and regulations being published and enforced by the FTC within a year’s time.

In the past, the FTC noted that the difficult regulatory process prevented the agency from pursuing areas the agency identified as problems and over which it had authority. Simplifying the rulemaking process could expose dealers to more significant and onerous regulation – exactly what dealers hoped to avoid in fighting for an exemption from the Consumer Financial Protection Bureau.

The additional power granted to the FTC to regulate dealers under the Dodd-Frank Act could have real impacts on how dealers do business. Arent Fox is closely monitoring this matter and will share additional information as it becomes available.