What is Express, Informed Consent Under the FTC CARS Rule?
What exactly is Express, Informed Consent, under the FTC CARS Rule and why is it such a big deal? Let’s start with the definition. The Rule defines Express, Informed Consent as “an affirmative act communicating unambiguous assent to be charged, made after receiving and in close proximity to a Clear and Conspicuous disclosure, in writing, and also orally for in-person transactions, of the following:
(1) What the charge is for; and
(2) The amount of the charge, including, if the charge is for a product or service, all fees and costs to be charged to the consumer over the period of repayment with and without the product or service.”
There’s more to the definition, but let’s pause here for a moment and look at the disclosures necessary to make consent both express and informed. First, the disclosure must clearly state what the charge is for. Easy enough: 6-year/72,000 mile exclusionary coverage vehicle service contract. It’s the second part that causes heartburn: “the amount of the charge, including all fees to be charged over the period of repayment with and without the product or service.”
What this means in practice is that you have to quote each item, whether it be the vehicle itself or a voluntary protection product, at both its agreed-upon price AND the extended price after financing the transaction, if it’s not a cash deal. So, if a VSC cost $2,400 but was financed for 6 years at 9.5%, it would need to be clearly and conspicuously disclosed at both its agreed-upon price, $2,400, and its fully-financed cost, or $3,158. Initially quoting the cost as its impact on monthly payment, and later at the agreed-upon price, as is commonly done today, would not pass muster. And remember, this expanded disclosure must be done for each individual product or service, not in the aggregate.
Let’s continue with the definition of Express, Informed Consent. It goes on: “The following are examples of what does not constitute Express, Informed Consent:
(i) A signed or initialed document, by itself;
(ii) Prechecked boxes; or
(iii) An agreement obtained through any practice designed or manipulated with the substantial effect of subverting or impairing user autonomy, decision-making, or choice.”
FTC CARS Rule Challenges and Best Practices:
Let’s dispense with the last item first: no one supports bullying customers into agreeing to buy something against their will. Please.
But the first example of what doesn’t constitute Express, Informed Consent is a problem. When I went to law school, signing a document created a rebuttable presumption that the customer has read the document, understood it, and agreed to be bound by its terms. But now, 1,000 years of contract jurisprudence has been set on its head, and only for cars and light trucks. Signing on the dotted line is no longer enough, but what is? The CARS Rule doesn’t say. Another signed document? But signatures aren’t enough. What constitutes “enough”? A DNA sample? Again, we don’t know.
A summary document, describing and disclosing every item for which the customer is charged, is a logical step but one, given the Rule’s own terms, should itself be inadequate.
Another step dealers could take in self-defense is recording or auditing every transaction to be able to demonstrate Express, Informed Consent was obtained. This is itself a big topic, and one we will address in the near future. For now, keep on doing things right: be transparent, be fair, and treat your customers with respect. Once the litigation surrounding the CARS Rule is resolved, we’ll be back with guidance on how to comply with I, including its requirement for Express, Informed Consent.