Auto Buyer Survey SS 9-12-16 fin

Supporting Statement for a Paperwork Reduction Act
Survey of Consumers’ Automobile Purchases and Financing at Dealerships
OMB Control No. 3084-NEW
A. JUSTIFICATION
(1)

Necessity for Collecting the Information

The study will provide Federal Trade Commission (“FTC” or “Commission”) staff with
information about consumer participants’ experiences in the automobile (car, minivan, SUV, and
light truck) buying and financing process at dealerships. For many consumers, aside from
housing costs, a car purchase is their most expensive financial transaction. Prices now average
more than $34,000 for a new vehicle and $20,000 for a used vehicle from a dealer, and most
consumers seek to finance the purchase of a new or used car.1 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.
However, financing offered or arranged by dealers can be a complicated, opaque process and
potentially involve unfair or deceptive practices. The FTC has broad authority to protect
consumers and responsibility for enforcing a variety of consumer protection statutes and
regulations for a wide variety of entities including automobile dealerships. These requirements
include the FTC Act, which prohibits unfair and deceptive practices, and many other federal
statutes and regulations that impact the auto purchase and financing process.2 In recent years, the
FTC has been particularly active in enforcement and other initiatives related to automobile

1

As of December 2015, the average price of a new car sold in the U.S. was $34,428, according to Kelley Blue
Book. See Kelley Blue Book, Record New-Car Transaction Prices Reported In December 2015, According to
Kelley Blue Book (Jan. 5, 2016), available at http://mediaroom.kbb.com/record-new-car-transaction-pricesreported-december-2015. The average price of a used car is $20,057. See Used Car Prices Hold Up in Strong NewVehicle Market), J.D. Power (Sept. 8, 2015), available at http://www.jdpower.com/cars/articles/used-cars/used-carprices-hold-strong-new-vehicle-market. Used cars available from independent dealers and from “buy here pay here”
dealers have been lower in price. For example, in 2014, over 42% of cars were sold at an average sales price of
$5,000 - $10,000 at independent dealers; the average cost of cars was $7,150 at “buy here pay here” dealers. See
2015 NIADA Used Car Industry Report, at 6 and 16, respectively, available at
http://www.niada.com/publications.php.
2

15 U.S.C. § 45(a). The Commission also has enforcement authority over automobile dealers under various other
statutes, including, for example, the Truth in Lending Act, 15 U.S.C. §§ 1601-1666j, and its implementing
Regulation Z, 12 CFR Part 226, 12 CFR Part 1026; the Consumer Leasing Act, 15 U.S.C. §§ 1667-1667f, and its
implementing Regulation M, 12 CFR Part 213, 12 CFR Part 1013; the Equal Credit Opportunity Act (ECOA), 15
U.S.C. § 1691f, and its implementing Regulation B, 12 CFR Part 202, 12 CFR Part 1002; the Electronic Fund
Transfer Act, 15 U.S.C. §§ 1693-1693r, and its implementing Regulation E, 12 CFR Part 205, 12 CFR Part 1005;
and the privacy and safeguard provisions of the Gramm-Leach Bliley Act, 15 U.S.C. §§ 6801-6809, and related
privacy rule, 16 CFR Part 313, and safeguards rule, 16 CFR Part 314. The FTC is also authorized to prescribe rules
under Section 553 of the Administrative Procedures Act, 5 U.S.C. § 553, with respect to unfair or deceptive acts or
practices by motor vehicle dealers, pursuant to the Dodd-Frank Act. See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Section 1029, 12 U.S.C. § 5519.

transactions, and since 2011, brought more than 25 cases protecting consumers in this area.3 The
FTC has also produced many consumer education and business education materials related to
automobile purchasing and financing.4
The proposed survey will explore in more detail the experience of actual consumers who
recently purchased and financed an automobile from a dealer, including through a review of the
consumer’s documents from the transaction. The survey is intended to inform the Commission
about current consumer protection issues that may exist and could be addressed through FTC
action, such as enforcement, rulemaking, or education initiatives. These are core aspects of the
FTC’s consumer protection mission.
(2)

Use of the Information

The FTC plans to conduct a qualitative survey of consumer experiences in recent
purchases of automobiles that were financed through automobile dealers. This will involve both
a discussion of the consumer’s experience with the auto purchase and financing process, and a
walk-through of the consumer’s documents related to the process. All participation will be
voluntary. While the results will not be generalizable to the U.S. population, they will provide
useful insights into consumer understanding of the process at the dealership and the consumer’s
related documents. The FTC has contracted with Shugoll Research, Inc. (“Shugoll”), a
consumer research firm with substantial experience conducting consumer surveys, to locate the
participants, conduct the survey, and write a brief methodological report and other report as
requested by the FTC.
(3)

Consideration of the Use of Information Technology to Reduce Burden

The proposed survey will use consumer interviews, including a review of each
consumer’s documents, to learn about their recent car buying and financing experience at the
dealership. Because this is a qualitative survey that will involve the consumer’s discussion of
their experiences pertinent to the dealership, including a walk-through of his or her documents,
the participants need to be physically present for the interviews.

3

See generally https://www.ftc.gov/news-events/media-resources/consumer-finance/auto-marketplace.
See, e.g., Understanding Vehicle Financing (revised January 2014), produced in cooperation with the American
Financial Services Education Foundation and the National Automobile Dealers Association, available at
http://www.consumer.ftc.gov/articles/0056-understanding-vehicle-financing; Lesley Fair, FTC, Operation Ruse
Control: 6 tips if cars are up your alley (Mar. 26, 2015), available at https://www.ftc.gov/newsevents/blogs/business-blog/2015/03/operation-ruse-control-6-tips-if-cars-are-your-alley; Colleen Tressler, FTC,
Check out the auto dealer and financing before you sign (Oct. 31, 2014), available at
http://www.consumer.ftc.gov/blog/check-out-auto-dealer-and-financing-you-sign.
4

2

(4)

Effort to Identify Duplication

The proposed survey does not duplicate current or previous collections. Neither the FTC
– nor others that the FTC has found – have conducted a qualitative survey of the consumers’
experience in purchasing and financing a vehicle at the dealership, including review of their
documents. The auto “roundtables” that the FTC conducted in 2011, and related comments that
were submitted, addressed various issues at a high level, including those raised by organizations
that work in the auto area, such as consumer groups, trade associations, state enforcement
agencies, and others. However, these roundtables did not provide an in-depth review of specific
consumers’ experiences in the full purchase and financing process at the dealership, nor did they
involve a walk-through of the consumers’ documents. In addition, the research cited by the
National Automobile Dealers Association in its public comment pertained to generalized
statements by consumers. The proposed survey here encompasses a broad-based discussion of
the consumers’ individual experiences and information. We know of no other studies that
provide the specific information being sought here. The proposed participant screener that the
contractor will use, and the topics for the interviews (which include the document walk-through),
are being provided to OMB.
(5)

Efforts to Minimize Burden on Small Organizations
Not applicable. Only individual consumers are being surveyed.

(6)

Consequences of Not Conducting the Collection of Information

If this information is not collected, the Commission may lack important information to
address salient consumer issues and to target more effectively future law enforcement, consumer
education actions, or other initiatives, as appropriate. The survey scope and burden has been
reduced as much as possible without sacrificing the value of the information to be collected.
(7)

Circumstances Requiring Collection Inconsistent With Guidelines

The collection of information in the proposed survey is consistent with all applicable
guidelines contained in 5 C.F.R. § 1320.5(d)(2). Part B of this Supporting Statement has further
detail about survey methodology.
(8)

Consultation Outside the Agency
a.

Public Comments

As required by section 3506(c)(2) of the Paperwork Reduction Act (“PRA”), 44 U.S.C.
§§ 3501-3521, the FTC published a notice seeking public comment on the proposed collections
3

of information. See 81 Fed. Reg. 780 (Jan. 7, 2016). In response to the PRA notice, the
Commission received 17 germane comments.5 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
5

The Commission received a total of 23 comments; 17 comments were germane, and are discussed below: a joint
comment from the Center for Responsible Lending, the National Council of La Raza, NAACP and eight additional
national consumer interest organizations (#633-6); the National Association of Consumer Advocates (#633-5); the
National Automobile Dealers Association (#633-4); the National Independent Automobile Dealers Association
(#633-7); a joint comment from the American Financial Services Association and the Consumer Bankers
Association (#633-1); the Syracuse University College of Law, Office of Clinical Legal Education (#633-2); and
11 individuals. The six non-germane comments are duplicates, “test,” or unrelated submissions. Public comments
associated with the matter are available at https://www.ftc.gov/policy/public-comments/initiative-633.

4

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.6
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;7 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.8 Since that time, the FTC has brought more than 25 auto dealer cases, many
6

Depending on the consumers who participate, it is additionally possible that participants with Native American
heritage and those with military backgrounds could be included. However, including non-English speakers in the
survey would require translators to be available for many potential languages and dialects, for possible participants
in the survey. This could vastly increase costs, and create delays during the survey, particularly if the needed
translator was not present. Participation by non-English speakers is beyond the focus of the instant survey.
7

NADA’s comment misstates that the proposed survey is quantitative. See NADA comment at 5. The survey is
qualitative.
8

The roundtables transcripts and videos from all three forums are available at: https://www.ftc.gov/news-

5

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.9 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.10 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.11 The survey will focus on learning directly from consumers their
events/press-releases/2012/02/ftc-continues-seek-public-input-consumer-issues-motor-vehicle; public comments
received in this matter are available at https://www.ftc.gov/policy/public-comments/initiative-369.
9

As also noted in the prior 60-day Federal Register Notice, more information on FTC cases in the auto area is
available at https://www.ftc.gov/news-events/media-resources/consumer-finance/auto-marketplace.
10
For example, in 2012, the Commission settled charges that five dealerships made deceptive claims that they would
pay off the remaining balance on consumers’ trade-ins, no matter what they owed. According to the FTC’s
complaints, the dealers actually rolled the remaining balance (negative equity) into the customers’ new car
financing, or in one instance, required the consumer to pay it out-of-pocket. See In the Matter of Billion Auto, Inc.,
Docket No. C-4356 (May 1, 2012), available at https://www.ftc.gov/enforcement/cases-proceedings/1123209/billion-auto-inc-matter; In the Matter of Frank Myers AutoMaxx, LLC, Docket No. C-4353 (Apr. 19, 2012),
available at https://www.ftc.gov/enforcement/cases-proceedings/112-3206/frank-meyers-automaxx-llc-matter; In
the Matter of Key Hyundai of Manchester, LLC, and Key Hyundai of Milford, LLC, Docket Number C-3358 (May 4,
2012), available at https://www.ftc.gov/enforcement/cases-proceedings/112-3204/key-hyundai-manchester-llchyundai-milford-llc-matter; and In the Matter of Ramey Motors, Inc., Docket No. C-4354 (Apr. 19, 2012), available
at https://www.ftc.gov/enforcement/cases-proceedings/112-3207/ramey-motors-inc-matter. A few years later, the
FTC settled charges that another dealer, among other things, promoted the sale and lease of its vehicles using an ad
that claimed consumers could get out of their current loan or lease for $1, when in fact the dealer rolled the balance
of the prior obligation into the new transaction. See In the Matter of TXVT Limited Partnership, Docket No. C-4508
(Feb. 12, 2015), available at https://www.ftc.gov/enforcement/cases-proceedings/142-3117/txvt-limited-partnershipmatter. In 2013, the FTC settled charges that two auto dealers deceptively advertised the cost or available discounts
for their vehicles. See, e.g., In the Matter of Ganley Ford West, Inc., Docket No. C-4428 (Jan. 28, 2014), available
at https://www.ftc.gov/enforcement/cases-proceedings/1223269/ganley-ford-west-inc-matter, and In the Matter of
Timonium Chrysler, Inc., Docket No. C-4429 (Jan. 28, 2014), available at https://www.ftc.gov/enforcement/casesproceedings/1323014/timonium-chrysler-inc-matter. About a year later, the FTC settled charges that another dealer,
among other things, misrepresented that specific discounts, rebates, incentives or prices were generally available to
consumers, when in fact they were not. See In the Matter of TT of Longwood, Inc., C-4431 (July 2, 2015), available
at https://www.ftc.gov/enforcement/cases-proceedings/152-3047/tt-longwood-inc-matter-cory-fairbanks-mazda.
The FTC has brought multiple other cases addressing deceptive practices by auto dealers. See, e.g., FTC, Press
Releases, FTC Announces Sweep Against 10 Auto Dealers, Jan. 9, 2014, available at https://www.ftc.gov/newsevents/press-releases/2014/01/ftc-announces-sweep-against-10-auto-dealers, and FTC, Multiple Law Enforcement
Partners Announce Crackdown on Deception, Fraud in Auto Sales, Financing and Leasing, Mar. 26, 2015,
available at https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partnersannounce-crackdown.
11

With respect to the studies that NADA referenced about generalized “customer satisfaction,” the proposed survey
neither is a duplicate of such a survey nor is it similarly focused. Instead, the proposed survey pertains to individual
consumers’ discussion of their experiences with the car purchase and financing process, including a walk-through of

6

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.12 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.”13 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 consumer’s related documents. This information to be gathered by the survey is also not necessarily something
that is covered by complaints filed with the FTC – which last year numbered 93,917, making it our eighth most
complained about category – because it encompasses a broader consideration of the purchase and financing process
and consumers’ experiences. See, e.g., FTC, Consumer Sentinel Network Data Book for January - December, 2015
(Feb. 2016) at 6, available at https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-databook-january-december-2015/160229csn-2015databook.pdf.
12

Staff also has now provided additional information regarding the topics to be discussed, as described above.

13

AFSA-CBA Comment at 1.

7

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.14 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 website at https://www.ftc.gov.15
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.16 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.17 The results of the study will be used to
14

See, e.g., FTC, Press Release, Third FTC Roundtable to Cover Motor Vehicle Leasing Issues, Review Sales,
Financing and Leasing Issues from All of the Roundtables, and Discuss Possible Next Steps (Oct. 25, 2011)
(“Dealer-arranged financing can be a complicated, opaque process and could potentially involve unfair or deceptive
practices.”), available at https://www.ftc.gov/news-events/press-releases/2011/10/third-ftc-roundtable-cover-motorvehicle-leasing-issues-review; see also FTC, Public Roundtables: Protecting Consumers in the Sale and Leasing of
Motor Vehicles, 76 Fed. Reg. 14014 (Mar. 15, 2011), available at https://www.gpo.gov/fdsys/pkg/FR-2011-0315/pdf/2011-5873.pdf.
15

Indeed, these cases include two civil penalty matters filed in federal court against auto dealers that were
previously charged by the FTC with violating Section 5 of the FTC Act by engaging in deceptive practices, among
other things, and who – after entering into administrative orders with the Commission – were charged with violating
those orders, again engaging in deceptive practices. See FTC, Press Releases, FTC Takes Action Against Two Auto
Dealership Chains For Violating 2012 Orders Prohibiting Deceptive Advertising of Vehicle Costs, Dec. 12, 2014,
available at https://www.ftc.gov/news-events/press-releases/2014/12/ftc-takes-action-against-two-auto-dealershipchains-violating, and FTC Action: Auto Dealership Will Pay $80,000 Penalty for Violating 2012 order Prohibiting
Deceptive Advertising of Vehicle Costs, Sept. 18, 2015, available at https://www.ftc.gov/news-events/pressreleases/2015/09/ftc-action-auto-dealership-will-pay-80000-penalty-violating-2012. The dealers paid $360,000
(Billion) and $80,000 (Ramey). See id.
16

See, e.g., 15 U.S.C. 45(a).

17

The Commission generally does not expect to redact information from consumers’ documents about the names
and locations of dealerships. However, to the extent that individual consumers’ or dealers’ information such as

8

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:18 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.19 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
account numbers, Social Security numbers, or Taxpayer ID numbers are contained on these documents, such
information will be redacted from information provided to the FTC. The survey will utilize rigorous protections for
privacy and security of consumer information.
18
These comments are: Wilson #633-00017; Prohaska #633-00012; Burton #633-00010; Mandola #633-00008;
Dawson #633-00009; Leech #633-00005; Aragon #633-00006; Johnson #633-00007; Sloan #633-00004; and Sutton
#633-00002, available at https://www.ftc.gov/policy/public-comments/initiative-633.
19

For example, one mother commented regarding the experience of her son who has learning disabilities, in
connection with an auto dealership where he went to claim a “scratch-off prize” that he thought he had won in
response to a flyer that he received in the mail. See Sloan #633-00004, available at
https://www.ftc.gov/policy/public-comments/initiative-633.

9

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.
b.

Consultation Outside the Agency

In addition to soliciting comments on the proposed survey, FTC staff has consulted with
the FTC contractor for this project, Shugoll, and with the FTC’s survey consultant, Manoj
Hastak, Ph.D., Associate Professor of Marketing at American University’s Kogod College of
Business Administration in Washington, DC.
Pursuant to OMB regulations, 5 C.F.R. § 1320.10(a) that implement the PRA, the FTC is
again seeking public comment contemporaneously with this submission.
(9)

Payments and Gifts to Respondents

Shugoll will provide gratuities to participants and to pretest and regular survey backup
consumers (backups) who are possible replacements for no-show participants in the survey. The
gratuities will be in the form of cash gift cards for $125 each for the regular pretest and regular
segment consumers; cash gift cards will also be provided to the pretest and regular segment
backups. Shugoll will also pay parking fees for the participants and backups who will come to
Shugoll’s facility in Bethesda, MD or Alexandria, VA, where the survey will occur.
(10) & (11) Assurances of Confidentiality/Matters of a Sensitive Nature
All of the consumer participants’ personal information will be redacted in information
provided to the FTC and will be anonymous as to the FTC. Responses provided at the survey
interview and in the document walk-through will not include any consumer identifying
information when reported to the FTC, and the FTC will not receive information about the
identity of individual respondents.
More specifically, Shugoll will set up two secure databases for maintaining information
about potential and selected survey participants. The firm will assign each consumer a random
identification number (“random ID number”), and that information along with the consumer’s
identifying information will be maintained by the contractor in one database. The FTC will only
have access to a second database that will include the random ID number with anonymized
information about the consumers and redacted information regarding the consumers’ purchase
and finance documents. Thus, only redacted copies of consumer purchase and finance
documents will be maintained in the survey. The survey will utilize rigorous protections for
privacy and security of consumer information.20
20

Shugoll has extensive anti-virus, anti-malware, anti-spyware, and anti-spam security controls in place to

10

(12)

Estimated Annual Hours Burden

In its January 7, 2016 Notice,21 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 hours22
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).23
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 x 12
minutes).24 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.
substantially protect its records from outside infiltration. Shugoll uses a segmented network and high performance
firewalls, password protections, and encryption software for transport of information to and from backup of its
network.
21

81 Fed. Reg. 780.

22

This is a total increase of 16 hours from the prior estimate.

23

As described below, the contractor also would have 19 additional consumers (backups) on site as possible
replacements for pretest and regular survey consumers who do not show-up for the interview. These consumers
would add certain costs for time related to various aspects of the survey as indicated in the text, but they would not
add to the total number of consumers participating in the survey interviews. Also, the 170 consumers include the
additional maximum 19 pretest and regular survey backups.
24

The FTC has reduced its estimate of needed preliminary review time from 15 minutes to 12 minutes (a 3-minute
reduction for each consumer), based on the contractor’s current estimate.

11

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 x 160 minutes each for the pretest, plus 3 backups x 60 minutes travel time per
backup, plus 2 (of the 3) backups x 100 minutes of maximum wait time per backup).25
Once the pretest is completed, the initial 40 interviews, including travel, will
cumulatively total an estimated108 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.26 If an additional 40 consumers are interviewed,27 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 x
150 minutes each plus 16 backup consumers x 60 minutes each).28
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 x 10 minutes each).29
Thus, the FTC’s survey will require 367 hours (119 hours for preliminary review + 19
25

After consultation with the contractor, the FTC has slightly increased its estimates of pretest time to account for
the backups in the pretest, who are replacements for possible no-show consumers in the pretest. As noted above,
three backups will experience travel time to and from the survey, of 60 minutes each, for a total of 180 additional
minutes or three hours. Also, two of the backups would be available on site for approximately 200 minutes (each
backup would be available to replace two consumers), and one of the backups would be available on site for
approximately 100 minutes (to replace one consumer). Thus, the backups might experience replacement time for
no-show consumers, which would not add participation time to the survey. However, if fewer consumers are noshows, it is possible that a maximum of 100 minutes in participation time would apply for each of the two backups a total of 200 minutes - while they wait to learn if they are needed for the next pretest segment after the initial pretest
segment. As noted, the other time for the backups –100 minutes for each of the two backups, and 100 minutes for
one backup – would be as replacement for scheduled pretests or, if the backups are not needed, they would be
released promptly at the beginning of the sessions; neither would add participation time.
26

As noted, the survey will involve consumers from the greater Washington, D.C. metropolitan area.

27

The survey plan has an option for an additional 40 consumers, for a maximum of 80 consumers.

28

The FTC has slightly increased its estimates of time for the regular interviews, to account for the possibility that
backup consumers may be needed as replacements for no-show consumers. These eight additional consumers will
experience travel time of 60 minutes each. They will not generate additional participation time: if they participate,
they will replace the no-show participants; if not needed, they will be released promptly.
29

The FTC has slightly increased its estimates for consumers to obtain credit scores, to account for the possibility
that backups may participate and may not already have their credit scores.

12

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.30
Costs to obtain their credit score should be nil or negligible. Increasingly, websites 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.
(13)

Estimated Annual Cost Burden

The cost per respondent should be negligible. Participation is voluntary, and will not
require any labor expenditures by respondents. There are no capital, start-up, operation,
maintenance, or other similar costs to the respondents.
(14)

Estimated Cost to the Federal Government

The total cost to the Federal government for the information collection will be
approximately $236,454 maximum (if all 85 interviews are conducted and both a methodological
and final written report are provided by the contractor). More specifically, staff projects it will
cost $118,050 to pay Shugoll to consult with the FTC regarding the qualitative survey and
development of survey materials; locate the participants; conduct the preliminary review, pretest,
and regular surveys (including a maximum of 85 interviews), and provide a brief written
methodological report. It will cost an additional $8,500, for a total of $126,550 to pay Shugoll, if
the FTC also requests a written summary report. The cost of FTC staff time is estimated to be
approximately $109,904.31 This is necessarily an estimate because several factors in this
calculation may vary, including the amount of staff involved and the actual time required.
(15)

Program Changes or Adjustments
Not applicable. This is a proposed new study.

(16)

Plans for Tabulation and Publication
The results of the study will be used to inform and provide insights to the FTC regarding

30

After consultation with the contractor, the FTC now plans to have consumers who do not already have their credit
score obtain it before their interview with the contractor; the contractor will advise consumers of this approach
during screening for the survey, which is voluntary. Consumers who do not have, or do not wish to obtain, their
credit score will not participate in the survey. This approach will limit provision of unnecessary personal
information to the contractor, and will facilitate the survey process, by avoiding delaying the pretest and/or regular
interviews for the consumer to obtain his or her credit score information if the consumer does not have it.
31

This estimate is based on staff time for two attorneys (at 20% of time for each), and two economists (with 10% of
time for each), including salary, benefits and additional office-related amounts.

13

consumer understanding of the automobile purchasing and financing process at the dealership.
The FTC has not determined whether it will publish a report on the matter. The collection of
information will begin after the completed OMB review process. The projected duration of the
information collection is approximately three months, including the contractor’s provision of a
brief methodological report and any other report if requested by the FTC.
(17)

Display of Expiration Date for OMB Approval
Not applicable.

(18)

Exceptions to Certification
Not applicable.

14

B. COLLECTION OF INFORMATION
(1)

Description of Study Design, Respondent Universe, and Sampling Methodology

The survey will be qualitative, involving consumer interviews and review of consumer
documents. It is intended to facilitate an in-depth discussion with the respondents of their
experience at the dealership in purchasing and financing an automobile. The survey is not
equipped for any statistical sampling methods. The survey will not be representative of the U.S.
population, and the Commission will not generalize the results to the U.S. population; however,
the Commission believes the survey can provide useful insights into consumer understanding of
the process at the dealership. This type of research is a core component of the FTC’s mission.
a.

Study Design

The survey will involve an initial pretest of five in-person consumer interviews to test the
survey questionnaire, followed by in-person interviews of 40 consumers; an additional 40
consumers may be interviewed, if the FTC deems the added interviews helpful. For the initial 40
consumers, the FTC will interview approximately 20 consumers who have “prime” or “above
subprime” credit scores and approximately 20 consumers who have “subprime” credit scores to
learn about their experiences with purchasing and financing in these two market segments. As
aforementioned, the sample group of consumers will be racially diverse and will include
participants of both sexes.32
32

As noted, the FTC survey involves a maximum of 85 in-depth in-person consumer interviews; while it is not
representative, it will nonetheless offer the FTC insight into consumers’ experiences in the auto purchase and
financing process at the dealership.
An in-person consumer survey using in-depth interviews that broadly explore the consumers’ experiences
in the purchase and financing process at the dealership, that is also representative under these circumstances, would
involve an extensive use of resources, and be highly costly and complex to administer. For example, the total
purchases of new and used vehicles at dealerships across the nation are substantial in number. In 2015, franchise
auto dealerships sold 17.3 million new cars and 11.4 million used cars, or 28.7 million total. See National
Automobile Dealers Association, NADA DATA 2015 (2015) at 1, available at https://www.nada.org/nadadata/, and
Edmunds, 2015 Used Vehicle Market Report (2015) at 1, available at http://static.ed.edmundsmedia.com/unversioned/img/industry-center/analysis/2015-used-market-report.pdf. It is not clear what percentage
of these transactions were consumer sales; whatever that figure, it has been estimated that 80% of franchise auto
dealers’ consumer sales are financed by the dealer. See, e.g., Jim Henry, “Go Ahead, Get a Prearranged Auto Loan,
Dealerships Say They Like A Challenge,” Forbes (Feb. 28, 2014), available at
http://www.forbes.com/sites/jimhenry/2014/02/28/go-ahead-get-a-prearranged-auto-loan-dealerships-say-they-likea-challenge/#2305cb9d40e3. For independent dealers, in 2013, the number of vehicles sold per dealer was 378.6
each, per 37,026 such dealers, for approximately 14 million total. See NIADA, 2014 Used Car Industry Report at 16
(citing CNW Research), available at http://www.niada.com/. Again, the percentage of such vehicles sold to
consumers is not clear, nor is the percentage of those financed by the dealer. In part, this is because: buy here pay
here dealers can be included as a component of independent dealer data; independent dealers may either provide
financing themselves or sell vehicles through financing offered by separate entities with whom they either are, or are
not, affiliated; and dealers can sell vehicles to buyers who obtain separate third party financing. Thus, while a
substantial number of vehicles are sold in the nation by various dealers, the precise number of vehicles sold and
financed by dealerships to consumers is not clear. It may be in hundreds of thousands of transactions, and many
thousands of such transactions annually may occur in the Washington, D.C. metropolitan area - a sizeable market for
auto sales and financing. In sum, the FTC staff believes that the proposed survey will instead provide the FTC with
useful insights into the consumers’ experiences, and while not representative, will bring increased understanding of

15

The FTC has contracted with Shugoll Research, Inc., a consumer research firm located in
metropolitan Washington, D.C., with substantial experience conducting consumer surveys, to
locate the participants, conduct the survey, and write a brief methodological report and any other
report as 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.33 Shugoll will identify interview
participants who have purchased an automobile from a dealer in the greater Washington, D.C.
metropolitan area in the previous six months, and used financing that was offered or arranged by
the dealer to make the purchase. The interview participant 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.34 The interview subjects and their personal
identifying information will be anonymized in material received by the FTC, and will be
vigorously protected by the survey firm.35
FTC staff, in consultation with Shugoll, will develop the questionnaire and conduct
interviews lasting approximately 90 minutes with each consumer.
b.

Sampling Frame

After considering the costs and benefits of various data collection methods, FTC staff has
concluded that the most efficient way to collect the data needed to meet the research objectives
within a feasible budget is to conduct consumer interviews with participants who recently
purchased and financed an automobile at the dealership.
The sampling will be racially diverse, include participants of both sexes, and involve
consumers who recently purchased and financed an automobile at a dealership. Again, however,
the participants are not intended to be representative of the entire U.S. population. To facilitate
conducting the qualitative research, which involves in-depth interviews of consumers’ recent
such experiences, in a cost-effective manner.
33

Shugoll will screen 170 consumers to ensure they have more than a sufficient number of consumers for the pretest
(five consumers), and both segments of the regular interviews (80 consumers).
34

For privacy purposes, Shugoll will not obtain the credit score for the consumer, but will explain to consumers who
do not have their score that various sources are available for promptly obtaining this information, including some
that do not charge.
35

As detailed above, Shugoll will set up two secure databases for maintaining information about potential and
selected survey participants. The firm will assign each consumer a random identification number (“random ID
number”), and that information along with the consumer’s identifying information will be maintained by the
contractor in one database. The FTC will only have access to a second database that will include the random ID
number with anonymized information about the consumers and redacted information regarding the consumers’
purchase and finance documents. Thus, only redacted copies of consumer purchase and finance documents will be
maintained in the survey. The survey will utilize rigorous protections for privacy and security of consumer
information.

16

experiences, Shugoll will use its facilities in, and select participants from, the metropolitan
Washington, D.C. area. The sampling frame for this study encompasses members of the
contractor’s available interview subjects, which affords hundreds of possible participants. As
also discussed in Part A of this Supporting Statement, FTC staff in consultation with its
contractor has determined that screening of up to 170 consumers will be used to ensure a
maximum of 85 completed interviews – five for the pretest and a maximum of 80 for the regular
segments of the interviews.
c.

Sampling Methodology

The contractor has determined the size of its screening sample based on several
considerations, including the funds available for the study, the cost of different interview sizes,
and the possibility of different consumer experiences at the dealership.36
The primary issue to be examined in the survey is to learn about the consumer’s
experiences in purchasing and financing their automobile at the dealership. For the initial 40
consumers, the survey will interview 20 consumers who have “subprime” credit scores, and 20
consumers who have “prime” or “above subprime” credit scores, in order to learn about the
consumer’s experience with purchasing and financing an automobile in these market segments.37
If consumers do not have their credit score, they may obtain it through services that provide this
information, and then provide documentation of the score to Shugoll.38
(2)

Description of the Information Collection Procedures

Shugoll will conduct interviews lasting approximately 90 minutes with each consumer.
The topic areas are listed below and will broadly enable the consumer to describe their
experiences in the auto purchase and financing process at the dealership, including review of
36

Interviews of five consumers for the pretest, and up to 80 consumers for the regular segments of the survey, will
provide the FTC with considerable information regarding the consumers’ experiences, through the in-depth
interviews and review of documents, and still limit resource usage and costs to conduct the survey.
37

For example, Experian categorizes consumers with scores below 601 as subprime. Other scores are above
subprime, and categorized as nonprime or prime. See generally Experian, State of the Automotive Finance Market,
A look at loans and leases in Q1 2016, available at http://www.experian.com/automotive/automotive-creditwebinar.html.
Shugoll will obtain at least two Caucasians, two Latinos/Hispanics, and two African Americans, and
participants from both sexes, in each of the “subprime” and “above subprime” groups. Other participant selections
would be racially and ethnically neutral and depend on consumers who can participate. The contractor also
generally will strive to obtain a mix of ages and income levels in participants, without specific representation from
any level of either category. The contractor also will strive to include a mix of consumers who purchased and
financed a vehicle from franchise, independent, and buy here pay here dealers, without specific representation from
any of those groups.
38

To ensure for privacy of consumer information, Shugoll will not obtain the credit score for the consumer but will
explain to consumers that do not have their score already that various sources are available for promptly obtaining
this information, including some that do not charge.

17

their documents. Because the consumers’ experiences could vary, the following interview topics
generally provide areas for discussion:39









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;40
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; 41 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:42







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
understanding of the automobile purchasing and financing process at the dealership. This type of
research is a core component of the FTC’s mission.
The contractor will provide the FTC with results from the consumer pretest and
interviews, including a brief methodological report. The contractor will also provide another
written report, if requested by the FTC.
39

The FTC staff expects to work with the contractor to address specific questions that will be asked of the
consumers, but the purpose is to enable the consumers to broadly address their experiences at the dealership, rather
than only limited issues.
40

This interview topic now clarifies that discussion of any GPS or tracking devices could be included if part of the
consumer’s experience.
41

The interview topics now clarify that the survey will consider other points that the consumer may raise about the
process.
42

The FTC staff has included the topics for the walk-through of the consumer’s documents. The experiences and
documents that the consumer may have, related to the purchase and financing of their car, could vary among
consumers who participate. However, the topics listed generally would cover such areas.

18

(3)

Methods to Maximize Response Rates/Reliability of Sample Data

As noted above, the survey will be qualitative, with consumer interviews to enable
participants to describe their automobile purchase and financing experience at the dealership.
The survey is voluntary, and only consumers who wish to participate will be selected for the
survey.43 Only consumers who purchased and financed an automobile at a dealership within the
past six months will participate in the survey, which will enable them to focus on a recent
experience. To help maximize participation in the survey and minimize non-response issues in
advance of the interviews, the contractor will:
·

Preliminarily screen consumers to ensure that they wish to voluntarily participate and
discuss their experiences, purchased and financed an auto at a dealership within the past
six months, and have their documents. Consumers will also have or obtain their credit
score and provide that information to the contractor before the interview, to ensure that
the interview proceeds expeditiously;44 and

·

Test the draft questionnaire with a pretest of five respondents to ensure that the
questionnaire minimizes burden and is clear, and then refine the questionnaire as
appropriate.

In addition, Shugoll expects to email participants prior to their scheduled interview, and
to have additional consumers available, as noted (backups for the pretest and regular segment
interviews) to enhance response and participation by the consumers.
(4)

Testing of Procedures or Methods Undertaken

As noted above, staff will pretest the survey materials using five respondents to ensure
that all aspects of the survey are easily understood and can generate useful information. The
pretest is discussed further throughout Part A above and in Part B.(1). It is incorporated within
the collection of information for which staff seeks OMB approval.
(5)

Individuals Consulted on the Study

The study is qualitative and does not involve quantitative or statistical aspects. The FTC
has consulted with Shugoll, which is experienced in conducting consumer surveys. The FTC has
also consulted with Manoj Hastak, Ph.D., a faculty member in the Kogod School of Business at
American University and a consumer research consultant with the Bureau of Consumer
Protection’s Division of Advertising Practices. Dr. Hastak has served as a consultant on survey
studies for the FTC on numerous occasions. In addition, the survey design has been reviewed
43

Consumers will be selected from a group that has expressed a willingness to participate in surveys.

44

In addition, two other screening criteria apply: (1) consumers and immediate family must not work in advertising,
public relations, or market research, nor in the automobile industry or a finance company; and (2) consumers must
be able and willing to provide answers that can be clearly understood in English.

19

internally by various FTC staff, including attorneys in the Division of Financial Practices and
economists in the Bureau of Economics.

20