Advisory opinion letter to Mr. Tobin: the applicability of the Trade Regulation Rule concerning Preservation…
87 F.T.C. 1465 · May 21, 1976 ·
source volume section (87 F.T.C. 1465)
Text is machine-OCR of the printed volume and may contain errors. Advisory opinions are the Commission's views on proposed conduct, not binding orders.
May 21 , 1976 Dear Mr. Tobin:
This is a request for a formal advisory opinion concerning the applicability of the Trade Regulation Rule concerning Preservation of Consumers Claims and Defenses, effective May 14, 1976. This opinion is despcrately nceded by automobile dealers located throughout the United States, particularly in the Statc of Texas because that state has a little "FTC Statue" which imposes heavy fines on dealers and imposes civil liability for violations of FTC Rules. In
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other words, a Staff Opinion will not suffice and a formal opinion of the Commission is necessary.
The single question posed in this request is as follows: Under the Certificate of Title Act in Texas, the seller of a motor vehicle is required to transfer the certificate of title to the purchaser. If the financing of the purchase of the vehicle involves a security interest, the lender, in order to perfect his lien, must record that lien on the certificate of title. It is not a legal duty of the seller or the purchaser to secure the recordation of the lien. By mutual understanding between dealers and lenders, it is a customary and almost universal practice that the dealer communicates with the creditor and secures drafting information . This information always includes a request by the creditor that the dealer make application for certificate of title note the creditor s lien thereon, and draft on the creditor for the purchase price. This voluntary cooperation between seller and creditor inures to the mutual benefit of seller and creditor in that it enables the seller to receive his purchase money in an expeditious manner and provides the creditor with the security of his lien. This is an ongoing procedure which may be repeated many times during the course of a single day between onc dealer and one creditor who have no other business connection.
Based on the above fact pattern, we request an advisory opinion as to whether such procedure is a "business arrangement" or any type of
affiliation" within the meaning of the Rule.
Sincerely yours
Isl John J. Pohanka
President
ADVISORY OPINIONS 1467