"Transmogrification" means to change something from one form to another. In the present case, an apt analogy would be changing a frog into a prince. Dealer regulation will undoubtedly metamorphose on both federal and state levels.
The shrieks can be heard throughout that mysterious land of consumer advocacy. Federal agencies, primarily the Federal Trade Commission and the Consumer Financial Protection Bureau, will no longer be fully aligned with consumer interest groups that have long reviled the dealer community. These agencies include the National Consumer Law Center (NCLC), Public Interest Research Group (PIRG), Consumer Federation of America (CFA), National Association of Consumer Advocates (NACA), Public Citizen, the American Bar Association (ABA), and the Center for Responsible Lending (CRL). Moreover, the attorneys general of the blue states belong to the Democratic Attorneys General Association. The DAGA website provides compelling evidence that these attorneys general are already steeling themselves for the change in administration, as these two quotes typify:
“Attorneys general from coast to coast have been preparing for months amid the competitive White House race,” – California’s Attorney General Rob Bonta (D)
Massachusetts Attorney General Andrea Campbell (D) said she’s “.. on alert for threats to … consumer protections and other issues,” and related further that she has “real concerns about the president-elect’s position when it comes to the rule of law… The role of the Democratic AG is the most critical, I think, in this moment in time,” Campbell said, arguing they’re “on the front line.”
A Summary of Federal Regulation and the Constitution
It may be helpful to review the nature and powers of agencies. Some of this law may be surprising. Article I of the Constitution establishes Congress, and Article I, section 8 states that Congress can regulate commerce or, by Supreme Court interpretation over the years, Congress can regulate just about anything. Congress can create agencies, such as the Federal Trade Commission or the Consumer Financial Protection Bureau. Congress can also transfer various powers to these agencies. These agencies can have all three kinds of power: executive, legislative and judicial. Agencies can set the rules with which business must comply, can investigate and prosecute those businesses, and can hold administrative hearings for violations of those rules. They can be rulemaker, prosecutor and judge. The president appoints various people to these agencies. Because agencies can have all three types of powers, they are forces to be reckoned with by the organizations over which they have jurisdiction.
Big Regulation Came, Went, Returned, and Will Disappear Again
More than 97,000 pages were published in the Federal Register during Barack Obama’s final year as president, a barometer of federal regulatory activity, whereas 61,950 pages were printed during Trump’s first year, a whopping 36% reduction in regulation. In Trump’s last year, 2020, 76,947 pages were published, the highest number during his years as president but still substantially lower than Obama’s. Under Biden, the 2023 Federal Register ended the year with 90,402 pages published, the second-highest tally of all time. Based on his first term, Trump will return to far less regulation and may once again initiate his two-to-one policy: For every new regulation, two existing regulations must be eliminated.
If It Moves, Regulate It – Current Dealer Issues and Predictions
The consumer-interest agenda manifested itself early in the Biden administration with various agency appointments aligned with consumer advocates’ objectives. This agenda had many issues that could be considered adverse to the car business.
The Niels Bohr remark, “Prediction is always difficult, especially about the future.” is often quoted but remains true. The following chart should be viewed with this quote in mind:
Trump Tone
Trump has clearly shown an aversion to regulation, and his agency appointments track this aversion. For example, in his first term, the directors he appointed to the CFPB, Mick Mulvaney and Kathy Kraninger, were not consumer activists, nor was Trump’s appointment of Joseph Simons as chairman of the FTC. In addition, a number of current agency employees will resign when these new nominations, such as Andrew Ferguson as chairman of the FTC, become effective, yielding more circumspect agencies. Activist state attorneys general will not find these revised federal agencies as receptive partners in consumer case prosecutions. However, these agencies will continue their missions and enforce the law.
The Easing of Regulation – Liability and Risk Remains
Elections have consequences, and the transmogrification of agency action is imminent. As this article’s chart indicates, dealer regulation may be reduced. The possibility that regulation and prosecutions may be diminished does not mean that dealers needn’t be diligent regarding their compliance duties. Stark risks remain from state agencies, especially in the blue states, and by private plaintiffs. Moreover, federal agencies cannot ignore dealer abuses of the public. As always, dealers need to govern themselves accordingly.
LEARN MORE: The Agent as an Accomplice
Terry O’Loughlin is director of compliance for Reynolds and Reynolds and is admitted to the Pennsylvania and Florida bars. Before joining Reynolds, he was employed by the Florida Office of the Attorney General, where he investigated automobile dealers and financing sources. He previously was a public accountant.
