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NADA applauds dropping letter grades from window stickers

July 7, 2011
By Mark Scarpelli, Metro Chicago NADA Director
Two regulatory agencies responsible for setting national energy policy announced last month a new fuel-economy label rule for passenger car and light-duty trucks without a controversial “letter grade” system opposed by the NADA and other auto industry groups. The National Highway Traffic Safety Administration and Environmental Protection Agency unveiled the new labels for model year 2013 at a press conference in Washington. The NADA applauds the move to eliminate letter grades, citing its potential to confuse consumers.
“With gasoline spiking to over $4 a gallon and alternative fuel vehicles hitting dealer showrooms, rolling out a totally unfamiliar ‘letter grade’ label would have only served to confuse and frustrate consumers,” the NADA said. “The NADA applauds the Obama administration’s decision to drop the ill-advised ‘letter grade’ in favor of one that prominently displays a vehicle’s miles-per-gallon numbers. By doing so, car shoppers can make informed comparisons on dealers’ lots, allowing them to take advantage of new technologies, which will ultimately put more fuel efficient vehicles on the road.”
In addition to the mpg numbers consumers have relied on for decades, the new labels will include: 
   Data comparing new technology or alternative-fuel vehicles to conventionally powered cars and trucks
   A fuel cost estimate over five years
   How a particular vehicle compares to all vehicles for smog and greenhouse gas emissions
   An estimate of how much fuel or electricity it will take to drive 100 miles
   Information on the driving range for electric vehicles and charging time
   A scanable code to allow smartphone users to access additional information online
Although they are better than the first proposal, the new fuel economy labels aren’t perfect, says Doug Greenhaus, director of Environment, Health and Safety for the NADA’s Regulatory Affairs Group. For example, the labels compare a vehicle’s emissions performance against all vehicles, as opposed to vehicles within the same class, Greenhaus says, which could confuse some consumers. Moreover, a vehicle’s five-year estimated fuel cost is compared to a hypothetical “average new vehicle,” also a comparison of limited value, Greenhaus says.
Automakers must include fuel economy information on the window labels of light-duty vehicles for model year 2013 before they are shipped. And dealers must maintain the labels until they are delivered to retail customers.
Questions about the new fuel economy labels may be directed to NADA Regulatory Affairs at or (703) 821-7040.
In other news . . .
• A provision in last year’s Dodd-Frank regulatory overhaul requires dealers and other creditors who use a credit score in taking adverse action – such as turning down a credit application – to include new credit score disclosures in their adverse action notices beginning July 21. (This provision also requires the disclosures to be included in risk-based pricing notices, but this does not affect dealers who issue Credit Score Disclosure Exception Notices to comply with the Risk-Based Pricing Rule.)
The NADA will soon release a new version of its publication, “A Dealer Guide to Adverse Action Notices,” explaining the new disclosure requirements and providing model adverse action notice forms that the Federal Reserve Board is developing to accommodate the new disclosures. The NADA will release this publication shortly after the Federal Reserve Board finalizes its model forms.
• Following strong advocacy by the NADA and its Regulatory Affairs group, the Federal Reserve Board has proposed temporarily exempting dealers engaged in indirect (three-party) vehicle financing transactions from a new, comprehensive data collection and reporting requirement that is scheduled to take effect July 21.
A provision of the Dodd-Frank regulatory overhaul of 2010 requires financial institutions, including auto dealerships, to inquire into whether a credit applicant is a small business or a women-owned or minority-owned business, maintain a record of responses to the inquiry for three years, report it to the federal government on an annual basis and make it available to the public upon request. The NADA plans to register its support for the exemption in written comments urging the board to adopt its proposal.
• Fed Raises Threshold for Contracts Covered by Truth in Lending Act A provision in the Dodd-Frank regulatory overhaul of 2010 has raised the dollar threshold for consumer credit and lease transactions that are covered by the Truth in Lending Act and Consumer Leasing Act. The threshold was raised from $25,000 to $50,000, effective July 21.
The law also mandated that the new threshold be adjusted for inflation on an annual basis. To meet this mandate, the Federal Reserve Board has announced that this threshold will increase to $51,800 beginning Jan. 1, 2012.