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FTC’s CARS Rule Aims for Transparency, Faces Legal Hurdles


The thought of driving off the lot in a new car can be both stressful and exhilarating. But if the dealer engages in dishonest practices, the process can get as stressful as a pile-up on your morning commute. 

The FTC’s Combating Auto Retail Scams (CARS) Rule, which was announced recently, requires transparency in the vehicle shopping process. And it’ll drive home major savings, too, to the tune of an estimated $3.4 billion per year for people shopping for a new vehicle. And it will save consumers an estimated 72 million hours each year. The CARS Rule includes key provisions about pricing, add-on products and services, and buyer’s consent.

However, this rule was put on pause as it received a legal challenge as automobile associations filed a petition with the Fifth Circuit Court of Appeals challenging the law. The Court agreed to hear the case challenging the FTC, and as a result, the CARS rule has been postponed as of Jan. 18.

The National Automobile Dealers Association (NADA) released the following statement by its President and CEO Mike Stanton, on the Federal Trade Commission’s (FTC) grant of a stay order on its vehicle shopping rule:

“We are pleased that the FTC has determined that ‘it is in the interests of justice to stay the effective date of the rule to allow for judicial review.’” We continue to believe the rule is unnecessary, redundant, and confusing, and will needlessly lengthen the car sales process for consumers. The FTC failed to demonstrate the need for the rule and has not tested the effectiveness of its mandates with consumers. NADA will continue to advocate in the courts and in Congress to keep this ill-conceived rule from taking effect.”

Buying or leasing a car is a major financial commitment and it’s a transaction that consumers have often approached with apprehension or uncertainty. According to the public comments the FTC received as part of the rulemaking process for the CARS Rule, many consumers believe they have been subjected to deceptive or unfair practices when buying or leasing a car – especially bait-and-switch tactics and hidden charges. Particularly troubling were reports from servicemembers about deceptive and predatory practices near military installations, and from car dealers about losing business to dishonest dealerships. Those comments underscore what the FTC has observed in decades of law enforcement actions: that unscrupulous dealerships have used illegal tactics to close a deal – conduct that costs consumers time and money and puts honest dealers at an unfair disadvantage.

In a recent briefing by Ethnic Media Services, experts spoke about this initiative and how to protect from scammers.

Malini Mithal, Associate Director, Division of Financial Practices, Federal Trade Commission said in a presentation that honesty is required regarding essential information such as costs, financing terms, and add-ons in automotive dealings. 

“Dealers are obligated to disclose the offering price, affirming consumers’ freedom to decline optional add-ons like service contracts,” Mithal said. “In discussions involving monthly payments, total payment information must be provided. Prohibitions include no junk fees, and charges are permissible only when consumers are informed about each charge and agree to it.” 

In compliance with the Consumer Assistance to Recycle and Save (CARS) Rule, dealers are mandated to transparently disclose the offering price for vehicles. The offering price, defined as the full cash amount for selling or financing a vehicle, must be clearly stated in various circumstances. These include any advertisements referencing a specific vehicle, representations of monetary amounts or financing terms, and communications with consumers related to a particular vehicle or financial terms. The dealer’s initial response to a consumer, especially in written form, must unequivocally reveal the offering price.

Dealers must explicitly disclose that add-ons are not obligatory when making representations about additional products or services. Whether expressed verbally or in writing, the dealer must inform consumers that they have the option to purchase or lease the vehicle without the mentioned add-on. The CARS Rule also prohibits dealers from charging consumers for add-ons that do not provide a tangible benefit.

In line with the CARS Rule, dealers must provide clear disclosures regarding the total payments for financed or lease transactions. Any representation, whether oral or written, about monthly payments for a vehicle should include the total amount the consumer will pay over the scheduled payment period. If considerations such as cash down payments or trade-ins are assumed, these must be explicitly disclosed in both oral and written representations.

These disclosures aim to ensure transparency and empower consumers with essential information during vehicle transactions, fostering fair and informed choices.

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