WASHINGTON, D.C. – The official launch of the Federal Trade Commission’s (FTC) Combating Auto Retail Scams (CARS) Rule – which would make it illegal for a dealer to make misrepresentations about certain topics that would affect a consumer’s buying or leasing choices – has been paused by the agency amid a legal challenge brought by two industry groups representing auto sellers. Originally, the rule was slated to go in to effect on June 30, 2024.
The CARS Rule addresses several issues that consumers have complained about in recent years, including fraudulent behavior on the part of unscrupulous sellers such as bait-and-switch tactics, so-called “junk fees” added to the purchase prices of the vehicles for “unnecessary” services such as certification, reconditioning, or inspections, and deceptive claims about price, financing, or add-ons.
The FTC announced the pause of the implementation of the CARS Rule last week in response to a petition originally filed in January by the National Automobile Dealers Association and Texas Automobile Dealers Association (collectively known as “NADA”) with the U. S. Court of Appeals for the Fifth Circuit. The petition filed by NADA claims that the FTC committed the following acts:
- Unlawfully issued the CARS Rule without the required advance notice of proposed rulemaking (“ANPR”)
- Failed to articulate a rational connection between its factual findings and its decision to impose a far-reaching, industry-wide rule
- Unreasonably and arbitrarily evaluated the benefits and costs of the CARS Rule
The FTC has responded to the petition, saying that – due to the Dodd-Frank Act – the agency was not required to provide an ANPR prior to proposing the rule, did not need to demonstrate industry misconduct or a regulatory gap to justify it, and that the justification of the rule’s cost-benefit analysis is not subject to judicial review.
The CARS Rule, as claimed by the FTC when it first announced it in December 2023, would “save consumers more than $3.4 billion and an estimated 72 million hours each year shopping for vehicles by targeting persistent and illegal bait-and-switch scams and junk fees in the car buying process.”
The rollout of the CARS Rule will remain stayed pending a ruling by the Fifth Circuit.
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.