WASHINGTON, D.C. – The 5th U.S. Circuit Court of Appeals is currently weighing the merits of a challenge brought against 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 – by the National Automobile Dealers Association and Texas Automobile Dealers Association (collectively known as “NADA”).
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.
Originally, the rule was slated to go in to effect on June 30, 2024; however, NADA’s challenge has delayed that rollout pending the outcome of the case, which the Court of Appeals began actively looking into on October 9.
NADA contends that the FTC bypassed important procedural steps when developing the CARS Rule – quickly releasing draft regulations and cost-benefit analyses as opposed to providing advance notice of proposed rulemaking (ANPR) to allow the holding of public comment sessions in order to get feedback – and is asking the court to either send it back to the FTC for major revisions or to overturn it outright.
NADA also challenged the FTC’s claim that the CARS Rule would shave off up to three hours of the car-buying process for consumers, saying that no data was supplied to substantiate that claim.
In contrast, the FTC claimed that they had done nothing wrong in how they rolled out the CARS Rule draft, saying that – due to the Dodd-Frank Act – the agency was not required to provide an ANPR prior to proposing the rule, and that the justification of the rule’s cost-benefit analysis is not subject to judicial review. As for the three hours saved claim, the FTC said they had generated that estimate by referring to data pulled from the 2020 Cox Automotive Car Buyer Journey Study.
The court will also determine the potential financial and regulatory burdens that could be imposed upon automotive dealerships if the CARS Rule were to go into effect, and if they would be considered unduly harsh.
Until the court’s judgement, the fate of the CARS Rule remains effectively in limbo.
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.