FTC’s New Rule Targets Unscrupulous Auto Dealership Tactics

The Federal Trade Commission (FTC) has announced its Combating Auto Retail Scams (CARS) Rule, aimed at curbing deceptive practices in automobile sales. The rule is designed to enhance transparency and protect consumers from misleading tactics employed by some dealerships. Key aspects of the CARS Rule include:

1. Elimination of Junk Fees: The rule prohibits dealers from imposing misleading fees on customers. Dealers must provide a clear and accurate representation of vehicle pricing, avoiding misrepresentation and ensuring transparency.
2. Disclosure of Optional Add-ons: Dealers are required to inform customers about optional add-ons that are not mandatory for the purchase. This prevents customers from being misled into believing that certain add-ons are necessary components of the deal.
3. Crackdown on Bogus Add-ons: The rule targets fees for services or items that offer no real value, such as redundant extended warranties or unnecessary add-ons. Dealers must obtain explicit consent from consumers for any charges related to the purchase.
4. Protection for Military Members: Recognizing that young military members may be vulnerable to deceptive practices, the rule includes provisions to safeguard this demographic from unscrupulous dealers.

The FTC emphasizes the goal of curbing exploitative fees and ensuring a fair and transparent car-buying process. The CARS Rule is set to take effect on July 30, 2024.

However, the National Automobile Dealers Association (NADA) has expressed strong opposition to the rule, labeling it as “heavy-handed bureaucratic overreach.” NADA argues that the rule will add unnecessary complexity and lengthen the car sales process. The association is exploring options to challenge the implementation of the rule.

The clash between consumer protection measures and industry resistance underscores the ongoing debate over the balance between regulation and market practices in the automotive sector. As the rule’s effective date approaches, further developments and potential legal challenges may shape the landscape of auto retail practices.