The ban on suspicious sales tactics was scheduled to take effect on July 30, but was postponed indefinitely after retailers protested.
January 18, 2024 in 5:57pm ET
Late last year, the Federal Trade Commission (FTC) finalized rules aimed at curbing shady dealer practices and protecting consumers from last-minute fees. The rule, known as the Automotive Retail Fraud Control (CARS) rule, was unanimously approved by the FTC and written to go into effect on July 30 of this year. But it’s now been suspended thanks to dealer lobbyists.
The National Automobile Dealers Association (NADA) was apparently not satisfied with the development of the CARS rule, and it and the Texas Automobile Dealers Association filed a petition with the Fifth Circuit Court of Appeals challenging the law. The court agreed to hear the FTC challenge, resulting in a stay of the CARS rule.
A key issue in the legal battle is whether the law actually applies within the FTC’s jurisdiction. In a petition to the Fifth Circuit, the dealer groups call this an “abuse of discretion” and ask the court to block its implementation. The FTC argues that the rule “does not impose even significant costs” on law-abiding dealers, and instead makes it more profitable for both dealers and consumers by eliminating junk fees and hidden costs. It claims it only guarantees a level playing field.
Because the CARS Rule petition was filed for expedited consideration, it is likely that the court will issue a decision before the end of the year. If the court rules in the FTC’s favor, the FTC believes the CARS rule would only be delayed by a few months at most, meaning it could still go into effect by the end of 2024.
Even if the FTC wins this battle, there may be more to come, as dealer groups are also pushing Congress to pass legislation that would directly limit the FTC’s ability to regulate car sales. If you consider the potential costs of violating CARS rules, you may see why. Violating trade regulation rules costs $50,120 per violation.