The Federal Trade Commission (FTC) announced that the CARS Rule will take effect on July 30th, 2024. The CARS Rule places specific requirements for auto dealership advertising, record-keeping, customer interactions, and the sale of finance and insurance (F&I) products. While the FTC believes this rule will protect consumers from potentially harmful dealership practices, Automotive News  reports it has faced opposition from the National Automobile Dealers Association (NADA), dealerships, and some lawmakers. Let’s go over the key aspects of the CARS Rule, the concerns raised by NADA, and the potential avenues the industry is looking at to block the rule.

Understanding the CARS Rule

The FTC commissioners unanimously approved the CARS Rule, which aims to address problems that the FTC believes prolong the car-buying process and cost consumers billions of dollars annually. The FTC CARS Rule sets specific guidelines for auto dealerships in several critical areas:

• • It prohibits the misrepresentation of material information such as price, financing, and add-ons.

• • It requires dealers to clearly disclose the offering price—the actual price to pay for the car—excluding only the required government charges.

• • Consumers cannot be charged for add-ons that don’t offer a benefit to them.

• • Requires dealers to get informed consent from consumers prior to charging them for anything.

NADA’s Concerns and Opposition

NADA CEO Mike Stanton has voiced strong opposition to the CARS Rule, labeling it an overreach that adds complexity and unnecessary disclosure requirements to vehicle transactions. Stanton argues that these changes would lead to increased expenses and transaction times for consumers, undermining the auto sales process. NADA is actively seeking ways to prevent the CARS Rule from taking effect and is exploring various avenues to achieve this.

NADA’s Course of Action

NADA is looking at several options to challenge the CARS Rule, including discussions with lawmakers for a legislative solution. The FTC has dismissed feedback from both NADA and lawmakers, but NADA is adamant about finding a solution to the CARS rule prior to implementation.

Congress has introduced two bills seeking to block the enforcement of the CARS Rule. Congress introduced these bills before the FTC finalized the rule, proposing conditions that must be met before enforcing it. One option is the “Review of Expensive and Detrimental Overregulation Act,” introduced in the Senate, which calls for quantitative research into the benefits to consumers and necessity of regulations such as the CARS rule. The Congressional Review Act offers another way for lawmakers to overturn the rule. If both the Senate and House pass resolutions opposing the CARS Rule and President Joe Biden signs off, the rule would be repealed, preventing the FTC from enforcing a similar rule in the future.

NADA is also considering going through the courts to challenge the CARS Rule. One legal point of contention is whether the FTC followed the legal process in establishing the rule. The categorization of the CARS Rule as a trade regulation rule enables the FTC to impose civil penalties for violations. However, trade regulation rulemaking typically takes longer and requires advance notice of proposed rulemaking. The FTC began at the notice stage and did not give the advance notice requirement for feedback and consumer protection when proposing the CARS Rule in 2022.

FTC’s Response

The FTC maintains that the CARS Rule is legal under the Dodd-Frank Act, specifically citing the Administrative Procedure Act’s informal notice-and-comment procedure. The FTC argues that it has been in contact with stakeholders for over a decade to address industry behavior and that the rule is necessary to protect consumers.

The FTC’s Combating Auto Retail Scams Rule introduces changes and regulations for auto dealerships, impacting various aspects of operations. NADA and some lawmakers oppose the rule, citing concerns about added complexity and disclosure requirements that could harm consumers. Auto dealerships seeking to block or challenge the CARS Rule have multiple options, including pursuing legislative remedies, using the Congressional Review Act, or exploring other legal avenues. As the CARS Rule’s effective date approaches, the automotive industry will closely monitor developments and potential actions taken by NADA and Congress.

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