The Federal Trade Commission ("FTC") finalized a new rule in December of 2023 called the Combating Auto Retail Scams (CARS) Regulations. It was part of a broader effort by the federal government to crack down on hidden fees, junk fees, and other "corporate rip-offs." For example, the U.S. Transportation Department finalized rules in April making it easier for airline passengers to get refunds.
Not surprisingly, however, corporations targeted in these new rules often call them both unnecessary and unduly burdensome. Many have filed lawsuits arguing that the regulations violate federal law in some way.
One such case is currently playing out in the Fifth Circuit Court of Appeals. The National Automobile Dealers Association (NADA) filed a lawsuit shortly after the proposed CARS Regulations were announced. The federal appeals court recently scheduled oral arguments on the case for October. Here's what you need to know.
What Are the CARS Regulations?
The CARS Regulations are supposed to prevent dealerships from promising you one car but then giving you a different one (sometimes called a "bait and switch") or having you pay for an unnecessary add-on to your car that you never agreed to. For example, the rules would prohibit a dealership from advertising certain financing options ("Zero percent down!") on a new vehicle to get customers onto the lot, only to then offer those financing options to only certain customers or to set up a financing plan where interest rates increase over time to make up for the lack of a down payment. The intention behind the rules is to provide protection for buyers who are spending a lot of money on a new or used vehicle.
Why Are the CARS Regulations Being Challenged?
NADA claims that the FTC did not follow the proper procedures when it instituted these new rules, especially because they were supposed to go into effect in only 6 months' time.
The dealerships also argue the FTC did not consider the financial impact on car dealerships to comply with things like extra record-keeping requirements and vetting for credit requests, which they argue will increase the prices on vehicles and make it harder for customers to obtain financing.
Until the court case is resolved, the FTC has put the CARS rules on hold. The FTC may also change its stance on the matter after the election when a new administration takes over. For now, car buyers should still expect the same car-buying experience as before. That means if you are in the market for a new car, make sure you read all of the fine print on your contract and understand everything you are paying for. As with any major purchase, consumers must protect themselves from hidden and junk fees.
Related Resources
- Dealer Used Car Sales and Warranties (FindLaw's Learn About the Law)
- Avoiding Car Advertising Scams (FindLaw's Learn About the Law)
- Auto Dealer Fraud - Enforcing Your Rights (FindLaw's Learn About the Law)
