Challenging the CARS Rule: The FTC’s Reply

You may know that TIADA and NIADA have issued arguments against the FTC CARS Rule, and now the FTC has issued its reply. The FTC recently rolled out the “CARS Rule” (Combating Auto Retail Scams Trade Regulation Rule), and it's got the whole independent automobile industry alarmed. While the FTC claims the rule is designed to protect consumers, as independent dealers in Texas, it's crucial to understand what this means for your business and how it might impact your day-to-day operations.
The CARS Rule specifically prohibits the following practices: making material misrepresentations, failing to disclose required information, charging for unnecessary add-ons, and charging without consent. These provisions aim to address deceptive pricing, hidden fees, and other unfair practices that harm consumers during the vehicle purchasing process. A recent comprehensive survey shows that the FTC has not fully accounted for the costs associated with the implementation of this Rule, especially as it pertains to "significant potential litigation exposure."

In its comments, NADA made several arguments against the CARS Rule, including that the Commission did not have a sufficient basis for issuing the Rule, the cost-benefit analysis was flawed, the disclosure requirements were duplicative, the qualitative studies were unreliable, and the Rule would lead to increased burdens and higher prices for consumers.

The FTC claims that “the process of buying or leasing a car is time-consuming, complicated, and opaque. It typically takes consumers several hours to wrest true pricing information from dealers and more time to wade through voluminous paperwork and dense fine print.” In their efforts to protect consumers, however, the FTC has failed in its arguments and created a rule that only further complicates—for consumers and dealers—the process of buying a car.

Here's the Lowdown on the FTC's Justification:

  • Claims of Widespread Issues: The FTC says they created this rule because they found evidence of unfair or deceptive practices in the auto retail world. We all know there are bad apples in every bunch, but the FTC believes these issues are widespread enough to warrant new regulations.
  • No Need for a “Regulatory Gap”: Even though there might not be a specific law addressing every single issue, the FTC believes they have the authority to step in and create new rules to protect consumers. This is important to note because it means they don't need to wait for a law to be passed before taking action.
  • Rule Follows the Rules: The FTC claims the CARS Rule meets all the legal requirements and isn't just some random decision. They say they did their research and gathered evidence to support their decision.
  • We Had Our Say (Kind of): The FTC did hold some public meetings and got feedback from different groups, including industry reps. However, it's unclear how much of that feedback actually shaped the final rule.
  • Targeted, Not Sweeping: The CARS Rule isn't meant to turn the industry upside down. It mainly focuses on bait-and-switch tactics and hidden or junk fees.

What TIADA Believes

TIADA believes that the CARS Rule will harm dealership operations by imposing burdensome requirements, increasing compliance costs, potentially leading to higher prices for consumers, creating additional paperwork and administrative burdens, restricting add-on charges and fees, and impacting profitability. Even with all these extra and unnecessary burdens on dealers, the FTC will not accomplish the goals it has set out in implementing the CARS Rule.

TIADA is all about protecting independent dealers and consumers in Texas. We're keeping a close eye on the CARS Rule and how it will affect your businesses. We're committed to making sure your voices are heard and that you have the resources you need to comply with any new regulations.

Bottom Line for Texas Dealers

The CARS Rule is relatively new, and we're still figuring out all the details. It's important to read the full rule and understand what's expected of you. Don't hesitate to contact TIADA for guidance and support as we navigate this new regulatory landscape together. Remember, staying informed and proactive is the best way to protect your business and continue serving your customers fairly.

TIADA will be available during the 2024 Conference & Expo to discuss issues related to the CARS Rule. In addition, Jean Noonan, of Hudson Cook, will present a complete review of the Rule as it stands to date. For more information, visit the Conference website and don't forget to register.


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