The enforcement of new consumer protection rules, devised to shield consumers from dealership scams, faces postponement following vigorous opposition from the National Automobile Dealers Association (NADA). Initially set to take effect on July 30, 2024, the implementation of these rules has now been halted, awaiting the outcome of a legal challenge.
Last year, the Federal Trade Commission (FTC) unveiled the Combating Auto Retail Scams (CARS) Rule, designed to curb dealerships’ use of deceptive tactics and unwarranted fees. The rule mandates dealers to disclose the offered vehicle price, provide details on total monthly payments, and disclose the full amount consumers would pay over their loan’s lifespan.
NADA swiftly expressed dissent, denouncing the rules as “heavy-handed bureaucratic overreach,” with CEO Mike Stanton asserting that they would elongate the car sales process and impose undue costs on all dealers, irrespective of their honesty.
In response, NADA and the Texas Automobile Dealers Association sought to challenge the regulation, petitioning the 5th Circuit Court of Appeals on January 5. Three days later, they requested a suspension of the rule’s effective date pending the court’s ruling.
On January 18, the FTC announced a temporary halt to the rule’s rollout during the appeal. Despite NADA’s objections, the FTC contends that their claims are unfounded, emphasizing that the rule does not significantly burden dealers already compliant with existing laws.
The FTC stated, “The rule does not impose substantial costs, if any, on dealers that presently comply with the law, and to the extent there are costs, those are outweighed by the benefits to consumers, to law-abiding dealers, and to fair competition – as honest dealers will not be at a competitive disadvantage relative to dishonest dealers.”
NADA expressed satisfaction with the pause, while the FTC maintains that, if the court expedites the review process as requested, the implementation of the CARS Rule should only face a minimal delay of a few months. The outcome of this legal tug-of-war will significantly impact the future landscape of consumer protection in auto retail.