The Federal Trade Commission announced that it just finalized the "Combating Auto Retail Scams Rule" (the "CARS Rule") in order to combat two types of common illegal tactics consumers face when buying a car -- bait-and-switch tactics and hidden junk fees. The CARS Rule will take effect on July 30, 2024.
In announcing the new rule, FTC Chair Lina M. Khan said, "When Americans set out to buy a car, they're routinely hit with unexpected and unnecessary fees that dealers extract just because they can. The CARS Rule will prohibit exploitive junk fees in the car-buying process, saving people time and money and protecting honest dealers."
Importantly, the CARS Rule only applies to "covered motor vehicle dealers," which are essentially state-licensed dealers, who take possession of motor vehicles, and who are predominantly engaged in the sale (or leasing) and servicing of motor vehicles.
Here are the key provisions of the CARS Rule:
- The CARS Rule prohibits car dealers from making misrepresentations about a wide variety of material information that could impact a consumer's purchasing decision, such as vehicle cost, discounts that are available, product add-ons, and whether consumer reviews are unbiased.
- The CARS Rule also defines when dealers must clearly and conspicuously disclose the offering price of the car. The rule also requires certain price-related disclosures when promoting a financing or lease transaction. In addition, the rule requires dealers to clearly and conspicuously disclose when add-ons are not required. (By the way, the CARS Rule also has detailed requirements on when a disclosure is, in fact, "clear and conspicuous.")
- The CARS Rule prohibits dealers from charging consumers for add-ons that don't provide any benefit or charging consumers for any item without obtaining the consumer's express, informed consent.
The CARS Rule applies to the sale of most self-propelled motor vehicles, but doesn't generally cover boats, motorcycles, scooters, electric bicycles, motor homes, and golf carts.
In connection with the release of the CARS Rule, the FTC also published some business guidance, FTC CARS Rule: Combating Auto Retail Scams – A Dealers Guide, in order to help auto dealers to comply with the new rule.
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