The case on the CARS Rule could be headed to court for arguments in October.
The U.S. Court of Appeals Fifth Circuit last week set a tentative date for the oral arguments in the lawsuit filed by the NADA and Texas ADA against the Federal Trade Commission on the Combatting Auto Retail Scams rule for Oct. 7, 2024.
A stay on the regulation remains in place as it works through the court. The FTC issued the stay after the NADA and TADA filed its lawsuit.
NIADA and Texas IADA have joined the effort to stop the Federal Trade Commission from enforcing the vehicle shopping rule. NIADA and TIADA filed an amicus brief to the NADA and Texas ADA lawsuit in the Fifth Circuit, asking for the rule to be vacated.
The filing by the NIADA and TIADA pointed to the harmful impacts on dealerships and consumers if the rule is put in place.
Consumers will see vehicle price increases due to the increased dealer requirements for disclosures and recordkeeping. They will also be faced with a more time-consuming and confusing sales experience, as dealers maneuver the disclosures, including providing an offering price and monthly payments in any discussion of a vehicle.
Consumers, who already have limited options, may find it impossible to secure financing as banks and third-party creditors reduce the funding to dealers lacking the resources to meet the requirements of the rule.
NIADA dealer members, more than 80 percent who employ less than 10 employees, will be faced with considerable costs from the rule, including professional fees from attorneys and IT personnel and record-keeping storage. Dealers may also see a decline in sales due to the extended sales process with the added disclosures and the repeating of the underwriting procedure for every vehicle inquiry.
The increased time spent covering the many disclosure requirements could also limit the amount of customers sales personnel may serve, impacting compensation and the overall performance of the dealership.
The rule’s impact could lead to the closure of many small dealerships due to loss of revenue and credit tightening. The loss of potentially thousands of dealerships will create ripple effects throughout the economy and in communities of all sizes.
