Arguments on the additional recordkeeping and the length of time to complete the car-buying process were presented Oct. 9 in the court case on the Federal Trade Commission’s Combatting Auto Retail Scams (CARS) rule.
The United States Court of Appeals for the Fifth Circuit in New Orleans heard 30-minute oral arguments from attorneys representing the plaintiffs National Automobile Dealers Association and the Texas Automobile Dealers Association and the defendant the FTC. Listen to the full hearing here.
The CARS rule was finalized in December 2023 by the FTC and it was set to go into effect July 30, 2024. The FTC issued a stay of the regulation, which remains in place, shortly after the NADA and TADA filed their lawsuit.
The rule would require dealers to provide consumers with an offering price, disclose all optional add-ons and give information about total payment when discussing the monthly payment. There are additional disclosures and recordkeeping of communications with customers required.
NIADA and the Texas IADA joined the efforts to stop the Federal Trade Commission from enforcing the vehicle shopping rule, filing an amicus brief in support of NADA/TADA.
In his oral argument, NADA and the Texas ADA attorney Jeffrey Harris said the FTC had failed to show how the added disclosures required by the rule would improve car purchases.
“The rules at issue in this case will inject FTC-mandated disclosures into hundreds of millions of interactions between car dealerships and their customers. Even the FTCs flawed analysis acknowledges that this will be a billion-dollar rule,” Harris said.
Harris also questioned the FTC’s notice of the new rule, offering price intent and the burden on dealers and consumers with the added disclosures.
“It’s difficult to overstate the burden this would impose on the industry to be papering up every single transaction with many new disclosures,” Harris said.
The FTC attorney Benjamin Aiken responded by saying the rule is aimed at bait-and-switch tactics and hidden fees in auto sales, which harm consumers and honest dealers.
He said the rule addresses gaps in the current regulations and gives the commission the ability to provide consumer redress.
“That is a current gap in the existing regulatory scheme. That is why we think that there are so many consumer complaints year to year. The higher stakes that dealers are now worried about is that the FTC will now have more authority to seek consumer redress,” Aiken said.
“We don’t deny that there are compliance costs here. The commission found that there would be $1.1 billion in compliance costs to motor vehicle dealers. And again, we stress-tested that. The commission still concluded that the benefits of the rule outweighed the costs.”
No date is set for a decision on the case.
A complete recap of the hearing will be published in the November issue of UCD.
