The Federal Trade Commission Tuesday finalized its automobile purchasing rule, which the agency says will combat “junk fees” and “bait-and-switch” issues.
The Combating Auto Retail Scams (CARS) rule, which will take effect July 30, 2024, will require automobile dealers to provide consumers with an offering price, disclose all optional add-ons, and give information about total payment when discussing the monthly payment. Dealers must also get consumers’ “expressed, informed” consent for any charges as part of the vehicle purchase. The FTC rule scrutinizes add-ons, which are part of the vehicle purchase.
The National Independent Automobile Dealers Association expressed concern about the impact on dealers from the rule. The Center for Automotive Research (CAR) found that the 10-year cost of the proposed rule to consumers would exceed $38 billion and would add 2 hours per transaction. NIADA members discussed the proposed vehicle shopping rule with lawmakers during the National Policy Conference in September.
“It’s frustrating to see the FTC rush this rule out given the extensive questions, concerns and comments the FTC received about the proposal,” said NIADA CEO Jeff Martin. “When we met with the FTC at our Policy Conference in September, it was clear there were more questions than answers from the agency. Our members are not opposed to well-thought-out, reasonable and responsible regulation. But taking a small sample size and punishing the entire industry for the actions of a few rogue actors does more harm than good for consumers and dealers. We will review the over 370-page rule, help our dealers navigate the new compliance regulations, and explore other options to address some of the overregulation in this rule.”
The proposed rule was presented in June 2022. The agency received thousands of comments.
The final FTC rule:
• prohibits motor vehicle dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing for motor vehicles
• requires accurate pricing disclosures in dealers’ advertising and sales communications
• requires dealers to obtain consumers’ express, informed consent for charges
• prohibits the sale of any add-on product or service that confers no benefit to the consumer
• requires dealers to keep records of certain advertisements and customer transactions.
“When Americans set out to buy a car, they’re routinely hit with unexpected and unnecessary fees that dealers extract just because they can,” said FTC Chair Lina M. Khan. “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”
The rule also includes language to make sure members of the armed services receive accurate information about the cost and financing of the vehicle, moving the vehicle out-of-state and repossession.
“The Department of Defense appreciates the FTC’s CARS Rule,” said Ashish S. Vazirani, Acting DoD Under Secretary of Defense for Personnel and Readiness. “For our service members and their families a car is an essential purchase, and this CARS Rule will help fight predatory practices that target our men and women in uniform. The Department is pleased to see the FTC issue the CARS Rule and believes it will contribute to service members’ overall economic security and readiness.”
The FTC has developed a website guiding dealers on the new rule, including the definition of disclosing important facts about the deal, including offering price, clearly and conspicuously.
“Under FTC law – and as defined in the CARS Rule – ‘clearly and conspicuously’ refers to a disclosure made in a way that’s easy for consumers to understand and difficult for them to miss,” the FTC website stated.
