Federal Trade Commission Hammers Down on Dealership Scams With New Rule
The Federal Trade Commission (FTC) has announced a new rule called Combating Auto Retail Scams (CARS) that protects consumers from unethical dealership tactics when buying a car. However, the National Automotive Dealers Association (NADA) disagrees with it.
The FTC's Case for CARS
According to a report from Car and Driver, the FTC’s CARS rule could save consumers as much as $3.4 billion annually once it goes into effect on July 30, 2024.
The CARS rule, which consists of four main points, would prohibit dealerships from misrepresenting information relevant to a consumer’s choices, require them to make a vehicle’s take-home price clear, outlaw charging for add-ons that will not add value for the consumers, and force dealerships to get buyers expressed consent before charging them for anything.
In other words, the CARS rule aims to eradicate shady dealership tactics from the car buying experience, such as junk fees and bait and switch tactics. That’s the theory, at least. Considering that dealerships ripping off consumers is not unheard of, the CARS rule could put some much-needed protections into place. For example, Motor1 reported last month that the Consumer Financial Protection Bureau (CFPB) ordered Toyota to pay $60 million in fines for misleading customers into buying optional add-ons.
The CARS rule would also protect consumers from being misled by dealerships advertising a vehicle trim being available for a particular price when it’s not in stock, thereby tricking buyers into thinking they can get a deal unavailable at that location. Older adults and younger military members are often the victims of these unethical dealership practices. The FTC estimates that 20 percent of military personnel 24 years of age or older have more than $20,000 in auto-related debts — a number that is double what the general population experiences.
The FTC introduced the basis for the CARS rule in June of last year. In July this year, 17 Democratic lawmakers asked the FTC to finalize them. The FTC states that saving consumers up to $3.4 billion annually will reduce the car buying process by 72 million hours.
To be fair to everyone, the FTC has set up a website for dealerships to use as a guide to check that they align with CARS mandates.
The NADA's Case Against CARS
According to a report from Motor1, the NADA has called CARS a “heavy–handed bureaucratic overreach” that will “needlessly lengthen the car sales process,” with NADA CEO Mike Stanton alleging that “the FTC made up data to support its claims.” Stanton also made a statement that the FTC “rejected calls to slow down the process and test the effectiveness of its proposal with real consumers,” adding that they are “exploring all options” to prevent “this ill-conceived rule from taking effect.”
When Motor1 asked the NADA about what data the FTC had fabricated, a spokesperson stated that it comes down to the language the FTC used in their ruling. “The FTC clearly states that it assumed — not ‘determined,’ ‘calculated,’ or even ‘estimated;’ assumed — that the regulation would save consumers” billions of dollars annually, the spokesperson claimed.
With both sides using the word billions, we expect more developments with the CARS rule before it takes effect on July 30, 2024.
