U.S. Federal Trade Commission Pauses Car-Buying Rules that would Limit Junk Fees and Shady Dealership Tactics

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Last year we rejoiced as we reported on the idea of the government putting a stop to the deceptive tactics of shady dealerships and their junk fees. However, the U.S. Federal Trade Commission (FTC) has hit a roadblock in implementing its rule aimed at restricting dubious practices by car dealerships and safeguarding consumers from last-minute fees. The rule, known as the Combating Auto Retail Scams (CARS) rule, had received unanimous approval from the FTC late last year and was slated to become effective on July 30th. However, it has now been put on hold due to opposition from dealer lobbyists.

The National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association jointly filed a petition with the Fifth Circuit Court of Appeals, challenging the legitimacy of the CARS rule. The court has agreed to hear the case, leading to the postponement of the rule’s implementation. The crux of the legal dispute revolves around whether the FTC has the authority to impose such regulations.

In their petition, the dealership groups labeled the CARS rule as “an abuse of discretion” and are seeking a court order to block its enforcement. The FTC contends that the rule imposes minimal, if any, substantial costs on law-abiding dealerships. Instead, it aims to level the playing field for both dealerships and consumers by eliminating junk fees and hidden costs.

The legal battle is expected to unfold quickly, given that the petition for expedited consideration implies a decision from the courts within the year. Should the court rule in favor of the FTC, the agency anticipates only a slight delay in implementing the CARS rule, possibly before the close of 2024.

However, even if the FTC prevails in this case, challenges may persist. Dealer groups have not only contested the rule in court but have also lobbied Congress to enact laws directly limiting the FTC’s authority over car sales. The potential financial repercussions for violating the CARS rule may shed light on the intensity of this opposition, with each offense carrying a hefty penalty of $50,120 under trade regulation rules. The outcome of these legal and legislative battles will likely shape the landscape of car sales regulations in the coming months.

Source: U.S. FTC Public Affairs


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