The Federal Trade Commission (FTC’s) has introduced a set of new regulations aimed at safeguarding car shoppers from deceptive practices by sellers. Dubbed the Combating Auto Retail Scams (CARS) Rule, these measures address longstanding grievances of car buyers, specifically targeting bait-and-switch tactics and unwarranted fees that have frustrated consumers faced with unexpected charges, such as a surprise $500 “protection” add-on.
The CARS Rule is built on four key pillars: (1) Dealers are prohibited from misrepresenting a vehicle’s price; (2) Dealers must transparently disclose the actual price that buyers will pay for the car; (3) Dealers are not allowed to charge consumers for add-ons that do not offer a tangible benefit; and (4) Dealers must obtain the buyer’s “express, informed consent” before levying any charges.
Originally proposed by the FTC in June 2022, the CARS Rule gained support from a group of 17 Democratic U.S. lawmakers in July 2023, urging the FTC to finalize the regulations. While the CARS Rule has now been officially confirmed, it is slated to become effective on July 30, 2024. The FTC estimates that this rule will save U.S. car shoppers over $3.4 billion annually and reduce the time spent shopping for vehicles by an estimated 72 million hours.
To assist auto dealers in adhering to the new rules, the FTC has established a dedicated website. The commission emphasizes that “honest dealers” should experience minimal changes, but it outlines specific actions that will be deemed illegal under the CARS Rule. For instance, dealers cannot misrepresent the availability of vehicles at an advertised price or any aspect of an add-on product or service. Charging consumers for add-ons without a discernible benefit is also prohibited.
The CARS Rule extends its protection to various demographics, addressing the susceptibility of older adults to unscrupulous car dealers. Additionally, the rule explicitly focuses on preventing scams targeting military service members, who are often subjected to deceptive information about dealer affiliations with the military and other issues affecting service members. According to the FTC, approximately 20 percent of service members accumulate at least $20,000 in auto debt by the age of 24, twice the rate in the general population.
Ashish S. Vazirani, acting DoD undersecretary of defense for personnel and readiness, expressed appreciation for the FTC’s CARS Rule, highlighting its significance in combating predatory practices that specifically target military service members and their families.