The CARS Rule: A Victory for Consumers and Honest Dealers
In a new move to safeguard consumers from deceptive practices in the auto retail industry, the Federal Trade Commission (FTC) has recently finalized the Combating Auto Retail Scams (CARS) Rule. This rule specifically targets two prevalent and harmful tactics faced by car buyers: bait-and-switch schemes and hidden junk fees. On December 15th, at an Ethnic Media Services Press Conference, several officials of the FTC explained this new rule, and the benefits it entailed.
The CARS Rule, expected to take effect on July 30, 2024, introduces several key provisions aimed at ensuring transparency and fairness in the car-buying process. The rule mandates that dealers refrain from misrepresentations regarding crucial information such as price and cost. Dealers must disclose the offering price, making it clear that optional add-ons are not required, and provide information about the total payment when discussing monthly payments. Jaime D. Brooks, an attorney in the Division of Financial Practices, emphasizing the rule's purpose, stated, “the rule focuses on combating two harmful practices: bait and switch and junk fees.”
Additionally, the rule tackles the issue of bogus add-ons, prohibiting dealers from charging for items that do not benefit consumers. Examples include warranty programs duplicating a manufacturer’s warranty, service contracts for irrelevant services, and software or audio subscription services on vehicles that cannot support them. Sanya Shahrasbi, an attorney in the Division of Financial Practices, drew attention to the impact of add-ons, stating, “Add-ons can cost customers thousands of dollars and increase costs.” She noted that these charges often target vulnerable groups, such as immigrants, people of color, and servicemembers, emphasizing that consumers must be informed and agree to any charges.
The rule’s focus on transparency also protects people who speak English as a second language, and who are often targeted by these deceiving practices. It states that any disclosure needs to be easily understandable, and it especially emphasizes that if a dealer is negotiating or promoting a price in a language, any disclosure of added costs or of the terms of the deal, must be in the same language.
The FTC initiated the rulemaking process in June 2022, seeking public input. The agency received extensive feedback from consumers, servicemembers, veterans, and auto dealers. Subsequently, the rule was refined to focus on protecting consumers from common scams while ensuring fair competition among auto dealers.
The CARS Rule is anticipated to save consumers over $3.4 billion annually and 72 million hours in shopping time. It also addresses the growing cost of vehicles, which have become a significant expense for many consumers. Malini Mithal, Associate Director of the FTC’s Division of Financial Practices, stressed the importance of honest practices, stating, “It’s very important to ensure that dealers act in a way that is honest, without tricks and traps. That’s not only good for consumers but also for honest dealers.”
As the CARS Rule aims to empower consumers, Malini Mithal provided practical advice: “Ask the price, if they aren’t willing to disclose it, walk away. If you can’t, tell the dealer you know your rights and you will report them to the FTC.”
To report fraud, scams, or bad business practices to the FTC in English go to reportfraud.ftc.gov; in Spanish go to reportefraude.ftc.gov; in other languages call 877-382-4357 from 9 a.m. to 5 p.m. ET. Press 3 for a list of languages.