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FTC New CARS (Combating Auto Retail Scams) Rule

by | Jan 11, 2024 | Consumer Lawyer, Georgia Fraud Lawyer

The Federal Trade Commission issued a new rule designed to protect auto buyers from scams in the sale including advertising and financing scams together with ad on product sales. The new rule is to go into effect this summer.
Requirements under the new CARS Rule include:

Prohibited Misrepresentations: It is a violation of the rule and an unfair or deceptive act or practice under Section 5 of the FTC Act to make any misrepresentation, expressly or by implication, regarding material information related to 16 categories of a motor vehicle transaction. “Material” is defined to mean “likely to affect a person’s choice of, or conduct regarding, goods or services,” so it appears to broadly apply throughout the sales process. These categories include:
The costs or terms of purchasing, financing or leasing a vehicle.
Any costs limitation, benefit or other aspect of an add-on product or service.
Whether the terms are, or transaction is, for financing or a lease.
The availability of any rebates or discounts that are factored into the advertised price but not available to all consumers.
The availability of vehicles at an advertised price.
Whether any consumer has been or will be preapproved or guaranteed for any product, service, or term.
Any information on or about a consumer’s application for financing.
When the transaction is final or binding on all parties.
Keeping cash down payments or trade-in vehicles, charging fees, or initiating legal process or any action if a transaction is not finalized or if the consumer does not wish to engage in a transaction.
Whether or when a dealer will pay off some or all of the financing or lease on a consumer’s trade-in vehicle.
Whether consumer reviews or ratings are unbiased, independent, or ordinary consumer reviews or ratings of the dealer or the dealer’s products or services.
Whether the dealer or any of the dealer’s personnel or products or services is or was affiliated with, endorsed or approved by, or otherwise associated with the United States government or any Federal, State, or local government agency, unit, or department, including the United States Department of Defense or its Military Departments.
Whether consumers have won a prize or sweepstakes.
Whether, or under what circumstances, a vehicle may be moved, including across State lines or out of the country.
Whether, or under what circumstances, a vehicle may be repossessed.
Any of the required disclosures under the CARS Rule.

Offering Price, Total Payment, and Optionality of Add-Ons: Dealers have to provide the offering price—the actual price any consumer can pay for the vehicle; tell consumers that optional add-ons (like extended warranties) are not required; and give information about the total payment when discussing monthly payments. If the communication of these representations are in writing, then the disclosures must also be in writing.
Prohibited Add-Ons: The rule prohibits dealers from charging for any add-on that does not provide a benefit to consumers. Examples of such add-ons include: warranty programs that duplicate a manufacturer’s warranty, service contracts for oil changes on an electric vehicle, Guaranteed Asset Protection (“GAP”) agreements that do not actually cover the car or neighborhood in which it is housed, or other parts of the deal, and software or audio subscription services on a vehicle that cannot support the software or subscription.
Consumer Consent: The rule requires dealers to get consumers’ express, informed consent for any charges that they pay as part of a vehicle purchase.

The National Auto Dealer’s Association has filed a lawsuit challenging the rule.