FTC Postpones Effective Date of Auto Retail Scams Rule Amidst Legal Challenge

Federal Trade Commission (FTC)

WASHINGTON, D.C. — The Federal Trade Commission (FTC) has decided to postpone the effective date of the Combatting Auto Retail Scams (CARS) Rule due to a pending legal challenge. The decision comes after two industry groups petitioned to overturn the rule, claiming it would increase compliance costs for car dealers.

The FTC, however, has countered these assertions, pointing out that they rest on mischaracterizations of what the rule actually requires. According to the Commission, the rule does not impose substantial costs, if any, on dealers who currently comply with the law. The FTC further argues that any costs incurred are outweighed by the benefits to consumers, law-abiding dealers, and fair competition.

The CARS Rule aims to save consumers more than $3.4 billion and approximately 72 million hours each year shopping for vehicles by addressing persistent and illegal bait-and-switch scams and junk fees in the car buying process. By leveling the playing field, honest dealers will not be at a competitive disadvantage relative to dishonest ones.

The decision to delay the rule’s implementation, originally slated for July 30, 2024, is significant for several reasons. First, it demonstrates the FTC’s willingness to listen to industry concerns and adapt its approach accordingly. This flexibility can foster a more cooperative relationship between regulators and the industries they oversee, ultimately benefiting both businesses and consumers.

Second, the postponement can help ensure that the CARS Rule is thoroughly reviewed and understood before it takes effect. This can help avoid unnecessary changes and confusion among legally compliant dealers who may have misunderstood the rule’s requirements.

Finally, the delay could allow for a smoother transition once the rule is implemented. If the court grants expedited review, as requested by the litigants, the stay of the effective date should not postpone the rule’s implementation by more than a few months. This would give dealers sufficient time to understand and adapt to the new regulations, minimizing disruptions to their operations.

The FTC’s 3-0 vote to approve the issuance of the order. As the legal challenge unfolds, the automotive industry and consumers alike will be watching closely to see how this rule, aimed at enhancing transparency and fairness in the car buying process, will ultimately take shape.

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