Staying Current with FTC, CFPB, and Evolving State Transportation Laws

The automotive dealership operates at the intersection of commerce, consumer finance, and transportation law. This unique positioning subjects dealers to a complex and constantly evolving regulatory environment shaped by federal agencies such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), as well as a patchwork of state-specific laws governed by Attorneys’ General, Departments of Banking, Revenue, State and Transportation.

Failure to remain compliant is no longer a minor operational risk—it is an existential threat.

Regulatory violations can result in multimillion-dollar penalties, reputational damage, litigation exposure, and even loss of licensure. In contrast, dealerships that proactively maintain compliance gain competitive advantages through consumer trust, operational efficiency, and reduced legal exposure.

The Regulatory Landscape Governing Dealerships:

Federal Oversight: FTC and CFPB
Automobile dealers—particularly those involved in financing—are considered financial institutions under federal law and are therefore subject to extensive oversight.

The FTC plays a central role in enforcing consumer protection laws, including:

• Prohibition of unfair or deceptive acts or practices (UDAP)
• Data security requirements under the Safeguards Rule
• Disclosure obligations under the Used Car Rule

and the FTC’s Safeguards Rule requires dealers to maintain a comprehensive written information security program to protect customer data, including ongoing monitoring and updates.

Meanwhile, the CFPB focuses on:

• Fair lending practices
• Credit disclosures
• Prevention of discriminatory financing
• Oversight of direct and indirect auto lending

Together, these agencies create a dual-layer compliance framework that directly affects daily dealership operations.

The FTC Framework – Core Compliance Obligations

The Safeguards Rule: Data Security as a Legal Requirement
Modern dealerships handle vast amounts of sensitive consumer data, including:

• Social Security numbers
• Credit histories
• Banking information

The FTC requires dealerships to:

• Develop written security programs
• Conduct risk assessments
• Quantifiable training of employees
• Monitor and test systems
• Report certain data breaches

Failure to comply can result in enforcement actions and liability exposure far beyond traditional regulatory penalties.

The Used Car Rule: Transparency in Sales
The FTC mandates that every used vehicle display a STATE SPECIFIC FTC Buyers’ Guide, which informs consumers about:

• Warranty status
• Mechanical conditions
• Dealer obligations

This rule is foundational in ensuring transparency and reducing post-sale disputes.

The Legacy Impact of the CARS Rule
Although the FTC’s Combating Auto Retail Scams (CARS) Rule was vacated by the Fifth Circuit in 2025 due to procedural issues, its underlying principles remain highly influential.

The rule targeted:

• Hidden fees
• Misleading pricing
• Add-on product abuse (physical aftermarket vehicle add-ons as well as backend products)
• Bait-and-switch tactics

Even after its removal, regulators continue to enforce these principles under existing UDAP authority.

The absence of a rule does not mean absence of enforcement.

The Holder Rule: Expanding Liability
The FTC Holder Rule allows consumers to assert claims against lenders for dealer misconduct, this creates:

• Shared liability between dealers and finance companies
• Increased scrutiny of dealer practices
• Strong incentives for compliance partnerships

Recent legal developments have expanded potential damages, including attorney’s fees in some jurisdictions, increasing financial exposure.

CFPB Oversight and Auto Finance Compliance

Indirect Auto Lending Risks
Many dealers operate through indirect lending relationships, which introduces CFPB oversight into:

• Dealer markups
• Interest rate disparities
• “Discriminatory” lending practices

Dealers must ensure:

• Consistent pricing policies
• Documentation of rate decisions
• Monitoring of lender relationships

Fair Lending and UDAAP Enforcement
The CFPB reports to the FTC to enforce prohibitions against:

• Misleading loan terms
• Hidden fees
• Predatory financing

Violations can result in:

• Civil penalties
• Restitution requirements
• Ongoing monitoring agreements
• CFPB referral to State agencies to levy additional fines and penalties

The Expanding Role of State Regulation

State governments are increasingly active in regulating dealership conduct. This trend has intensified as federal rulemaking has faced legal challenges.

For example, after the FTC’s CARS Rule was vacated in 2025, many states (especially CA, CO, CT, MD, PA & VA) began advancing their own:

• Junk fee prohibitions
• Add-on product regulations
• Disclosure requirements
• Licensing and operational mandates

State Attorneys General are now among the most aggressive enforcers, often pursuing large settlements tied to deceptive sales practices. Many “rules” are set forth as “recommendations”, which truly aren’t requests.

Evolving Legal Risks in 2025–2026

Regulatory Uncertainty
The dealership industry is currently in a state of regulatory flux:

• The CARS Rule has been vacated
• New rulemaking is likely
• State laws are rapidly evolving

This creates a compliance environment defined by uncertainty and rapid change.

Increased Enforcement Despite Fewer Rules
Even without new formal regulations:

• FTC enforcement remains active
• State AGs are filling gaps
• Litigation risk is increasing

Dealers must recognize that principles matter more than technical rules.

Reputation and Consumer Trust
Modern consumers are increasingly aware of:

• Hidden fees
• Deceptive practices
• Data privacy concerns

Transparent dealerships gain:

• Higher customer retention
• Better online reviews
• Increased referral business

Dealers who prioritize compliance gain a competitive advantage:

• Attract better lender relationships
• Avoid operational disruptions
• Scale more effectively

WHAT YOU CAN DO ABOUT IT…IN NEXT MONTH’S DETAILED ARTICLE, we will be explaining Best Practices for Dealership Compliance as fleshed out by our industry experts!

We’ve sought out recommendations from Allison Harrison (ALH Law), Patrick O’Brien (NIADA Government & Legislative Coordinator, and former CFPB staff member) and, the compliance guru, Steve Levine (Ignite Consulting).

We will be going more in depth into what you NEED to do to secure YOUR dealership, including:

• Build a Culture of Compliance in leadership, operations, sales and complaint management
• Implement Robust Training Programs including FTC and CFPB requirements, ethical sales practices, data security protocols
• Conducting Regular Internal Audits and appointing a Compliance Officer to review and evaluate advertising, sales and policies for potential risk
• Leverage Compliance Technology
• Stay Informed and how connections through your local IADA can assist with keeping dealers up-to-date on the evolving landscape

As regulatory activity continues to evolve, staying informed is not optional—it is essential.

Dealerships that anticipate regulatory changes will be best positioned to succeed.

The importance of staying current with FTC, CFPB, and evolving state transportation laws cannot be overstated.

Regulatory compliance is no longer a back-office function—it is a core business strategy.

Dealers who fail to adapt risk severe consequences. Those who embrace compliance, however, gain stability, trust, and long-term success.

In next month’s print issue, look out for the key details that you will want to save and review with your team. As always, we are available to address any and all questions regarding Federal or State compliance… preferably far in advance of an audit!