08
July
2025

Key Insights and Action Steps Following the Vacating of the CARS Rule

The 5th Circuit Court vacated the CARS Rule due to procedural issues with the FTC, not on overregulation grounds. This could lead to its revival under a future administration, emphasizing the need for vigilance in the automotive industry.

Key Insights and Action Steps Following the Vacating of the CARS Rule

The 5th Circuit Federal Court vacated the CARS Rule ("Combatting Auto Retail Scams") at the end of January this year. This Rule was not vacated because the courts realized that there was duplication with existing FTC Rules or because of the enforcement clashes between Federal agencies but because the FTC was so eager to capitalize on the mistrust of our industry that it jumped the gun and failed to follow its own procedures for Rulemaking.

Let's be clear—we did not win this battle— they defaulted on a technicality. This is not a feather in the cap in defeating overregulation. A new administration may revive the CARS Rule and assist the FTC in following the correct procedure to fast-track its reinstatement, with the potential for more teeth to the Rule. We NEED to be vigilant.

What does that mean for the automotive industry?

With the current Administration's concentration on pulling back on overreach and duplication in Federal oversight, the tides have changed. The FTC and what's left of the CFPB continue to target the automotive industry's practices, specifically disclosures and lending, through the states' Attorneys General. They have continued to expand what falls under their definition of deceptive practices under UDAP ("Unfair and Deceptive Practices").

The FTC is going to the most sympathetic AGs – especially those who filed an "Amicus Brief" in support of the CARS Rule despite the illegal manner in which it had been constructed. In our region, this includes Delaware, Maryland, New Jersey, New York, Pennsylvania, and Washington DC – with the charge being led by California. States are being encouraged to "fill the vacuum" left by the CARS Rule defeat – but in reality, most states already have extensive consumer protection regulations that serve the same purpose.

Rather than the "recommendation" of the CFPB (which had been knocked down quite a few pegs) encouraging enforcement action by the FTC, the FTC is now pushing down the same encouragement for enforcement action by the state's Attorney's General. In states where the AGs are less able to be influenced, the FTC's focus is shifting to lawmakers to supplement existing laws where they believe a deficiency exists. The legislators are being led to believe that it is their responsibility to protect consumers from themselves. Consumer advocacy groups that were huge proponents of the CARS Rule are pushing AG involvement in complaints, as are aggressive attorneys.

To clarify—the industry leaders, MidAtlantic IADA and NIADA are NOT opposed to complete and express consent on the part of consumers. We believe in dealers being ethical in their presentations and following all prescribed rules and recommendations already in place… maybe even more so—to root out the unethical dealers that give us all a bad reputation.

ACTION ITEMS to Takeaway:

  • We need to be vigilant—if you hear something, say something—this could be an offhand comment from an inspector or legislator. We are constantly watching proposed legislation locally and Nationally, but if something is mentioned or someone is being targeted, please let us know so we can get involved.
  • We need to be sure our practices are bulletproof!
  • Follow all existing laws and rules in place.
  • Be SURE to obtain "Express Informed Consent" from EVERY buyer, EVERY time: 
    • No Prechecked Boxes
    • No Vague "Bundles"
    • No hidden fees or multiple fees lumped under one heading
    • Transparent sale process with detailed disclosures
    • Consistency in EVERY DEAL, EVERY TIME, and in EVERY DEAL JACKET

If you are involved with Menu Selling (which we highly suggest for multiple reasons), your menu must include an "OPT-OUT for ALL," presenting each product's ala carte cost to the buyer and a clear explanation of the purpose of each product.

If you have any questions, please get in touch with me at 717-638-9002 x129 or our valued sponsor, Ignite Consulting. We will gladly review your situation and what you need to protect yourself better. All you need is one displeased customer to make your life a nightmare. Visit www.ignitecp.com/ free-resources or www.hudsoncook.com/ insights-subscribe.cfm to keep up to date faster than we can get info out to you. Have a GREAT month, and we look forward to continuing to serve you!

Sources:
Ignite Consulting Partners, webinar 6/17/2025, with Ace Christian of Secure Close and Steve Levine of Ignite Consulting Partners

MayerBrown.com, article, "A Post CARS Rule Break? Not So Fast. Buckle Up For New Regulatory Activity In The Motor Vehicle Space", Authors: Kris D Kelly, Jeffrey Taft, and Joy Tsai

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Categories: Dealer News Stories

Kathy Sabaski

Kathy Sabaski

Deputy Executive Director

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