The implementation of new rules designed to protect consumers from dealership scams has been delayed, following heavy resistance from the National Automobile Dealers Association (NADA). Intended to go into effect on July 30, 2024, their introduction has now been paused pending the results of a court case.
The Federal Trade Commission (FTC) announced the Combating Auto Retail Scams (CARS) Rule late last year, which is aimed at stopping dealers from using bait-and-switch tactics and junk fees. It also requires dealers to tell consumers the price at which a vehicle is being offered, to disclose the total monthly payments, and the full amount a consumer would pay over the life of their loan.
NADA immediately came out in opposition to the rules, which CEO Mike Stanton called “heavy-handed bureaucratic overreach.” He complained that the rules would lengthen the car sales process and impose costs on all dealers, even honest ones.
Read: Dealers Angry As FTC Finalizes Rules On Bait & Switch, Transparent Pricing, And Junk Fees
That led NADA and the Texas Automobile Dealers Association to petition the 5th Circuit Court of Appeals to overturn the regulation on January 5, reports Autonews. Three days later, the groups asked the court to pause the date of the rule’s implementation pending the outcome of their appeal.
On Thursday, January 18, the FTC announced that it would pause the rollout of the rules as the appeal was heard. However, it claims that NADA’s complaints are unfounded and that their “assertions rest on mischaracterizations of what the rule requires.”
“The Commission’s order points to the inaccurate argument that the rule will increase compliance costs for car dealers, which is not true for dealers who currently follow the law,” wrote the FTC. “The rule does not impose substantial costs, if any, on dealers that presently comply with the law, and to the extent there are costs, those are outweighed by the benefits to consumers, to law-abiding dealers, and to fair competition – as honest dealers will not be at a competitive disadvantage relative to dishonest dealers.”
NADA has said that it is very pleased with the pause. Meanwhile, the FTC says that, if the court reviewing the rule grants an expedited review as has been requested, the implementation of the CARS Rule should not be delayed by more than a few months.
