Update: Court Kills FTC’s Fraud-Fighting ‘CARS’ Rule
Last updated February 12, 2025
Update to original article from December 2023:
A U.S. appeals court has vacated the Federal Trade Commission’s (FTC) Combating Auto Retail Scams (CARS) Rule, which would have banned bait-and-switch sales tactics and prohibited junk fees.
In its January ruling, the 5th Circuit Court of Appeals in New Orleans sided with automakers, who called the new regulations “arbitrary and capricious,” and claimed the commission did not follow proper procedures in creating the rule. Mike Stanton, President and CEO of The National Auto Dealers Association, called the ruling “a victory for the rule of law and a great outcome for consumers.” The CARS Rule would have added “massive amounts of time, complexity, paperwork and cost to the car-buying and car-shopping experience for virtually every customer,” Stanton said in a statement.
Erin Witte, director of consumer protection at the Consumer Federation of America, questioned why dealers challenged such a “common sense rule” to lower costs for Americans. “Buying a car is time-consuming and frustrating,” Witte said in a statement. “Rather than choosing to be part of the solution by simply agreeing to provide car buyers with transparency and fairness, the National Auto Dealers Association chose to aggravate the problem and sue the FTC in the court that has not hesitated to repeatedly put corporations over consumers. This fight is far from over.”
The CARS rule never took effect. In February 2024, the FTC postponed the effective date because of the auto dealers’ lawsuit.
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Original article:
Buying a car is a complicated transaction, and no matter how prepared you are when you head to the showroom, the dealer always has the upper hand.
The process is even more unfair when a shady dealer lies about its prices to get you into its showroom. It might quote a price for a specific vehicle, but when you get to the dealership, the car is gone, and the sales staff is no longer willing to honor its commitment. Instead, it offers another vehicle—which just happens to cost more.
“Bait and switch has been a long-standing problem with car sales,” said Chuck Bell, director of advocacy programs at Consumer Reports.
The new FTC CARS Rule targets bait-and-switch sales tactics that lure buyers to dealerships, and would ban hidden junk fees that are often buried in lengthy contracts. In its notice of proposed rulemaking, the FTC stated that it receives more than 100,000 complaints about car dealers annually. The FTC said it would save consumers nationwide more than $3.4 billion as well as an estimated 72 million hours each year shopping for vehicles “by targeted persistent and illegal bait-and-switch scams and junk fees in the car buying process.”
What the CARS Rule Would Do
The CARS Rule would require that price quotes provided by phone, email, on the dealer’s website, or in person are the total price (minus tax and licensing fees). Such transparency would save consumers “an enormous amount of time, and allow them to engage in head-to-head comparison shopping,” Bell told Checkbook.
Dan Dwyer, a staff attorney at the FTC’s division on Financial Practices who worked on the CARS Rule, said it was designed to protect consumers and honest car dealers.
“We’re not trying to get in the way of the dealers’ business,” Dwyer told Checkbook. “It doesn’t require any new paperwork, and as such, it should be business as usual for honest dealers. And in fact, it will help them compete by leveling the playing field and providing clear rules of the road. Honest dealers can’t compete fairly when unscrupulous dealers lure customers away with bogus prices.”
Here’s what would be required if the CARS Rule takes effect:
Offering Price, Total Payment, and Optional Add-Ons: Dealers must provide their offering prices—the actual prices any consumer would pay for vehicles; tell consumers that optional add-ons (such as extended warranties) are not required; and give information about total payments when discussing financing options.
Ban Bogus Add-Ons: The rule prohibits dealers from charging for any add-ons that do not provide benefits to buyers. The Commission cites these real-life examples of worthless add-ons: Warranty programs that duplicate manufacturers’ warranties, service contracts for oil changes on electric vehicles that don’t use oil, nitrogen-filled tires that contain no more nitrogen than normal air, and software/audio subscription services on vehicles that cannot support those subscriptions.
Require Consumers’ Consent: The rule requires dealers to get consumers’ express, informed consent for any charges that are part of vehicle purchases.
“The rule focuses on conduct that’s already illegal,” Dwyer said. “It’s already unlawful to charge consumers for items without their consent. It’s also illegal to charge consumers for items based on deception, by lying to them about the benefits. So, the rule actually helps draw clear lines about what is needed in the car-buying context and what dealers need to do to comply with existing law.”
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.