Government Pauses Ban On Shady Dealership Upcharges

The ban on shady sales tactics was supposed to take effect July 30th, but dealerships protested, and now it's delayed indefinitely.

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Victoria Scott

By: Victoria Scott

Jan 18, 2024 at 5:57pm ET

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Late last year, the Federal Trade Commission (FTC) finalized a rule intended to curtail shady dealership practices and protect consumers from last-minute fees. This rule, known as the Combating Auto Retail Scams (CARS) rule, was approved unanimously by the FTC, and was written to go into effect on July 30th of this year. But now it's been paused thanks to dealer lobbyists.

The National Automobile Dealers Association (NADA) wasn't pleased with the CARS rule's development, apparently, so it and the Texas Automobile Dealers Association filed a petition with the Fifth Circuit Court of Appeals challenging the law. The Court agreed to hear the case challenging the FTC, and as a result, the CARS rule has been postponed.

The main issue in the legal battle is whether the law is actually within the FTC's jurisdiction to impose. The dealership groups, in the petition to the Fifth Circuit, called it "an abuse of discretion" and seek the court to block its implementation. The FTC maintains that the rule "does not impose substantial costs, if any" on law-abiding dealerships, and instead simply guarantees a more even playing field for both dealerships and consumers by eliminating junk fees and hidden costs.

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The petition against the CARS rule was filed for expedited consideration, which means that it's likely that a decision will come from the courts within the year. If the courts decide in favor of the FTC, the FTC believes that the CARS rule will be delayed by only a few months at most, which means it's possible it will still be enacted before the end of 2024.

Even if the FTC wins this battle, there may be more ahead, as dealership groups have also pursued Congress to make laws directly curtailing the FTC's ability to regulate car sales. The potential costs of breaking the CARS rule might give insight as to why: violating a trade regulation rule costs $50,120 per offense.

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