The Federal Trade Commission (FTC) has finalized regulations to combat deceptive practices in the Cars Trade, aiming to protect consumers from bait-and-switch tactics and hidden fees. These new rules, known as the Combating Auto Retail Scams (CARS) Rule, are projected to save consumers over $3.4 billion and approximately 72 million hours annually.
Transparency and Fairness in Cars Trade Transactions
The CARS Rule mandates clarity and transparency in car sales, focusing on key aspects of the transaction process. Dealers are prohibited from misrepresenting crucial information such as price, financing terms, available discounts, rebates, and vehicle availability. This directly addresses the common bait-and-switch tactic where enticing offers lure customers only to be met with different, less favorable terms.
Furthermore, the rule tackles hidden junk fees, those unexpected charges often buried within lengthy contracts. Dealers must now disclose the offering price, clearly stating the price any consumer can pay for the vehicle. They must also inform consumers that optional add-ons, such as extended warranties, are not mandatory. When discussing monthly payments, the total payment amount, inclusive of all fees, must be presented.
Protecting Consumers from Bogus Add-ons in the Cars Trade
A significant aspect of the CARS Rule is the prohibition of bogus add-ons that provide no actual benefit to the consumer. Examples include warranties duplicating manufacturer coverage, unnecessary service contracts for electric vehicles, ineffective GAP agreements, and unusable software or subscriptions. Dealers are required to obtain express, informed consent from consumers for any charges associated with the vehicle purchase.
Impact of the CARS Rule on Military Personnel in the Cars Trade
The CARS Rule offers specific protections for military personnel and their families, who are often targeted by deceptive practices in the cars trade. It prohibits dealers from making false claims about military affiliations, vehicle relocation restrictions, and repossession risks. This is particularly important for service members who frequently relocate and may face unique financial challenges. The Department of Defense has expressed support for the CARS Rule, recognizing its contribution to the economic security and readiness of service members.
Enforcement and Implementation of the CARS Rule in the Cars Trade
The FTC carefully considered public input, receiving tens of thousands of comments before finalizing the CARS Rule. This feedback ensured the rule effectively protects consumers while maintaining a level playing field for honest car dealers. The rule is set to take effect on July 30, 2024. The FTC has published guidance for both consumers and auto dealers to clarify rights and responsibilities under the new regulations. This guidance includes FAQs and resources to help both parties navigate the cars trade under the new rules. The FTC aims to empower consumers and promote fair competition within the car buying market.
