FTC Targets Car Dealership Scams With New Rule

The Federal Trade Commission (FTC) has taken a significant step to protect consumers from auto dealership scams with the introduction of the Combating Auto Retail Scams (CARS) Rule. This new regulation, announced on Tuesday, aims to put an end to the deceptive practices of hidden fees and bait-and-switch pricing tactics employed by some auto dealers. The FTC estimates that these underhanded methods cost U.S. consumers approximately $3.4 billion annually and add an astounding 72 million hours to their vehicle shopping experiences.

The CARS Rule is a direct response to the growing concern over misleading information about vehicle prices, costs, and other crucial details during the purchasing process. Under this rule, dealers are required to disclose the actual price consumers will pay for vehicles, clarify that additional items like extended warranties are optional, and provide complete upfront information about monthly payments.

Watch a valet crash a customer’s dream car.

This initiative was partly motivated by the experiences of consumers like Stacy Lupo from Winter Haven, Florida. Lupo recounted her ordeal of being charged for an extended warranty she declined while purchasing a car, a common scenario under the current system. The CARS Rule aims to prevent such deceptive practices, ensuring a fair and transparent car-buying process.

Apart from safeguarding general consumers, the rule also offers specific protections for military personnel and their families, who are often targeted with deceptive practices. The CARS Rule prohibits false claims about dealers’ military affiliations and misinformation about vehicle relocations and repossessions – issues particularly pertinent to service members.

The FTC’s new rule is the result of extensive feedback from consumers, service members, veterans, auto dealers, and other stakeholders. It focuses on preventing the most common scams targeting vehicle buyers while also protecting honest dealers and ensuring fair competition in the auto market.

Scheduled to take effect on July 30, 2024, the CARS Rule represents a major stride in safeguarding consumer interests in the auto industry. The FTC has also provided new guidance for consumers and auto dealers to prepare for the rule’s implementation, highlighting its commitment to promoting competition and protecting consumers in the automotive sector.