GIVE ME A BRAKE The FTC continues its deep dive into the automotive industry with its latest opening chess move in the Combating Auto Retail Scams Rule, simply known as the CARS Rule. The Rule is comprehensive and will fundamentally change the way dealers do business. In this article, I will briefly cover all of these topics to provide a better understanding of what is to come on the new regulations’ effective date. The keyword here is “briefly” because the regulations that the FTC released spanned over 370 pages. In order to fully understand the CARS Rule and how it can potentially affect your daily operations, we will publish a series of articles over the next few months, with each focusing on a specific area of the regulations to give each portion the attention that it deserves. Hopefully, you will be well-equipped to meet the demands by the Rule’s effective date of July 30, 2024. OVERVIEW AND APPLICABILITY By now, you’ve heard about the CARS Rule by its original name, the “Motor Vehicle Trade Regulations Rule” (or some variation of it), either from your state trade association or the National Automobile Dealers Association. For those of you who have not, the CARS Rule is essentially a set of regulations that purports to provide dealer guardrails (or a euphemism I like to use: “instructions with legal ramifications”) on how you are to advertise, market and sell motor vehicles to customers. Touted as a consumer protection regulation, the goal of the CARS Rule is to reduce the number of unscrupulous dealers and poor transaction experiences that thousands of Americans ostensibly face every year. It is interesting to note that those dealerships that only sell motorcycles, ATVs, RVs, boats, scooters, electric bikes and golf carts will be unaffected. From advertising disclosures to record-keeping requirements, let’s jump into the thick of it to provide you with a bit more clarity as to what will need to change at the dealership level. ADVERTISING PROHIBITIONS You have a car. You want to sell that car. You advertise the car for sale. A consumer sees the advertisement, inquires about it, and the vehicle is sold. Sounds simple enough, right? The FTC has always overseen this advertising process under its current authority in Section 5, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” It was broad, but the CARS Rule effectively groups the FTC’s fire on automotive transactions. Here is a list of prohibited activities when advertising a motor vehicle for sale. The list is long, so buckle up. You cannot misrepresent the following: 1. The cost or terms of purchasing, financing or leasing a motor vehicle; 2. The costs, limitations, benefits or any other aspect of an add-on product or service; 3. Whether or not the terms advertised are for financing or leasing; 4. The availability of any rebates or discounts by factoring into the advertised price those that are not widely available to all consumers; 5. The availability of vehicles at an advertised price; A Summary of the CARS Rule By Hao Nguyen, Chief Legal Officer, ComplyAuto 16
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