(As first published in nvla LeaseWire)

On January 4, 2024, the Federal Trade Commission (“FTC”) published the final rule known as the Combatting Auto Retail Scams Trade Regulation Rule (“CARS Rule”). The FTC’s authority is derived under the Dodd-Frank Act to make rules about unfair or deceptive dealer practices.

The rule was set to go in effect on July 30, 2024. As a result of a petition in court to vacate or modify the CARS Rule brought by the National Automobile Dealers Association and the Texas Automobile Dealer Association, on January 18, 2024 the FTC issued an order delaying the effective date. The petition claims the rule is “arbitrary, capricious, an abuse of discretion, without observance of procedure required by law, or otherwise not in accordance with law.” 

According to the FTC, the rule was fashioned to bring about truth and transparency in car leasing and purchasing and to combat misleading and deceptive practices. The rule prohibits misrepresentations concerning material matters “likely to affect a person’s choice of, or conduct regarding, goods or services”; requires dealers to clearly disclose the offering price; makes it unlawful to charge for add-ons that do not provide a benefit; and requires dealers to get the customer’s, express informed consent concerning changes in the transaction. 

The CARS Rule applies to any person or business in the United States or a U.S. territory that (1) is licensed by a state, the District of Columbia, or a territory to engage in the sale of covered motor vehicles; (2) takes title to, holds an ownership interest in, or takes physical custody of covered motor vehicles; and (3) is predominantly engaged in the sale and servicing of covered motor vehicles, their leasing and servicing, or both. 16 C.F.R. §463.2(f).

Covered motor vehicles means any self-propelled vehicle designed for transporting people or property on public streets and therefore applies to automobiles, including cars, trucks, and SUVs. 16 C.F.R. §463.2(e). The rule specifically excludes (1) recreational boats and marine equipment; (2) motorcycles, scooters, and electric bicycles; (3) motor homes, recreational vehicle trailers, and slide-in campers; and (4) golf carts. Commercial vehicles are not exempted by the definition.

The rule applies to all methods utilized by dealers to communicate with potential vehicle lessees and purchasers. 

All disclosures made by dealers must be clear and conspicuous which means that the disclosures must be “easily understandable.” This includes advertising in languages other than English. These disclosure requirements will go beyond disclosures already required under Regulation M covering leases and Regulation Z covering retail installment sale contracts promulgated under the Truth in Lending Act.

The rule also contains certain recordkeeping requirements.

Violation of CARS, like any FTC Trade Regulation Rule, may lead to orders requiring a dealer to change how it conducts its business, return money to injured consumers, and pay civil penalties of up to $50,120 per violation.

Sloan Schickler is a partner in the commercial finance law firm, Schickler & Schickler PLLC. Schickler, a veteran vehicle leasing, finance and bank attorney and the attorneys in her firm have decades of experience representing and protecting lessors, banks, captive and independent finance companies in all facets of the vehicle leasing and financing business. She has served as the NVLA Legal and Legislative counsel since 2017, is currently the only woman on the board of directors and is a supporter of Leasing News and sits on its Advisory Board. Sloan can be reached at sloan.schickler@schicklerlaw.com or 212-262-5297.