The CARS Rule: What Dealers Need to Know After the Fifth Circuit Decision
UPDATE (January 2025): The FTC’s Combatting Auto Retail Scams (CARS) Rule has been vacated by the Fifth Circuit Court of Appeals. This post has been updated to reflect current legal status.
What Happened
On January 27, 2025, the Fifth Circuit ruled that the FTC violated its own procedural requirements when issuing the CARS Rule. The court found that the FTC failed to issue a required Advance Notice of Proposed Rulemaking (ANPRM) under Section 18(b) of the FTC Act.
As a result, the CARS Rule has “no force or effect.” The specific requirements it would have imposed, including explicit informed consent for every charge and strict “offering price” definitions, are not enforceable.
What This Means for Dealers
The CARS Rule is dead (for now). However, dealers should understand:
- General FTC Act Still Applies: The FTC can still pursue dealers for deceptive practices under its general authority (Section 5 of the FTC Act). You cannot lie about pricing or slip undisclosed fees into contracts.
- State Laws Remain: Many states have their own consumer protection laws that mirror or exceed what the CARS Rule would have required.
- FTC May Try Again: The FTC could attempt to re-promulgate the rule following proper procedures. This would take years, but the agency has signaled continued interest in auto retail practices.
Best Practices Despite the Ruling
Even without the CARS Rule, dealers should maintain transparent practices:
- Clear Pricing: Disclose all mandatory fees upfront in advertising
- Documented Consent: Get written acknowledgment for all add-on products
- No ‘Sliding’: Never add products to a deal without explicit customer approval
- Record Retention: Keep comprehensive records of all transactions
The FTC is watching the industry closely. The safest path forward is operating as if robust consumer protection rules apply, because in many states, they already do.
Legal Note: NADA and TADA prevailed in their challenge. The FTC may appeal to the Supreme Court or restart the rulemaking process with proper procedures.
