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How will the new CARS rule benefit consumers?

On Behalf of | Dec 19, 2023 | Dealer Fraud

Car dealers are notorious for adding junk fees onto the cost of vehicles. Consumers are often focused on the large number at the top of an invoice and less on the multitude of smaller charges underneath it. However, they add up – and some charges may be tied to “issues” that don’t exist or features that the customer will never use.

The Federal Trade Commission (FTC) is working to put an end to that and other dishonest tactics used by too many car dealers with the Combating Auto Retail Scams (CARS) rule. The new rule, which takes effect on July 30, 2024, details “four principles of truth and transparency” that should be part of any car sale or lease transaction.

Prohibiting add-on charges for things that offer no benefit

There are any number of these charges, and consumers understandably think they must be necessary. However, they may not apply to a specific vehicle. Thanks to the CARS rule, every charge must be justifiable not broadly, but to the specific vehicle being purchased by an individual buyer.

Disclosing the “out-the-door” price for the vehicle

While they don’t have to do this up-front, if a customer asks, dealers must tell them how much they could actually purchase the vehicle for without any add-ons. That’s often referred to as the “out-the-door” or “offering” price. Further, if a customer is financing the purchase, they must be given the total payment amount with interest and fees if they ask for it.

Requiring the “express, informed consent” of consumers for any charges

Some dealers include language in their contracts that allow them to add or change pricing or financing agreements without a customer’s consent. The new rule will formally prohibit this practice.

Prohibiting misrepresentations about material information

Dealers cannot misrepresent prices, debates or discounts. They also can’t engage in “ratcheting up the price of the vehicle with last-minute add-ons” thanks to this new law.

What are the penalties for non-compliance?

The CARS rule takes precedence over state laws (which vary considerably) unless a “state law or regulation gives consumer greater protections.” If a dealer violates the new rule, the FTC can require it to pay back customers what it owes them and pay penalties of potentially just over $50,000 for each violation.

While those are big incentives for dealers to abide by the new regulation, there’s no guarantee that all of them will. Further, unfortunately, there are still other ways they can defraud consumers. If you believe you’ve been the victim of such fraud, it’s wise to seek legal guidance as soon as possible accordingly.

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