No Telling Yet Where This Car Will Go

CARS, the much-reviled FTC vehicle-shopping rule scheduled to take effect July 30, may be on hold for now, but an uncertain outcome makes preparation wise.

I’m sure a lot of auto dealers were exhaling with gusto when the Federal Trade Commission’s vehicle consumer rule, CARS, was stayed pending resolution of litigation.

The national and Texas automobile dealers associations sued the FTC over the new rule shortly after the new year. NADA says CARS, instead of protecting consumers as the FTC says, would actually be “terrible” for them, unnecessarily adding “massive amounts of time, complexity, paperwork and cost” to the vehicle-buying process.

One industry compliance expert told me – ironically the morning before the Fifth Circuit Court of Appeals granted the plaintiffs their request to stay the rule while the court considers the case – that CARS would bog down dealers with documentation requirements that he couldn’t see how they’d realistically fulfill.

NADA says CARS, which the FTC finalized in mid-December, would in fact require dealers to “completely overhaul their operations in order to comply” with a rule it says addresses already illegal practices. It also says agency rule-makers have “failed at every juncture to justify” the rule or prove that it would benefit consumers.

CARS, short for Combatting Auto Retail Scams in the long tradition of naming bureaucratic mechanisms with snappy acronyms, is designed to prevent bait-and-switch scams and hidden junk fees in auto retail.

The agency holds that CARS would benefit consumers, law-abiding dealers and fair competition and that it wouldn’t bring significant, if any, added costs for dealers who already comply with it.

The plaintiffs’ “suggestion that legally compliant dealers have to make unnecessary changes to satisfy petitioners’ misunderstandings of the rule [has] created uncertainty,” the FTC says in a press release announcing its order postponing CARS’ effective date, which has been set at July 30.

“… honest dealers will not be at a competitive disadvantage relative to dishonest dealers” if the rule is upheld, it says.

The agency estimates CARS would save consumers more than $3.4 billion and 72 million shopping hours each year.

NADA, meanwhile, argues that CARS would cost a single dealership about $47,000 upfront each year, or $2.2 billion nationwide.

 But since the rule is up in the air for now, it seems wise for dealers to proceed as though FTC will win the court battle over CARS, as there could be little to no time to prepare otherwise.

The FTC says that if the plaintiffs are granted expedited review of the case, the stay shouldn’t postpone the rule’s enforcement by longer than a few months, if at all.

Maybe instead of exhaling, try to deep-breathing exercises as you work with your compliance experts on a worse-case scenario.

Hannah Mitchell is executive editor of F&I and Showroom. A former daily newspaper journalist, her first car was a hand-me-down Chevrolet Nova.