The Fifth Circuit Court of Appeals decided to vacate the Combating Auto Retail Scams (CARS) Rule, also referred to as the Vehicle Shopping Rule, on January 27. In a 2-1 decision, the court vacated the Rule because the FTC did not issue an Advanced Notice of Proposed Rulemaking (ANPRM) before issuing the Final Rule. The court did not address challenges to the Rule’s requirements, but focused only on the FTC’s failure to follow its own rulemaking process. This NADA/TADA victory means that, for now, the FTC cannot enforce the Vehicle Shopping Rule.
The FTC must now decide what to do next. Generally, the FTC can either challenge or accept the ruling. If the FTC chooses to accept the ruling, the two most likely next steps are to either abandon the Rule or start the rulemaking process all over again.
We do not know what the FTC will do next. Some have speculated that with the change in administration and its general apprehension toward regulations, the FTC will not move forward with an appeal or a new rulemaking process. Time will tell.
What dealers should be thinking about now?
While this is a huge victory for auto dealers nationwide, this does not give dealers permission to ignore all the warnings and requirements in the Rule. Three things to remember:
-
Many of the Rule’s requirements were already required. This decision does not change that fact. Dealers will still need to comply with all existing laws and regulations and cannot assume they are in the clear because the Vehicle Shopping Rule didn’t move forward.
-
The FTC’s enforcement authority continues. Nothing in this action limits the FTC’s ability to pursue enforcement actions against dealers for violating existing laws and regulations. We have seen many of these issues raised in enforcement actions for at least the last five years. Just last month, a 10-dealership group entered into a $20-million settlement with the FTC over issues including price advertising, add-on products/services, and junk fees. It does not matter which party is in office, the FTC will continue to pursue enforcement actions.
-
State legislatures/regulators may pick up the mantle. While many are anticipating that there will be a reduction of federal legislative or regulatory action, that does not mean all legislative or regulatory activity will go away. States can move in to fill any void left by the federal government. For example, the CFPB issued the
Strengthening State-Level Consumer Protections report earlier this month. This report outlines recommendations for “strengthening state-level consumer protection law” for state legislators and regulators to consider. The LAW
® and BANKERS SYSTEMS
® forms team tracks thousands of pieces of legislation and regulation each year in the 50+ jurisdictions we do business in, and we are already seeing consumer protection legislation being introduced.
While this decision is a welcome reprieve from some of the overwhelming burdens and requirements the Vehicle Shopping Rule would have placed on dealers, it should not give anyone a false sense of security. As always, dealers should review their processes, forms, and training to ensure they are meeting their obligations and complying with existing laws and regulations.