O'Loughlin advises dealers to go ahead and prepare now instead of waiting on pending litigation over the rule to resolve. - IMAGE: Pexels/Gustavo Fring

O'Loughlin advises dealers to go ahead and prepare now instead of waiting on pending litigation over the rule to resolve.

IMAGE: Pexels/Gustavo Fring

On Dec. 12, the Combating Auto Retail Scams Rule, or CARS, was promulgated by an activist Federal Trade Commission. It will take effect on July 30, and creates significant new perils for dealers.

In the briefest terms, CARS mandates the following:

  • No misrepresentations concerning price and cost
  • The offering price, total payments, and voluntary protection products pricing must be clearly explained and disclosed.
  • Voluntary protection products must offer true objective value.
  • Consumers must provide dealers with express and informed consent.

The FTC clearly seeks to amplify disclosures and explanations that must be provided to consumers and, in so doing, create a clear record for prosecuting and litigating dealers for their disclosure failures. Prohibiting junk fees and deceptive trade practices are the government’s objectives. There doesn’t appear to be anything truly new in CARS, just a substantial augmentation of what is currently legally demanded. This is not to say that CARS won’t require new disclosures and protocols, as it probably will, after it’s been thoroughly reviewed and applied. But dealers should re-examine their compliance protocols in certain key areas to avoid CARS from being used against them. 

New laws create urgency in all forms of enforcement by all agencies.

Whenever new laws are enacted to police commercial activity, state, federal and private plaintiffs become motivated to take legal action regarding, not only the new law, but other related consumer-protection laws. In addition, both the FTC and the Consumer Financial Protection Bureau have been encouraging state agencies to advance their federal agendas, which undoubtedly will include CARS.

Basic rules to avoid being prosecuted or sued – how do prosecutors and plaintiffs decide which dealers to prosecute?

Every dealer should know all the laws and follow each one diligently and without fail. But is this possible? It probably isn’t because the regulatory burden is substantial. How do government agencies and attorneys decide which dealers to target? Answer: They track the most obvious issues that come to their attention. Dealers need to prioritize their compliance efforts in two areas to avoid this attention: advertising and consumer complaints. The vast majority of cases are brought due to deceptive advertising and unresolved consumer complaints. Controlling these two aspects of dealers’ businesses will reduce the chances of legal problems by approximately 70%.

Regulators’ favorite case –deceptive advertising

Government regulators must generate cases as part of their jobs.  What could be easier for these regulators than tracking dealer advertising from their offices that is available online or through print or other media? These cases can be quickly developed and are simple to prove. Statutory damages, usually around $10,000 per infraction, can be expensive. In addition, identified dealerships are now on the list of perceived law breakers for future investigations, an unenviable situation. 

The most damaging and dangerous cases – consumer complaints

If regulators receive several complaints regarding a particular dealer, it’s likely that an investigation will be initiated. This means that subpoenas may be served, and copious files will be audited for not only the reasons for which the consumers complained, but for all other detectible legal transgressions. In other words, dealers are enormous targets when regulators examine all their operations. 

Three remedies all dealers should implement

There are remedies all dealers should immediately implement:

  • Appoint a compliance officer who oversees advertising, consumer complaints, and other compliance issues.
  • Know the advertising laws and follow them.
  • Establish a rigorous consumer-complaint protocol so that these complaints are resolved and are never filed with a state agency, attorney or on a website.

Regardless of the final interpretation and application of CARS, these remedies will be a foil to being a defendant. The time to act is now.


Terry O’Loughlin is director of compliance for Reynolds & Reynolds and is admitted to the Pennsylvania and Florida Bars. Before joining Reynolds, he was employed by the Florida Office of the Attorney General, where he investigated automobile dealers and financing sources. He previously was a public accountant.  



Originally posted on F&I and Showroom

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