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This post presents a brief overview of the requirements of the FTC CARS Rule and Mosaic’s compliance solution to address these requirements.


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FTC CARS Rule: Combating Auto Retail Scams

The CARS Rule gives the FTC first-strike capability to penalize dealers for violations of the Rule.


Mosaic Compliance Services banner for the FTC CARS Rule compliance. The image includes a brief overview of the CARS Rule requirements and Mosaic's solutions, with a call to visit mosaiccs.com/carsrule for more information.




Download our CARS Rule whitepaper.









Overview of New Requirements:


1. Prohibits misrepresentations about material information.

The CARS Rule makes it illegal for a dealer to make misrepresentations about certain topics that would affect a consumer’s buying or leasing choices. Deceptive claims about price, financing, or Add-ons as examples.


2. Requires dealers to clearly disclose the offering price — the actual price anyone can pay to get the car, excluding only required government charges.

Before they visit the dealership and throughout the transaction, consumers have the right to know the drive-off-the-lot price. If a dealer mentions optional add-ons, the dealer has to tell the consuemrs they can say no. And if discussing a monthly payment, the dealer has to tell the consumer the total payment.


3. Makes it illegal for dealers to charge consumers for Add-ons that don’t provide a benefit.

Under the CARS Rule, if the consumer won’t benefit from an add-on product or service, the dealer can’t charge for it.


4. Requires dealers to get consumers’ express, informed consent before charging them for anything.

That means no surprise fees or hidden charges. Dealers must get a buyer’s clear and informed “yes” to what they’re buying and how much they’re being charged.


5. Requires dealers to keep records demonstrating compliance with the Rule for two years - including records of training materials.

Scripts and training materials are important evidence of a Dealer’s compliance program regarding the Rule’s requirements, including of the information and instructions that dealership staff are given.


New Requirements Details:


Requirement 1


The CARS Rule prohibits misrepresentations about material information in the following categories:

  • The costs or terms of buying, financing, or leasing a vehicle

  • Any costs, limitation, benefit, or any other aspect of an add-on product or service;

  • Whether the terms are, or transaction is, for financing or a lease

  • The availability of any rebates or discounts that are factored into the advertised price but not available to all consumers

  • The availability of vehicles at an advertised price

  • Whether any consumer has been or will be preapproved or guaranteed for any product, service, or term

  • Any information on or about a consumer’s application for financing

  • When the transaction is final or binding on all parties

  • Keeping cash down payments or trade-in vehicles, charging fees, or initiating legal process or any action if a transaction isn’t finalized or if the consumer doesn’t wish to go forward with a transaction

  • Whether or when a dealer will pay off some or all of the financing or lease on a consumer’s trade-in vehicles

  • Whether consumer reviews or ratings are unbiased, independent, or ordinary consumer reviews or ratings of the dealer or the dealer’s products or services

  • Whether the dealer or any of the dealer’s personnel or products or services is or was affiliated with, endorsed or approved by, or otherwise associated with the United States government or any federal, state, or local government agency, unit, or department, including the Department of Defense or any branch of the military

  • Whether consumers have won a prize or sweepstakes

  • Whether, or under what circumstances, a vehicle may be moved, including across state lines or out of the country

  • Whether, or under what circumstances, a vehicle may be repossessed

  • Any of the disclosures required by the Rule


Requirement 2


The CARS Rule requires dealers to clearly disclose the Offering Price – the actual price any consumer can pay to get the car, excluding only required government charges.

The CARS Rule requires dealers to clearly and conspicuously disclose the following:


Offering price
  • The full cash price for which the dealer will sell or finance the vehicle to any consumer. The only costs that can be excluded from the Offering Price are required government charges – for example, taxes, license and registration costs, or inspection or certification fees.

  • Offering Price must also be disclosed in:

    • Any ad that references, expressly or by implication, a specific vehicle

    • Any ad that represents, expressly or by implication, any monetary amount or financing term for any vehicle

    • Any communication with a consumer that refers, expressly or by implication, to a specific vehicle or to any monetary amount or financing term. In its first response to a consumer, the dealer must clearly disclose the offering price. If the communication or response is in writing, the offering price must be disclosed in writing

Add-ons aren’t required
  • Dealers must clearly disclose that an add-an isn’t required and that the consumer can buy or lease the vehicle without the add-on, if that’s the case.


The total of payments for a financed or lease transaction
  • Dealers must clearly disclose the total amount the consumer will pay after making all payments as scheduled


Monthly payments comparison
  • If a dealer makes any express or implied comparison between payment options that includes a discussion of a lower monthly payment, the dealer must clearly disclose that the lower monthly payment will increase the total amount the consumer will pay to buy or lease the vehicle, if that’s the case.


Requirement 3


The CARS Rule makes it illegal to charge consumers for Add-ons that don’t provide a benefit.

What’s an Add-on?

Under the Rule it is any product or service not provided to the consumer or installed by the manufacturer that the dealer, directly or indirectly, charges the consumer for.


Examples of illegal Add-ons:
  • Charges for “nitrogen-filled tires” that contain no more nitrogen that naturally exists in the air.

  • Add-ons that don’t provide coverage for the vehicle, the consumer, or the transaction, or are duplicative of the car’s warranty coverage.

  • A GAP Agreement where the consumer’s vehicle or neighborhood is excluded from coverage or the loan-to-value ratio means the consumer won’t benefit financially from the product or service.


Requirement 4


The CARS Rule requires dealers to get consumers’ express, informed consent before charging them for anything.

Express, Informed Consent

An affirmative act communicating unambiguous assent to be charged, made after receiving clear and conspicuous disclosures of:

  1. What the charge is for; and

  2. The amount of the charge, including, if the charge is for a product or service, all fees and costs the consumer will be charged over the period of repayment with and without the product or service

Note: the consumer’s consent must be in close proximity to when and where the dealer makes the clear disclosures. This information must be conveyed in writing, and also orally for inperson transactions.


What does NOT constitute Express, Informed Consent?
  1. A signed or initialed document, by itself.

  2. A prechecked box

  3. An agreement obtained through any practice that has the effect of impairing consumers’ autonomy, decision-making, or choice

To summarize, consumers have a right to know in advance what they’ll be charged and must give an unambiguous and fully informed “yes” before the business can charge them.


Requirement 5


Requires dealers to keep records demonstrating compliance with the Rule for two years - including records of training materials.

Scripts and training materials are important evidence of a Dealer’s compliance program regarding the Rule’s requirements, including of the information and instructions that dealership staff are given.


  • Dealers should implement a CARS Rule policy, and record employees have read and acknowledged it.

  • Dealers should train employees on the CARS Rule, and track successful completion of training for at least two years.


Penalties


What’s the penalty for violating the CARS Rule?

The violation of any FTC Trade Regulation Rule – including the CARS Rule – could result in provisions that will require a company to change how it does business going forward, to give money back to injured consumers, and to pay civil penalties of as much as $50,120 per violation. Non compliance is considered a deceptive trade practice.


Mosaic's CARS Rule Compliance Solution


Fully managed compliance for the CARS Rule in one place. Let our compliance advisors help ensure your store’s success.


Diagram depicting the FTC CARS Rule Compliance Solution, illustrating a cyclical process with interconnected blue circles. The process includes six steps: Risk Assessment, Policy, Employee Training, Sales Monitoring, Audits, and Compliance Management, highlighting the comprehensive approach to regulatory compliance in the automotive industry.
Risk Assessment

Identify your CARS compliance risk and receive a guided action plan to mitigate it.


Policy

Implement a policy built by attorneys and have it digitally deployed to ensure store-wide compliance.


Employee Training

Educate your team on the CARS Rule and receive best practices on how to protect your dealership.


Sales Monitoring

Check against AI for CARS-compliant communication and record mandated oral acceptance of purchases for a desired time.


Audits

Audit your website, advertisements, prices and sales paperwork for CARS compliance.


Compliance Management

Get expert guidance and support from a dedicated compliance advisor who will track and manage your CARS compliance with you.


Contact Mosaic to learn how your dealership can achieve complete compliance with the CARS Rule.






Stay Updated on Automotive Compliance:

Subscribe to our blog for ongoing discussions on the CARS Rule, automotive compliance updates, and industry best practices. Follow us on LinkedIn to join the conversation and stay ahead of the curve. Let's navigate the world of automotive commerce together!


Mosaic Compliance Services banner for the FTC CARS Rule compliance. The image includes a brief overview of the CARS Rule requirements and Mosaic's solutions, with a call to visit mosaiccs.com/carsrule for more information.





Download our CARS Rule whitepaper.









More About the CARS Rule:




Transition from a courtroom scene to a car dealership setting, illustrating the shift from legal proceedings to automotive compliance with visual elements emphasizing transparency, fairness, and ethical sales practices.

The landmark case of AMG Capital Management vs. FTC has reshaped the regulatory landscape and set the stage for the Federal Trade Commission’s (FTC) CARS Rule. This blog post delves into the AMG v. FTC case and explores its implications for the automotive industry, particularly the introduction and enforcement of the CARS Rule.


Understanding the AMG v. FTC Case

AMG Capital Management, a financial institution, was fined $1.27 billion for alleged unethical practices. Challenging the FTC's authority to impose such fines, AMG took the case to the Supreme Court. The unanimous 9-0 verdict in favor of AMG clarified that the FTC lacked the legal power to directly impose financial penalties, necessitating a new approach to enforce regulations and combat deceptive practices.




A Supreme Court Decision that Reshaped the FTC's Role

The Supreme Court's decision in AMG v. FTC highlighted a significant gap in the FTC's enforcement capabilities. Without the authority to impose financial penalties, the FTC needed a specific rule to address deceptive practices in industries like automotive sales. This led to the creation of the "Combating Auto Retail Scams" (CARS) Rule.


Enter the CARS Rule: A New Era of Regulation

The CARS Rule was developed to fill the enforcement gap revealed by the AMG v. FTC case. It empowers the FTC to take action against dealerships that engage in deceptive advertising, mislead consumers about financing options, or sell add-ons that provide no real value. The regulation aims to ensure transparency and fairness in the car-buying process, marking a significant shift toward stricter regulations for car dealerships.


Why This Matters for the Automotive Industry

While enforcement of the CARS Rule is currently not in effect pending judicial review, the introduction of the Rule signifies a new era of compliance for the automotive industry. Dealerships must now prioritize ethical sales practices and transparent communication with customers. If the rule survives, the FTC will be equipped with more robust enforcement mechanisms.


Watch the Full Keynote Video for Deeper Insights

Gain a deeper understanding of the CARS Rule, its current state, and its potential future by watching the full keynote video featuring industry expert James S. Ganther, Esq. This comprehensive analysis provides valuable insights to help you stay informed and compliant in this evolving regulatory landscape.






Stay Updated on Automotive Compliance:

Subscribe to our blog for ongoing discussions on the CARS Rule, automotive compliance updates, and industry best practices. Follow us on LinkedIn to join the conversation and stay ahead of the curve. Let's navigate the world of automotive commerce together!


More About the CARS Rule:

Updated: 2 days ago

Modern car dealership setting with diverse employees and customers discussing compliance and consumer protection. The scene features clear glass walls, informative posters, and a professional atmosphere, emphasizing transparency, trust, and collaborative engagement.

The FTC's Combating Auto Retail Scams (CARS) Rule has sparked significant discussion within the auto retail industry. At Mosaic Compliance Services, we are committed to helping dealerships navigate these regulatory changes and stay compliant. This post will delve into the CARS Rule, its implications, and how dealerships should anticipate adapting practices to meet the new standards.



Understanding the CARS Rule's Framework:

The CARS Rule is a trade regulation issued under the authority of the Federal Trade Commission Act, similar to how Regulation Z operates under the Truth in Lending Act (TILA). This rule sets forth specific compliance requirements for dealerships, focusing on disclosures, advertising practices, and the sale of add-on products.



Key Provisions of the CARS Rule

The FTC designed the CARS Rule to enhance consumer protection and transparency in auto sales. Here are the critical aspects of the rule:

  1. Prohibition of Misrepresentations: The rule mandates that all information provided during the car buying process must be truthful and accurate.

  2. Clear Disclosure of Offering Price: Dealers must clearly disclose the actual price a consumer will pay for the vehicle, excluding only required government charges.

  3. Protection Against Unnecessary Charges: The rule makes it illegal for dealers to charge consumers for add-ons that do not provide a real benefit.

  4. Express, Informed Consent: Dealers must obtain explicit, informed consent from consumers before charging them for any additional products or services. This consent must be given after clear disclosures are made both in writing and orally for in-person transactions.


Potential Impacts of the CARS Rule

While the CARS Rule aims to improve consumer protection, it also presents challenges for dealerships:

  • Increased Complexity: The new disclosure and consent requirements may lengthen the car buying process.

  • Shifting Sales Strategies: Dealers might need to adjust their approaches to explain the value of add-on products.

  • Potential Cost Increases: Stricter regulations could lead to higher overall costs for car purchases.


Navigating the Compliance Landscape

Adapting to the CARS Rule will require a proactive approach. Here are some strategies to help dealerships stay compliant:

  • Stay Informed: Keep up with the latest updates on the CARS Rule and its implementation.

  • Review Advertising Practices: Ensure all advertising materials and website content comply with the rule's disclosure requirements.

  • Update Contracts and Forms: Make necessary changes to contracts and forms to align with the new regulations.

  • Train Your Team: Provide comprehensive training to your sales and compliance teams on the CARS Rule and its implications.


Conclusion

The CARS Rule represents a significant shift in the regulatory landscape for auto dealerships. While it introduces new challenges, it also offers an opportunity to build trust with consumers through enhanced transparency and fair practices. Mosaic Compliance Services is here to support you in navigating these changes and ensuring your dealership remains compliant.


Ready to Learn More?

For a more detailed breakdown of the CARS Rule and expert insights, watch the full-length video from Mosaic Compliance Services. Together, we can build a stronger, more transparent future for the auto industry.






Stay Updated on Automotive Compliance

Subscribe to our blog for ongoing discussions on the CARS Rule, automotive compliance updates, and industry best practices. Follow us on LinkedIn to join the conversation and stay ahead of the curve. Let's navigate the world of automotive commerce together!


More About the CARS Rule:

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