CARS Rule Pause Doesn’t Shield Dealers from FTC and State AG’s Actions: Here’s an Example
Heads Up: The delay of the Combatting Auto Retail Scams Rule (or CARS Rule for short) doesn’t stop the FTC or State Attorney Generals from taking action against dealers, often for huge sums. In fact, they’re working together to root out unfair and abusive acts and practices.
Case in Point: Junk Fees and Discriminatory Conduct
In October 2023, the Federal Trade Commission (FTC) and the Wisconsin Attorney General announced the settlement of a joint enforcement action for $1.1 million over alleged junk fees and discriminatory conduct against a Wisconsin dealership, its current and former owners, and a general manager.
The defendants were accused of regularly charging customers junk fees for add-on products or services without their consent, and in some cases, deceptively told consumers that unwanted products like guaranteed asset protection (“GAP”) were required.
Furthermore, a statistical analysis by the regulators allegedly revealed that both the former and current owners discriminated against Native American customers by:
- charging them, on average, a higher markup on interest rates
- charging them, more often, for unwanted junk fees
As part of the settlement, the defendants are required to:
- stop deceiving consumers about whether add-ons are required for a purchase;
- obtain consumers’ express informed consent before charging them for add-ons;
- establish a comprehensive fair lending program that will allow consumers to seek outside financing for a purchase and cap the additional interest markup the dealership can charge consumers; and
- pay $1.1 million to be used to refund affected consumers.
Samul, Levine, Director of the FTC’s Bureau of Consumer Protection stated that “we are holding these dealerships accountable for discriminating against American Indian customers and sneaking junk fees onto consumers’ bills” and “we are fully committed to ensuring that all consumers navigating the car-buying process can do so without facing unlawful discrimination or paying for products and services they do not want.”
Stay out of regulators’ crosshairs with help from KPA
KPA’s here to help dealerships prevent consumer complaints, investigations, and enforcement actions. We offer advertising, sales, and finance solutions that guide dealerships to find and resolve issues proactively.
FTC CARS Resource Hub
The upcoming CARS Rule, effective July 30, 2024, will greatly influence dealership practices. Access our comprehensive resource hub for all the necessary information.
