CARS Rule Clarifier

The CARS rule has an exemption for Motorcycle dealers, RV dealers and Marine dealers. Does this mean they are no longer bound by the FTC safeguards rule?  Short Answer: NO!

The Combating Auto Retail Scams (CARS) trade regulation rule falls under the authority of the Dodd-Frank Wall Street reforms, the Consumer Protection Act of 2010 and the Unfair or Deceptive Acts or Practices within the Federal Trade Commission act. Although the FTC has regulatory authority for this rule, it is a separate authority from the FTC Safeguards rule. The exemptions outlined in the CARS act DO NOT apply to 16 CFR 314, which is the Safeguards Rule.

CARS rule record keeping requirements.

The CARS rule imposes requirements to track customer information regarding aspects of the interactions with customers as described within the rule. Customer information gathered and retained (for a minimum of 24 months in some cases) would likely fall under information governed by the FTC Safeguards Rule. For dealerships that do not maintain local databases, this may be a concern and creates the need for a local data storage option. It would then be prudent to make sure that system has the same or similar encryption as your cloud-based applications.

Key considerations of the CARS rule.

• Prohibits misrepresentation about material information –
  • Material information is that which is “likely to affect a person’s choice of, or conduct regarding, goods or services.” Things like vehicle availability, financing considerations, limitations, etc. must all be clearly stated and annotated.
• Requires dealerships to clearly disclose the offering price- the actual price anyone can pay to get the car –
  • Addresses bait and switch tactics and hidden charges;
  • Offering Price means the full cash price for which a dealer will sell or finance the vehicle to any consumer, provided that the dealer may exclude only required government charges.
• Makes it illegal to charge consumers for add-ons that don’t provide a benefit –
  • The Rule defines an add-on as any product or service not provided to the consumer or installed by the manufacturer that the dealer, directly or indirectly, charges the consumer for.
• Requires dealers to get consumer’s express, informed consent before charging them for anything –
  • The Rule explains that express, informed consent means 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.
• Record keeping requirements –
  • Dealers must create and retain, for at least 24 months, all records necessary to demonstrate their compliance with the Rule. The 24 months is calculated from the date the record was created. It includes the following documents:
    • Ads
    • Purchase orders and financing and leasing documents
    • Documents about add-ons
    • Consumer complaints

The CARS rule effective date has been postponed pending an appeal submitted to the 5^th circuit court. We will update you when new information is available.

This information is offered for your consideration and general knowledge. It is not legal advice. Please consult your attorney for any specific legal impacts of any of the information highlighted in this post. Read more about the CARS rule here.