Should the FTC Reevaluate Consumer Protections After the CARS Rule Was Vacated by the Court?

Should the FTC Reevaluate Consumer Protections After the CARS Rule Was Vacated by the Court?

Here’s The Scoop

In a significant win for car dealerships and consumer choice, the United States Court of Appeals for the Fifth Circuit recently struck down a controversial rule proposed by the Federal Trade Commission (FTC). The Combating Auto Retail Scams Trade Regulation, or CARS rule, was intended to regulate car dealerships more heavily, but critics argued it was a bureaucratic overreach that would have burdened both consumers and businesses.

The court’s decision highlights a critical issue: the FTC’s failure to adhere to its own procedural guidelines. The agency bypassed the Advance Notice of Proposed Rulemaking (ANPRM), a crucial step that ensures public input and transparency in the regulatory process. Instead, the FTC jumped straight to the Notice of Proposed Rulemaking (NPRM), raising concerns about the lack of public discourse on this significant regulation.

The CARS rule aimed to address deceptive practices like bait-and-switch tactics and undisclosed fees, with special provisions for military families. However, automotive industry groups such as the National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA) criticized the rule as rushed and poorly researched. They argued that it would have added unnecessary complexity and cost to the car-buying process, ultimately hurting both consumers and dealers.

The FTC claimed the rule would save consumers over $3.4 billion and reduce car-buying time by 72 million hours annually. Yet, the reality, according to NADA, was that consumers would face longer wait times at dealerships, increased paperwork, and higher costs, potentially losing $1.3 billion a year in wasted time.

While some, like New Jersey car dealership owner Tom Maoli, supported the rule for its potential to boost consumer confidence, the broader industry consensus was that it would have been a logistical nightmare. NADA and TADA pointed out that the rule would have required consumers to fill out at least five new forms, complicating the process and driving up costs.

The court’s decision underscores the importance of regulatory agencies following proper procedures and considering the real-world impact of their rules. The FTC’s attempt to fast-track this regulation without adequate public input was rightly challenged, ensuring that any future attempts will require a more thorough and transparent process.

This ruling is a reminder of the need for balanced regulation that protects consumers without stifling business operations or individual freedoms. The FTC now faces the challenge of restarting the process if it wishes to pursue this regulation again, but for now, the decision is a victory for those advocating for less government intervention in the marketplace.

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