On January 18, 2024, the Federal Trade Commission’s (“FTC”) announced that it is postponing the effective date of the Combating Auto Retail Scams Rule (“CARS Rule”) in light of the legal challenge from industry trade associations seeking judicial review of the new rule.  In a 3-0 vote, the FTC’s commissioners approved an order that, while taking issue with the trade associations’ arguments in the petition for review that the FTC maintains are “mischaracterizations,”  stays the effective date pending the completion of that review “in the interests of justice.”  The FTC maintains that the effective date may only be postponed for a few months in light of the parties’ request for expedited review of the CARS Rule.

The CARS Rule, announced by the FTC on December 12, 2023 and published in the Federal Register on January 4, 2024, sets new requirements on the sale, financing, and leasing of new and used vehicles by motor vehicle dealers.  It prohibits certain misrepresentations in the financing process, sets disclosure requirements on dealers’ advertising and sales communications, mandates that dealers obtain consumers’ express, informed consent for charges, and prohibits the sale of add-on products or services if there is no benefit to the consumer.  We previously discussed the final CARS Rule here.

This postponement mitigates, for now, some of the uncertainty regarding the effective date of the CARS Rule in light of the petition for review filed on January 5, 2024 by the National Automobile Dealers Association (“NADA”) and Texas Automobile Dealers Association (“TADA”).  In the petition, NADA and TADA ask the U.S. Court of Appeals for the Fifth Circuit to vacate or modify the rule and stay its enforcement pending resolution of the petition, alleging that the new rule is arbitrary, capricious, an abuse of discretion, and was promulgated without observance of procedures required by law.  NADA and TADA filed an opposed motion for stay of the final rule and expedited consideration on January 8, 2024, but the parties now agree on the relief sought in that motion and the FTC filed an unopposed motion to expedite review and establish a briefing schedule on January 18, 2024.  In that unopposed motion, the FTC asks the court to set deadlines for the petitioners’ opening brief (March 15, 2024), the FTC’s opposition brief (May 14, 2024), petitioners’ reply brief (June 13, 2024), and oral argument at the court’s earliest convenience thereafter.

We will discuss the CARS Rule and other developments resulting from it, including this legal challenge and the FTC’s stay of the effective date, during our webinar, “The CARS Rule: What You Need To Know About the FTC’s Final Motor Vehicle Dealer Trade Regulation Rule,” on January 23, 2024 at 1:00 p.m. ET. (Click here for more information and to register).