US Court of Appeals sets time for CARS Rule arguments
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Image courtesy of the Federal Trade Commission.
Hudson Cook partner Eric Johnson made a clever quip on LinkedIn late last week.
“So, Friday is typically a slow news day? Think again,” Johnson wrote in this post because the U.S. Court of Appeals for the Fifth Circuit closed the week by tentatively scheduling oral arguments in the legal challenge to the CARS Rule.
According to a notice Johnson sent to Cherokee Media Group on Monday, attorneys for the Federal Trade Commission, the National Automobile Dealers Association and the Texas Automobile Dealers Association will appear in New Orleans to give their arguments during the week of Oct. 7.
“Stay tuned as the date and time could be changed,” Johnson added on social media.
The FTC finished 2023 by unveiling the Combating Auto Retail Scams Trade Regulation Rule, triggering a tremendous reaction from NADA and the dealer community.
At that time, the FTC explained the CARS Rule prohibits dealers from using “bait-and-switch claims to lure vehicle buyers to the lot,” including about the cost of a car or the terms of financing, the availability of any discounts or rebates, and the actual availability of the vehicles being advertised.
“It also tackles hidden junk fees — charges buried in lengthy contracts that consumers never agreed to pay. In some cases, these fees are for services or products that provide no benefit to consumers,” the FTC said.
Then in January, the FTC issued an order postponing the effective date of the rule while a legal challenge against the rule is pending from NADA and TADA in the U.S. Court of Appeals for the Fifth Circuit.
Previously, the rule was set to be implemented on July 30.
“We are pleased that the FTC has determined that ‘it is in the interests of justice to stay the effective date of the rule to allow for judicial review,’” NADA president and CEO Mike Stanton said in a statement after the stay was issued.
“We continue to believe the rule is unnecessary, redundant, confusing, and will needlessly lengthen the car sales process for consumers,” Stanton continued. “The FTC failed to demonstrate the need for the rule and has not tested the effectiveness of its mandates with consumers.
“NADA will continue to advocate in the courts and in Congress to keep this ill-conceived rule from taking effect,” Stanton went on to say.
Earlier this summer, NADA cheered the passage of the fiscal year 2025 Financial Services and General Government (FSGG) appropriations bill by the U.S. House FSGG Appropriations Subcommittee.
The association said that included in the funding bill is a provision that would stop the FTC from implementing or enforcing the Vehicle Shopping Rule (also known as the CARS Rule) until Sept. 30, 2025.
Now, dealers will have their day in court, too, so to speak.
Will the court render its decision by the time we’re all handing out Halloween candy or enjoying Thanksgiving turkey?
Steve Levine, an auto finance lawyer with more than 30 years of experience protecting dealers and finance companies and an owner and chief legal and compliance officer of Ignite Consulting Partners, suspects it could be into 2025 before the court shares its decision.
Levine replied to Johnson’s post on LinkedIn saying, “Given the time it could take to get a ruling one way or the other, we may be going into the new year without a definitive answer.”