A federal appeals court has struck down a Biden-era regulation aimed at protecting car buyers from deceptive dealership practices, Automotive News reported. The rule, known as the Combatting Auto Retail Scams (CARS) rule, sought to eliminate bait-and-switch pricing, surprise fees, and charges for unnecessary services. The Federal Trade Commission (FTC) estimated the rule would have saved consumers $3.4 billion. However, a legal challenge from dealership groups resulted in its repeal.
The ruling, issued by the Fifth U.S. Circuit Court of Appeals, said that the FTC had not followed the proper rulemaking procedures. While two judges sided with the dealership groups, a third dissented, emphasizing that Congress had already granted the FTC authority to implement consumer protections in the auto industry.
The ruling means that dealers can continue practices that many consumers find deceptive, such as advertising vehicles at attractive prices only to add thousands in hidden fees once a buyer is ready to sign.
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What the CARS rule would have changed
The overturned regulation targeted several common but controversial dealership practices, many of which have been widely criticized by consumer advocacy groups, including tactics like bait-and-switch pricing, where dealerships lure customers in with low advertised prices only to claim the vehicle is unavailable or attach hidden conditions to the deal.
The rule also prohibited dealers from charging junk fees, such as fees for oil changes on electric vehicles or extended warranties that duplicate manufacturer coverage.
Under the rule, dealers would also be required to be upfront about optional add-ons, mandating that dealers obtain explicit consent from consumers before adding any extra costs to their purchase agreements.
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Dealers celebrate while consumers lose out
The National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association led the challenge against the rule, arguing that it would complicate the car-buying process and increase dealership costs. NADA President Mike Stanton said the decision was a “great outcome for consumers,” arguing that the rule would have led to more paperwork and delays, according to Reuters.
Critics of the decision argued otherwise. Judge Stephen Higginson, the lone dissenter in the ruling, said that the rule was developed “after a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices.”
Future of consumer protections in car buying
With the FTC’s leadership shifting under the new administration, the likelihood of reviving federal action against junk fees appears slim. FTC chair Andrew Ferguson, who has worked to end the agency’s DEI program since being appointed to the position by President Trump earlier this month, has not commented on the ruling or indicated if he has any plans to reintroduce similar protections in the future.
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Final thoughts
For now, car buyers remain vulnerable to hidden fees and misleading advertising, making it more important than ever for consumers to scrutinize pricing and question add-ons before finalizing a vehicle purchase. Experts recommend that buyers request an itemized breakdown of all charges before signing any paperwork and be prepared to walk away from deals that contain surprise fees.
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