👩‍⚖️ Fifth Circuit Tosses FTC's CARS Rule

The Gist

The Fifth Circuit vacated the FTC’s CARS Rule—meant to combat bait-and-switch tactics and hidden fees—because the FTC skipped a key procedural step (issuing an advance notice). The ruling doesn’t endorse bad practices but reminds everyone, including regulators, to follow the rules.

The Legalese, Straight From the Source:

Here’s a taste of the jargon from the Fifth Circuit ruling:

"Whether the FTC erred in promulgating the CARS Rule without an ANPRM hinges on whether the statutory authority for the Rule comes from § 18(a)(1)(B) of the FTC Act or from § 1029(d) of the Dodd-Frank Act."

Translation? The court decided the FTC skipped a key step—issuing an “advance notice of proposed rulemaking” (ANPRM)—and that it broke its own rules while doing so.

Snark aside, this wasn’t about the Combating Auto Retail Scams Rule’s (CARS Rule) intentions. It was about whether the FTC followed the proper legal process.

Spoiler: The court said they didn’t.

What Dealers Need to Know:

The CARS Rule Is Vacated (For Now): The rule aimed to combat bait-and-switch tactics, hidden fees, and other shady practices by mandating clear disclosures, prohibiting “valueless add-ons,” and requiring express consumer consent. But with this ruling, those regulations are no longer set to take effect.

Why This Matters: The court’s decision obviously wasn’t a green light for bad behavior. It was a reminder that government agencies, like dealers, need to follow the rules. The ruling didn’t end the conversation forever, consumers are still watching, and some other version of the framework will surely rise from the ashes.

The Backstory: The FTC received 27,000 comments on the rule, mostly from consumers, many complaining about deceptive practices. The National Automobile Dealers Association (NADA) argued that the FTC didn’t give enough advance notice and failed to make its case with sufficient data.

Ok, So…

This ruling will keep the many ethical dealers we know free to do their work, but it isn’t a victory lap. While the CARS Rule was vacated on procedural grounds, consumer trust remains a top priority, and those consumers have been told auto dealers just evaded a policy that would “keep them honest.” Now’s the time for dealers to lean into transparency and ethical practices—not just because it’s good business, but because your customers are never just doing business with you. They’re doing business with their history with, perception of, and expectation from all auto dealers. Sometimes, you’re just the person they’re holding accountable at the moment.

And hey, if the FTC wants to make a comeback, maybe they’ll remember their own advice about full disclosure next time.

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