The Federal Trade Commission’s (FTC) controversial Combating Auto Retail Scams (CARS) Rule may be dead for now, but compliance must remain a top priority for dealers. In this episode of Training Camp with Adam Marburger, Jim Ganther, compliance expert and CEO of Mosaic Compliance Services, breaks down the rule’s vacature, what it means for dealers, and why regulatory oversight isn’t going away anytime soon.
The FTC’s CARS Rule, intended initially to curb deceptive practices in automotive retail, was vacated by the Fifth Circuit Court of Appeals after the agency failed to follow its own regulatory procedures. Ganther notes that the FTC’s missteps, including failing to issue advanced notices of proposed rulemaking, ultimately led to its downfall.
Ganther highlights a common misunderstanding regarding the vacature. The elimination of the CARS Rule does not grant dealers the freedom to engage in dishonest practices, as these deceptive actions have always been illegal, even before the rule was implemented. Although the rule is no longer in place, federal and state laws continue to regulate dealer operations.
He predicts that the CARS Rule—or a newer version—could return within one to three years, depending on political shifts and FTC leadership changes. He noted a key difference between the Biden and Trump administrations, stating that under Biden, regulations have been pushed forward without clear evidence of consumer harm. In contrast, Trump’s approach focused on enforcement where harm was evident. A revived rule could again target F&I disclosures, making it harder for consumers to buy finance and insurance products, which Ganther argues is counterproductive.
Despite the vacature, Ganther stresses that compliance remains critical. He points out that the most effective regulators today are the internet and banks, not federal or state agencies. More than 50% of car buyers start their search online and have access to millions of pages of information. They can research any topic they may have questions about, and often, they arrive at the dealership informed. With an increased frequency of knowledgeable consumers, transparency is essential.
Banks also serve as powerful enforcers and are even more powerful than the Federal Trade Commission or the Consumer Financial Protection Bureau (CFPB). This concept was demonstrated during the Military Lending Act controversy, when financial institutions refused to buy non-compliant contracts, forcing dealerships to adjust overnight.
Ganther urges dealers to stay proactive so that they remain compliant. He emphasizes the importance of written policies, regular audits, and training programs, noting that banks could quickly require compliance scores before purchasing dealership paper. While the FTC’s CARS Rule has been struck down, oversight isn’t disappearing—and dealers must stay prepared.
“The big takeaway is the CARS Rule is dead, but it is likely to come back, and even if it does not, all of the specific acts it outlined are still illegal at the federal level, and they remain illegal at the state level. You have to up your game to make sure you’re not doing any of them.” – Jim Ganther
