New FTC rule adds time and money to car-buying process
by Geoffrey Pohanka, Maryland Matters
November 27, 2024
Car buyers who want to spend less time and money at the dealership are in for a shock, thanks to a bureaucratic plan coming out of Washington, D.C.
Unveiled last December, the new Federal Trade Commission (FTC) Vehicle Shopping Rule – which the agency has dubbed the Combating Auto Retail Scams, or CARS, Rule – would make buying a car more expensive, more time-consuming and more complicated. Year after year, in survey after survey, consumers report extraordinarily high – 90% and above – levels of satisfaction with their local new-car dealership experience.
These high consumer grades come from a number of factors, but one in particular in recent years is shorter and shorter transaction times, which dealers continue to make a top priority. Unfortunately, the new FTC rule stands to upend this very important trend. An independent study found the rule will add 60 to 80 minutes to the vehicle purchasing process.
The rule will require consumers to fill in at least five new, untested forms at the dealership – not just when completing a purchase, but throughout the shopping process. This additional 60 to 80 minutes will cost consumers $1.3 billion a year in lost time alone.
I serve hundreds of customers every day, and I can say with certainty that not a single one wants to spend more time or money when purchasing their new car.
The FTC got this new rule so wrong because it was written in secret and without direction by Congress. In addition to the new forms that will come on top of the mound of paperwork customers already have to complete, the rule also requires every text or email a car shopper sends to a salesperson, no matter how innocuous, be kept for two years and turned over to the FTC upon demand.
The FTC estimates that the rule will require 1.595 million “overall annual hours of burden” just for these “collections of information.” The cost of gathering and storing these new “burdens” will largely be passed along to consumers in the form of higher prices.
In fact, the rule’s cost to the entire auto industry has been independently estimated to be $24.1 billion over the next 10 years. These are costs that will only be passed down to consumers, who already face rising prices at the grocery store and for many other essential needs.
My dealership is a family business. We’ve been serving our communities for over 100 years, through wars, recessions and even a global pandemic. We know our customers and what they expect in the car-buying process.
The FTC never bothered to speak to dealers or our customers before proposing this rule, so it is no surprise that it will not work in the showroom. Instead of designing a regulatory regime that encourages a faster, easier and a more seamless buying experience, the FTC opted for more paperwork, more waiting and added costs. What’s more, this rule does not add any new consumer protections that are not already in existence, making it a solution in search of a problem.
The FTC seems to agree that its rule was a misfire, as the agency voluntarily decided that it would not begin enforcing the rule while it was being challenged in court.
The FTC’s “ready-fire-aim” method of regulating needs immediate oversight by Congress. A great start would be passage of the FTC REDO Act, which would send this flawed rule back to the drawing board. The bipartisan FTC REDO (Review of Expensive and Detrimental Overregulation) Act, introduced by Sens. Jerry Moran (R-Kan.) and Joe Manchin (I-W.Va.), would withdraw the CARS rule and require the FTC, if it opts to “redo” the rule, to do so with transparency, full public participation and without cutting corners.
Additionally, Sen. Chris Van Hollen (D-Md.) and Rep. Steny Hoyer (D-Md.) serve on the subcommittees that have jurisdiction over the FTC’s budget and can use Congress’ “power of the purse” to shut down this rule until it can be redone.
Consumers can ill-afford such a burdensome, costly rule. Fortunately, if Congress acts, they won’t have to.
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