As you may know, the FTC CARS Rule, also known as the Vehicle Shopping Rule (“Rule”), is set to impose stringent requirements on motor vehicle dealers. With its focus on advertising practices, consumer disclosures and recordkeeping, compliance will demand significant changes in how dealerships operate. The Rule has been finalized, but its effective date has been “stayed” — that is, delayed — until the legal challenges to the Rule are resolved.

While it is possible that the legal review of the Rule could succeed, forcing the FTC to return to the “drawing board,” the challenge remains that complying with the Rule’s extensive and complex requirements will take time and effort. Therefore, it is crucial for dealers to take proactive steps now to ensure they are prepared if and when the Rule ultimately takes effect.

Moreover, according to the FTC, many of the prohibitions and requirements of the Rule are simply a codification of the current rules. In other words, regardless of the CARS Rule’s ultimate outcome, dealers need to understand and implement changes to their advertising, F&I and related practices.

Here are some key actions that dealerships can implement now to be ready for the Rule:

1. Review and Revise Advertising Practices
   One of the central components of the Rule is its focus on advertising transparency — particularly price advertising. Dealers should consistently audit all advertising materials, including online listings, vehicle display pages, TV spots, print ads and social media campaigns, to ensure they will be in compliance with the Rule’s requirements. The Rule, if passed, will include an obligation for dealers to clearly display the “Offering Price” on advertisements for specific vehicles or that reference monetary amounts or financing terms. The Offering Price is the all-in cash price that a dealer will sell a vehicle to any buyer excluding only charges imposed by the government; therefore the Offering Price must include document processing fees, dealer preparation charges, mandatory add-ons, etc. Dealers must also clearly disclose the total of all payments if a monthly payment is mentioned. Additionally, dealers must avoid misrepresentations and if optional add-ons are mentioned, must disclose that optional add-ons are not required. It’s essential to work with vendors that understand the Rule to develop ads that align with the Rule’s requirements.
   
   
2. Implement Comprehensive Disclosure Processes
   To comply with the Rule’s strict disclosure requirements, dealers must establish clear and consistent communication practices. Employees should be trained to provide these disclosures both in writing and verbally, particularly regarding the Offering Price, during the first communication with consumers about a specific vehicle — whether that interaction occurs in person, online or over the phone. Dealers should revise their sales processes to ensure that all consumer interactions include the necessary disclosures, such as the total cost of the vehicle over the loan term, the Offering Price and the consumer’s express informed consent. Many of these disclosures will need to be documented in writing to demonstrate compliance. Dealers should begin working with their forms providers to prepare for the updated forms requirements.
   
   
3. Plan for Obtaining and Documenting Express Informed Consent
   The Rule requires dealers to obtain express informed consent before charging consumers for any item, including mandatory and optional add-ons. Dealers should establish systems that document each step of consumer consent, from initial disclosures to final purchase agreements. This may include updated desking sheets, F&I menus and digital tools to ensure that customers fully understand and agree to all charges. Dealerships should also evaluate their customer relationship management (CRM) systems, desking systems and digital tools to centralize and automate this process where possible.
   
   
4. Upgrade Recordkeeping Systems
   With the Rule’s 24-month recordkeeping requirement, dealerships must ensure that they create all records required to establish compliance with the Rule, and then have the infrastructure to store detailed records for every transaction. This includes maintaining copies of advertisements, purchase orders, consumer communications and evidence of express informed consent. Dealers should consider investing in centralized digital systems to retain and organize these records, ensuring they can be easily retrieved in the event of an FTC inquiry. Working closely with CRM and DMS providers will be critical to meeting these obligations. Dealers should begin to ensure that their providers are ready for the Rule’s recordkeeping requirements.
   
   
5. Train Employees on the New Compliance Standards
   The success of any compliance program hinges on employee training. Dealers should begin training their sales, finance, and marketing teams on the key elements of the Rule, ensuring that all staff understand the requirements around disclosures, advertising and recordkeeping. Of particular importance is the requirement to disclose the Offering Price in the first response to a communication that refers to a specific vehicle, or monetary amount or finance term for any specific or group of vehicles. Employees will no longer be able to ask the customer to come in to discuss pricing or ignore any such communications. Regular training sessions should be conducted to address potential compliance gaps and ensure that employees are prepared to interact with consumers under the new rules.The concept of a disclosed and advertised Offering Price will take some understanding, training and likely a change of many policies and sales practices at dealerships.
   
   

6. Review and Update Vendor Contracts
   Dealers rely on various third-party vendors for services like advertising, CRM, and digital communication tools. As the Rule holds dealerships accountable for compliance, even when outsourcing services, dealers must review and update vendor contracts to ensure that all parties are familiar with and compliant with the Rule. It may also be wise to implement regular compliance checks with vendors to prevent any violations that could result in FTC penalties.

7. Engage with Vendors to Ensure Compliance
   Dealers should consider engaging vendors who can help meet their compliance requirements under the Rule. This includes reviewing website Vehicle Display Pages (VDPs) and advertisements, as well as generating compliant advertisements. Additionally, dealers should review their F&I practices through audits of deal jackets to ensure their disclosure documentation, finance and consumer practices are compliant. Given the complexity of dealership regulations and the unique environment in which dealers operate, it’s essential that they work with knowledgeable compliance personnel for these types of services and audits. Compliance vendors must have expertise not only in the legal requirements dealers face but also in the operational aspects of dealerships to provide actionable feedback and recommendations.
   
   MTADA-endorsed member ComplyAuto has developed ComplyAuto Guardian, a patented AI-based technology to support compliance efforts. Guardian uses artificial intelligence to scan websites and advertisements for compliance and even to generate compliant advertisement text. In addition, Guardian utilizes the most powerful tools in the industry to conduct efficient, comprehensive and thorough deal jacket audits and reviews.
   
   ComplyAuto’s Guardian accomplishes these tasks with an eye on federal and state law compliance — the only tool in the industry to do so.
   
   The Guardian software also stores advertisements and analyzes written communications to identify potential CARS Rule compliance gaps. Dealers can benefit from using Guardian today but should the CARS Rule become final, Guardian is easily adapted to assist dealers with meeting specific CARS Rule compliance requirements.

Conclusion

The FTC’s CARS Rule, if it survives the legal challenge, and goes into effect, will represent a major shift in how dealerships operate, particularly concerning advertising, consumer interactions and recordkeeping. Even though the Rule’s effective date is paused while the Rule is under legal review, now is the time for dealers to start getting ready for the Rule by auditing their processes, updating their systems and training employees. Dealers should also reach out to ComplyAuto to see how the Guardian suite of tools can help you now — and into the future.

For more in-depth analysis of the CARS Rule, NADA members are encouraged consult the recently-published Driven publication “A Dealer Guide to the FTC Vehicle Shopping Rule,” which was co-authored by ComplyAuto.

Click to access the NADA dealer guide to the FTC Vehicle Shopping Rule.