The Rule Is Gone, but the Risk Remains
Although the FTC’s Combating Auto Retail Scams Rule (the “CARS Rule”) was set aside by the U.S. Court of Appeals for the Fifth Circuit on January 27, 2025, and then later withdrawn by the FTC on February 12, 2026, the consumer protection concerns that prompted it remain very much alive. The court’s decision was based on procedural issues in how the rule was issued, not on the validity of the consumer protections it sought to establish. As a result, while the CARS Rule never became enforceable, federal and state regulators continue to focus on dealership practices involving pricing transparency, add-on products, advertising accuracy, and consumer disclosures.
The court ruling did not weaken the FTC’s authority to pursue unfair or deceptive acts or practices under existing law, nor did it limit the enforcement powers of state regulators.
What Still Applies to Dealers
Even without the CARS Rule, dealerships remain fully subject to the Federal Trade Commission Act’s prohibition against unfair or deceptive acts or practices (UDAP).
These provisions already address much of the conduct the CARS Rule was intended to regulate, including:
- Adding fees or products without customer approval and clear disclosure
- Using bait-and-switch tactics
- Selling add-on products that provide little or no consumer benefit
- Misrepresenting vehicle prices or financing terms
- Advertising vehicles that are not actually available at the promoted price
Many of the same compliance risks continue to exist under current law, even without a new rule on the books.
In short, the rule may be gone, but the expectations behind it are not.
State Attorneys General:
A growing enforcement force of state Attorneys General is increasingly active in policing dealership conduct, and many viewed the CARS Rule decision as a setback to consumer protection efforts. Nineteen attorneys general publicly supported the FTC’s position, citing ongoing consumer complaints tied to misleading pricing, hidden fees, and forced add-ons.
State Legislatures Are Filling the Gap
In parallel with increased enforcement, state legislatures are advancing statutory requirements that reflect the consumer protection principles underlying the FTC’s CARS Rule.
California introduced Senate Bill 766 in early 2025, its own version of a “CARS Act.” The bill requires clearer price disclosures, prohibits misleading information, restricts add-on products that lack consumer benefit, and introduces a three-day right of cancellation for used vehicles at or below $50,000. This benefit, which requires dealers to allow returns without cause (within 3 days/400 miles), aims to curb deceptive practices. Set to take effect on October 1, 2026, it is expected to significantly impact auto retail practices in California and go even further than the FTC’s proposal.
Recent cases demonstrate how aggressively states are already enforcing these principles:
In late 2024, the FTC and the Illinois Attorney General reached a $20 million settlement with a dealership group accused of advertising low prices while requiring consumers to purchase add-on products or charging for them without consent. The dealerships were also required to change how pricing was disclosed in advertising and financing discussions. Other examples include:
- In Arizona, a $2.6 million settlement addressed allegations of misleading online pricing and mandatory add-on charges, as well as concerns about disparate financial impacts on Latino consumers.
- New York settled with dealerships accused of inflating lease-end purchase prices and adding unexpected fees.
- Pennsylvania brought suit against a used car dealer for selling vehicles “as-is” without properly disclosing known defects or providing proper title documentation. Pennsylvania later amended its Automotive Industry Trade Practices law to expand what qualifies as advertising and to require disclosures of known vehicle conditions, such as flood damage or structural defects.
- Massachusetts issued a 2025 regulation requiring sellers to disclose the “total price” of a product, including all mandatory fees and add-ons, mirroring the pricing transparency principles underlying the CARS Rule.
These actions show that state regulators are not waiting for federal rulemaking. They are actively using existing consumer protection laws to pursue dealerships they believe are engaging in deceptive practices.
What This Means for Dealerships
Dealerships should continue to evaluate and strengthen compliance practices around:
- Transparent pricing and advertising
- Clear disclosure of total vehicle cost Proper presentation of add-on products Avoiding forced or misleading fees
- Honest representation of vehicle condition Fair and consistent treatment of all consumers
Conclusion
The CARS Rule may be off the table, but its influence lives on through existing federal UDAP laws, aggressive state enforcement actions, and new state legislation. Compliance expectations have not relaxed; they have simply shifted.
The smartest strategy is not to view the CARS Rule as an FTC failed initiative, but as a blueprint for what federal and state regulators already expect responsible dealerships to do. Pricing transparency, ethical sales practices, and consumer-first disclosures are no longer just best practices—they are the foundation of modern dealership compliance. This is not new compliance; these are the same illegal and unethical practices that have haunted our industry for years, damaging its reputation and overshadowing the tremendous opportunity and professionalism the automotive industry truly offers.
By Linda J. Robertson, Executive Director, AFIP/ADCO
Linda J. Robertson is the Executive Director and founder of the Association of Dealership Compliance Officers (ADCO). She develops compliance education, certification programs, and risk-management strategies that help dealerships strengthen regulatory compliance, protect consumer information, and foster cultures of ethical accountability. AFIP and ADCO are now one compliance company. Linda can be contacted at linda.robertson@adcocommunity.com
Disclaimer:
The information provided in this article is for educational and informational purposes only and should not be construed as legal advice. Readers should consult qualified legal counsel or compliance professionals regarding specific regulatory requirements or legal obligations applicable to their organization or jurisdiction.
Copyright © 2026 Linda J. Robertson. All rights reserved.
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