A U.S. appeals court has tossed out consumer protection rules put in place by the Biden administration that barred auto dealers from imposing deceptive add-on fees to new car buyers.
On Monday, the 5th Circuit Court of Appeals, in a 2-1 decision, ruled that the Federal Trade Commission (FTC) violated procedural requirements by drafting the regulation without providing prior notice to auto dealers, Reuters reports. The decision favored the National Automobile Dealers Association (NADA) and a Texas dealer group that had legally challenged the FTC’s initial ruling.
The FTC’s regulation mandated that auto dealers maintain pricing transparency in advertisements and sales discussions and obtain informed consent from consumers before charging for any item. Proposed by the Biden administration in 2022 and finalized in January 2024, the rule was paused following a legal challenge by the NADA and a Texas dealer group.
The FTC said that the regulation would put an end to auto dealers charging unnecessary fees on things like service contracts for oil changes on electric vehicles or redundant warranties. The agency also estimated the rule would’ve saved consumers over $3.4 billion and 72 million hours annually when purchasing vehicles.
However, NADA President Mike Stanton said the ruling, was “a victory for the rule of law and a great outcome for consumers.”
“As we have been saying since this rushed, poorly researched, and unnecessary rule was announced, the FTC’s Vehicle Shopping Rule (“CARS” Rule) would have added massive amounts of time, complexity, paperwork and cost to the car-buying and car-shopping experience for virtually every customer,” Stanton said. “That truly would have been a nightmare for consumers and dealers alike.”
The court’s decision follows a December victory for the FTC
, which secured a $20 million settlement from a group of 10 car dealerships accused of systematically defrauding vehicle buyers.RELATED CONTENT: Dentist Sentenced To 15 Years In Prison For Stealing Patients’ Pain Meds During Surgery