I called my previous article, “The quiet before the storm, the FTC vs the NADA/TADA.” So, I believe it’s appropriate to call this short article “Thunder and Lightning”, based on the recent announcement by the 5th District Court of Appeals. I’m not sure why I continue using storm analogies, but just like an approaching storm, we need to be prepared. Can you imagine doing nothing knowing an impending storm was on its way?
On July 11th the FTC announced that on October 7th, 2024 the 5th District Circuit Court of Appeals would hear oral arguments. I do not have a crystal ball, maybe I was just lucky when I predicted this exact action in my previous article. On July 1st, 2024 I wrote, “Due to the impact and gravity the CARS rule will have on the industry, the court will likely grant the request for oral arguments even though in the past the courts have only granted 20% of such requests. We should hear from the courts in the next few months if they will allow oral arguments.”
In the first week of October of this year, the 5th District Court of Appeals will hear both sides of the arguments in this jurisdiction. Meaning the filing in Texas landed the arguments in the most conservative court in the district and one that is not a fan of regulations.
This meeting is not solely to interrupt the regulation, it is first to determine whether the FTC went through the right technical requirements to promulgate the regulation. Second, did the FTC have the authority to go as far as they did if they did not follow the right procedure (if that is the case). The FTC claims that the NADA’s challenge under the Administrative Procedure Act, “lacks merit and the petition for review should be denied.” And that “NADA’s claim that the commission needed to publish an advance notice of proposed rulemaking (ANPRM) was incorrect and that NADA has not shown any prejudice from the lack of an ANPRM.”
So, who is correct and who is incorrect will be determined mostly based on the argument of whether the FTC followed their own codified rules and whether they had the authority to do so. The one thing I want to be clear about is that this regulation is already in place and is the final rule. If the FTC loses the argument they will appeal, only delaying the inevitable. Whether the CARS rule goes into effect in 2025 or 2026, is not stopping the FTC from using parts of the rule in recent enforcements.
The FTC is determined in its actions to extend and clarify existing laws related to UDAP, which was part of the basis for the FTC’s briefs and arguments. First, the FTC states that the rule only clarifies and helps define existing laws, that are not being followed and gives the FTC more power to act on those laws. Second, the FTC claims that the only dealers that are against the new rule are those “BAD DEALERS” benefiting from a lack of regulation and that “GOOD DEALERS” who follow the law are at a disadvantage. Third, the rule has been in the works for over thirteen years. Going back to the round table meetings, held by industry experts and the FTC to create a rule that would be easy for dealers to follow. These round tables were by invitation only and occurred in Detroit, Washington D.C., and Atlanta, where the rule was discussed, argued, and reduced.
This FINAL CARS Rule, according to the FTC is less robust and has been slimmed down greatly since conception in 2011 and followed all requirements to promulgate the regulation. The FTC has also stated they are open to listening and clarifying any concerns about the new rule. However, the FTC is determined that the rule will go into effect either way because the need is so great, since current UDAP laws are being violated and consumers are still being taken advantage of.
If you want to read my full article and get all the information on the FTC Final CARS rule, go to https://secureclose.net/2024/06/30/quiet-before-the-storm/ for all the details. If you want more information on how SecureClose can help keep you compliant, and lower risk and costs, request a demo at sales@secureclose.net or call (855) 496-9335 and schedule today.
