On October 6, Governor Gavin Newsom signed into law the California Combating Auto Retail Scams (CARS) Act. This legislation aims to fortify consumer protections and enhance transparency in the car-buying process. The enactment of this law follows a series of discussions and amendments, as highlighted in our previous blog and podcast, which traced the bill’s evolution and its alignment with the Federal Trade Commission’s (FTC) vacated CARS Rule.
Key Provisions of the CARS Act
The CARS Act introduces several stringent requirements for auto dealers:
- Prohibition of Misrepresentations: Dealers are prohibited from misrepresenting material information about vehicle sales, including costs, financing terms, and the benefits of add-ons.
- Clear and Conspicuous Disclosures: The Act mandates that dealers provide clear disclosures regarding, among other things, the “total price” and the voluntary nature of add-ons.
- Ban on “Valueless” Add-Ons: Dealers are barred from charging for add-ons that do not benefit the purchaser, such as unnecessary warranties or services.
- Three-Day Right to Cancel: For used vehicle sales under $50,000, the Act provides consumers with a three-day right to cancel, offering a cooling-off period.
- Record Retention Requirement: Dealers must retain records demonstrating compliance with the Act for two years, a reduction from the initially proposed seven years.
The Impact of the CARS Act
For auto dealers, the CARS Act introduces a new layer of regulatory complexity. Compliance with the Act’s provisions will require adjustments to sales practices, disclosure procedures, and record-keeping protocols. As we noted in our previous discussions, these changes could lead to increased operational costs and potential legal challenges for both dealers and finance companies.
