January 30th 2025.
A recent ruling by a U.S. appeals court has caused a stir in the automotive industry. The court has overturned consumer protection rules that were put in place by the Biden administration to prevent auto dealers from adding deceptive fees to the purchase of new cars.
According to Reuters, the 5th Circuit Court of Appeals made the decision in a 2-1 vote on Monday. The court ruled that the Federal Trade Commission (FTC) did not follow proper procedures when drafting the regulation, as they did not give prior notice to auto dealers. This ruling was a win for the National Automobile Dealers Association (NADA) and a Texas dealer group who had challenged the FTC's initial ruling in court.
The regulation, proposed by the Biden administration in 2022 and finalized in January 2024, aimed to promote transparency in the pricing of new cars. It required auto dealers to be upfront about any additional fees and obtain consent from consumers before charging for them. However, the rule was put on hold after the NADA and Texas dealer group took legal action against it.
The FTC argued that the regulation would prevent auto dealers from charging unnecessary fees, such as service contracts for electric vehicles or redundant warranties. The agency estimated that this would save consumers over $3.4 billion and 72 million hours annually when purchasing vehicles.
On the other hand, NADA President Mike Stanton hailed the court's decision as a victory for both the rule of law and consumers. "Since the announcement of this rushed, poorly researched, and unnecessary rule, we have been voicing our concerns about the impact it would have on the car-buying experience," Stanton said. He further stated that the FTC's Vehicle Shopping Rule would have added significant time, complexity, paperwork, and cost for both consumers and dealers.
This ruling comes after the FTC's success in securing a $20 million settlement from ten car dealerships in December. These dealerships were accused of systematically defrauding vehicle buyers, highlighting the importance of consumer protection in the automotive industry.
In related news, a dentist was recently sentenced to 15 years in prison for stealing pain medication from his patients during surgery. This serves as a reminder that fraudulent practices can occur in any industry and the need for strong consumer protection laws to safeguard the public.
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