Addendum Stickers and the CARS Rule

The automotive industry is facing significant changes with the introduction of the FTC's CARS Rule. One area that could see a substantial impact is the use of addendum stickers. These stickers, traditionally used as a sales tactic, are set to undergo major transformations to comply with the new regulations. In this blog post, we explore how the CARS Rule affects addendum stickers and what dealerships would need to do to stay compliant.

The End of Traditional Addendum Stickers

Addendum stickers have long been a tool for dealerships to increase the front-end gross. However, under the new CARS Rule, this practice is likely to become obsolete. The rule mandates that any additional costs reflected on the addendum sticker must already be included in the advertised price.

Challenges with Addendum Stickers

Dealerships that continue to use addendum stickers as a means to increase prices will find it difficult to navigate these new regulations. For instance, if a dealership is selling a product like Pulse, which reduces rear-end collisions, the cost of this product must be included in the initial advertised price, not added later with an addendum sticker.

Compliant Usage

While the traditional use of addendum stickers may be fading, they can still be used in a legally compliant manner. Dealers can use addendum stickers to describe what is included in the vehicle without using them to increase the price above what was originally advertised.

Avoiding Illegal Practices

Dealerships must avoid illegal practices when using addendum stickers. For example, adding costs for unnecessary or non-existent services, like engraving the VIN on a catalytic converter in an electric vehicle, is both illegal and unethical. Such practices not only violate the CARS Rule but also damage the dealership's reputation and customer trust.

Adapting to the CARS Rule

If the CARS Rule survives litigation in its current form, dealerships will need to adapt their pricing strategies. This includes:

1. Including All Costs in the Advertised Price: Ensure that any additional costs are part of the initial advertised price to avoid surprises for consumers.

2. Using Addendum Stickers Transparently: Use these stickers to inform customers about what is included in the vehicle.

3. Training Staff: Educate sales teams on the new regulations and the importance of compliance to avoid legal repercussions.

4. Regular Audits: Conduct regular audits of advertising and pricing practices to ensure adherence to the CARS Rule.

Check out the full CARS Rule Keynote:

WATCH FULL KEYNOTE

Stay Updated on Automotive Compliance

Subscribe to our blog for ongoing discussions on the CARS Rule, automotive compliance updates, and industry best practices. Follow us on LinkedIn to join the conversation and stay ahead of the curve. Let's navigate the world of automotive commerce together!

More About the CARS Rule:

Understanding the FTC's CARS Rule: Insights from James Ganther at Agent Summit 2024

First Steps to Understanding the CARS Rule

AMG v. FTC: Prelude to the CARS Rule

The CARS Rule and Automotive Marketing

Addendum Stickers and the CARS Rule

The CARS Rule and Fine Print: Navigating Clear and Conspicuous Disclosures

The Conundrum of Express, Informed Consent in the FTC CARS Rule

Inside the Legal Battle Over the CARS Rule

Does the CARS Rule Mean the End of Dealer Fees?

Defending Dealerships: The Fight Against the FTC's CARS Rule

CARS Rule Solutions for F&I Agents and Dealers

The CARS Rule and Fine Print: Navigating Clear and Conspicuous Disclosures

One of the requirements of the CARS Rule is "clear and conspicuous disclosures." According to the Rule's definition of clear and conspicuous disclosures, fine print will not be allowed. In this post, we'll look at what the Rule says about these disclosures.

Clear and Conspicuous vs. Fine Print

Industry expert James Ganther sheds light on the CARS Rule's emphasis on "clear and conspicuous" disclosures. This eliminates the use of fine print, demanding that all important information be readily noticeable and easily understood by consumers. Additionally, these disclosures must be positioned near the advertised price or any terms they modify.

The Challenge of Constrained Space

This requirement presents a practical challenge for car dealerships. Fitting all the mandated disclosures into a single advertisement, without resorting to fine print, can be a daunting task. Further complicating matters are advertising regulations set by original equipment manufacturers (OEMs). Balancing the CARS Rule's demands with OEM requirements could create significant hurdles for advertisers.

Impossible to Miss?

The CARS Rule further emphasizes that disclosures must be "impossible to miss." This stringency raises concerns about the feasibility of crafting legally compliant car advertisements, particularly given the limited space constraints inherent in many advertising formats. Industry insiders, as noted by Ganther, express skepticism about achieving this level of detail within the confines of a typical car ad.

Click Here: The Limits of Digital Disclosures

Even the idea of directing viewers to additional information through clickable buttons isn't considered a suitable solution under the CARS Rule. The government maintains that disclosures must be physically present within the advertisement itself, readily accessible on the same page or image.

Watch the Full Video for Expert Insights

Gain deeper insights into the CARS Rule and its impact on the retail automotive industry, don’t miss the full keynote speech by James S. Ganther, Esq. at Agent Summit 2024. Click the button below to watch the full video and learn more about the state and future of the CARS Rule, and how your dealership can stay ahead of these regulatory changes.

WATCH FULL KEYNOTE

Stay Updated on Automotive Compliance

Subscribe to our blog for ongoing discussions on the CARS Rule, automotive compliance updates, and industry best practices. Follow us on LinkedIn to join the conversation and stay ahead of the curve. Let's navigate the world of automotive commerce together!

More About the CARS Rule:

Understanding the FTC's CARS Rule: Insights from James Ganther at Agent Summit 2024

First Steps to Understanding the CARS Rule

AMG v. FTC: Prelude to the CARS Rule

The CARS Rule and Automotive Marketing

Addendum Stickers and the CARS Rule

The CARS Rule and Fine Print: Navigating Clear and Conspicuous Disclosures

The Conundrum of Express, Informed Consent in the FTC CARS Rule

Inside the Legal Battle Over the CARS Rule

Does the CARS Rule Mean the End of Dealer Fees?

Defending Dealerships: The Fight Against the FTC's CARS Rule

CARS Rule Solutions for F&I Agents and Dealers

FTC CARS Rule and CFPB Insights from the 2024 NIADA Convention & Expo

We're thrilled to share our recent experience at the NIADA Convention and Expo, at the Wynn in Las Vegas. Our CEO, Jim Ganther, had the opportunity to attend several enlightening sessions. Check out our recap below.

Unpacking the FTC CARS Rule

The FTC CARS Rule, designed to protect consumers by ensuring transparent disclosure of vehicle pricing, has left many in the industry seeking clarity. Eric and Mark provided a comprehensive analysis, but unfortunately, their insights highlighted more questions than answers. Here are some key points from their session:

1. Ambiguity in Definitions: Eric and Mark emphasized the pervasive ambiguity within the FTC CARS Rule. The lack of clear definitions, especially regarding Express, Informed Consent, creates significant challenges for compliance. Mark drew a compelling analogy, likening the FTC’s guidance to a fiancée who tells you what she doesn't want for dinner but not what she does.

2. The Offering Price Dilemma: A critical component of the CARS Rule is the requirement for dealers to disclose the full price of every good or service, including both cash price and financed cost. However, the rule's ambiguity leaves dealers questioning whether this Offering Price needs to generate Express, Informed Consent in every document it appears, such as menus, product contracts, buyers’ orders, and installment sale contracts. This uncertainty could necessitate a complete rewrite of these documents and their associated processes.

What Lies Ahead?

As we await further clarification, the industry is keeping a close watch on the NADA and TADA v. FTC case, currently pending before the Fifth Circuit Court of Appeals. Oral arguments are expected to be heard as soon as July or August, with a potential decision by the end of the year. This decision could provide much-needed clarity and direction for automotive dealers nationwide.

Fireside Chat with the FTC

Jim also attended a thought-provoking session featuring a Fireside Chat with the Federal Trade Commission (FTC). This session provided high-level insights but left many questions unanswered, particularly regarding Express, Informed Consent.

Key Takeaways:

• The FTC provided high-level insights but didn't offer specific answers to critical questions.

• The session's most valuable moments came after the presentation, where off-stage interactions provided deeper insights.

• Our primary question: What will constitute Express, Informed Consent under the new rule? The current rule only tells us what it is not.

• While a definitive answer wasn't provided, the FTC representative suggested that a properly configured menu might serve as documentation of Express, Informed Consent for vehicle protection products.
  

Fireside Chat with the CFPB

In another session, Jim attended a Fireside Chat with the CFPB. While the presentation itself did not offer much new information, the Q&A session that followed provided valuable insights.

Session Highlights:

• The session focused on a recent CFPB report on negative equity, issued earlier this week. While no immediate actions are planned, the Q&A revealed the CFPB’s current priorities.

• The CFPB is focused on cancellations and refunds. This includes scenarios where a car is totaled, repossessed, or a contract is voluntarily canceled.

Action Points for Dealers and Providers:

• Review and enhance your processes for handling cancellations and refunds.

• Ensure your processes are quick, efficient, transparent, and accurate to comply with CFPB expectations.

Conclusion

At Mosaic Compliance Services, we understand the complexities and challenges posed by evolving regulations. We are committed to staying at the forefront of industry developments and providing our clients with timely, accurate information to ensure compliance and operational efficiency.

Stay tuned for more updates as we continue to navigate these regulatory changes together. If you have any questions or need assistance with compliance matters, please do not hesitate to reach out to us.