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The new California Combating Auto Retail Scams (CARS) Act, which Governor Newsom signed on October 7, 2025, mirrors the thwarted efforts of the Federal Trade Commission (“FTC”) to address concerns about unfair or deceptive acts or practices among motor vehicle dealers. The California CARS Act will become effective on October 1, 2026, and will prohibit dealers from making misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle, or about any costs, limitation, benefit, or other aspect of any add-on product or service.

Applicability

The California CARS Act will constitute a new title within the state’s Civil Code[1] and will apply generally to motor vehicle dealers in the state. However, the new protections will not apply to “commercial purchasers” of vehicles, meaning those that purchase five or more vehicles from the dealer per year for use primarily for business or commercial purposes. They also will not apply to vehicles with a gross vehicle weight rating of 10,000 pounds or more.

Total Price

One of the key aspects of the California CARS Act (as with the FTC’s fallen CARS Rule) is the requirement to disclose the “total price.” Specifically, the Act will require dealers to disclose, clearly and conspicuously in connection with the sale or financing of a vehicle, the vehicle’s total price. That total price includes the total sales price of the vehicle, excluding taxes, fees, and charges; any dealer price adjustment; and the cost of any item installed on the vehicle at the time of the advertisement or communication. It does not include any deduction for a rebate. The total price must be included in any advertisement of a specific vehicle for sale, or that represents any monetary amount or financing term for a specific vehicle. In addition, the total price must be included in the first written communication with a consumer about a specific vehicle, such as the dealer’s first response to a consumer regarding the vehicle. The total price disclosure requirement does not, however, apply to used vehicles sold at auctions.

Other Disclosures

In addition to the disclosure of the total price of specific vehicles in advertisements and communications, dealers must disclose in any written representation during a negotiation to purchase or lease a specific vehicle that any add-on products or services the dealer mentions are not required. The disclosure must be clear and conspicuous and in writing. If the negotiation is taking place primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, the disclosure that the consumer may purchase or lease the vehicle without the add-on product or service must also be provided in that language.

When making any written representation about the amount of monthly payments to purchase or lease a specific vehicle, the dealer must disclose in writing the amount the consumer will pay after making all those monthly payments. If the dealer makes written comparisons between payment options that include lower monthly payments, the dealer must explain that those lower payments often increase the total amount the consumer will pay.Continue Reading New California CARS Act

Although the Fifth Circuit Court of Appeals vacated the Federal Trade Commission’s (“FTC”) Combating Auto Retail Scams Trade Regulation Rule (“CARS Rule”) on January 27, 2025, the FTC and state attorneys general continue to target the auto sales and lending industries through enforcement actions and legislation. Among those efforts, the California legislature is considering its…

On January 27, 2025, the Fifth Circuit Court of Appeals held that the Federal Trade Commission’s rule to curb certain practices in the automobile dealer industry was invalid on procedural grounds because the agency did not issue an advance notice of proposed rulemaking.

On January 4, 2024, the Federal Trade Commission (“FTC”) published a final “Combating Auto Retail Scams Trade Regulation Rule,” or “CARS Rule.” The rule was scheduled to become effective on July 30, 2024. The FTC issued that rule after publishing a proposed rule for public comment in July 2022 and after a series of public roundtables with input from industry participants, consumers, and others.

The final rule provides that certain acts or practices of motor vehicle dealers are prohibited as unfair or deceptive, including misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle or of any add-on product or service (such as extended warranties, service and maintenance plans, payment programs, guaranteed automobile or asset protection (“GAP”) agreements, emergency road service, VIN etching and other theft protection devices, or undercoating). The final rule also would prohibit misrepresentations regarding many other aspects of purchasing or financing a vehicle, or the circumstances under which a vehicle may be repossessed.

The final rule also provides that it is a prohibited unfair or deceptive act or practice not to disclose in advertisements or consumer communications a vehicle’s full cash offering price (excluding only government charges), or not to disclose that an add-on product or service is voluntary (if true). When making any representations about the amount of monthly payments for vehicle financing, the final rule provides that the dealer must disclose the total amount the consumer will pay after making all payments, including the amount of any down payment or trade-in.

As to add-on products or services, the final rule provides that it is a prohibited unfair or deceptive act or practice for a dealer to charge for any such product or service that provides no benefit to the consumer, including certain nitrogen-filled tire-related products or services; products or services that are merely duplicative of otherwise applicable warranty coverage; or any item without the consumer’s express, informed consent.

The auto dealer and finance industries quickly objected to the rule, arguing in part that the FTC did not adequately consider the costs of the rule and that the rule is arbitrary and capricious. The FTC then determined that it was in the interests of justice to stay the rule’s effective date to allow for judicial review.

The Fifth Circuit did not address the validity of the rule’s substantive provisions, or the FTC’s authority to declare those or other practices as unfair or deceptive. However, the court held that the final rule is invalid because the FTC did not issue an advance notice of proposed rulemaking (“ANPRM”) prior to issuing its proposed rule.Continue Reading Fifth Circuit Vacates the FTC’s CARS Shopping Rule

For the most recent edition of Supervisory Highlights, the Consumer Financial Protection Bureau focused on examiners’ findings in the auto finance sector. Several of these practices were identified by the CFPB in prior Supervisory Highlights. Many of the CFPB’s concerns relate to trends in the marketing, sales, financing, and refunds related to add-on products like optional vehicle- or payment-protection, and to consumers’ difficulty in cancelling those products or receiving refunds. The Federal Trade Commission and state regulators also have prioritized these areas, and several states have recently passed legislation addressing add-on products (including refunds, cancellation and notification). In several of the findings, the CFPB noted that the failures related to inadequate oversight of service providers, reflecting another recurring theme in CFPB’s compliance management expectations.

The CFPB has framed many of these targeted practices as unfair, deceptive or abusive acts or practices (“UDAAP”), which is consistent with certain of the agency’s recent consent orders or suits related to auto servicing practices.

In response to the findings, the CFPB generally demanded ceasing the allegedly noncompliant practices, developing policies and procedures to ensure compliance going forward, and in some cases refunding amounts to consumers.

Motor vehicle dealers, auto finance companies, servicers and secondary market purchasers of auto loans should take note of these highlighted practices when evaluating their policies and procedures.Continue Reading CFPB Supervisory Highlights Target Certain Auto Lending and Servicing Practices

In response to the significant ambiguities raised by New Hampshire’s recent amendments to its Motor Vehicle Retail Installment Sales Act — not to mention their immediate effectiveness and draconian liability provisions — the state’s Banking Department has issued several nuggets of guidance.

Recently, the Department sought to address the pressing question of whether persons involved in various financing transactions and securitizations involving motor vehicle retail installment contracts must now obtain a license. As of August 26, 2024, the Department’s web site states that securitization trusts that are established for the purpose of pooling retail installment contracts and reconstituting them into securities are not required to obtain a sales finance company license in the state. While the Department stated further that the licensing requirement will typically be fulfilled by the servicer or other entity responsible for servicing the contracts in the securitization trust, it did not expressly address the licensing obligations applicable in other types of financing transactions or to other types of special purpose entities. We expect that a similar licensing exemption would apply to those transactions and entities, because the servicer would need to be licensed or an exempt entity.Continue Reading New Hampshire Banking Department Clarifies Licensing for Motor Vehicle Financing

On August 2, 2024, New Hampshire enacted legislation that significantly revises its Motor Vehicle Retail Installment Sales Act, effective July 1, 2024.

Unfortunately, that effective date is not a typographical error. The New Hampshire Banking Department apparently tried during the legislative process to extend the effective date until January 1, 2025, but that extension did not make it into the enacted bill. While the bill was enacted with an effective date of July 1, 2024, the Department attempts at least to provide assurances that the bill became effective upon signing, and not retroactively. Still, the effective date of the amendments is just one of the topics requiring clarification.Continue Reading New Hampshire Significantly Amends its Motor Vehicle Retail Installment and Sales Finance Company Act

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

Mayer Brown is publishing its first edition of Licensing Link, a new periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this…

The CFPB marketed its latest set of supervisory highlights as the “Junk Fees Special Edition.” The splashy headline is consistent with the agency’s recent focus on fees that it asserts are hidden from the competitive process. In speeches, press releases, and blog posts (and now a single proposed rule), the CFPB has stressed its growing concern with “junk” fees. The CFPB even created a section of its web site solely devoted to press releases on “junk” fees.

Gleaning compliance guidance from Supervisory Highlights is not always straightforward, as they do not provide full details. However, in this Special Edition, the CFPB notes that it has characterized the following types of fees and practices as junk:

Deposit Accounts

  • Overdraft Fees – specifically, those charged when the consumer had a sufficient balance when the financial institution authorized the transaction, but not at the time of settlement.
  • Multiple Non-Sufficient Funds Fees for the Same Transaction.

Auto/Title Financing

  • Late Fees that Exceed the Credit Contract or After Acceleration/Repossession.
  • Estimated Repossession Fees that Greatly Exceed Average Costs – even if the excess was refunded.
  • Payment Processing Fees – specifically, those that exceed processing costs, when free payment options are only available for checks or ACH transfers.
  • Fees to Retrieve Personal Property from Repossessed Vehicles – the CFPB said such fees were “unexpected” and unfair.
  • Premature Repossession and Related Fees – charging late fees and repossessing vehicles before title loan payments became due.

Mortgage Loan ServicingContinue Reading CFPB Junk Fees Special Edition