For years, dealers have heard that the add-ons must actually add value because of the claims that the FTC have brought against dealers.
April 12, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
This month’s CARS COLUMN article focuses on the requirement that add-ons must be beneficial. For years, dealers have heard that the add-ons must actually add value because of the claims that the FTC have brought against dealers. In fact, it was one of the bullet points in our “Constant Compliance Training” article in this newsletter.
The CARS Rule now expressly prohibits the charging of any Add-on Product or Service if the consumer would not benefit from such Add-on Product or Service.
The FTC highlighted two add-ons in the Rule that it specifically views as nonbeneficial, but by no means is the list exhaustive:
(1) nitrogen-filled tire related-products or services that contain no more nitrogen than naturally exists in the air, or
(2) products or services that do not provide coverage for the vehicle, the consumer, or the transaction or are duplicative of warranty coverage for the vehicle, including a GAP Agreement if the consumer’s vehicle or neighborhood is excluded from coverage or the loan-to-value ratio would result in the consumer not benefiting financially from the product or service.
As previously pointed out, the Rule notes that the products or services of questionable benefit to consumers are not limited to those listed, giving the FTC discretion to make this value judgment in a case-by-case basis.
Although the FTC is attempting to codify this beneficial requirement under the CARS Rule, dealers should be adhering to this beneficial requirement currently. If the consumer gets two years of maintenance with the purchase of the vehicle from the manufacturer, consumers should not be offered a maintenance plan that overlaps with that coverage. The extended warranty purchased should not overlap with the manufacturer warranty. If it’s a used vehicle and the original owner bought the leather seat protection or the paint protection, you should not be selling the same product since its already on the vehicle. Dealers should be offering products to consumers that add value to the vehicle because whether this is codified or not under the CARS Rule, it is a current requirement.
Whether or not the CARS Rule ever becomes effective should not have bearing on whether you offer beneficial add-ons because the FTC is already enforcing the requirement and plaintiffs’ attorneys are bringing suits on it.