*California and Massachusetts Dealers* – Must Address New State “Junk Fee” Rules
By Mark Sanborn
Senior Product and Regulatory Counsel
The Fifth Circuit’s decision to overturn the FTC’s Vehicle Shopping Rule, combined with the transition to a new presidential administration, appears to have dampened federal momentum for new rulemaking initiatives—but it hasn’t slowed momentum at the state level. Indeed, states like California and Massachusetts are increasingly stepping in with robust new rules that seek to “fill in” the perceived regulatory gap at the federal level. In addition, state regulators nationwide (of ALL political persuasions) are stepping up enforcement of current laws against dealers. For dealerships, these developments carry clear operational and compliance implications that demand close attention, even in jurisdictions that haven’t yet passed similar laws.
California: New Rules For Subscriptions and Related Products
One example of this trend is with so-called “Junk fee” rules. The FTC’s Junk Fee Rule was scaled back significantly. At the state level, California has responded with the introduction of two significant consumer protection measures in recent months that reshape how businesses, including auto dealerships, handle subscriptions and pricing disclosures.
First is Assembly Bill 2863 (AB 2863), which targets negative-option subscription practices. Effective July 1, 2025, this law mandates that businesses obtain clear and separate consent from customers before enrolling them in auto-renewing plans. The law also requires that all terms—including pricing and renewal cadence—be disclosed prior to collecting any payment information, and that cancellation methods be as simple as sign-up. These rules apply broadly and would affect dealership offerings such as telematics services (such as LoJack), satellite radio subscriptions, roadside assistance products, and other products with recurring charges.
As more dealers bundle digital services or sell subscription-based products through F&I menus, they must ensure that terms are clear, processes are transparent, and cancellation is frictionless. Don’t simply assume that third parties (vendors or OEMs) will meet these requirements for you. If you are involved in the sale (and particularly if you are compensated) of these subscriptions, you must ensure that the companies whose products you are selling are prepared to meet the disclosure and cancellation requirements under this new law.
Meanwhile, California Senate Bill 478 (SB 478), was effective July 1, 2024, and tackles so-called “junk fees”—undisclosed or unavoidable charges that surface late in a transaction. NOTE – licensed auto dealers are largely exempt from SB 478 thanks to your advocates at the CNCDA and the existing comprehensive state vehicle advertising laws, but this exemption is not absolute. Dealers can still run afoul of the law if they require payment for pre-installed accessories or add-ons not included in the advertised price. Dealers should ensure that any statement about the total cost of a vehicle is not misleading, and that any optional items are presented as such.
This law reiterates the standard that already exists for dealers in California: advertised prices should reflect all non-optional costs except for taxes and government fees. Optional products—whether they’re paint protection or tire warranties—must be properly labeled and clearly communicated.
Massachusetts Junk Fee Rule: Indications of The Broader Trend
California is not alone. Massachusetts has finalized a new regulation—940 CMR 38.00—that will take effect September 2, 2025. Like SB 478, the Massachusetts regulation targets deceptive pricing practices and hidden fees. It requires that all mandatory charges be included in any advertised price and mandates clear labeling of optional add-ons. Notably, it also cracks down on negative-option subscription practices, echoing California’s AB 2863 in requiring clear cancellation procedures and upfront disclosure of recurring charges.
Like California, Massachusetts also exempts auto dealerships and vehicle manufacturers as far as their activities are covered under existing advertising regulations, but dealers are subject to the portions of the new Massachusetts rule governing recurring subscriptions and trial offers. The Massachusetts Attorney General has made it clear that non-compliance will be treated as a per se unfair or deceptive act, enabling enforcement actions with treble damages and attorneys’ fees. That level of liability should put dealerships on high alert. Sales and F&I teams will need to revise marketing materials and reconsider how products are presented during the sales process—particularly where bundling or post-sale services are involved.
The CARS Act: Will California Resurrect The Vehicle Shopping Rule?
Perhaps the most consequential development for auto dealers in California is the introduction of the Combating Auto Retail Scams (CARS) Act, Senate Bill 766, in early 2025. Modeled after the now-defunct federal FTC CARS Rule (a.k.a. Vehicle Shopping Rule), this bill largely echoes the original Vehicle Shopping Rule that was rejected by the Fifth Circuit on procedural grounds. Key provisions include a ban on misrepresenting material terms of a sale or lease, a mandate to disclose full prices and identify optional add-ons, and a prohibition on upselling products that offer no real consumer benefit—such as nitrogen-filled tires or duplicative service contracts.
Most notably, the CARS Act would replace California’s current optional 2-day used car return policy on certain used vehicles, with a mandatory 10-day cooling-off period applicable to all used vehicles. This would introduce serious financial and logistical considerations for dealerships, especially those with high used vehicle turnover.
Remember, this is just a proposal. However, should the CARS Act become law, its implications would be far-reaching. Sales practices will need to be revised, compliance documentation will become more complex, and liability exposure will increase significantly. This proposed legislation is still in the very early stages and it is not certain that the law will pass, and if it does pass, it may be significantly amended. ComplyAuto will continue to monitor this and other legislation for our dealer clients.
What’s the Bottom Line for Dealers?
First – it is critical that you understand that existing laws have not changed or been rolled back, and enforcement – at both the state and federal level – continues at a blistering pace. You MUST align your price advertising and F&I practices with the current rules, or you are putting your stores at risk.
Second – the trajectory is clear: in reaction to a perceived gap in new regulations at the federal level, states are stepping up with NEW regulations. This isn’t just about fees or subscriptions, but dealers in states like California and Massachusetts need to ensure they fully understand and comply with the new “Junk Fee” requirements.
Third – dealers would do well to think proactively, not reactively. That means reviewing existing pricing structures, auditing subscription services, evaluating how optional products are marketed, and training staff to operate in this evolving regulatory environment. It also means following regulatory trends outside your own state. For one thing, the state regulators work closely together and these trends are likely to be coming your way soon. Moreover, best practices with regard to these issues are fast becoming baseline requirements under broad UDAP and other theories.
States are no longer waiting for Washington to act. The compliance landscape is being redrawn at the state level—and dealers who ignore these changes do so at their peril.
ComplyAuto Can Help
Dealers in Massachusetts are encouraged to review the recent webinar ComplyAuto conducted with the Massachusetts State Automobile Dealer Association (MSADA) to learn more about the upcoming Massachusetts rules.
On all these issues, ComplyAuto can help – it’s what we do. We offer multiple approaches to help you automate compliance with a full suite of compliance solutions—from federal and state privacy and data security laws to website cookie consent, advertising, F&I audits, and VDP reviews.
Our latest innovation, DealCheck AI, scans every deal before the customer drives off, catching missing documents and errors in real-time. That means fewer unfunded deals, reduced CIT, no chargebacks, and complete deal files—so your team can stop chasing paperwork and get back to selling cars.