The California CARS Act (Senate Bill 766) is poised to bring a state-level version of the FTC’s vacated CARS Rule back to life in California. Among its key features: stricter dealer disclosures, limits on add-on products and stronger consumer protections.
With several amendments (as previously reported), the California Legislature has passed SB 766, with an effective date of October 1, 2026, allowing a 10-month operative delay for implementation and compliance preparation.
Notably, amendments made earlier this summer have narrowed the bill’s focus to retail vehicle sales to consumers. As a result, it excludes fleet, commercial and wholesale transactions. Vehicles over 10,000 pounds and motorcycles are also not included.
What are the California CARS Act’s Key Requirements and Prohibitions?
- Scope: Applies only to retail vehicles sold to consumers—not wholesale, fleet, or vehicles over 10,000 lbs.
- Disclosure & Consent Requirements: Dealers must provide clear written disclosures (in the negotiation language), itemize all F&I add-ons, and more.
- Add-On Restrictions: Prohibits F&I products that void warranties. GAP waivers that don’t meaningfully benefit the consumer are prohibited.
- Cancellations & Recordkeeping: A 3-day cancellation option for used vehicles under $50K. Dealers must maintain evidence of compliance (advertisements, communications) for two years.
- Timely Payments: Dealers must make payments to F&I product companies within 10 days of the sale, unless otherwise agreed, to ensure customer coverage is maintained.
Implications for the Auto Industry
With the passage of the California CARS Act, smart auto lenders and F&I product companies will reassess compliance strategies and internal workflows, including:
- New compliance processes for dealer networks and F&I product administrators
- Tighter scrutiny of add-on product structures, particularly GAP waivers and service contracts
- Addressing the ripple effects expected as other states follow California’s lead in regulating F&I products at the retail level
This legislation amplifies a trend we identified in our California Auto Finance Regulations analysis. States are increasingly filling enforcement gaps left by federal uncertainty.
Navigating the State Compliance Overlay
While recent shifts at the CFPB suggest changing federal priorities, California’s CARS Act demonstrates how state-level oversight can expand in response.
For auto finance companies, this means one thing: compliance can no longer be isolated from operational strategy. Maintaining audit readiness and operational excellence requires a continuous compliance overlay that is integrated into daily processes and not treated as an afterthought.
What Auto Lenders & F&I Product Companies Should Do
Once enacted, the California CARS Act will transform how auto finance stakeholders handle the sales, disclosure and administration of F&I products. California’s decision to revive aspects of the FTC’s vacated rule marks the beginning of a new era in state-driven consumer protection enforcement. This shift will require careful coordination among dealers, lenders and F&I product companies.
To stay ahead, auto finance companies should begin reviewing all F&I product forms and processes for compliance alignment now. If you are interested in learning more about how this or other developments impact your F&I product servicing operations, connect with F&I Sentinel to schedule a no-obligation meeting with a member of our Concierge Compliance Team today.
The information provided in this post does not, and is not intended to, constitute legal advice; instead, all information, content, and materials referenced are for general informational purposes only. Readers should contact their attorney to obtain advice with respect to any particular legal matter.
