WASHINGTON—As auto prices keep the accelerator down, the Federal Trade Commission has launched rulemaking it says is designed to protect consumers’ pocketbooks and level the road for “honest” dealers, including the banning of junk fees.
The FTC has proposed a rule to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience. As auto prices increase, the Commission stated it is seeking “to eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted junk charges.”
According to the FTC, the proposed rule would protect consumers and honest dealers by making the car-buying process more clear and competitive. It would also allow the Commission to recover money when consumers are misled or charged without their consent.
In the last 10 years alone, the FTC reported it has brought more than 50 law enforcement actions related to automobiles and helped lead two nationwide law enforcement sweeps that included 181 state-level enforcement actions in these areas. In spite of these actions, complaints from consumers related to automobiles remain in the top 10 complaint types received by the FTC, with more than 100,000 complaints from consumers annually over the past three years.
The First Step
The FTC said it is taking a first step toward “establishing a set of guidelines that would provide consumers with key protections against dealers who unlawfully charge junk fees without their consent or engage in bait-and-switch advertising.”
In the Notice of Proposed Rulemaking the FTC said it is seeking comment on proposed measures that would:
- Ban bait-and-switch claims. “The proposal would prohibit dealers from making a number of deceptive advertising claims to lure in prospective car buyers. This deal deception can include the cost of a vehicle or the terms of financing, the cost of any add-on products or services, whether financing terms are for a lease, the availability of any discounts or rebates, the actual availability of the vehicles being advertised, and whether a financing deal has been finalized, among other areas. Once in the door or on the hook, consumers face the fallout of false promises that don't pan out.”
- Ban fraudulent junk fees. “The proposal would prohibit dealers from charging consumers junk fees for fraudulent add-on products and services that provide no benefit to the consumer (including ‘nitrogen filled’ tires that contain no more nitrogen than normal air),” the FTC said.
- Ban surprise junk fees. The proposal would prohibit dealers from charging consumers for an add-on without their clear, written consent and would require dealers to inform consumers about the price of the car without any of optional add-ons, according to the FTC.
- Require full upfront disclosure of costs and conditions. “The proposal would require dealers to make key disclosures to consumers, including providing a true ‘offering price’ for a vehicle that would be full price a consumer would pay, excluding only taxes and government fees. It would also require dealers to make disclosures about optional add-on fees, including their price and the fact that they are not required as a condition of purchasing or leasing the vehicle, along with disclosures to consumers with key information about financing terms.”