Federal regulator seeks to end junk fees, bait-and-switch advertising
The Federal Trade Commission announced a proposed rule that would ban junk fees and bait-and-switch advertising in the car buying marketplace.
The move comes amid inflation and supply issues making car buying more expensive than in recent years. Further, a report by the Consumer Federation of America (CFA) notes that consumers complain about the car buying experience more than any other industry.
The FTC noted that the current surge in pricing makes their action more urgent:
“As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”
The FTC proposal would result in the following actions to improve the car buying experience for consumers:
- 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).
- 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.
- 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.
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