Have you ever paid for dealer “prep” or add-ons such as extended warranties, fabric protection, and VIN etching? Or, did you find out that the car in the ad costs much more when you get to the dealer?
The Federal Trade Commission is working to address deceptive advertising and unlawful add-on sales in the auto industry. The agency would like to hear from you by Sept. 12 on a proposal that would ban junk fees, bait-and-switch tactics, and other practices affecting car buyers.
As auto prices surge, the FTC wants to eliminate the tricks and traps that make it hard or impossible to compare prices or leave consumers with thousands of dollars in unwanted junk charges. The agency also would like to be able to recover money when consumers are misled or charged without their consent.
“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.”
In the last 10 years, the FTC 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. However, 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 commission 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. 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 written consent and would require dealers to inform consumers about the price of the car without any of the 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’re not required as a condition of purchasing or leasing the vehicle, along with disclosures to consumers with key information about financing terms.
The notice includes questions for public comment on whether provisions should or shouldn’t be included in the rule, as well as questions on the costs and benefits to consumers and auto dealers. Also, the notice includes an analysis estimating that the net economic benefit of the rule would be more than $29 billion over 10 years.
After the commission reviews the comments, it will decide whether the rule should be finalized.
You can submit your comment online or by mail:
- Online – follow the link to the rulemaking notice and click on the “comment” button.
- By mail – send your comment to: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, D.C. 20580.