Dealers Successfully Force The Feds To Temporarily Back Down On Banning Shady Junk Fees

Image: David Zalubowski (AP)

Junk fees plague industries like hotels and airlines and end up costing consumers billions every year in add ons, “administrative fees” and other overpriced nonsense. The fees really come out of the woodwork at car dealerships, it seems. While it was enough of a problem for the federal government to take notice, things have changed in favor of dealers.

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First spotted by Motor1, the Federal Trade Commission paused a ban on dealer junk fees that were originally set to take effect this summer. The ban comes after the National Automobile Dealers Association protested the move by filing a petition.

The ban was a long time coming. After watching and receiving complaints about dealer fees over the last decade, the FTC decided to take action. In a 126 page proposal, the agency set out to target and ban four main tactics/behaviors that dealers use to get over people. One of those were junk fees. The rule would have cracked down on things like doc fees, markups disguised as protection packages and non negotiable add ons. The official set of rules was dubbed Combating Auto Retail Scams (CARS) and was announced in December 2023.

Dealers naturally protested losing their fat slice of money cake. How are they going to continue to screw people over if the feds block these fees? So both the National Automobile Dealers Association and the Texas Automobile Dealers Association pushed back by filing a petition in the Fifth Circuit Court of Appeals. The whole point was to tie up the rule in court so it won’t be implemented come its July 30 deadline, which is exactly what happened. The court has agreed to hear the petition. The issue, as Motor1’s (and friend of Jalopnik) Victoria Scott points out, is if the FTC even has the legal authority to enact the rule.

The main issue in the legal battle is whether the law is actually within the FTC’s jurisdiction to impose. The dealership groups, in the petition to the Fifth Circuit, called it “an abuse of discretion” and seek the court to block its implementation. The FTC maintains that the rule “does not impose substantial costs, if any” on law-abiding dealerships, and instead simply guarantees a more even playing field for both dealerships and consumers by eliminating junk fees and hidden costs.

Even though the dealers are getting what they want by interrupting implementation of the rule, the order for the postponement says that it could still take effect. So while dealers may be celebrating this result, they’re likely only delaying the inevitable.