FTC tackling the problem of unfair, deceptive fees when buying a car
The U.S. Federal Trade Commission spent at least half of last year wrestling with the issue of what it calls junk fees. These are the nickel-and-diming charges that “are unnecessary, unavoidable, or … that inflate costs while adding little to no value.” Easy targets are convenience fees for buying a ticket or using a credit card, resort fees at a hotel, or connection fees on phone cards. The FTC spent the first part of its multi-round battle dealing specifically with junk fees in the auto industry — charges that include bait-and-switch pricing, charges for either fake products and services or products and services that cost the dealer nothing to provide, and costs for items that should be included in the advertised purchase price (destination fees, anyone?). The government agency received more than 10,000 comments about dealership junk fees before closing the suggestion box in September 2022 and moving to rulemaking stage of what’s called the Motor Vehicle Dealers Trade Regulation Rule. The aim there is to create “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.”
However, not long after ending that process, the FTC took up the matter again in relation to Unfair or Deceptive Fees levied by all kinds of businesses that are making tens of billions annually a few bucks at a time. It appears there’s so much involved with the proposed rulemaking that “interested parties” compelled the FTC to extend the process. The agency announced the comment period will run until February 8. Automotive News broke down the eight categories of junk fees under consideration as:
Misrepresenting or not ” clearly and conspicuously” disclosing “the total cost of any good or service for sale” in ads or marketing.
Misrepresenting or not disclosing “the existence of any fees, interest, charges, or other costs that are not reasonably avoidable for any good or service” in ads or marketing.
Misrepresenting or not disclosing if “fees, interest, charges, products or services are optional or required.”
Misrepresenting or not disclosing “any material restriction, limitation or condition concerning any good or service that may result in a mandatory charge … or that may diminish the consumer’s use of the good or service, including the amount the consumer receives.”
Misrepresenting that a customer owes for “any product or service the consumer did not agree to purchase.”
Charging for anything “without express and informed consent.”
Charging for “fees, interest, goods, services or programs that have little or no added value to the consumer or that consumers would reasonably assume to be included within the overall advertised price.”
Misrepresenting or not disclosing “the nature or purpose of any fees, interest, charges or other costs.”
If all goes perfectly, the result would be to compel companies to announce, up front, the “inclusion of any mandatory fees whenever consumers are quoted a price for a good or service.”
Even though the auto-specific junk fee rulemaking is now in-chamber, this new rulemaking doesn’t prohibit comments on the automotive industry along with everything else. So if you’d like to see the FTC get some teeth to address specific, questionable line items in the new car invoice you’ve been sent, or with the hotel bill you got when you had to fly three states away to buy a car, visit the the comment site to air your grievance.
However, if your major gripe is markups, don’t bother. Their occasionally tardy reveal is an artifact of the contracts between manufacturers and franchised dealers. An OEM-dealer franchise agreement can mandate that the dealer won’t advertise any vehicle at a certain amount below or above MSRP. So even if a dealer knows it plans to charge $100,000 for a vehicle with a $60,000 MSRP, the OEM agreement might say the dealer can only advertise the vehicle for $62,000 at most. Then the potential customer calls, gets the bad news, and is angry at the dealer for wasting everyone’s time. Technically, an ADM would count as junk fee #2 in the above list. The FTC can’t stop the dealer from charging an ADM; the solution would be figuring out how to get the ADM front and center in a way that doesn’t contravene the franchise contract with the OEM.
But there are plenty of other proper junk fees to deal with in the meantime. At the time of writing, there are more than 5,200 comments in the log. Head to Regulations.gov to be heard.
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