FTC Cracking Down on ‘Junk Fees’ and ‘Bait-and-Switch’ Auto Sales

The Federal Trade Commission is preparing to crack down on unsavory auto sales practices amid skyrocketing prices.

The price of automotive purchases in the US has been exploding as a result of supply chain issues and rising inflation. The result has been record prices, often made worse by dealerships adding on “junk fees.” The FTC is preparing to crack down on these practices, proposing new rules to address the problem.

“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 is proposing rules that would address four specific types of dishonest, exploitative behavior:

• Ban bait-and-switch, wherein customers are lured in with deceptive promises, only to be saddled with more expensive options, worse financing terms, and more.
• Ban fraudulent junk fees, such as services and options that offer no value or benefit.
• Ban surprise junk fees and prohibit dealers from charging additional, undisclosed fees without the customer’s written consent. The rule would also require the dealer to inform the customer what the vehicle would cost without the add-on fees, giving the customer the ability to make an informed decision.
• Require full disclosure of costs and conditions upfront. This would require the “offering price” to be the full and total price, with only government taxes and fees excluded.

The FTC’s rules should help address some of the more egregious issues plaguing car buyers, especially since the beginning of the supply chain issues impacting the industry.

With inventory in short supply, some dealerships have taken to gouging customers. Others have even reserved the right to price-adjust up to six months after purchase, charging the customer more depending on current pricing.

The FTC’s new rules should be a boon for consumers and reign in the dishonest, predatory behavior some dealerships are engaging in.